Document:

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                                                                    EXHIBIT 10.2

                     FORM OF EXECUTIVE EMPLOYMENT AGREEMENT

         This Employment Agreement (this "Agreement") is made as of April 26,
2000 (the "Effective Date"), by and between BMC Software, Inc., a Delaware
corporation (the "Employer"), and ______________, an individual resident of
Houston, Texas (the "Executive"). The Employer and the Executive are each a
"party" and are together "parties" to this Agreement.

                                    RECITALS

         WHEREAS, the Employer desires to employ the Executive, and the
Executive wishes to accept such employment, upon the terms and conditions set
forth in this Agreement.

                                    AGREEMENT

         NOW THEREFORE, in consideration of the employment compensation to be
paid to the Executive and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, agree as follows:

1.       DEFINITIONS

         For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.

         "AGREEMENT" refers to this Employment Agreement, including all Exhibits
attached hereto, as amended from time to time.

         "BENEFITS" as defined in Section 3.1(b).

         "BOARD OF DIRECTORS" refers to the board of directors of the Employer.

         "CHANGE OF CONTROL" refers to (i) the acquisition of at least 50% of
Employer's outstanding voting stock; (ii) an unapproved change in the majority
of the Employer's board of directors; (iii) a merger, consolidation, or similar
corporate transaction in which the Company's shareholders immediately prior to
the transaction do not own more than 60% of the voting stock of the surviving
corporation in the transaction; and (iv) shareholder approval of the company's
liquidation, dissolution, or sale or substantially all of its assets.

         "CONFIDENTIAL INFORMATION" means any and all:

                  (a) trade secrets (as defined herein) concerning the business
         and affairs of the Employer, product specifications, data, know-how,
         formulae, compositions, processes, designs, sketches, photographs,
         graphs, drawings, samples, inventions and ideas, past, current, and
         planned research and development, current and planned manufacturing or
         distribution methods and processes, customer lists, current and
         anticipated customer requirements, price lists, market studies,
         business plans, computer software and programs (including object code
         and source code), computer software and database technologies, systems,
         structures, and architectures (and related formulae, compositions,
         processes, improvements, devices, know-how, inventions, discoveries,
         concepts, ideas, designs,

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         methods and information), and any other information, however
         documented, that is a trade secret;

                  (b) information concerning the business and affairs of the
         Employer (which includes historical financial statements, financial
         projections and budgets, historical and projected sales, capital
         spending budgets and plans, the names and backgrounds of key personnel,
         personnel training and techniques and materials), however documented;
         and

                  (c) notes, analysis, compilations, studies, summaries, and
         other material prepared by or for the Employer containing or based, in
         whole or in part, on any information included in the foregoing.

         "DISABILITY" as defined in Section 6.2.

         "EFFECTIVE DATE" is the date stated in the first paragraph of the
Agreement.

         "EMPLOYEE INVENTION" shall mean any idea, invention, technique,
modification, process, or improvement (whether patentable or not), any
industrial design (whether registerable or not), any mask work, however fixed or
encoded, that is suitable to be fixed, embedded or programmed in a semiconductor
product (whether recordable or not), and any work of authorship (whether or not
copyright protection may be obtained for it) created, conceived, or developed by
the Executive, either solely or in conjunction with others, during the
Employment Period, or a period that includes a portion of the Employment Period,
that relates in any way to, or is useful in any manner in, the business then
being conducted or proposed to be conducted by the Employer, and any such item
created by the Executive, either solely or in conjunction with others, following
termination of the Executive's employment with the Employer, that is based upon
or uses Confidential Information.

         "EMPLOYMENT PERIOD" is the term of the Executive's employment under
this Agreement.

         "FISCAL YEAR" shall mean the Employer's fiscal year, which shall end on
March 31 of each year, or as changed from time to time.

         "FOR CAUSE" as defined in Section 6.3.

         "GOOD REASON" as defined in Section 6.3.

         "PERSON" is any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.

         "PROPRIETARY ITEMS" as defined in Section 7.2(a)(iv).

         "SALARY" as defined in Section 3.1(a).

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         "TRADE SECRETS" shall mean the whole or any part of any scientific or
technical information, design, process, procedure, formula, or improvement that
has value and that the owner has taken measures to prevent from becoming
available to persons other than those selected by the owner to have access for
limited purposes.

2.       EMPLOYMENT TERMS AND DUTIES

         2.1      EMPLOYMENT

         The Employer hereby employs the Executive, and the Executive hereby
accepts employment by the Employer, upon the terms and conditions set forth in
this Agreement.

         2.2      EMPLOYMENT PERIOD

         Subject to the provisions of Section 6, the term of the Executive's
employment under this Agreement will commence upon the Effective Date and end on
that date which is the fourth anniversary of the Effective Date, unless sooner
terminated pursuant to the terms of this Agreement (the "Employment Period").
The Employment Period may be extended by mutual agreement of the parties.

         2.3      DUTIES

         The Executive will have such duties as are assigned or delegated to the
Executive by the Board of Directors, and will initially serve as the Employer's
____________. The Executive will devote his entire business time, attention,
skill, and energy exclusively to the business of the Employer, will use his best
efforts to promote the success of the Employer's business, and will cooperate
fully with the Board of Directors in the advancement of the best interests of
the Employer. The Executive's employment will be subject to the policies
maintained and established by the Employer, from time to time. Nothing in this
Section 2.3, however, will prevent the Executive from engaging in additional
activities in connection with passive personal investments and community affairs
that are not inconsistent with the Executive's duties under this Agreement.
Additionally, nothing in this Section 2.3 will prevent the Executive from
serving on the Board of Directors of other companies or organizations, or
engaging in other activities, so long as such participation does not conflict
with the interests or business of Employer or require such involvement as to
interfere with the performance of the Executive's duties hereunder and has been
expressly approved by the Chief Executive Officer of Employer. If the Executive
is elected as a director of the Employer or as a director or officer of any of
its affiliates, the Executive will fulfill his duties as such director or
officer without additional compensation. The Executive acknowledges and agrees
that he owes a fiduciary duty of loyalty, fidelity and allegiance to act at all
times in the best interests of the Employer.

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3.       COMPENSATION

         3.1      COMPENSATION

                  (a) Salary. During the Employment Period, the Executive will
         be paid an annual base salary of ________ (the "Salary"), which will be
         payable in twenty-four (24) equal installments according to the
         Employer's customary payroll practices. Executive may be subject to
         such increases in Salary as deemed appropriate in the sole discretion
         of the Compensation Committee of the Board of Directors of Employer.

                  (b) Benefits. The Executive will, during the Employment
         Period, be permitted to participate in such pension, profit sharing,
         life insurance, hospitalization, major medical, and other employee
         benefit plans of the Employer that may be in effect from time to time,
         to the extent the Executive is eligible under the terms of those plans
         (collectively, the "Benefits").

                  (c) Stock Options. The Executive will, upon execution of this
         Agreement, receive the right and option to purchase _______ shares of
         stock of the Employer, such options to be subject to the terms and
         conditions of the BMC Software, Inc. 1994 Employee Incentive Plan and
         the Executive Stock Option Agreement.

                  (d) Restricted Stock. Executive will, upon execution of this
         Agreement, be presented with ______ of restricted stock of the
         Employer, subject to the terms and conditions of the Restricted Stock
         Agreement.

                  (e) Cash Bonus. Executive will be eligible for a cash bonus
         based as described in Attachment A incorporated in herein by reference.

4.       FACILITIES AND EXPENSES

         4.1      FACILITIES.

         The Employer will furnish the Executive office space, equipment,
supplies, and such other facilities and personnel as the Employer deems
necessary or appropriate for the performance of the Executive's duties under
this Agreement.

         4.2      EXPENSES.

         The Employer will pay on behalf of the Executive (or reimburse the
Executive for) reasonable expenses incurred by the Executive at the request of,
or on behalf of, the Employer in the performance of the Executive's duties
pursuant to this Agreement, and in accordance with the Employer's employment
policies, including reasonable

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expenses incurred by the Executive in attending business meetings, in
appropriate business entertainment activities, and for promotional expenses. The
Executive must file expense reports with respect to such expenses in accordance
with the Employer's policies then in effect.

5.       VACATIONS AND HOLIDAYS

         The Executive will be entitled to paid vacation during the term of the
Agreement in accordance with the vacation policies of the Employer in effect for
its employees from time to time. The Executive will also be entitled to the paid
holidays and other paid leave set forth in the Employer's policies.

6.       TERMINATION

         6.1      EVENTS OF TERMINATION

         The Employment Period, the Executive's Salary and any and all other
rights of the Executive under this Agreement or otherwise as an employee of the
Employer will terminate (except as otherwise provided in this Section 6):

                  (a) upon the death of the Executive;

                  (b) upon the Disability (as defined in Section 6.2) of the
         Executive immediately upon notice from either party to the other;

                  (c) upon termination by the Employer for cause (as defined in
         Section 6.3);

                  (d) upon the voluntary retirement from or voluntary
         resignation of employment by the Executive for any reason other than
         those set forth in Section 6.1(f) below;

                  (e) upon termination by the Employer for any reason other than
         those set forth in Section 6.1(a) through 6.1(d) above; or

                  (f) upon voluntary resignation of employment by the Executive
         within 60 days of the occurrence of an event that constitutes Good
         Reason, as defined in Section 6.3 below.

         Upon termination of the Employment Period, as provided above or
otherwise, Executive's rights respecting Benefits, Stock Options, Restricted
Stock and Cash Bonus will be determined under the applicable plan or program
providing the same.

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         6.2      DEFINITION OF DISABILITY

         For purposes hereof, the term "Disability" shall mean an incapacity by
accident, illness or other circumstance which renders the Executive mentally or
physically incapable of performing the duties and services required of the
Executive hereunder on a full-time basis for a period of at least 180
consecutive days.

         6.3      DEFINITION OF "FOR CAUSE" AND "GOOD REASON"

                  (a) For purposes of Section 6.1, the phrase "for cause" means:
         (i) the Executive's continued and material failure to perform his
         obligations under this Agreement; (ii) the Executive's material failure
         to adhere to any Employer policy or code of conduct; (iii) the
         appropriation (or attempted appropriation) of a material business
         opportunity of the Employer, including attempting to secure or securing
         any personal profit in connection with any transaction entered into on
         behalf of the Employer; (iv) the Executive's engaging in conduct that
         is materially injurious to the Employer, (v) the misappropriation (or
         attempted misappropriation) of any of the Employer's funds or property;
         (vi) the conviction of, the indictment for (or its procedural
         equivalent), or the entering of a guilty plea or plea of no contest
         with respect to, a felony, the equivalent thereof, or any other crime
         with respect to which imprisonment is a punishment or; (vii) the
         conviction of the Executive by a court of competent jurisdiction of a
         crime involving moral turpitude. The determination of whether the
         Executive's employment is terminated for cause shall be made solely by
         the Employer, which shall act in good faith in making such
         determination.

                  (b) "Good Reason" means:

                         (1) The occurrence, prior to a Change of Control or
                  after the date which is 12 months after a Change of Control
                  occurs, of any one or more of the following events without the
                  Executive's express written consent: (i) a significant change
                  in the Executive's reporting responsibilities, titles or
                  offices from those previously applicable to the Executive;
                  (ii) a reduction in the Executive's Salary from that provided
                  to him immediately on the Effective Date of this Agreement (or
                  the effective date of any extension of this Agreement pursuant
                  to Paragraph 7(a)) or as the same may be increased from time
                  to time; or (iii) a diminution in employee benefits (including
                  but not limited to medical, dental, life insurance and
                  long-term disability plans) and perquisites applicable to the
                  Executive from those substantially similar to the employee
                  benefits and perquisites provided by the Employer (including
                  subsidiaries) to executives with comparable duties; or

                         (2) The occurrence, within 12 months after the date
                  upon which a Change of Control occurs, of any one or more of
                  the following events without Executive's express written
                  consent: (i) a change in Executive's reporting
                  responsibilities, titles or offices as in effect immediately
                  prior to the Change of Control or any removal of Executive
                  from, or any failure to re-elect Executive to, any of such
                  positions which has the effect of diminishing Executive's
                  responsibility or authority; (ii) a reduction by the Employer
                  or a subsidiary thereof in Executive's Salary as in effect
                  immediately prior to the Change of Control or as the same may
                  be increased from time to time or a change in the eligibility
                  requirements or performance criteria under any bonus,
                  incentive or

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                  compensation plan, program or arrangement under which
                  Executive is covered immediately prior to the Change of
                  Control which adversely affects Executive; (iii) the Employer
                  or a subsidiary thereof requiring Executive to be permanently
                  based anywhere other than within 50 miles of Executive's job
                  location at the time of the Change of Control; (iv) without
                  replacement by a plan providing benefits to Executive equal to
                  or greater than those discontinued, the failure by the
                  Employer or a subsidiary thereof to continue in effect, within
                  its maximum stated term, any pension, bonus, incentive, stock
                  ownership, purchase, option, life insurance, health, accident,
                  disability, or any other employee benefit plan, program or
                  arrangement in which Executive is participating at the time of
                  the Change of Control, or the taking of any action by the
                  Employer or a subsidiary thereof that would adversely affect
                  Executive's participation or materially reduce Executive's
                  benefits under any of such plans; (v) the taking of any action
                  by the Employer or a subsidiary thereof that would materially
                  adversely affect the physical conditions existing at the time
                  of the Change of Control in or under which Executive performs
                  his employment duties; (vi) if Executive's primary employment
                  duties are with a subsidiary of the Employer, the sale,
                  merger, contribution, transfer or any other transaction in
                  conjunction with which the Employer's ownership interest in
                  the subsidiary decreases below a majority interest; or (vii)
                  any material variance from the terms of this Agreement by the
                  Employer or a subsidiary thereof.

         6.4      SEVERANCE

         Should the Executive's employment with the Employer be terminated
during the Employment Period pursuant to Section 6.1(e) or Section 6.1(f) above,
the Executive shall be entitled to:

                  (a) a payment equal to __ years of his then current Salary;
         and

                  (b) a payment equal to the average of the yearly cash bonus
         amounts received by him in each of the __ years preceding the year of
         termination provided he held his current position as of the end of each
         such year;

         Such payments under this section will be made no later than 30 days
following the termination from employment. Severance payments do not constitute
continued employment beyond the termination date.

         6.5      CHANGE OF CONTROL

         If, within 12 months of a Change of Control, the Executive's position
is eliminated or the Executive is terminated pursuant to Section 6.1(e) or
6.1(f) above, regardless of whether such termination event occurs during or
after the Employment Period, the Executive shall be entitled to the following in
lieu of the amounts set forth in Section 6.4:

                  (a) a payment equal to __ years of his then current Salary;

                  (b) a payment equal to the average of the yearly cash bonus
         amounts received by him in each of the __ years preceding the year of

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         termination, provided the Executive held his current position as of the
         end of each such year;

                  (c) potential vesting of Executive's Stock Option award
         pursuant to Section 3.1 (c) above, subject to the terms and conditions
         of the Executive Stock Option Agreement;

                  (d) potential vesting of his Restricted Stock award pursuant
         to Section 3.1 (d) above, subject to the terms and conditions of the
         Restricted Stock AgreemenT evidencing such award;

                  (e) continued medical and life insurance benefits at no cost
         to the Executive, for the Executive and his dependents (including his
         spouse) who were covered as of such termination event under the medical
         and life insurance benefit plan as in effect for employees of the
         Employer during the coverage period, or the substantial equivalence,
         for 18 months or until such time that he is re-employed and is provided
         medical and life insurance benefits (which coverage shall be promptly
         reported to the Employer by the Executive) whichever is sooner.

         Severance payments do not constitute continued employment beyond the
termination date.

         6.6      NO MITIGATION

         Any remuneration received by the Executive from a third party following
the Employment Period shall not apply to reduce the Employer's obligations to
make payments hereunder.

         6.7      LIQUIDATED DAMAGES

         Due to the difficulties in estimating damages for an early termination
of the Employment Period, the Employer and the Executive agree that the
payments, if any, to be received by the Executive hereunder shall be received as
liquidated damages.

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7.       NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS

         7.1      ACKNOWLEDGMENTS BY THE EXECUTIVE

         The Executive acknowledges that (a) prior to and during the Employment
Period and as a part of his employment, the Executive has been and will be
afforded access to Confidential Information; (b) public disclosure of such
Confidential Information could have an adverse effect on the Employer and its
business; (c) because the Executive possesses substantial technical expertise
and skill with respect to the Employer's business, the Employer desires to
obtain exclusive ownership of each Employee Invention, and the Employer will be
at a substantial competitive disadvantage if it fails to acquire exclusive
ownership of each Employee Invention; and (d) the provisions of this Section 7
are reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Employer with exclusive ownership of
all Employee Inventions.

         7.2      AGREEMENTS OF THE EXECUTIVE

         In consideration of the compensation and benefits to be paid or
provided to the Executive by the Employer under this Agreement, the Executive
covenants the following:

                  (a) Confidentiality.

                      (i)    The Executive will hold in confidence the
                             Confidential Information and will not disclose it
                             to any person except with the specific prior
                             written consent of the Employer or except as
                             otherwise expressly permitted by the terms of this
                             Agreement.

                      (ii)   Any trade secrets of the Employer will be entitled
                             to all of the protections and benefits under any
                             applicable law. If any information that the
                             Employer deems to be a trade secret is found by a
                             court of competent jurisdiction not to be a trade
                             secret for purposes of this Agreement, such
                             information will, nevertheless, be considered
                             Confidential Information for purposes of this
                             Agreement. The Executive hereby waives any
                             requirement that the Employer submit proof of the
                             economic value of any trade secret or post a bond
                             or other security.

                      (iii)  None of the foregoing obligations and restrictions
                             applies to any part of the Confidential Information
                             that the Executive demonstrates was or became
                             generally available to the public other than as a
                             result of a disclosure by the Executive.

                      (iv)   The Executive will not remove from the Employer's
                             premises (except to the extent such removal is for
                             purposes of the performance of the Executive's
                             duties at home or while traveling, or except as
                             otherwise specifically authorized by the Employer)
                             any document, record, notebook, plan, model,
                             component, device, or computer software or code,
                             whether embodied in a disk or in any other form
                             (collectively, the "Proprietary Items"). The
                             Executive recognizes that, as between the Employer
                             and the Executive, all of the Proprietary Items,
                             whether or not developed by the Executive, are the
                             exclusive property of the Employer. Upon
                             termination

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                             of this Agreement by either party, or upon the
                             request of the Employer during the Employment
                             Period, the Executive will return to the Employer
                             all of the Proprietary Items in the Executive's
                             possession or subject to the Executive's control,
                             and the Executive shall not retain any copies,
                             abstracts, sketches, or other physical embodiment
                             of any of the Proprietary Items.

                  (b) Employee Inventions. Each Employee Invention will belong
         exclusively to the Employer. The Executive acknowledges that all of the
         Executive's writing, works of authorship, and other Employee Inventions
         are works made for hire and the property of the Employer, including any
         copyrights, patents, or other intellectual property rights pertaining
         thereto. If it is determined that any such works are not works made for
         hire, the Executive hereby assigns to the Employer all of the
         Executive's right, title, and interest, including all rights of
         copyright, patent, and other intellectual property rights, to or in
         such Employee Inventions. The Executive covenants that he will
         promptly:

                      (i)    disclose to the Employer in writing any Employee
                             Invention;

                      (ii)   assign to the Employer or to a party designated by
                             the Employer, at the Employer's request and without
                             additional compensation, all of the Executive's
                             right to the Employee Invention for the United
                             States and all foreign jurisdictions;

                      (iii)  execute and deliver to the Employer such
                             applications, assignments, and other documents as
                             the Employer may request in order to apply for and
                             obtain patents or other registrations with respect
                             to any Employee Invention in the United States and
                             any foreign jurisdictions;

                      (iv)   sign all other papers necessary to carry out the
                             above obligations; and

                      (v)    give testimony and render any other assistance in
                             support of the Employer's rights to any Employee
                             Invention.

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                  (c) Notice of Intent to Resign. Executive agrees to provide
         Employer with 90 days advance notice of his intention to resign
         ("Notice Period"). During the Notice Period, Executive shall continue
         in the diligent fulfillment of all duties of his position and this
         Agreement. Should Executive fail to provide Employer with the full
         Notice Period, Executive shall forfeit that portion of his earned
         pro-rata yearly cash bonus as follows:

                  (90 - (number of full days of advance notice) / 90) X(times)
         pro-rata earned yearly cash bonus = amount forfeited by Executive.

                  Pro-rata earned yearly cash bonus is: (unconditional portion
         of yearly cash bonus, if any, targeted for Executive in the current
         Fiscal Year) / (number of full months worked in the current Fiscal
         Year / 12).

                  (d) NonDisparagement. Executive shall not disparage the
         Employer or any of its shareholders, directors, officers, employees, or
         agents.

                  (e) Creative Works. Executive shall not create, assist with or
         consult on any creative works which discuss, describe or reference
         Employer or any executive of Employer. Creative works includes but is
         not limited to novels, nonfiction writings, any authored work, plays,
         screenplays, musicals or the like.

         7.3      DISPUTES OR CONTROVERSIES

         The Executive recognizes that should a dispute or controversy arising
from or relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained in
secrecy and will be available for inspection by the Employer, the Executive, and
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.

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8.       NON-COMPETITION AND NON-INTERFERENCE

         8.1      ACKNOWLEDGMENTS BY THE EXECUTIVE

         The Executive acknowledges that: (a) the services to be performed by
him under this Agreement are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the Employer's business is international in scope
and its products are marketed throughout the United States and the world; (c)
the Employer competes with other businesses that are or could be located in any
part of the United States or the world; (d) the provisions of this Section 8 are
reasonable and necessary to protect the Employer's business; and (e) in
connection with the fulfillment of his duties hereunder and as an employee of
the Employer, the Employer will provide Executive with Confidential Information
necessitating the execution of the covenants contained in this Section 8.

         8.2      COVENANTS OF THE EXECUTIVE

         In consideration of the acknowledgments by the Executive, and in
consideration of the compensation and benefits to be paid or provided to the
Executive by the Employer, the Executive covenants that during and for two (2)
years following the Employment Period he will not, directly or indirectly:

                  (a) except in the course of his employment hereunder, engage
         or invest in, own, manage, operate, finance, control, or participate in
         the ownership, management, operation, financing, or control of, be
         employed by, associated with, or in any manner connected with, lend the
         Executive's name or any similar name to, lend Executive's credit to or
         render services or advice to, any business whose products or activities
         compete in whole or in part with the products or activities of the
         Employer anywhere in the world, provided, however, that the Executive
         may purchase or otherwise acquire up to (but not more than) five
         percent (5%) of any class of securities of any enterprise (but without
         otherwise participating in the activities of such enterprise) if such
         securities are listed on any national or regional securities exchange
         or have been registered under Section 12(g) of the Securities Exchange
         Act of 1934, as amended;

                  (b) whether for the Executive's own account or for the account
         of any other person, solicit business of the same or similar type being
         carried on by the Employer, from any person known by the Executive to
         be a customer or a potential customer of the Employer, whether or not
         the Executive had personal contact with such person during and by
         reason of the Executive's employment with the Employer;

                  (c) whether for the Executive's own account or the account of
         any other person, (i) solicit, employ, or otherwise engage as an
         employee, independent contractor, or otherwise, any person who is an
         employee (or

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         was an employee within two (2) years of the date in question) of the
         Employer at any time during the Employment Period or in any manner
         induce or attempt to induce any employee of the Employer to terminate
         his employment with the Employer; or (ii) interfere with the
         Employer's relationship with any person, including any person who at
         any time during the Employment Period was an employee, contractor,
         supplier, or customer of the Employer; or

         If any covenant in this Section 8.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.

         The period of time applicable to any covenant in this Section 8.2 will
be extended by the duration of any violation by the Executive of such covenant.

9.       GENERAL PROVISIONS

         9.1      INJUNCTIVE RELIEF AND ADDITIONAL REMEDY

         The Executive acknowledges that the injury that would be suffered by
the Employer as a result of a breach of the provisions of this Agreement
(including any provision of Sections 7 and 8) would be irreparable and that an
award of monetary damages to the Employer for such a breach would be an
inadequate remedy. Consequently, the Employer will have the right, in addition
to any other rights it may have, to obtain injunctive relief to restrain any
breach or threatened breach or otherwise to specifically enforce any provision
of this Agreement, and the Employer will not be obligated to post bond or other
security in seeking such relief.

         9.2      COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT
                  COVENANTS

         The covenants by the Executive in Sections 7 and 8 are essential
elements of this Agreement, and without the Executive's agreement to comply with
such covenants, the Employer would not have entered into this Agreement or
employed the Executive. The Employer and the Executive have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by the Employer.

         If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 7 and 8.

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         9.3      REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE

         The Executive represents and warrants to the Employer that the
execution and delivery by the Executive of this Agreement do not, and the
performance by the Executive of the Executive's obligations hereunder will not,
with or without the giving of notice or the passage of time, or both: (a)
violate any judgment, writ, injunction, or order of any court, arbitrator, or
governmental agency applicable to the Executive; or (b) conflict with, result in
the breach of any provisions of or the termination of, or constitute a default
under, any agreement to which the Executive is a party or by which the Executive
is or may be bound. The Executive further specifically represents and warrants
that he is not subject to, nor will he violate, any agreement not to compete
upon the execution and delivery by him of this Agreement.

         The Executive represents and warrants that he will not utilize or
divulge any proprietary materials or information from his previous employers.

         9.4      OBLIGATIONS CONTINGENT ON PERFORMANCE

          The obligations of the Employer hereunder, including its obligation to
pay the compensation provided for herein, are contingent upon the Executive's
performance of the Executive's obligations hereunder.

         9.5      WAIVER

         The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.

         9.6      BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED

         This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective successors, assigns, heirs, and
legal representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated or assigned.

                                       14
<PAGE>   15

         9.7      NOTICES

         All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested and signed for by the party required
to receive notice, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case to the appropriate addresses and facsimile numbers set forth below (or to
such other addresses and facsimile numbers as a party may designate by notice to
the other parties):

         If to Employer:

         BMC Software, Inc.
         2101 CityWest Blvd
         Houston, Texas 77042
         Telephone No.: (713) 918-8800
         Facsimile No.: (713) 918-8000
         Attn: President

         If to the Executive:

         9.8      ENTIRE AGREEMENT; AMENDMENTS

         Except as provided in (a) plans and programs of the Employer referred
to in Sections 3.1(b) through (e), and (b) any signed written agreement
contemporaneously or hereafter executed by the Employer and the Executive, this
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, between the parties hereto with respect to the subject matter
hereof. Notwithstanding the foregoing, this Agreement shall not be construed to
supersede any stock option agreements or restricted stock agreements entered
into between Executive and Employer at any time prior to the execution of this
Agreement. This Agreement may not be amended orally, but only by an agreement in
writing signed by the parties hereto.

         9.9      GOVERNING LAW

         THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

                                       15
<PAGE>   16

         9.10     ARBITRATION

         In the event that there shall be any dispute arising out of or in any
way relating to this Agreement, the contemplated transactions, any document
referred to or incorporated herein by reference or centrally related to the
subject matter hereof, or the subject matter of any of the same, the parties
covenant and agree as follows:

                  (a) The parties shall first use their reasonable best efforts
         to resolve such dispute among themselves, with or without mediation.

                  (b) If the parties are unable to resolve such dispute among
         themselves, such dispute shall be submitted to binding arbitration in
         Houston, Texas, under the auspices of, and pursuant to the rules of,
         the American Arbitration Association's Commercial Arbitration Rules as
         then in effect, or such other procedures as the parties may agree to at
         the time, before a tribunal of three (3) arbitrators, one of which
         shall be selected by the Executive, one of which shall be selected by
         the Employer, and the third of which shall be selected by the two (2)
         arbitrators so selected. Any award issued as a result of such
         arbitration shall be final and binding between the parties, and shall
         be enforceable by any court having jurisdiction over the party against
         whom enforcement is sought. A ruling by the arbitrators shall be
         non-appealable. The parties agree to abide by and perform any award
         rendered by the arbitrators. If either the Executive or Employer seeks
         enforcement of the terms of this Agreement or seeks enforcement of any
         award rendered by the arbitrators, then the prevailing party
         (designated by the arbitrators) to such proceeding(s) shall be entitled
         to recover its costs and expenses (including applicable travel
         expenses) from the non-prevailing party, in addition to any other
         relief to which it may be entitled. If a dispute arises and one party
         fails or refuses to designate an arbitrator within thirty (30) days
         after receipt of a written notice that an arbitration proceeding is to
         be held, then the dispute shall be resolved solely by the arbitrator
         designated by the other party and such arbitration award shall be as
         binding as if three (3) arbitrators had participated in the arbitration
         proceeding. Either the Executive or the Employer may cause an
         arbitration proceeding to commence by giving the other party notice in
         writing of such arbitration. Executive and the Employer covenant and
         agree to act as expeditiously as practicable in order to resolve all
         disputes by arbitration. Notwithstanding anything in this section to
         the contrary, neither Executive nor the Employer shall be precluded
         from seeking court action in the event the action sought is either
         injunctive action, a restraining order or other equitable relief. The
         arbitration proceeding shall be held in English.

                  (c) Legal process in any action or proceeding referred to in
         the preceding section may be served on any party anywhere in the world.

                                       16
<PAGE>   17

                  (d) Except as expressly provided herein and except for
         injunctions and other equitable remedies that are required in order to
         enforce this Agreement, no action may be brought in any court of law
         and EACH OF THE PARTIES WAIVES ANY RIGHTS THAT IT MAY HAVE TO BRING A
         CAUSE OF ACTION IN ANY COURT OR IN ANY PROCEEDING INVOLVING A JURY TO
         THE MAXIMUM EXTENT PERMITTED BY LAW. Each party acknowledges that it
         has been represented by legal counsel of its own choosing and has been
         advised of the intent, scope and effect of this Section 9.10 and has
         voluntarily entered into this Agreement and this Section 9.10.

                  (e) Excluded from this Section 9.10 are any claims for
         temporary injunctive relief to enforce Sections 7 and 8 of this
         Agreement.

         9.11     SECTION HEADINGS, CONSTRUCTION

         The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.

         9.12     SEVERABILITY

         If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

         9.13     COUNTERPARTS

         This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.

         9.14     WAIVER OF JURY TRIAL

         THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH
RESPECT TO THIS AGREEMENT.

         9.15     WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS

         The Employer may withhold from any payments and benefits made pursuant
to this Agreement all federal, state, city, and other taxes as may be required
pursuant to any law or governmental

                                       17
<PAGE>   18

regulation or ruling and all other normal deductions made with respect to the
Employer's employees generally.

         IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.

                                    EMPLOYER:

                                    BMC Software, Inc.

                                    By:
                                        ---------------------------------------

                                    Name:
                                    Title:

                                    EXECUTIVE:

                                    -------------------------------------------

                                       18
<PAGE>   19

Executed copies of Executive Employment Agreements with Max Watson, William
Austin, Robert Beauchamp and Darroll Buytenhuys have been omitted. The following
schedule sets forth the material details in which such executed copies differ
from the Form of Executive Employment Agreement.

<TABLE>
<CAPTION>
Item                  Max Watson         William Austin     Robert Beauchamp      Darroll Buytenhuys
----                  ----------        ---------------     ----------------      ------------------

<S>                   <C>                <C>                <C>                   <C>
Duties                Chairman,          Sr. VP             Sr. VP -- PM&D        Sr. VP -- Field Ops,
                      President and      and CFO                                  International
                      CEO

Salary                $610,000           $375,000           $430,000              $240,000

Stock Options         1,000,000          115,000            115,000               50,000

Restricted Stock      N/A                75,000             75,000                40,000

Severance:
  Salary Payment      3 years            2 years            2 years               2 years
  Bonus Payment       2 year average     3 year average     3 year average        3 year average

Change of Control:
  Salary Payment      3 years            2 years            2 years               2 years
  Bonus Payment       2 year average     3 year average     3 year average        3 year average
</TABLE>

                                       19<PAGE>   1
                                                                   EXHIBIT 10.46

             THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
                           AND MODIFICATION AGREEMENT

         This Third Amendment to Forbearance and Extension Agreement and
Modification Agreement (the "AMENDMENT") by and among the undersigned entities
identified as Bank and Obligors is entered into effective this 31st day of July,
2000 (the "AMENDMENT EFFECTIVE DATE").

                                    RECITALS:

         WHEREAS, Bank and Obligors are parties to a Forbearance and Extension
Agreement dated as of May 31, 2000, as amended by the First Amendment to
Forbearance and Extension Agreement dated as of June 15, 2000 and as amended by
the Second Amendment to Forbearance and Extension Agreement dated as of June 30,
2000 (the "Forbearance Agreement"); and

         WHEREAS, Bank and Obligors have agreed, on the terms and conditions
herein set forth, that the Forbearance Agreement be amended in certain respects:

         NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, IT IS AGREED:

         1. Definitions. Terms used herein which are defined in the Forbearance
Agreement shall have the same meanings when used herein unless otherwise
provided herein.

         2. Amendments to Forbearance Agreement. On and after the Amendment
Effective Date, the Forbearance Agreement shall be amended as follows:

         (a) Paragraph 1 of the Forbearance Agreement is hereby amended to read
in its entirety as follows:

                  1. At the specific request of the Obligors, Bank hereby agrees
         to forbear from exercising any remedy available to Bank upon the
         occurrence of any Event of Default or Default (as such terms are
         defined in the Loan Agreement described and identified on SCHEDULE 1
         hereof, as are all defined terms used herein unless otherwise
         specifically defined herein) existing as of the date hereof under the
         Loan Documents (described and identified on SCHEDULE 1 hereto) until
         the earlier of (a) a Triggering Event (hereinafter defined) or (b)
         August 31, 2000 (the earlier of which to occur is herein referred to as
         the Termination Date).

         (b) Paragraph 2 of the Forbearance Agreement is hereby amended to read
in its entirety as follows:

                  2. Without in any way waiving any existing Event of Default
         and at the request of the Obligors, Bank hereby agrees to extend the
         Maturity Date of the Obligations from July 31, 2000 to the earlier of
         August 31, 2000 or the occurrence of a Triggering Event.

         3. Amendments to Loan Documents. As a material inducement to Bank to
enter into this Amendment each of the Obligors, notwithstanding anything to the
contrary contained in any Loan Document, hereby agree that effective as of the
Amendment Effective Date:

THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
AND MODIFICATION AGREEMENT - Page 1

<PAGE>   2

                  (a) the interest rate payable with respect to the Loans shall
         be equal to the lesser of the Ceiling Rate or the Base Rate plus three
         and one-half percent (3.5%);

                  (b) on the Termination Date, Obligors shall pay to Bank a
         $50,000 Forbearance Fee (herein so called) plus the $50,000 Forbearance
         Fee previously due and not paid by Obligors pursuant to a prior
         forbearance for a total of $100,000;

                  (c) Eligible Accounts and Eligible Inventory shall not include
         any Accounts or Inventory of any Foreign Subsidiary, including but not
         limited to Baylor Company Limited;

                  (d) the Bank shall immediately engage appraisers acceptable to
         Obligors to provide a new appraisal for the machinery and equipment at
         Baylor Company Limited. From and after the receipt by Bank of such
         appraisal the Eligible Equipment component of the Borrowing Base shall
         be the lesser of the amount reflected in the existing appraisal or the
         amount reflected in the new appraisal; and

                  (e) Obligors shall provide on or before August 3, 2000, August
         10, 2000, August 17, 2000, August 24, 2000 and August 31, 2000 a
         rolling forecast of twelve week cash requirements for the next twelve
         weeks.

         4. No Reliance by Others. None of the provisions of this Amendment
shall inure to the benefit of Obligors or any Person other than Bank;
consequently, Obligors shall not be, and no Person other than the Bank shall be,
entitled to rely upon or raise as a claim or defense, in any manner whatsoever,
the failure of Bank to comply with the provisions of this Amendment. Bank shall
not incur any liability to Obligors or any other Person for any act or omission
of the other.

         5. Limitations. The amendments set forth herein are limited precisely
as written and shall not be deemed to (a) be a consent to, or waiver or
modification of, any other term or condition of the Forbearance Agreement, the
Loan Agreement or any of the other Loan Documents, or (b) except as expressly
set forth herein, prejudice any right or rights which the Bank may now have or
may have in the future under or in connection with the Forbearance Agreement,
the Loan Agreement, the Loan Documents or any of the other documents referred to
therein. Except as expressly modified hereby or by express written amendments
thereof, the terms and provisions of the Forbearance Agreement, the Loan
Agreement, the Notes, and any other Loan Documents or any other documents or
instruments executed in connection with any of the foregoing are and shall
remain in full force and effect. In the event of a conflict between this
Amendment and any of the foregoing documents, the terms of this Amendment shall
be controlling. The representations and warranties made in each Loan Document
are true and correct in all material respects on and as of the Amendment
Effective Date.

         6. Representations and Warranties of the Obligors. To induce the Bank
to execute and deliver this Amendment (which representations shall survive the
execution and delivery of this Amendment), the Obligors represent and warrant to
the Bank that:

                  (a) this Amendment has been duly authorized, executed and
         delivered by it and this Amendment constitutes the legal, valid and
         binding obligation, contract and agreement of the Obligors enforceable
         against them in accordance with its terms, except as enforcement may be
         limited by bankruptcy, insolvency, reorganization, moratorium or
         similar laws or equitable principles relating to or limiting creditors'
         rights generally;

THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
AND MODIFICATION AGREEMENT - Page 2

<PAGE>   3

                  (b) the Forbearance Agreement, as amended by this Amendment,
         constitutes the legal, valid and binding obligation, contract and
         agreement of the Obligors enforceable against them in accordance with
         its respective terms, except as enforcement may be limited by
         bankruptcy, insolvency, reorganization, moratorium or similar laws or
         equitable principles relating to or limiting creditors' rights
         generally; and

                  (c) the execution, delivery and performance by the Obligors of
         this Amendment (i) has been duly authorized by all requisite corporate
         action, (ii) does not require the consent or approval of any
         governmental or regulatory body or agency, and (iii) will not (A)
         violate (1) any provision of law, statute, rule or regulation or its
         certificate of incorporation or bylaws, (2) any order of any court or
         any rule, regulation or order of any other agency or government binding
         upon it, or (3) any provision of any material indenture, agreement or
         other instrument to which it is a party or by which its properties or
         assets are or may be bound, including, without limitation, the
         Subordinated Note and Warrant Purchase Agreement dated as of July 23,
         1998 in the principal amount of $30,000,000 for 11.28% Senior
         Subordinated Notes due July 23, 2006 and Common Stock Purchase
         Warrants, or (B) result in a breach or constitute (along or with due
         notice or lapse of time or both) a default under any indenture,
         agreement or other instrument referred to in clause (iii)(A)(3) of this
         Section 4(c).

         7. Conditions to Effectiveness of This Amendment. This Amendment shall
not become effective until, and shall become effective when, each and every one
of the following conditions shall have been satisfied:

                  (a) pay to Bank all accrued fees and expenses incurred by
         Bank's advisors with respect to the Events of Default under the Loan
         Documents accruing since July 11, 2000, specifically being $20,430.49
         to Bank to reimburse it for such amounts due Munsch Hardt Kopf & Harr,
         P.C. and E&Y Restructuring, L.L.C. Such $20,430.49 shall be payable
         upon execution of this Amendment;

                  (b) Obligors shall have delivered to Bank by August 4, 2000, a
         Borrowing Base Certificate dated effective as of July 31, 2000;

                  (c) executed counterparts of this Amendment, duly executed by
         the Obligors and the Bank, shall have been delivered to the Bank;

                  (d) Obligors shall execute and deliver to Bank a Full Release
         and Covenant Not to Sue (the "RELEASE") in the form of ANNEX 1 attached
         hereto;

                  (f) Obligors shall cause their counsel, Fuqua & Keim, L.L.P.,
         to deliver to them an opinion upon which Bank can rely opining as to
         the enforceability of this Amendment and the Release together with all
         documents and agreements executed in connection therewith in the form
         of ANNEX 2; and

                  (g) the representations and warranties of the Obligors set
         forth in Section 5 hereof are true and correct on and with respect to
         the date hereof.

THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
AND MODIFICATION AGREEMENT - Page 3

<PAGE>   4

         Upon receipt of all of the foregoing, this Amendment shall become
effective.

         8. Payment of Expenses. The Obligors agree, whether or not the
transactions hereby contemplated shall be consummated, to reimburse and save the
Bank harmless from and against liability for the payment of all reasonable
substantiated out-of-pocket costs and expenses arising in connection with the
preparation, execution, delivery, amendment, modification, waiver and
enforcement of, or the preservation of any rights under this Amendment,
including, without limitation, the reasonable fees and expenses of any local or
other counsel for Bank, and all stamp taxes (including interest and penalties,
if any), recording taxes and fees, filing taxes and fees, and other charges
which may be payable in respect of, or in respect of any modification of, the
Forbearance and Extension Agreement, the Loan Agreement and the other Loan
Documents. The provisions of this Section shall survive the termination of the
Forbearance and Extension Agreement and the repayment of the Loans.

         9. Governing Law. This Amendment and the rights and obligations of the
parties hereunder and under the Forbearance Agreement shall be construed in
accordance with and be governed by the laws of the State of Texas and the United
States of America.

         10. Descriptive Headings, etc. The descriptive headings of the several
Sections of this Amendment are inserted for convenience only and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.

         11. Entire Agreement. This Amendment and the documents referred to
herein represent the entire understanding of the parties hereto regarding the
subject matter hereof and supersede all prior and contemporaneous oral and
written agreements of the parties hereto with respect to the subject matter
hereof.

         12. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts and all of such
counterparts shall together constitute one and the same instrument. Complete
sets of counterparts shall be lodged with the Obligors and the Bank.

         13. Amended Definitions. As used in the Forbearance Agreement
(including all annexes thereto) and all other instruments and documents executed
in connection therewith, on and subsequent to the Amendment Effective Date, the
term "Agreement" shall mean the Forbearance Agreement as amended by this
Amendment.

         This Amendment is executed effective as of the date referenced above by
duly authorized representatives of each of the entities signatory hereto.

THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
AND MODIFICATION AGREEMENT - Page 4

<PAGE>   5

                                      BANK:

                                      COMERICA BANK-TEXAS,
                                      a Texas banking association

                                      By:
                                         ---------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                      OBLIGORS:

                                      BOOTS & COOTS INTERNATIONAL WELL
                                      CONTROL, INC., a Delaware corporation

                                      By:
                                          --------------------------------------
                                      Name: LARRY H. RAMMING
                                           -------------------------------------
                                      Title: CHAIRMAN AND CEO
                                             -----------------------------------

                                      ABASCO, INC.,
                                      a Texas corporation

                                      By:
                                         ---------------------------------------
                                      Name: LARRY H. RAMMING
                                           -------------------------------------
                                      Title: CHAIRMAN AND CEO
                                             -----------------------------------

                                      BAYLOR COMPANY,
                                      a Texas corporation

                                      By:
                                         ---------------------------------------
                                      Name: LARRY H. RAMMING
                                           -------------------------------------
                                      Title: CHAIRMAN AND CEO
                                            ------------------------------------

                                      BAYLOR COMPANY LIMITED,
                                      a company organized under the laws of
                                      England and Wales

                                      By:
                                        ----------------------------------------
                                      Name: LARRY H. RAMMING
                                            ------------------------------------
                                      Title: CHAIRMAN AND CEO
                                            ------------------------------------

THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
AND MODIFICATION AGREEMENT - Page 5

<PAGE>   6

BAYLOR CONTROLS, INC.,
a Texas corporation

By:
   -------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

BAYLOR ELECTRONICS, INC.,
a Texas corporation

By:
   -------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

BOOTS & COOTS/IWC DE VENEZUELA, S.A.,
a company organized under the laws
of Venezuela

By:
    ------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

BOOTS & COOTS OVERSEAS, LTD.,
a company organized under the laws
of the British Virgin Islands

By:
   -------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

BOOTS & COOTS SPECIAL SERVICES, INC.,
a Texas corporation

By:
   -------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
AND MODIFICATION AGREEMENT - Page 6

<PAGE>   7

                                      ELMAGCO, INC.,
                                      a Delaware corporation

                                      By:
                                         ---------------------------------------
                                      Name: LARRY H. RAMMING
                                           -------------------------------------
                                      Title: CHAIRMAN AND CEO
                                            ------------------------------------

                                      HELL FIGHTERS, INC.,
                                      a Texas corporation

                                      By:
                                         ---------------------------------------
                                      Name: LARRY H. RAMMING
                                           -------------------------------------
                                      Title: CHAIRMAN AND CEO
                                            ------------------------------------

                                      INTERNATIONAL TOOL & SUPPLY DE VENEZUELA
                                      S.A., a company organized under the laws
                                      of Venezuela

                                      By:
                                         ---------------------------------------
                                      Name: LARRY H. RAMMING
                                           -------------------------------------
                                      Title: CHAIRMAN AND CEO
                                            ------------------------------------

                                      INTERNATIONAL TOOL & SUPPLY PERU,
                                      a company organized under the laws of Peru

                                      By:
                                        ----------------------------------------
                                      Name: LARRY H. RAMMING
                                           -------------------------------------
                                      Title: CHAIRMAN AND CEO
                                            ------------------------------------

                                      INTERNATIONAL TOOL & SUPPLY UK,
                                      a company organized under the laws of
                                      England and Wales

                                      By:
                                        ----------------------------------------
                                      Name: LARRY H. RAMMING
                                           -------------------------------------
                                      Title: CHAIRMAN AND CEO
                                            ------------------------------------

THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
AND MODIFICATION AGREEMENT - Page 7

<PAGE>   8

INTERNATIONAL WELL CONTROL SERVICES,
LTD., a company organized under the
laws of the Cayman Islands

By:
   -------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

IWC ENGINEERING, INC.,
a Texas corporation

By:
   -------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

IWC SERVICES, INC.,
a Texas corporation

By:
   -------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

SCHOTTEL, INC.,
a Delaware corporation

By:
   -------------------------------
Name: LARRY H. RAMMING
     -----------------------------
Title: CHAIRMAN AND CEO
      ----------------------------

THIRD AMENDMENT TO FORBEARANCE AND EXTENSION AGREEMENT
AND MODIFICATION AGREEMENT - Page 8

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