UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

Plaintiff, individually and on behalf of all other persons similarly situated, by his undersigned attorneys, alleges upon personal knowledge as to himself and his own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through his attorneys, which included, among other things, a review of the public documents and announcements made by defendants, and Securities and Exchange Commission ("SEC") filings, and press releases regarding BMC Software, Inc., ("BMC" or the "Company") as follows:

NATURE OF THE ACTION

1. This is a class action on behalf of all persons who purchased the common stock of BMC between April 25, 2000 and July 5, 2000 inclusive (the "Class Period"), to recover damages caused by defendants' violation of the federal securities laws. During the Class Period, defendants issued to the investing public false and misleading financial statements and press releases concerning the Company's publicly reported revenues and earnings. Moreover, the Company omitted to state material information necessary to be issued in order to make prior statements misleading.
2. In the third quarter of fiscal 2000, BMC announced that it would not meet earnings expectations. As a result of that announcement, the Company's shares fell 36% to the tune of $7 billion. BMC blamed the significant shortfall on problems with their sales force, failure to close several large potential transactions, an absence of large mainframe software deals, customer refusals to purchase due to Y2K concerns and weakness in BMC's European operations. A quarter later, BMC came back with a positive earnings surprise and the claim by President and CEO Max Watson that, "[d]uring the third quarter, the company faced an unusual set of challenges -- some of which we believe were unique to this quarter and therefore behind us."
3. Just as investors regained confidence in BMC, the Company announced that it will significantly miss earnings estimates causing the stock to lose approximately 40% of its value. The Company blamed the shortfall on slower than expected main-frame sales. This excuse, already used to explain their third quarter problems, rang hollow in light of the fact that the slowdown for computer upgrades and expansions in the main-frame market was already well known to defendants who publicly represented two months earlier that this segment remained "very strong" and "very profitable."

JURISDICTION AND VENUE

4. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§§§ 1331 and 1337, and Section 27 of the Securities Exchange Act of 1934 (the "Exchange Act") (15 U.S.C. §§ 78aa).
5. This action arises under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder (17 C.F.R. §§ 240.10b-5).
6. Venue is proper in this district pursuant to Section 27 of the Exchange Act and 28 U.S.C. § 1391(b). Many of the acts and transactions constituting the violations of law alleged herein, including the preparation and dissemination to the investing public of materially false and misleading information, occurred in this Judicial District. Defendant BMC maintains its principal place of business in this Judicial District at 2101 City West Blvd. Houston, TX 77042-2827.
7. In connection with the acts, transaction and conduct alleged herein, Defendants, directly and indirectly, used the means and instrumentalities of interstate commerce, including the United States mails, interstate telephone communications and the facilities of the national securities exchanges.

THE PARTIES

8. Plaintiff Dean Francola purchased shares of BMC common stock, as indicated in the certification attached hereto, during the Class Period and was damaged thereby.
9. Defendant BMC provides software products on a worldwide basis that purports to increase the productivity, reliability and recoverability of its customers' core information technology ("IT") operations, including their software applications and the systems on which they run. BMC's goal is to help customers improve the efficiency and productivity of their mainframe and distributed IT systems. BMC's software products address the three predominant operating environments of enterprise computing: the IBM OS/390 mainframe operating system, the various UNIX operating systems, and Microsoft's Windows NT operating system.
10. Defendant William Austin ("Austin") was at all relevant times, Senior Vice-President and Chief Financial Officer of BMC. During the Class Period, Austin sold 20,000 shares of BMC stock based on inside information reaping $872,800 in proceeds.
11. Defendant Robert Beauchamp ("Beauchamp") was at all relevant times Senior Vice President - Research and Development of BMC. During the Class Period, Beauchamp sold 12,000 shares of BMC stock based on inside information reaping $540,000 in proceeds.
12. Defendant Garland B. Cupp ("Cupp") was at all relevant times a Director of BMC. During the Class Period, Cupp sold 9,782 shares of BMC stock based on inside information reaping $426,006 in proceeds.
13. Defendant Lew Gray ("Gray") was at all relevant times a Director of BMC. During the Class Period, Gray sold 3,000 shares of BMC stock based on inside information reaping $130,320 in proceeds.
14. Defendant Brinkley Morse ("Morse") was at all relevant times Senior Vice President - Corporate Development of BMC. During the Class Period, Morse sold 50,000 shares of BMC stock based on inside information reaping $2,210,500 in proceeds.
15. Defendant Max Watson ("Watson") was at all relevant times President, Chief Executive Officer and Chairman of BMC. During the Class Period, Watson sold 120,000 shares of BMC stock based on inside information reaping $5,328,600 in proceeds.
16. Austin, Beauchamp, Cupp, Gray, Morse and Watson (collectively the "Individual Defendants") were at all relevant times during the Class Period controlling persons of BMC within the meaning of Section 20(a) of the Exchange Act. By reason of their stock ownership, management positions, and/or membership on BMC's Board, the Individual Defendants were controlling persons of BMC and had the power and influence, and exercised the same, to cause it to engage in the illegal conduct complained of herein. The Individual Defendants are liable for the false statements pleaded herein, as those statements were each "group published" information, the result of the collective action of the Individual Defendants.
17. As officers, directors and/or controlling persons of a Company whose common stock is traded on NASDAQ and governed by the provisions of the federal securities laws, the Individual Defendants each had a duty to disseminate truthful information promptly and accurately with respect to the Company's operations, products, markets, management, earnings and business prospects, to correct any previously issued statements that had become materially misleading or untrue, and to disclose any trends that would materially affect earnings and the financial results of BMC, so that the market price of the Company's publicly traded securities would be based upon truthful and accurate information.
18. Under rules and regulations promulgated by the SEC under the Exchange Act, the Individual Defendants also had a duty to report all trends, demands or uncertainties that were likely to influence: (a) BMC's liquidity; (b) BMC's net sales, revenues and/or income; and (c) previously reported financial information such that it would not be indicative of operating results. The Individual Defendants' representations during the Class Period violated these specific requirements and obligations.
19. The Individual Defendants, because of their positions with the Company, controlled and/or possessed the power and authority to control the contents of BMC's reports, press releases and presentations to the public, which information was conveyed through the investing public. Each defendant was provided with copies of the Company's reports and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected.
20. Because of their positions and access to material non-public information available to them but not to the public, each of these defendants knew or recklessly disregarded that the adverse facts specified herein had not been disclosed to, and were being concealed from, the public and that the positive representations which were being made were then materially false and misleading.
21. Defendants are also each liable as individual participants in a fraudulent scheme and course of conduct that operated as a fraud and/or deceit upon the class. Because of their executive, managerial and/or directorial positions with the Company, each of the defendants had access to the adverse, non-public information about the business, finances and future business prospects of BMC as particularized herein and acted to misrepresent, misstate or conceal such information from plaintiff and the investing public.
22. It is also appropriate to treat the defendants as a group for pleading purposes under the federal securities laws and the Federal Rules of Civil Procedure and to presume that the false and misleading information complained of herein was disseminated through the collective actions of the defendants. Defendants were involved in the drafting, producing, reviewing, and/or disseminating of the false and misleading information detailed herein, knew or recklessly disregarded that such materially misleading statements were being issued by the Company, and/or approved or ratified these statements in violation of the federal securities laws. Defendants' false and misleading statements and omissions of fact consequently had the effect of, both on their own and in the aggregate, artificially inflating the price of the common stock of BMC at all times during the Class Period.

CLASS ACTION ALLEGATIONS

23. Plaintiff brings this action as a class action pursuant to Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure on behalf of a Class consisting of all persons and entities who purchased or otherwise acquired BMC common stock from April 25, 2000 through July 5, 2000, inclusive, and who were damaged thereby. Excluded from the Class are defendants, officers and directors of the Company, members of their immediate families, and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest.
24. During the Class Period, thousands of shares of common stock of BMC were traded on an efficient and developed securities market. Thousands of brokers nationwide have access to trading information about BMC through the system. Within minutes of any transaction taking place, this system displays the most recent trades and prices.
25. The members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to plaintiff at this time and can only be ascertained through appropriate discovery, plaintiff believes that there are thousands of members of the Class. As of June 23, 2000, BMC had over 246,544,630 shares of common stock outstanding and actively traded on the NASDAQ, an efficient market, under the ticker symbol "BMCS."
26. Plaintiff's claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by defendants' wrongful conduct in violation of federal law that is complained of herein.
27. Plaintiff will fairly and adequately protect the interests of the members of the Class and have retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests that are adverse or antagonistic to those of the Class.
28. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Because the damages suffered by many individual Class members may be relatively small, the expense and burden of individual litigation make it virtually impossible for the Class members to individually seek redress for the wrongful conduct alleged herein.
29. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:
a. whether the federal securities laws were violated by defendants' acts as alleged herein;
b. whether defendants participated in and pursued the common course of conduct complained of herein;
c. whether documents, press releases and other statements disseminated to the investing public and the Company's shareholders during the Class Period misrepresented the business condition of BMC;
d. whether defendants failed to correct prior statements when subsequent events rendered those prior statements untrue or inaccurate;
e. whether defendants acted willfully or recklessly in misrepresenting and/or omitting to state material facts;
f. whether the market price of BMC's common stock during the Class Period was artificially inflated due to the misrepresentations and/or non-disclosures complained of herein; and
g. whether the members of the Class have sustained damages, and, if so, what is the proper measure thereof.
30. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that:
a. defendants made public misrepresentations or omitted material facts during the Class Period, as alleged herein;
b. the misrepresentations and/or omissions were material;
c. BMC's common stock was traded in an efficient market;
d. the misrepresentations and/or omissions alleged tended to induce reasonable investors to misjudge the value of BMC shares; and
e. plaintiff and members of the Class acquired their shares between the time defendants made the misrepresentations and/or omissions and the time the truth was revealed, without knowledge of the falsity of the misrepresentations.

NO STATUTORY SAFE HARBOR

31. The statutory safe harbor providing for forward-looking statements under certain circumstances does not apply to any of the false forward-looking statements pleaded in this Complaint. None of the forward-looking statements pleaded herein were sufficiently identified as a "forward-looking statement" when made. Nor did meaningful cautionary statements identifying important factors that could cause actual results to differ materially from that in the forward-looking statements accompany those statements. To the extent that the statutory safe harbor does apply to any forward-looking statements pleaded, the defendants are liable for those false forward-looking statements because at the time each of those statements was made, the speaker actually knew the forward-looking statement was false and the forward-looking statement was authorized and/or approved by an executive officer of BMC who actually knew that those statements were false when made.

BACKGROUND

32. Last year, BMC was considered one of the best performers on the S&P 500 with its stock appreciating nearly 81% over 12 months. All that changed on January 5, 2000 when BMC pre-announced terrible earnings for the third quarter fiscal 2000. The Company's shares fell 36%, representing a $7 billion loss to investors. BMC blamed the significant shortfall on problems with their sales force, failure to close several large potential transactions, an absence of large mainframe software deals, customer refusals to purchase due to Y2K concerns and weakness in BMC's European operations. Analysts following BMC were skeptical at BMC's explanation suggesting that the latest warning wasn't the only reason the stock price dropped dramatically. "It was the recent pattern and a loss of confidence," said Charles Hill, director of research at First Call/Thomson Financial. The Company's future was clearly in doubt. Merrill Lynch & Co. analyst Christopher Shilakes had forecast a 37% growth in licensing revenue, about $40 million more than BMC ultimately reported. The licensing division, Shilakes said in a statement quoted by Bloomberg News, is expected to be the source of future growth at the Company. "This makes the missed target even more disappointing."
33. Analysts reacted harshly to the company's announcement with a number of downgrades.
34. On January 25, 2000 BMC announced actual results. As reported by the Business Wire of that day, Defendant Watson claimed that the circumstances that led to the dramatic shortfall in 3Q were now behind them.

"During the third quarter, the company faced an unusual set of challenges --some of which we believe were unique to this quarter and therefore behind us,"said Max Watson, chairman, president and chief executive officer of BMC Software. "We believe that we have the right strategy in place and that we offer the proven products and solutions to help our valued customers meet the technology challenges of today's Internet-driven marketplace. We remain enthusiastic about the many new opportunities stemming from the widespread adoption of e-commerce applications worldwide."

"We are also pleased with the progress of the European organization, which showed significant improvement in performance this quarter," he continued. "While we continue to focus our attention on this region, we have also taken steps to strengthen our management team both in North America and internationally. We believe these measures will allow us to more effectively execute on the opportunities before us and we expect to see results from these efforts in the March quarter."

35. BMC generates revenues from license fees for its software products and maintenance fees for the associated maintenance, enhancement and support of these products. License revenue consists of product license fees and license upgrade fees.
36. The Company licenses its products in basic two ways: on a MIPS license basis or by copy. The acronym MIPS (millions of instructions per second) refers to the execution speed of large servers or mainframes, and implies the amount of work a computer can perform. MIPS licenses are commonly referred to as an enterprise license and entitle the customer to run a listed product from a vendor at a specific location. When a customer's MIPS capacity increases for a previously licensed product, BMC charges the customer a license upgrade fee. License upgrade fees are primarily generated by BMC Software's mainframe products. License upgrade fees include fees associated with a customer's current additional processing capacity and fees associated with a customer's future anticipated additional processing capacity.

37. When products are licensed on a per copy basis, license revenues from
the initial licensing of each copy of the product are considered product license fees. All revenues from the customer's licensing of the right to use a previously licensed copy on a larger computer are license upgrade fees.

SUBSTANTIVE ALLEGATIONS

38. On April 25, 2000 BMC pleasantly surprised analysts with a positive fourth quarter earnings announcement. The Company reported earnings of 49 cents a share, two cents above the street estimate. Revenues increased 23% from a year ago to $476 million. As reported by CNNFN, BMC's CFO, Bill Austin, expressed his pleasure with the Company's recent success attributing it to increases in license revenues in distributed systems. Austin also pointed out that the Company's traditional mainframe business remains "very strong" and "very profitable."

....[F]rankly we were very pleased. Our distributed systems' growth rates for the quarter just on the license revenue side, were up 46 percent versus our mainframe licenses which were only up 4 percent. But it demonstrates the shift that has been going on in this business. While our traditional business, our mainframe business is very strong and is very profitable we've been slowly shifting into the distributed systems model and the results this quarter were very gratifying to us.

Well, as you know, we really bounced back this quarter after somewhat of a disappointing third quarter, but as we look at our future we set expectations to be in excess of a 20 percent growth company both top line and bottom line. Our biggest issue is really turning ourselves much more into a marketing company. We're known in the global 2000 and we've always been in the - behind the scenes in the infrastructure and we've got to create a little bit more of a marketing buzz around what BMC really can offer. And when you look at what - where our growth is it really is in the distributed system and we've spawned a number of new businesses that, you know, outside of our traditional lines. So, it's up to us to make sure that we get our message out.

39. On April 25, 2000, BMC conducted an hour long conference call featuring commentary from defendants Watson and Austin. By all accounts, the conference call was

upbeat with virtually no negative comments about the quarter or future prospects of the Company. Defendants' comments regarding the prospects for the next fiscal year and specifically the next quarter were very positive. During that conference call the following representations were made:

Defendant Austin stated, "we expect to exceed this quarter's cash flow significantly" over the next quarter,

Defendant Watson stated that they expected to see "margin improvement", and growth of new business segments. Moreover, the problems with the sales staff have been ameliorated and the team is "jazzed and sees lots of opportunities."

Watson specifically stated that BMC has addressed and overcome the issues plaguing them in the third quarter, concluding that, "we are in so much better shape not only in closing the fourth quarter but for the new year."

40. Defendants Watson and Austin also opined positively on BMC's prospects for the next quarter and remaining fiscal year. Defendant Austin was "absolutely optimistic" and suggested surprise earnings upside. With respect to the potential loss of mainframe business, defendant Watson specifically stated that even if IBM business slows, it would not adversely impact the Company because new business will pick up the slack. He concluded boldly, claiming that BMC had a "spectacular rebound."
41. On April 26, 2000, as a direct result of representations made during the Company's conference call, BMC was upgraded by a number of analysts including: Merrill Lynch, Prudential, PaineWebber, CS First Boston and CIBC World Markets.
33. On May 2, 2000, BMC scheduled Analyst Day, which defendants used as a forum to tout BMC and to assure the market that it was a company on the mend -- one which would not issue a negative earnings surprise reminiscent of the third quarter. As reported by analysts Dane Lewis and Connie Pon of Robertson Stephens, BMC expected several new product releases and "strong revenue growth" for its various business units. The defendants told the analysts to expect growth of 22% from $1.7 billion to $2.1 billion during

the current fiscal year (BMC's fiscal year begins in April and runs through March of the next calendar year).
42. This projection and the representations made during the April 25, 2000 conference call were false and misleading when made. Unbeknownst to investors, BMC was becoming a casualty of the MIPS slowdown (i.e. the slowdown in sales for computer upgrades and expansions). Two factors were causing the "MIPS slowdown." First, mainframe customers purchased extra MIPS capacity for their systems during 1998 and 1999 in anticipation of their Y2K needs for testing applications and for storing data they feared losing in the event of a "Y2K disaster." This created a glut in mainframe computer capacity for the year 2000. Second, the current MIPS cycle from IBM, the "G7", was nearing its end, with a new cycle expected to be released in the second half of 2000. Both events were well documented and known to defendants.
43. Defendants were well aware of the MIPS slowdown. BMC had great relations with IBM, as defendant Austin disclosed in an interview transmitted to the public by Radio Wall Street on October 10, 1999. As revealed in the April 25, 2000 conference call, BMC knew that IBM was phasing out the G7 and releasing a new version of its main frame. Moreover, defendants were well aware of the Y2K issues affecting BMC's industry and the steps its customers took to mitigate the potential disaster associated with the event, including the purchase of extra MIPS capacity. BMC's projections were false and misleading when made because the MIPS slow down was affecting both initial product license fees from new customers and license upgrade fees from customers who added MIPS capacity. Simply put, companies were not purchasing MIPS, so they did not need require additional licenses from BMC.
44. At the same time, BMC was facing severe competitive pressure from, Computer Associates ("CA"), a larger software provider, which offered a suite of comparable products to those offered by BMC. This fact was never revealed in the rosy conference call. In fact, the only mention of CA was Watson's comments that the industry was now a two-horse race. He specifically would not opine on who was wining that race and said that both companies should be lauded.
45. By May, BMC's stock price had been languishing between $40-$50, never recovering from its drop subsequent to the third quarter shortfall. On May 17, 2000, in an effort to instill investor confidence in BMC and its ability to compete in the marketplace, the Company announced its Software Assurance 2000 Conference ("Assurance 2000"). "Assurance 2000 will be a global gathering of CIOs, top executives, managers and technical staff.... At Assurance 2000, IT professionals from around the world will learn how to optimize BMC Software solutions to get the most from their own people and systems. In addition, BMC Software will give participants a first look at what the company is planning for the future."

BMC Software Inc. (Nasdaq:BMCS) today announced that 120 CIOs from leading companies around the world have registered to attend the CIO session of its inaugural Assurance 2000 conference in Las Vegas, Nev., next week. A highlight of the conference, the CIO track will consist of educational, interactive sessions hosted by BMC Software executives and customers, and will focus on the technology issues professionals face today, what they can do to solve these problems and how they can optimize their BMC Software solutions.

"We've put together a very strong, very compelling agenda which will address a myriad of business issues and challenges that CIOs face in their respective environments," said Max Watson, BMC Software's chairman, president and CEO. "What these CIOs take away from Assurance 2000 will further arm them with the necessary tips, techniques, and solutions that are critical in the competitive business arena."

Following [the key note] address, three BMC Software executives -- Bob Beauchamp, senior vice president of product management and development; Jeanne Moreno, vice president and CIO; and Wayne Morris, vice president of corporate marketing -- will host a presentation entitled "Powering Speed and Change in the Digital Economy: BMC Software's Strategic Direction and Industry Trends." The executives will highlight the history of BMC Software, how the company's CIOs deal with today's technology realities, and how BMC Software's evolution of technology will pave the company's vision for tomorrow.

46. On June 2, 2000 Lehman Brothers, pursuant to information and guidance provided by defendants, released a analyst report entitled BMC Software - Building

Backlog and Bouncing Back. This report gave BMC a "buy" rating. The report noted that although there was a MIPS slow down, BMC had "guided" analysts (and the public), to "high-single-digit-growth" in its main frame business.
47. Over the next month BMC issued a steady stream of press releases relating to strategic partnerships (i.e. Segue Software, Releasenow.com, Actuate, Interland), new acquisitions (e.g. Optisystems) and new product releases (e.g. Patrol 2000 and Patrol for R/3 - Diagnose). Collectively, these releases had the effect of convincing the market that BMC had successfully overcome the problems plaguing it the third quarter and that investors could expect results similar to those posted in the fourth quarter.
48. On June 18, 2000 BMC met institutional investors in Boston, Massachusetts and confirmed that street estimates of 45-46 cents a share were on target. As reported by CIBC's analyst Melissa Eisenstat, in a report dated June 19, 2000, defendant Austin told investors that IT budgets for its customers were "huge." Furthermore, Ms. Eisenstat noted that Austin told her that several $10 million deals had already closed. Ms. Eisenstat, because of the comments of defendant Austin and the guidance he provided, was "comfortable" with her estimate of earnings of $.45 per share for the quarter ending June 30, 2000, only 11 days away.
49. Defendant Austin's comments were false and misleading because by June 18, 2000 he most assuredly knew that there was a MIPS slowdown and that BMC was suffering from its effects. He also knew that CA's competitive posture was negatively and materially affecting BMC's business.
50. As of July 2, 2000, BMC, was being followed by 24 analysts, 23 of whom gave BMC a "Buy/Hold" recommendation. According to Multex.com of that date, "[t]he investment community has a very high level of confidence in the forecast of earnings for the company."
51. Notwithstanding defendants' public assurances, in a manner reminiscent of their January announcement, on July 5, 2000, BMC shocked the market by revealing preliminary earnings well below analyst expectations. BMC stated that first quarter earnings were expected to be between 18 and 21 cents a share, significantly below company-guided analyst estimates of 46 cents a share. As reported by the Business Wire of that day, defendant Watson based the dismal earnings on a shortfall in mainframe license revenues -- a part of the business which defendant Austin claimed to be "very strong" and "very profitable nearly two months earlier and Watson stated the loss of which would not adversely impact the Company.

BMC Software Inc. (Nasdaq: BMCS) today released preliminary financial results for the first quarter of fiscal year 2001. BMC Software said its preliminary estimate of total revenues for its first quarter ended June 30, 2000 would be in a range of $365 million to $375 million.

* * *

"We depend each quarter on a high percentage of license revenue closing in the last days or day of the quarter. We experienced weakness in our mainframe business at quarter end. We attribute the shortfall in mainframe license revenues to a lack of a sufficient number of customers committing to enterprise license transactions," said Max Watson, chairman, president and chief executive officer of BMC Software. "While I am disappointed in these results, I remain confident in our employees, our customers and our solutions."

52. Pursuant to BMC's announcement the stock collapsed, falling over $14 from $35 1/2 to $21 5/16 and losing approximately 40% of its value. BMC hitting its 52 week low was subsequently downgraded by a number of analysts.
53. In a July 5, 2000 interview on RadioWallStreet.com, analyst Paul Rodriguez of CE Unterburg Towbin stated that the Company "wasn't telling anyone anything although there was weakness in the stock price." Moreover, the Company remained silent about the quarter and did not give sufficient detail about what went wrong. Rodriguez was "troubled" by BMC concluding that, "something didn't smell right to me."

DEFENDANTS' INSIDER TRADING

54. While defendants were issuing the materially false and misleading statements alleged throughout the Complaint, certain individual defendants were taking advantage of their knowledge of the adverse facts not disclosed to the public until the end of the Class Period. The extent of defendants' trades, the timing of their trades and the nature of their trading habits all establish that defendants had possession of the material adverse facts alleged herein. Specifically, the Individual Defendants sold more than 214,782 shares of the BMC stock they owned for proceeds of $9,508,226 million. The Individual Defendants sold the following amounts of BMC shares at artificially inflated prices throughout the Class Period while in possession of material non-public information that was not disclosed to the investment community at the time of such transaction:

ADDITIONAL ALLEGATIONS OF DEFENDANTS' SCIENTER

55. During the Class Period, each of the Individual Defendants, who were senior executives and/or directors of BMC were privy to confidential and proprietary information concerning BMC, its operations' finances, financial condition, products and present and future business prospects, including terms of sales, customer returns, price protection promotions, credit allowances and customer inventory levels. These defendants also had access to and knew of, or were reckless in not knowing of, material adverse non public information concerning BMC's present and future financial condition.
56. Each of the Individual Defendants was provided with copies of BMC's management reports, and press releases alleged herein to be misleading prior to, or shortly after their issuance. All of the Individual Defendants had the ability and opportunity to prevent their issuance or cause them to be corrected. As a result, each of the Individual Defendants is responsible for the accuracy of the public reports and releases detailed herein as "group published" information and are therefore responsible and liable for the representations contained therein.
57. During the Class Period, defendants directly and indirectly engaged and participated in a continuous course of conduct to misrepresent the results of BMC's operations and to conceal adverse material information regarding the finances, financial condition, and results of operations of BMC as specified herein. Defendants employed devices, schemes, and artifices to defraud, and engaged in acts, practices, and a course of conduct as herein alleged in an effort to increase and maintain an artificially high market prices for the common stock of the Company. This included the formulation, making, and/or participation in the making of untrue statements of material facts, and the omission to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, which operated as a fraud and deceit upon plaintiff and the other members of the Class.
58. The defendants are liable, jointly and severally, as direct participants in the wrongs complained of herein. Defendants had a duty promptly to disseminate accurate and truthful information with respect to BMC's products, operations, financial condition and future business prospects or to cause and direct that such information be disseminated so that the market price of BMC stock would be based on truthful and accurate information.
59. As officers, directors and/or controlling persons of a publicly held company whose common stock is registered with the SEC under the Exchange Act, traded on the NASDAQ Market System, and governed by the provisions of the Exchange Act, defendants had a duty to promptly disseminate accurate and truthful information with respect to the Company's operations, business, products, markets, management, earnings and present and future business prospects, to correct any previously issued statements from any source that had become untrue, and to disclose any trends that would materially affect earnings and the present and future financial operating results of BMC, so that the market price of the Company's publicly traded securities would be based upon truthful and accurate information.

ADDITIONAL ALLEGATIONS OF MOTIVE & OPPORTUNITY

60. Each defendant had the opportunity and motive to commit the acts alleged herein. By virtue of their positions with BMC and because of the significant reputational and monetary benefits they stood to gain from a positive public perception of BMC and as a result of artificially inflated stock prices, defendants had both the opportunity and motive to commit the acts alleged herein. Defendants were aware of BMC's true financial condition yet recklessly disregarded the limitations of the Company. The air of accomplishment and success created as a result of defendants' material misrepresentations made BMC more attractive to potential investors, and served to maintain its stock price at artificial levels.
61. Each defendant had the opportunity to commit and participate in the fraud. The Individual Defendants were the senior officers of BMC and they controlled press releases, corporate reports, communications with analysts, public filings, and the reporting of the Company's financials. Thus, these defendants controlled the public dissemination of BMC's false and misleading statements to the investing public as alleged herein which artificially inflated the price of BMC's stock.
62. Each of these defendants also had the motive to commit and participate in the fraud in order to gain pecuniary benefits. Individual Defendants have deferred their salaries or been paid in stock since 1997 directly inextricably linking their interests to BMC's stock price.
63. The Individual Defendants also participated in BMC's bonus compensation plan, which pays bonuses based in whole or in substantial part on the financial performance of the Company. In addition, each Individual Defendant was eligible, based on "substantial growth" in BMC's stock value, to receive long-term compensation awards in the form of BMC common stock and options. Each of the Individual Defendants was thus motivated to falsify BMC's reported profits during the Class Period in order to collect larger payments under the bonus and long-term compensation plans.

COUNT I

(Violations of Section 10(b) of the Exchange Act

and Rule 10-5 Promulgated Thereunder)

64. Plaintiff repeats and re-alleges the allegations above as though fully set forth herein.
65. During the Class Period, the defendants, and each of them, carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including plaintiff and the other class members, as alleged herein; (ii) artificially inflate and maintain the market price of BMC; and (iii) cause plaintiff and other members of the Class to purchase BMC securities at inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them, took the actions set forth herein.
66. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (c) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company's stock in an effort to maintain artificially high market prices for BMC securities in violation of section 10(b) of the Exchange Act and Rule 10b-5.
67. The statements made by defendants during the Class Period were materially false and misleading because at the time they were made, the Company and persons acting as corporate officers knew or recklessly ignored, but failed to disclose, the matters set forth herein.
68. In ignorance of the artificially high market prices of BMC' publicly traded securities, and relying directly on defendants or indirectly on the false and misleading statements made by defendants, upon the integrity of the market in which the securities trade, on the integrity of the regulatory process and the truth of representations made to appropriate agencies throughout the Class Period and/or on the absence of material adverse information that was known to defendants but not disclosed in public statements by defendants during the Class Period, plaintiff and the other members of the Class acquired BMC securities during the Class Period at artificially high prices and were damaged thereby.
69. Had plaintiff and the other members of the Class and the marketplace known of the true financial condition, business prospects and character of leadership of BMC which were not disclosed by defendants, plaintiff and other members of the Class would not have purchased or otherwise acquired their BMC securities during the Class Period, or would have not done so at the artificially inflated prices which they paid. Hence, plaintiff and the Class were damaged by defendants' violations of Section 10(b) and Rule 10b-5.

COUNT II

(Violation of Section 20(a) of the Exchange Act

Against the Individual Defendants)

70. Plaintiff incorporates by reference the above paragraphs above as if set forth fully herein. This Count is asserted against the Individual Defendants.
71. The Individual Defendants acted as controlling persons of BMC within the meaning of Section 20 of the Exchange Act as alleged herein. By reasons of their executive, managerial positions with BMC, defendants Austin, Beauchamp, Cupp, Gray, Morse and Watson had the power and authority to cause the Company to engage in the wrongful conduct complained of herein.
72. By reasons of the aforementioned wrongful conduct, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of their wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with purchasing the Company's securities during the Class period.
WHEREFORE, plaintiff prays for relief and judgment, as follows:
1. Determining that this action is a proper class action, certifying plaintiff as class representatives under Rule 23 of the Federal Rules of Civil Procedure and their counsel as class counsel;
2. Awarding compensatory damages in favor of plaintiff and the other class members against all defendants, jointly and severally, for all damages sustained as a result of defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;
3. Awarding plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and
4. Such other and further relief as the Court may deem just and proper.

PLAINTIFF DEMANDS A TRIAL BY JURY

1 Profits reflect an average stock price during that period.

Dated: August 1, 2000

HOEFFNER BILEK & EIDMAN LLP

Thomas E. Bilek, Esq.

440 Louisiana Street, Suite 720

Houston, Texas 77002

Tel: (713) 227-7720

WOLF HALDENSTEIN ADLER FREEMAN

& HERZ

Fred Taylor Isquith, Esq.

Brian S. Cohen, Esq.

270 Madison Avenue

New York, New York 10016

Tel: (212) 545-4600

LAW OFFICES OF CHARLES J.

PIVEN, P.A.

Charles J. Piven, Esq.

The World Trade Center

401 East Pratt Street, Suite 2525

Baltimore, MD 21202

Tel: (410) 332-0030

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