<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1999
REGISTRATION NO. 333-67263
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
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>
<S> <C>
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)
</TABLE>
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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
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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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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
SUBJECT TO COMPLETION, DATED JANUARY 8, 1999
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 computer 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 computer systems management
tools for the IBM mainframe and client/server 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 computer systems management software industry.
You will be asked to adopt the merger agreement approved by the Boole board
of directors at a special meeting of the stockholders to be held on February ,
1999 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. This is a fixed exchange ratio that will not be adjusted for changes in the
stock price of either company before the merger is completed. The BMC common
stock trades on the Nasdaq National Market under the symbol "BMCS."
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO
STOCKHOLDERS AND IS IN YOUR BEST INTERESTS. YOUR 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
FOR A DISCUSSION OF CERTAIN SIGNIFICANT MATTERS THAT SHOULD BE CONSIDERED
BEFORE VOTING ON THE MERGER AGREEMENT AND THE MERGER AT THE SPECIAL MEETING, SEE
"RISK FACTORS" BEGINNING ON PAGE 12.
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.
This proxy statement/prospectus is dated , 1999, and is first
being mailed to Boole stockholders on or about , 1999.
"THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROXY STATEMENT/PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED."
<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 FEBRUARY , 1999
To the stockholders of Boole & Babbage, Inc.:
A special meeting of stockholders of Boole & Babbage, Inc., a Delaware
corporation ("Boole"), will be held on February , 1999 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 January
, 1999 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
, 1999
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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SUMMARY................................... 1
The Companies........................... 2
Boole's Recommendation to You........... 3
Reasons for the Merger.................. 3
Opinion of Boole's Financial Advisor.... 3
Interests of Boole's Officers and
Directors in the Merger............... 3
Risk Factors............................ 3
Conditions to the Merger................ 3
The Special Meeting..................... 4
Required Vote........................... 4
Record Date and Voting Power............ 4
Share Ownership of Management........... 4
Comparative Per Common Share Market
Price Information..................... 4
No Appraisal Rights..................... 4
No Solicitation......................... 5
Termination of the Merger Agreement..... 5
Termination Fee......................... 6
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................... 13
Forward-Looking Information............. 15
THE COMPANIES............................. 17
BMC..................................... 17
Merger Sub.............................. 19
Boole................................... 19
THE SPECIAL MEETING....................... 19
Date, Time and Place.................... 19
Purpose of the Special Meeting.......... 19
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Record Date and Voting Power............ 19
Voting and Revocation of Proxies........ 19
Required Vote........................... 20
Solicitation of Proxies................. 20
Other Matters........................... 21
THE MERGER................................ 21
General Description of the Merger....... 21
Background.............................. 21
Reasons for the Merger.................. 24
BMC's Reasons for the Merger............ 25
Boole's Reasons for the Merger.......... 26
Opinion of Boole's Financial Adviser.... 28
Interests of Boole's Officers and
Directors in the Merger............... 33
Material Federal Income Tax
Consequences.......................... 35
Anticipated Accounting Treatment........ 36
Governmental Approvals.................. 36
Restrictions on Resales by Affiliates... 36
CERTAIN TERMS OF THE MERGER AGREEMENT..... 37
Effective Time of the Merger............ 37
Manner and Basis of Converting Shares... 37
Boole Options........................... 38
Employee Stock Purchase Plan............ 39
Conditions to the Merger................ 39
Representations and Warranties.......... 41
Certain Covenants; Conduct of Business
Prior to the Merger................... 41
No Solicitation......................... 43
Termination of the Merger Agreement..... 44
Expenses and Termination Fee............ 45
STOCK OPTION AGREEMENT.................... 46
Terms of the Option..................... 46
Exercise Events......................... 47
Repurchase at the Option of BMC......... 47
Repurchase at the Option of Boole....... 48
Other................................... 48
VOTING AGREEMENTS......................... 49
MANAGEMENT AND OTHER INFORMATION.......... 49
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SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS.................................. 50
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS.................... 52
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET.................. 53
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF INCOME........... 58
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS........... 59
DESCRIPTION OF BMC CAPITAL STOCK.......... 61
General................................. 61
BMC Common Stock........................ 61
Rights to Purchase Preferred Stock...... 61
</TABLE>
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<CAPTION>
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BMC Preferred Stock..................... 63
Transfer Agent and Registrar............ 64
COMPARATIVE RIGHTS OF BMC AND BOOLE
STOCKHOLDERS............................ 65
INDEPENDENT AUDITORS...................... 67
LEGAL MATTERS............................. 67
EXPERTS................................... 67
STOCKHOLDER PROPOSALS..................... 67
WHERE YOU CAN FIND MORE INFORMATION....... 68
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 70. 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 software planning applications that address the core business
of businesses and organizations. Boole has historically concentrated on
monitors that measure a systems' performance 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 software systems, 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 software tools for the IBM mainframe and
client/server 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 share of Boole common stock you own. The
actual number of shares you will receive in the merger will be 0.675
multiplied by the number of shares of Boole common stock that you own at
the effective time. The exchange ratio is fixed and, regardless of
fluctuations in the market prices of BMC's or Boole's common stock, will
not change between now and the date that the merger is completed. Moreover,
neither Boole nor BMC has the right to terminate the merger agreement or
renegotiate the exchange ratio as a result of market price fluctuations.
Should the Boole stockholders approve the merger, we anticipate that the
merger will be completed on the same day as the special meeting. 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 February , 1999 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.
1
<PAGE> 7
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 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: 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
basis allocable to any fractional share interest for which you receive
cash).
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: 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 17)
BMC SOFTWARE, INC. (SEE PAGE 17)
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, perform optimally 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 software planning
applications that address the core business of businesses and organizations 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. Many of BMC's customers are
Fortune 1000 industrial and service corporations and similar organizations
worldwide.
BOOLE & BABBAGE, INC. (SEE PAGE 19)
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.
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 client/server 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 rep-
3
<PAGE> 9
resented 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.
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.
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.
THE SPECIAL MEETING (SEE PAGE 19)
A special meeting of the stockholders of Boole will be held on February ,
1999, 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.
RECORD DATE AND VOTING POWER (SEE PAGE 19)
You are entitled to vote at the special meeting if you owned shares of
Boole common stock on the close of business on January , 1999, 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.
REQUIRED VOTE (SEE PAGE 20)
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.
SHARE OWNERSHIP OF MANAGEMENT (SEE PAGE 52)
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.
INTERESTS OF BOOLE'S OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 35)
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 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.
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
4
<PAGE> 10
common stock closed at $48.06. On January , 1999, Boole common stock closed at
$ , and BMC common stock closed at $ .
NO APPRAISAL RIGHTS
You are not entitled to any appraisal or dissenters' rights in connection
with the merger.
CONDITIONS TO THE MERGER (SEE PAGE 41)
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 45)
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.
STOCK OPTION AGREEMENT (SEE PAGE 48)
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 $32.44 and 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 of the shares purchased by BMC at prices
set forth in the option agreement.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 47)
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
42) has occurred with respect to the other
5
<PAGE> 11
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 47)
The merger agreement requires Boole to pay BMC $30.0 million if (1) 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 (2) prior to the special meeting, a third party publicly
announces its desire to enter into certain 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.
ANTICIPATED ACCOUNTING TREATMENT (SEE PAGE 38)
The merger is expected to be accounted for as a "pooling of interests" for
financial accounting purposes.
FORWARD-LOOKING STATEMENTS (SEE PAGE 15)
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>
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......................................... 59.88 34.88 34.88 16.00
1999*
First Quarter (through January 7, 1999)................ $46.50 $40.75 $30.56 $27.50
</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 January , 1999:
<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
January , 1999...................
</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. If the merger had
occurred on January , 1999, you would have received a fraction of a share of
BMC common stock worth $ for each share of Boole common stock you owned. The
actual equivalent per share price of a share of Boole common stock that you will
receive if the merger closes may be different from this price because the per
share price of BMC common stock on the Nasdaq National Market fluctuates
continuously.
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................... -- -- -- -- -- -- --
Dividends paid per share......... -- -- -- -- -- -- --
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>
8
<PAGE> 14
BOOLE
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for
each of the years ended September 30, 1994 through 1998 have been derived from
Boole's Consolidated Financial Statements, which have been audited by Ernst &
Young LLP, independent auditors. 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, 1998 incorporated by reference in this proxy
statement/prospectus.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues............................................ $141,600 $169,027 $180,151 $197,097 $218,236
Operating income.................................... $ 4,366 $ 12,785 $ 12,829 $ 11,814 $ 36,282
Net earnings........................................ $ 2,102 $ 13,123(1) $ 11,457 $ 13,469 $ 36,654
Basic earnings per share............................ $ .09 $ .51 $ .43 $ .49 $ 1.31
Shares used in computing basic earnings per share... 24,285 25,535 26,565 27,715 28,045
Diluted earnings per share.......................... $ .08 $ .47 $ .40 $ .45 $ 1.20
Shares used in computing diluted earnings per
share............................................. 25,725 27,700 28,815 30,145 30,580
Dividends paid...................................... -- -- -- -- --
Dividends paid per share............................ -- -- -- -- --
Total assets........................................ $145,621 $182,827 $224,540 $260,144 $309,926
</TABLE>
- -------------------------
(1) 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 54-62. 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....................... $601,321 $752,871 $938,039 $422,008 $ 573,219
======== ======== ======== ======== ==========
Operating income..................... $159,538 $221,898 $256,667 $ 71,530 $ 180,999
======== ======== ======== ======== ==========
Net earnings......................... $116,929 $169,552 $197,531 $ 48,214 $ 152,193
======== ======== ======== ======== ==========
Basic earnings per share............. $ .54 $ .77 $ .89 $ .22 $ .65
Shares used in computing basic
earnings per share................ 218,256 219,330 222,429 221,353 233,525
Diluted earnings per share........... $ .51 $ .72 $ .83 $ .20 $ .61
Shares used in computing diluted
earnings per share................ 228,266 234,178 237,199 236,884 248,625
Dividends declared................... -- -- -- -- --
Dividends declared per share......... -- -- -- -- --
COMBINED BALANCE SHEET DATA:
Working capital...................... $ 62,096
Total assets......................... $1,868,121
Long-term debt (including current
maturities)....................... --
Stockholders' equity................. $1,072,484
</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.
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................................................ $4.58
</TABLE>
BOOLE
<TABLE>
<CAPTION>
ADJUSTED TO YEARS SIX MONTHS
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................................................ $0.65 $0.31 $1.67 $0.99
Diluted.............................................. $0.59 $0.29 $1.54 $0.91
Book value.............................................. $4.61 $5.08
EQUIVALENT COMBINED PRO FORMA PER COMMON SHARE DATA:
Income from continuing operations
Basic................................................ $0.36 $0.51 $0.60 $0.43
Diluted.............................................. $0.34 $0.48 $0.56 $0.41
Book value.............................................. $3.09
</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.
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
client/server 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 client/server 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.
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 likelihood of successful integration
of BMC's and Boole's software products and the combined company's future product
strategy. Customers may also 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,
12
<PAGE> 18
the merger may make it more difficult for the combined company to enter into
relationships, including 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.
RISKS RELATING TO BMC
Volatility of BMC's Stock Price. BMC's stock price has been and is highly
volatile. 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 Associated with License Revenues. The timing
and amount of BMC's license revenues are subject to a number of factors that
make estimation of operating results prior to the end of a quarter extremely
uncertain. BMC generally operates with little or no sales backlog and, as a
result, license revenues in any quarter are dependent upon contracts entered
into or orders booked and shipped in that quarter. Most of BMC's sales are
closed at the end of each quarter, and there has been and continues to be a
trend toward larger enterprise license transactions, which can have sales cycles
of up to a year or more and require approval by a customer's upper management.
These transactions are typically difficult to manage and predict. Failure to
close an expected individually significant transaction could cause BMC's
revenues and earnings in a period to fall short of expectations.
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.
13
<PAGE> 19
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.
Risk that High Operating Margins will Decline. 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.
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 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.
Risks Associated with Competition in the Software Industry. BMC operates in
a highly competitive industry characterized by rapid technological change. The
distributed systems and application management markets in which BMC operates are
far more crowded and competitive than its traditional mainframe systems
management markets. BMC's ability to compete effectively and its growth
prospects depend upon many factors, including:
- the success of its existing client/server systems products;
- the timely introduction and success of future software products; 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.
BMC's inability to keep pace with technological change in its industry
would have an adverse effect on its revenues and earnings. BMC has experienced
long development cycles and product delays in the past, particularly with some
of its client/server systems products, and expects to have delays in the future.
Delays in new mainframe or client/server 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,
14
<PAGE> 20
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 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 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, particularly in Europe
and the Pacific Rim, and difficulties in staffing and managing international
operations.
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.
FORWARD-LOOKING INFORMATION
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,
15
<PAGE> 21
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 paragraphs above, 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, 1998 and in BMC's and Boole's quarterly reports on Form 10-Q
for the fiscal quarters ended after their respective fiscal year ends.
16
<PAGE> 22
THE COMPANIES
BMC
BMC develops, markets and supports high-performance system management
software products that address customers' critical information technology
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 information technology
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 client/server 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 client/server 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 client/server 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 used with them. Database management
systems, 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 database management systems allow an application to
access, retrieve, manipulate and analyze it. The primary database management
systems 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 database management systems form the backbone of the
transaction intensive information technology systems that are critical to both
the day-to-day operations and the long-term strategies of BMC's customers. These
information technology systems are continuously growing in size and complexity.
Since BMC's inception, one of its key focuses and
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competencies has been improving the performance, availability, reliability,
recoverability and ease of use of these database management systems.
Over the past four years, BMC has devoted significant resources to building
its client/server 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 client/server 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
client/server 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 designed for IBM's IMS and DB2
database management systems 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 information technology systems. Organizations are requiring that
their information technology systems deliver guaranteed levels of service to the
end-user. Information technology 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
database management systems 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 applications which address the core
business processes of businesses or other organizations, such as accounting and
financial reporting, manufacturing and inventory management, human resources and
payroll, and order entry and tracking. Applications packaged for enterprise
resource planning represent one of the most significant recent trends in
enterprise computing. The packaged resource planning 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 resource planning applications as well as their key underlying
components such as the UNIX and Windows NT operating systems and the
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leading database management systems. BMC is actively developing resource
planning modules for its other client/server systems management products.
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, client/server 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 February ,
1999, 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 to consider and vote upon a
proposal to adopt the merger agreement and approve the merger and 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, January , 1999, 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.
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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 of the special meeting
in accordance with the instructions contained in the proxy. 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 Boole board of directors. A Boole stockholder who has executed and returned
a proxy may revoke it at any time before it is voted at the special meeting by
executing and returning a proxy bearing a later date, filing written notice of
revocation with the Secretary of Boole stating that the proxy is revoked or
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. They have
agreed in the voting agreements 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. They granted BMC an irrevocable proxy to vote their
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, which
represents 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 are record holders of Boole common stock for the
forwarding of solicitation materials to the beneficial owners of Boole common
stock. Boole will reimburse
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such brokers, custodians, nominees and fiduciaries for the reasonable
out-of-pocket expenses incurred by them in connection with the forwarding of
solicitation materials. Boole has engaged the services of Corporate Investor
Communications to distribute proxy solicitation materials to brokers, banks and
other nominees and to 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 Boole board of
directors does not know of any business to be presented at the special meeting
other than as set forth in the notice accompanying this proxy
statement/prospectus. If any other matters should properly come before the
special meeting, it is intended that the shares represented by proxies will be
voted with respect to such matters in accordance with the judgment of the
persons voting such proxies.
THE MERGER
GENERAL DESCRIPTION OF THE MERGER
At the effective time, Merger Sub will be merged with and into Boole. Boole
will be the surviving corporation and will continue 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 will automatically be converted
into 0.675 of a share of BMC common stock.
Based on 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, representing approximately % of
the total BMC common stock to be outstanding after such issuance. This assumes
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 these 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
August 17-18, 1998, Boole management met face-to-face with senior management of
this company to further discuss a potential acquisition, and to provide due
diligence information concerning Boole. This company's market capitalization and
stock appreciation over the past few years were lower than other potential
acquirers, and Boole regarded this to be a relative disadvantage in assessing a
potential merger with this company. On August 19, Mr. Newton informed an
executive of this company that it would not be the preferred merger partner, but
that executive indicated continued interest in a merger with Boole. However, on
September 1, this executive called Mr. Newton and said that no offer would be
forthcoming. Boole had no further discussions with the company prior to the
announcement of the merger with BMC.
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. Two of these
potential partners (in addition to the potential merger partner referred to in
the preceding paragraph) indicated interest that led to face-to-face meetings.
Morgan Stanley contacted a large information technology company concerning
a potential merger with Boole. This company indicated interest in a potential
merger and on September 3, 1998, representatives of this company met with Boole
senior management at Boole's offices in San Jose, and received a presentation
concerning Boole's operations. Boole believed that this company had strategic
reasons to wish to increase its presence in the software industry, and
accordingly that an attractive offer from this company might be forthcoming. In
addition, this company has significant stock market presence and a positive
reputation with investors, which Boole believed would benefit Boole stockholders
following a merger. However, despite leaving numerous phone messages, Boole and
Morgan Stanley had only limited further communications from this company. No
offer of any type was ever made by this company relating to a potential business
combination with Boole.
Morgan Stanley also contacted another large information technology company
concerning a potential merger with Boole. On September 19, 1998, Mr. Newton,
received a phone message from an executive of this company indicating interest
in a business combination with Boole. On October 9, 1998, representatives of
this company met with Boole management, and limited due diligence information
concerning Boole was provided. Boole believed that its products and services
would help expand this company's product line, and accordingly believed that
significant potential synergies existed to make a merger with this company
attractive. This company also has a significant stock market presence and a
positive reputation with investors, which Boole believed would benefit Boole
stockholders following a merger. No offer of any type was ever made by this
company relating to a potential business combination with Boole. On October 30,
1998, a representative of this company contacted Morgan Stanley to indicate that
the company had no interest in a business combination with Boole.
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On August 18, 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.
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.
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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 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
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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."
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 software planning applications that
address the core business of businesses and organizations. Boole has
historically concentrated on monitors that measure a systems' performance 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 software systems, UNIX and
Microsoft NT. Although the two companies' product lines address distinctly
different systems management disciplines,
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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 software tools for the IBM mainframe and
client/server 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 client/server and mainframe system products
with little or no overlap in functionality, including the advancement of
BMC's ASA 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;
- 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:
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- 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;
- 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 agreement 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
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to the merger, including the strategic overview and prospects for Boole. The
Boole board of directors also considered the following positive factors, among
others, in connection with its review and analysis of the merger. The Boole
board's conclusions with respect to each of these factors supported its
determination that the merger agreement and the consummation of the merger were
fair to, and in the best interests of, Boole and its stockholders:
- the financial condition, results of operations, prospects and competitive
position of BMC and Boole before and after giving effect to the
merger -- the Boole board believed that, in light of, among other things,
market and industry conditions, the potential synergy and compatibility
between Boole and BMC, the financial strength of BMC and the ability to
leverage BMC's extensive sales network to increase sales of Boole's
products, the long-term financial condition, results of operations,
prospects and competitive position of the combined company would be
better than the long-term financial condition, results of operations,
prospects and competitive position of Boole on a stand alone basis;
- current financial market conditions and historical market prices and
trading information with respect to BMC common stock and Boole common
stock -- the Boole board viewed favorably BMC's stock market presence and
positive reputation with investors and the greater liquidity to Boole
stockholders of an investment in BMC common stock instead of Boole common
stock;
- 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 Boole board's belief that the complementary products and services,
sales channels, partners, technology and critical skills of BMC and Boole
should enable the combined company to compete more effectively;
- the Boole board's belief that the terms of the merger agreement are
reasonable;
- a comparison of selected recent acquisition and merger transactions in
the industry -- the Boole board viewed favorably the comparison of the
merger to the information provided to it by Morgan Stanley relating to
selected recent acquisition and merger transactions in the industry
(including the information described below under "-- Opinion of Boole's
Financial Advisor -- Analysis of Selected Precedent Transactions");
- the expected tax and accounting treatment of the merger -- the Boole
board viewed favorably the expectations that (1) for U.S. federal income
tax purposes, no gain or loss would 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, and (2)
the merger would be accounted for as a "pooling of interests";
- the opinion of Morgan Stanley rendered at the October 30, 1998 meeting of
the Boole board of directors that, based upon certain analyses performed
by Morgan Stanley and discussed with the Boole board of directors over
the course of a number of board meetings, including the October 30, 1998
meeting (portions of which analyses are described below under "-- Opinion
of Boole's Financial Advisor"), and based upon and subject to the various
conditions set forth in the opinion of Morgan Stanley, the
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exchange ratio was fair to holders of Boole common stock from a financial
point of view as of October 30, 1998;
- the Boole board's belief that the merger will benefit Boole's customers
and employees for a number of reasons, including because the combined
company will be better able to provide enhanced and more valuable
products to its customers, and the combined company will provide
employees with the opportunity to participate in the growth of a more
competitive company; and
- positive 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;
- the possibility that the public announcement of the merger would have a
negative impact on Boole's sales, customer relations and operating
results and Boole's ability to attract and retain key management,
marketing and technical personnel;
- certain terms of the merger agreement and related agreements that
prohibit Boole and its representatives from soliciting third party bids
and from accepting, approving or recommending unsolicited third party
bids except in very limited circumstances, which terms would reduce the
likelihood that a third party would make a bid for Boole; 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 agreement and 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 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
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merger. Morgan Stanley was selected by the Boole board of directors 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 of directors 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:
- reviewed certain publicly available financial statements and other
information of Boole and BMC, respectively;
- reviewed certain internal financial statements and other financial and
operating data concerning Boole and BMC prepared by the managements of
Boole and BMC, respectively;
- 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;
- 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;
- reviewed the pro forma impact of the merger on the earnings per share of
BMC;
- reviewed the reported prices and trading activity for the Boole common
stock and the BMC common stock;
- 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;
- reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
- reviewed and discussed with the senior managements of Boole and BMC their
strategic rationales for the merger;
- participated in discussions and negotiations among representatives of
Boole and BMC and their financial and legal advisors;
- reviewed the draft merger agreement and certain related agreements; and
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- 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 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.
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
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"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 the 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 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.
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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 research analysts for the calendar years
2000 and 2001, illustrative multiples of earnings per share ranging from 12.0
times to 18.0 times, illustrative discount rates ranging from 10.3% to 15.0% and
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 the 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, illustrative discount rates ranging from 13.5% to 15.0% and the
present value per share of BMC common stock on a standalone basis ranged from
$45.96 to
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$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 Boole board of directors. 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 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
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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.
Prior to retaining Morgan Stanley in connection with a potential sale of
the company, Boole retained Morgan Stanley in connection with two potential
acquisitions by Boole of other companies. Discussions with each of these
companies were terminated and no transaction was ever consummated with these
companies. Accordingly, no compensation (other than reimbursement of
out-of-pocket expenses) was ever paid to Morgan Stanley in connection with these
potential acquisitions.
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 Boole board
of directors was aware of these interests and considered them, among other
matters, in approving the merger agreement and the merger transactions.
Indemnification and Insurance. The merger agreement provides that after the
effective time, BMC will indemnify each present and former director and officer
of Boole against any claims, losses, liabilities, damages, judgments, fines,
fees, costs or expenses incurred in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to matters existing or
occurring at or prior to the effective time. BMC will fulfill and honor 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. BMC will 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, BMC will maintain 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. BMC is not 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. If the annual premiums of
such insurance coverage exceed this amount, BMC will be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount. 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.
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Employment Agreements. To facilitate the integration of BMC and Boole after
the closing of the merger, BMC has agreed to employ the following Boole
executives for a term of eight months following the closing of the merger: Paul
Newton, Johannes Bruggeling, Richard Harritt, Jim Black, Saverio Merlo and
Arthur Knapp. Each of these Boole executives has executed an employment
agreement with BMC pursuant to which the Boole executive will receive
compensation equal to his base salary as an employee of Boole prior to the
closing of the merger. Upon termination of employment, the Boole executive will
be entitled to receive the following:
- the remainder of all amounts payable in connection with such termination
under Boole's 1999 Executive Incentive Plan, less all amounts paid as
compensation to such employee by BMC under the employment agreement,
- accrued vacation,
- sabbatical payments, and
- vested benefits under Boole's employee benefit plans.
Automatic Acceleration of Stock Options; Severance Payments. Pursuant to
Boole's Executive Incentive Plan, which has been in effect since 1994, Paul
Newton, Johannes Bruggeling, Richard Harritt, Jim Black, Saverio Merlo, Arthur
Knapp, Dicklam Au and James Stratton will be entitled to certain benefits in
connection with the merger. The 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 February 28, 1999, the executive
plan participants will hold an aggregate of 836,269 unvested options to purchase
Boole common stock. In addition, the 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 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 plan.
Pursuant to Boole's 1993 Non-Employee Directors' Stock Option Plan,
assuming that the merger is consummated on February 28, 1999, 59,042 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 material federal income tax consequences of the merger to the
holders of Boole common stock 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,
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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, 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 tax-free reorganization, that
BMC, Merger Sub and Boole will each be a party to the tax-free 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 tax-free reorganization:
(a) no gain or loss will be recognized by BMC, Merger Sub or Boole
solely as a result of the merger;
(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
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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. Either BMC or
Boole may terminate the merger agreement if the merger cannot be accounted for
as a pooling of interests.
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. 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 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 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.
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, with the Department of Justice and
the FTC under the HSR Act on November 24, 1998 and the waiting period terminated
on December 24, 1998.
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 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 within
30 days prior to the effective time or the sale or other disposition of BMC
common stock thereafter prior to the publication of financial results that
include at least 30 days of post-merger combined operations of BMC and Boole
could preclude pooling of interests accounting treatment of the merger.
Accordingly, the
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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 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 obtained executed affiliate agreements from all persons known
to the managements of BMC or Boole to be affiliates of such corporations.
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 that all the
conditions to the merger contained in the merger agreement are satisfied or
waived, it is anticipated that the effective time will occur on the date of the
special meeting or as soon as practicable following the special meeting.
MANNER AND BASIS OF CONVERTING SHARES
At the effective time, each share of Boole common stock which is issued and
outstanding, without any action on the part of the Boole stockholders, will
automatically be converted into a fraction of a share of 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, Boston EquiServe, which has been
selected by BMC to act as exchange agent, will mail to each record holder of
Boole common stock immediately prior to the effective time, a letter indicating
that the merger has been completed. Record holders of Boole common stock will
also be mailed a letter of transmittal to be used to exchange 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 at the offices of the exchange agent at BankBoston, N.A., c/o Boston
EquiServe, 150 Royall Street, Corporate Reorganization, Canton, MA 02021.
Additionally, holders of certificates that previously evidenced Boole common
stock may, at their option after the effective time, physically surrender such
certificates for certificates evidencing BMC common stock in person at the
offices of the exchange agent. After the effective time, 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. Share certificates should not be surrendered for exchange by Boole
stockholders prior to the effective time.
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No fractional shares of BMC common stock will be issued in the merger.
Instead, each Boole stockholder entitled to a fractional share will receive a
cash amount, without interest, based on the closing price for BMC common stock
on the Nasdaq National Market on the last trading day before the effective time.
After the effective time, until surrendered and exchanged, each certificate
that previously evidenced Boole common stock will be deemed to evidence shares
of BMC common stock and the right to receive cash in lieu of fractional shares.
BMC will not pay dividends or other distributions on any shares of BMC common
stock to be issued in exchange for any unsurrendered Boole common stock
certificate until such Boole common stock certificate is surrendered as provided
in the merger agreement. Following such surrender, BMC will pay, without
interest, to the record holder of the certificates representing the shares of
BMC common stock issued in exchange therefor (1) all dividends and other
distributions paid with respect to such shares of BMC common stock with a record
date on or after the effective time and (2) at the appropriate date, all
dividends or other distributions with respect to such shares of BMC common stock
with a record date on or after the effective time but prior to the surrender of
such certificate and a payment date occurring after the surrender of such
certificate.
BOOLE OPTIONS
At the effective time, each outstanding Boole stock option 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 by the exchange ratio. The
exercise price per share of BMC common stock will be 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, BMC will be required at the effective time 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, Boole's Employee Stock Purchase Plan will 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 will be determined by treating the last business day prior to the effective
time as the last day of such offering period. Other pro-rata adjustments may be
required pursuant to the Employee Stock Purchase Plan to reflect the reduced
offering period, but such offering period will otherwise be treated as a fully
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effective and completed offering period for all purposes of the plan. Prior to
the effective time, Boole will take all actions that are necessary to give
effect to the merger transactions. The change in the offering period referred to
in the merger agreement is conditioned upon the completion 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 Boole
stockholders;
- 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
- 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 the merger are
also subject to the receipt of certain closing certificates and satisfaction
before the effective time of the following conditions:
- BMC shall have performed in all material respects the obligations
required to be performed by it before the effective time and each of the
representations and warranties of BMC contained in the merger agreement
shall be true as of the effective time as if made at such time. The
representations and warranties that address matters only as of a
particular date shall remain true and correct as of such particular date.
Any inaccuracies in the 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;
- this proxy statement/prospectus shall have become effective under the
Securities Act;
- BMC shall have made effective provision for the assumption at the
effective time of all outstanding Boole stock options;
- 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,
and the 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. The opinion shall not have been withdrawn or modified in any
material respect. If Cooley Godward LLP does not render an opinion or
withdraws or modifies its opinion, this condition will be satisfied if
counsel to BMC renders a tax opinion to Boole.
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BMC's Conditions. The obligations of BMC to consummate the merger are also
subject to the receipt of certain closing certificates and satisfaction before
the effective time of the following conditions:
- Boole shall have performed in all material respects the obligations
required to be performed by it before the effective time and the
representations and warranties of Boole contained in the merger agreement
shall be true as of the effective time as if made at such time. The
representations and warranties that address matters only as of a
particular date shall remain true and correct as of such particular date.
Any inaccuracies in the 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; 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. The opinion shall not have been withdrawn or modified in any
material respect. If Vinson & Elkins L.L.P. does not render an opinion or
withdraws or modifies its opinion, this condition will be deemed to be
satisfied if counsel to Boole renders a tax 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 taken as a whole, including their respective
subsidiaries. In no event shall any of the following constitute a Material
Adverse Effect or a Material Adverse Change:
- a change in the trading prices of either of BMC's or Boole's equity
securities in and of itself between the date of the merger agreement and
the effective time;
- 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;
- effects, changes, events, circumstances or conditions directly
attributable to out-of-pocket fees and expenses incurred in connection
with the merger transactions or 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;
- 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;
- any effects, changes, events, circumstances or conditions resulting from
the announcement or pendency of any of the transactions contemplated by
the merger agreement; and
- any effects, changes, events, circumstances or conditions resulting from
compliance by BMC or Boole with the merger agreement.
There can be no assurance that all of the conditions to the merger will be
satisfied.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties of
Boole and BMC relating to, among other things, certain aspects of the respective
businesses of the parties and certain other matters. The representations and
warranties expire at the effective time.
CERTAIN COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE MERGER
Affirmative Covenants of Boole. Boole has agreed that prior to the
effective time, except to the extent BMC shall consent in writing, it will:
- operate its business only in the usual, regular, and ordinary manner in
an effort to maintain its goodwill and 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 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;
- take all commercially reasonable actions as may be necessary, advisable
or proper (1) to consummate the merger and the other transactions
contemplated by the merger agreement, (2) to insure that the
representations and warranties made by it in the merger agreement are
true and correct at the effective time, (3) to fully perform all
covenants made by it in the merger agreement, and (4) to satisfy all
other obligations imposed upon it by the merger agreement;
- permit BMC to inspect its records and to consult with its officers,
employees, attorneys, and agents during normal business hours, 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
- maintain insurance on its properties and its business in substantially
similar amounts as is presently carried by it; provided, that if prior to
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 the
merger agreement will not be affected.
In addition, Boole has agreed that prior to the effective time it will:
- deliver to BMC the audited financial statements of Boole for the fiscal
year ended September 30, 1998 and unaudited balance sheets and statements
of income, retained earnings and cash flows as of the end of each fiscal
quarter of Boole beginning with the quarter ended December 31, 1998
through the effective time; and
- 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.
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Negative Covenants of Boole. Boole has agreed that prior to the effective
time, except as otherwise agreed to by BMC, 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 merger;
- 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 (1) cannot be terminated on
notice of 14 days or less without the payment of severance compensation
or (2) provide for any increase in compensation, including any
modification of any stock option agreements, outside the ordinary course
of business, 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;
- 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 or as may be required by law;
- amend its certificate of incorporation or bylaws or merge or consolidate
with any other corporation or change the rights of its capital stock;
- subject to certain exceptions, issue or sell, or issue options or rights
to subscribe to, any shares of its capital stock or subdivide or
reclassify any shares of its capital stock, or acquire, or agree to
acquire, any shares of its capital stock;
- declare or pay any dividend on shares of its capital stock or make any
other distribution of assets to the holders of its capital stock;
- 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, it will:
- operate its business in the usual, regular and ordinary manner;
- permit Boole to inspect its records and to consult with BMC's officers,
employees, attorneys and agents during normal business hours, 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;
- register the issuance of BMC common stock to the stockholders of Boole in
connection with the merger under the Securities Act;
- list the shares of BMC common stock to be issued in the merger and
pursuant to all assumed Boole stock options on the Nasdaq National
Market; and
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- take all commercially reasonable actions as may be necessary, advisable
or proper (1) to consummate the merger and the other transactions
contemplated by the merger agreement, (2) to insure that the
representations and warranties made by it in the merger agreement are
true and correct at the effective time, (3) to fully perform all
covenants made by it in the merger agreement, and (4) 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,
it will not:
- take any action or enter into any transaction which would materially
affect or materially delay its ability to complete the merger;
- amend its certificate of incorporation or bylaws or merge into any other
corporation or change in any manner the rights of the BMC common stock;
- subject to certain exceptions, issue or sell any shares of its capital
stock, or issue options, or subdivide or reclassify any shares of its
capital stock, or acquire, or agree to acquire, any shares of its capital
stock; or
- declare or pay any dividend on shares of its capital stock or make any
other distribution of assets to the holders of its capital stock.
BMC and Boole have each agreed that prior to the effective time, they will:
- notify the other party of any of the following: (a) any event occurring
after 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, (b) any Material Adverse Effect on
such party, and (c) 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 as a pooling
of interests for financial accounting purposes; and
- not prevent the merger from qualifying as a tax-free reorganization.
NO SOLICITATION
As an inducement to BMC to enter into the merger agreement, Boole has
agreed not to:
- solicit, initiate, facilitate or knowingly encourage 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 of a substantial
amount of assets of Boole or any equity interest in Boole or any merger,
consolidation, business combination, sale of securities,
recapitalization, liquidation, dissolution or similar transaction
involving Boole (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
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:
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- furnishing information pursuant to an appropriate confidentiality letter
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 with respect to such proposal
or changing, withdrawing or withholding the approval or recommendation by
its board of directors of the merger agreement or the merger, but only
if, in either case, the Boole board of directors concludes that such
action is reasonably necessary in order for it to comply with its
fiduciary obligations to Boole's stockholders.
If the Boole board of directors receives a Boole Transaction Proposal, then
Boole must immediately inform BMC of the terms and conditions of the proposal
and the identity of the person making it. Boole must keep BMC fully informed of
the status and details of any Boole Transaction Proposal and of all steps it is
taking in response to a Boole Transaction Proposal. Boole and its board of
directors are not prohibited from making disclosure to Boole's stockholders or
taking actions which, in the good faith judgment of Boole's board of directors,
may be required under applicable law.
For purposes of the merger agreement, the term "Superior Boole Transaction
Proposal" means a bona fide Boole Transaction Proposal that the Boole board of
directors determines in good faith, after consultation with 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 as follows:
- by mutual 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 from BMC;
- 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 business days following receipt by Boole of notice from BMC;
- 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 from Boole;
- 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 the merger agreement or the merger under the terms,
conditions and procedures set forth in the no solicitation clause of the
merger agreement;
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- 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 business days following receipt by BMC of notice from Boole;
- by BMC or Boole if 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;
- by BMC or Boole if an order, decree, ruling or injunction shall have been
entered by a court after the date of the merger agreement, and shall not
have been vacated, withdrawn or overturned, permanently restraining,
enjoining or otherwise prohibiting the merger and such order, decree,
ruling or injunction shall have become final and non-appealable;
- by either BMC or Boole, if all conditions to 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 be accounted for as a "pooling of
interests" for financial reporting purposes; or
- by BMC or Boole if a meeting of the Boole stockholders shall have been
held and Boole's stockholders shall have taken a final vote on the merger
proposal and the Boole stockholders shall not have adopted the merger
agreement and approved the merger.
Subject to limited exceptions, including the survival of Boole's agreement
to pay a termination fee to BMC under certain circumstances, 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 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 Boole
board of directors shall have withdrawn or modified in a manner adverse
to BMC its approval of the merger agreement or the merger under the
terms, conditions and procedures set forth in the no solicitation clause
and there shall not have occurred a Material Adverse Effect on BMC; or
- prior to the Boole stockholders' meeting at which a final vote is taken
on the merger proposal, there is publicly announced by a third party a
proposal for Another Boole Transaction (as defined below) and there shall
not have occurred a Material Adverse Effect on BMC, and the Boole
stockholders shall not have adopted the merger agreement and approved the
merger and Boole enters into an acquisition agreement which provides for
Another Boole Transaction or Another Boole Transaction is consummated
within twelve months after the termination of the merger agreement,
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unless the merger agreement has been previously terminated under certain
circumstances.
"Another Boole Transaction" means any transaction pursuant to which a third
party acquires 50% or more of the outstanding Boole common stock, a third party
acquires 25% or more of the total assets of Boole, a third party merges,
consolidates or combines in any other way with Boole other than in a transaction
in which Boole stockholders continue to own at least 75% of the equity of the
surviving corporation, or Boole distributes or transfers to its stockholders
assets constituting 25% or more of the market value or earning power of Boole on
a consolidated basis.
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, 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 to
purchase up to 19% of Boole's common stock outstanding as of October 31, 1998.
The purchase price per option share is the lesser of $32.44 and the product of
0.675 times the average of the closing price per share of BMC common stock for
the three trading days prior to the exercise of the option.
TERMS OF THE OPTION
The option is exercisable at any time following the occurrence of an
Exercise Event (as defined below). The option will remain in full force and
effect from the date of the stock option agreement until the earliest to occur
of the effective time, the first anniversary of the receipt by BMC of notice
from Boole of the occurrence of an Exercise Event, or termination of the merger
agreement prior to the occurrence of an Exercise Event. 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. BMC may exercise the option
following the occurrence of the Exercise Events set forth in paragraphs (A) and
(B) below only if a Boole stockholders' meeting at which a final vote is taken
on the merger proposal has been held and the Boole stockholders shall not have
adopted the merger agreement and approved the merger. 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 a tender offer or exchange offer to purchase any shares of Boole
common stock such that,
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<PAGE> 54
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 or the right to acquire beneficial ownership of, or
any group 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 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 the merger proposal, 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 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 Boole stockholders' meeting at which a final vote
is taken on the merger proposal, there is publicly announced by a third
party a proposal for Another Boole Transaction.
REPURCHASE AT THE OPTION OF BMC
During the option term, BMC may require Boole to repurchase from BMC that
portion of the option that is unexercised and all the shares of Boole common
stock purchased by BMC pursuant to the option that BMC then owns. This put right
is only available to BMC after the first Repurchase Event (as defined below) and
ending on the first anniversary of such Repurchase Event. Such repurchase shall
be at an aggregate price equal to the sum of:
(a) the aggregate exercise price paid 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 (a) 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; (b) 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 date on which BMC exercises the put right; or (c) the highest
bid price per share of Boole common stock as quoted on the Nasdaq National
Market during the 60 business days preceding the date on which BMC exercises the
put right. "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.
49
<PAGE> 55
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 its put right, or, if no
Repurchase Event shall have occurred, at the expiration of one year from the
date the option was first exercised, that BMC sell to Boole 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 adjust the number of shares and the exercise price
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 obligating Boole to
register under the Securities Act the offering, sale and delivery by BMC of
shares of Boole common stock acquired by it pursuant to the exercise of the
Option and prohibiting BMC from acquiring or making a proposal to acquire shares
of Boole common stock under certain circumstances.
50
<PAGE> 56
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 have each entered into voting agreements with BMC dated October 31,
1998. They have agreed in the voting agreements 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, they have granted
BMC an irrevocable proxy to vote their 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. They have also agreed that, prior to the
termination of the voting agreements, not to transfer, assign, convey or dispose
of any of the shares of Boole common stock owned by them as of the record date
unless each person to whom any such shares, or any interest in any of such
shares, is transferred executes a voting agreement and agrees to hold such
shares subject to all of the terms and provisions of the voting agreement.
MANAGEMENT AND OTHER INFORMATION
After 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 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."
51
<PAGE> 57
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), by each director and
executive officer of Boole and by each person or group who is known to the
management of Boole 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 shares, which are owned by numerous investment
advisory clients, none of which is
52
<PAGE> 58
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).
53
<PAGE> 59
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.
54
<PAGE> 60
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-------------------------------------------------
PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents..... $ 100,982 $ 46,354 $ 147,336
Investments................... 65,855 46,152 112,007
Trade receivables............. 186,911 87,813 274,724
Other current assets.......... 50,010 15,495 65,505
---------- -------- ----------
Total current
assets............. 403,758 195,814 599,572
Property and equipment, net..... 197,813 11,225 209,038
Purchased and internally
developed software, net....... 107,648 12,898 120,546
Investment securities........... 795,762 -- 795,762
Other long-term assets.......... 53,214 89,989 143,203
---------- -------- ----------
Total assets.......... $1,558,195 $309,926 $1,868,121
========== ======== ==========
Current liabilities:
Current portion of deferred
revenue.................... $ 293,290 $ 57,532 $ 350,822
Other current liabilities..... 118,676 54,653 13,325(A) 186,654
---------- -------- ------- ----------
Total current
liabilities........ 411,966 112,185 13,325 537,476
Deferred revenue................ 152,156 55,596 207,752
Other long-term liabilities..... 48,817 1,592 50,409
---------- -------- ------- ----------
Total liabilities..... 612,939 169,373 13,325 795,637
Stockholders' Equity:
Common stock.................. 2,173 31 176(B) 2,380
Additional paid-in capital.... 137,592 102,264 (35,570)(B) 204,286
Retained earnings............. 863,286 69,454 (13,325)(B) 919,415
Other stockholders' equity.... (57,795) (31,196) 35,394(B) (53,597)
---------- -------- ------- ----------
Total stockholders'
equity............. 945,256 140,553 (13,325) 1,072,484
========== ======== ======= ==========
Total liabilities and
stockholders'
equity............. $1,558,195 $309,926 $1,868,121
========== ======== ==========
</TABLE>
55
<PAGE> 61
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 $359,908
Maintenance............... 159,828 81,585 241,413
-------- -------- -------- --------
Total revenues.... 428,850 172,471 601,321
Selling and marketing
expenses.................. 116,724 89,204 205,928
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>
56
<PAGE> 62
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 $482,341
Maintenance..................... 182,316 88,214 270,530
-------- -------- -------- --------
Total revenues.......... 563,210 189,661 752,871
Selling and marketing expenses.... 154,829 94,135 248,964
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>
57
<PAGE> 63
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 $631,706
Maintenance...................... 216,687 89,646 306,333
-------- -------- -------- --------
Total revenues........... 730,634 207,405 938,039
Selling and marketing expenses..... 205,219 97,716 302,935
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>
58
<PAGE> 64
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------
PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
------------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Licenses...................... $217,947 $ 56,574 $274,521
Maintenance................... 103,176 44,311 147,487
-------- -------- -------- --------
Total revenues........ 321,123 100,885 422,008
Selling and marketing
expenses...................... 94,138 48,559 142,697
Research and development
expenses and related
charges....................... 109,523 12,618 122,141
Cost of maintenance services and
product licenses.............. 35,719 17,275 52,994
General and administrative
expenses...................... 23,824 8,822 32,646
Merger costs.................... -- -- --
-------- -------- -------- --------
Operating income.............. 57,919 13,611 71,530
Interest and other income....... 13,296 5,364 18,660
-------- -------- --------
Income before taxes........... 71,215 18,975 90,190
Provision for income taxes...... 36,856 5,120 41,976
-------- -------- --------
Net earnings.................. $ 34,359 $ 13,855 $ 48,214
======== ======== ========
Basic earnings per share........ $ .17 $ .73 $ .22
======== ======== ========
Shares used in computing basic
earnings per share............ 202,446 18,907 221,353
Diluted earnings per share...... $ .16 $ .68 $ .20
======== ======== ========
Shares used in computing diluted
earnings per share............ 216,384 20,500 236,884
</TABLE>
59
<PAGE> 65
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
----------------------------------------------
PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Licenses......................... $327,005 $ 63,535 $390,540
Maintenance...................... 134,498 48,181 182,679
-------- -------- ------- --------
Total revenues........... 461,503 111,716 573,219
Selling and marketing expenses..... 134,546 50,823 185,369
Research and development expenses
and related charges.............. 84,958 12,746 97,704
Cost of maintenance services and
product licenses................. 48,792 19,137 67,929
General and administrative
expenses......................... 31,591 9,627 41,218
-------- -------- ------- --------
Operating income................. 161,616 19,383 180,999
Interest and other income.......... 22,629 6,774 29,403
-------- -------- --------
Income before taxes.............. 184,245 26,157 210,402
Provision for income taxes......... 50,884 7,325 58,209
-------- -------- --------
Net earnings..................... $133,361 $ 18,832 $152,193
======== ======== ========
Basic earnings per share........... $ .62 $ .99 $ .65
======== ======== ========
Shares used in computing basic
earnings per share............... 214,534 18,991 233,525
Diluted earnings per share......... $ .59 $ .91 $ .61
======== ======== ========
Shares used in computing diluted
earnings per share............... 227,951 20,674 248,625
</TABLE>
60
<PAGE> 66
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 consolidated financial statements of Boole for the years ended September
30, 1997 and 1998 reduced by the unaudited consolidated statements of income of
Boole for the six months ended March 31, 1997 and 1998, 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, 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
61
<PAGE> 67
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.
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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 917 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 BMC board of directors 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 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. This
includes the shares of BMC common stock to be issued in the merger. The rights
were issued subject to a rights agreement dated as of May 8, 1995, and amended
as of April 21, 1997 between BMC and BankBoston N.A., as rights agent. 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, 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 will occur upon the earlier of (a)
ten business days following a public announcement that a person or group of
affiliated or associated persons has acquired beneficial ownership of 20% or
more of the outstanding Voting Shares (as defined in the Rights Agreement) of
BMC, or (b) ten business days following the commencement or
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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 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 evidence the rights after that time.
If a person or group were to acquire 20% or more of the Voting Shares of
BMC, each right then outstanding would become a right to buy that number of
shares of BMC common stock that at the time of such acquisition would have a
market value of two times the purchase price of the right. Rights beneficially
owned by the Acquiring Person would become null and void.
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 have the right to
receive, upon exercise of the right at the then current purchase price, 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 of
shares) 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 of shares) 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 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 issue BMC common stock in mandatory redemption of, and in exchange
for, all or part of the then outstanding and exercisable rights 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 Rights owned by any acquiring
person or group would become null and void in this instance.
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 the then
outstanding rights at a price of $.01 per right. Immediately upon the action of
the BMC board of directors ordering redemption of the rights, the right to
exercise the rights will terminate and the only right of the holders of rights
will be to receive the redemption price.
Expiration; Amendment of Rights. The rights will expire on May 12, 2005,
unless earlier redeemed or exchanged. The terms of the rights may be amended by
the BMC board of
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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. 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
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 preferred share purchase 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
$1.00 in cash or 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
$1,000 per share or 1,000 times the payment made on the BMC common stock. In the
event of any merger, consolidation or other transaction in which the BMC common
stock is exchanged for or changed into other stock or securities, cash or
property, each whole share of BMC Series A Preferred Stock is entitled to
receive 1,000 times the amount received per share of BMC common stock. Each
whole share of BMC Series A Preferred Stock is entitled to 1,000 votes on all
matters submitted to a vote of BMC stockholders. 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 BMC stockholders.
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TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the BMC common stock is Boston
EquiServe.
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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 35 nor more than 60 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 its 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
business combinations involving a Related Person (as defined below) or any
person affiliated with a Related Person two-thirds of the then outstanding
shares of stock voting as a class must approve such transaction. This provision
does not apply if the business combination shall have been approved by a
majority of the unaffiliated directors or certain price and procedure
requirements are met.
The specified business combinations to which the provisions of the Boole
charter apply include the following:
- any merger or consolidation with a Related Person or its affiliate,
- 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,
- the adoption of any plan or proposal for the liquidation or dissolution
of Boole,
- any reclassification of securities or recapitalization of Boole that has
the effect of increasing the proportionate share of capital stock
beneficially owned by any Related Person or its affiliate, or
- any agreement, contract or other arrangement providing for any of the
foregoing.
A "Related Person" is defined as any person who has announced or publicly
disclosed a plan or intention to become the beneficial owner of 20% or more of
the Boole voting stock or 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 20% or more of the Boole 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 written consent is signed by the holders of outstanding stock having 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.
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The Boole bylaws permit the stockholders to repeal, alter or amend the
bylaws or adopt new bylaws. The bylaws also authorize the Boole board of
directors to repeal, alter 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 80% 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, 1998 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
year 1996, 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, 1998
Current Reports on Form 8-K............ Filed November 6, 1998 and January 8,
1999;
BOOLE FILINGS (FILE NO. 0-13258) PERIOD
- --------------------------------------- ---------------------------------------
Annual Report on Form 10-K............. Year ended September 30, 1998
Current Reports on Form 8-K............ Filed October 23, 1998, November 10,
1998 and January 8, 1999
</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 , 1999 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 , 1999. 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> 78
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.
<TABLE>
<S> <C>
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
</TABLE>
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<PAGE> 110
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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<PAGE> 111
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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<PAGE> 112
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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<PAGE> 113
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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<PAGE> 114
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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<PAGE> 115
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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<PAGE> 116
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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<PAGE> 117
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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<PAGE> 118
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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<PAGE> 119
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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<PAGE> 120
APPENDIX B
STOCK OPTION AGREEMENT
BY AND AMONG
BMC SOFTWARE, INC.
AND
BOOLE & BABBAGE, INC.
<PAGE> 121
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.
B-11
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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.
B-12
<PAGE> 133
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
B-13
<PAGE> 134
APPENDIX C
FORM OF VOTING AGREEMENT
<PAGE> 135
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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<PAGE> 137
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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<PAGE> 138
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.
C-4
<PAGE> 139
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
C-5
<PAGE> 140
APPENDIX D
OPINION OF MORGAN STANLEY & CO.
<PAGE> 141
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> 142
(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> 143
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> 144
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> 145
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>
II-2
<PAGE> 146
<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.
*11.1 -- Statement re computation of per share earnings.
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>
- ---------------
* Filed herewith.
All other exhibits have been previously filed.
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.
II-3
<PAGE> 147
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required in Section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona 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
II-4
<PAGE> 148
deemed underwriters, in addition to the information called for by the other
Items of the applicable form;
(7) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and BMC being acquired involved therein, that was
not the subject of and included in the Registration Statement when it
became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE> 149
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Houston,
Texas, on the 8th day of January, 1999.
BMC SOFTWARE, INC.
By: /s/ WILLIAM M. AUSTIN
----------------------------------
William M. Austin
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to 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>
* Chairman of the Board, January 8, 1999
- ----------------------------------------------------- President and Chief Executive
Max P. Watson, Jr. Officer
(Principal-Executive-Officer
/s/ WILLIAM M. AUSTIN (Principal-Financial-Officer) January 8, 1999
- -----------------------------------------------------
William M. Austin
/s/ KEVIN M. KLAUSMEYER (Principal-Accounting-Officer) January 8, 1999
- -----------------------------------------------------
Kevin M. Klausmeyer
* Director January 8, 1999
- -----------------------------------------------------
John W. Barter
* Director January 8, 1989
- -----------------------------------------------------
B. Garland Cupp
* Director January 8, 1999
- -----------------------------------------------------
Meldon K. Gafner
* Director January 8, 1999
- -----------------------------------------------------
Lew W. Gray
* Director January 8, 1999
- -----------------------------------------------------
George F. Raymond
* Director January 8, 1999
- -----------------------------------------------------
Tom C. Tinsley
*By: /s/ M. BRINKLEY MORSE
-------------------------------------------------
M. Brinkley Morse
Attorney-in-fact
</TABLE>
II-6
<PAGE> 150
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
*11.1 -- Statement re computation of per share earnings.
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>
- ---------------
* Filed herewith.
All other exhibits have been previously filed.
<PAGE> 1
EXHIBIT 11.1
<TABLE>
<CAPTION>
12 MONTHS ENDED 6 MONTHS ENDED
------------------------------ -------------------
3/31/96 3/31/97 3/31/98 9/30/97 9/30/98
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Weighted average shares
outstanding
Boole
Unadjusted for exchange ratio
Basic..................... 26,071 27,133 28,061 28,010 28,135
Incremental shares from
assumed conversion of
stock options and
other................... 2,258 2,301 2,470 2,360 2,493
-------- -------- -------- -------- --------
Diluted................... 28,329 29,434 30,531 30,370 30,628
Adjusted for exchange ratio
of .675
Basic..................... 17,598 18,314 18,941 18,907 18,991
Incremental shares from
assumed conversion of
stock options and
other................... 1,524 1,554 1,668 1,593 1,683
-------- -------- -------- -------- --------
Diluted................... 19,122 19,868 20,609 20,500 20,674
BMC
Basic..................... 200,658 201,016 203,488 202,446 214,534
Incremental shares from
assumed conversion of
stock options and
other................... 8,486 13,294 13,102 13,938 13,417
-------- -------- -------- -------- --------
Diluted................... 209,144 214,310 216,590 216,384 227,951
Combined weighted average
shares outstanding
Basic..................... 218,256 219,330 222,429 221,353 233,525
Incremental shares from
assumed conversion of
stock options and
other................... 10,010 14,848 14,770 15,531 15,100
-------- -------- -------- -------- --------
Diluted................... 228,266 234,178 237,199 236,884 248,625
Pro forma net income........... $116,929 $169,552 $197,531 $ 48,214 $152,193
Pro forma earnings per share
Basic..................... $ 0.54 $ 0.77 $ 0.89 $ 0.22 $ 0.65
Diluted................... $ 0.51 $ 0.72 $ 0.83 $ 0.20 $ 0.61
</TABLE>
<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
January 6, 1999
<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 amendment No. 1 to 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 21, 1998 with respect to the
consolidated financial statements of Boole & Babbage, Inc. incorporated by
reference in its Annual Report (Form 10-K) for the year ended September 30, 1998
and the related financial statement schedule included therein, filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
San Jose, California
January 5, 1999
<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
January 6, 1999
