Document:

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                                                                EXHIBIT 10.9(b)

                       NONSTATUTORY STOCK OPTION AGREEMENT

         This Nonstatutory Stock Option Agreement is made as of the ______ day
of ____________, 20___, between BMC Software, Inc., a Delaware corporation (the
"Company"), and ______________________________ ("Employee").

         To carry out the purposes of the BMC Software, Inc. 2002 Employee
Incentive Plan (the "Plan"), by affording Employee the opportunity to purchase
shares of common stock of the Company, par value $.01 per share ("Stock"), and
in consideration of the mutual agreements and other matters set forth herein and
in the Plan, the Company and Employee hereby agree as follows:

         1. GRANT OF OPTION. The Company hereby irrevocably grants to Employee
the right and option ("Option") to purchase all or any part of an aggregate of
_________ shares of Stock, on the terms and conditions set forth herein and in
the Plan, which Plan is incorporated herein by reference as a part of this
Agreement. In the event of any conflict between the terms of this Agreement and
the Plan, the Plan shall control. Capitalized terms used but not defined in this
Agreement shall have the meaning attributed to such terms under the Plan, unless
the context requires otherwise. This Option shall not be treated as an incentive
stock option within the meaning of section 422(b) of the Code.

         2. PURCHASE PRICE. The purchase price of Stock purchased pursuant to
the exercise of this Option shall be $______ per share, which has been
determined to be not less than the Fair Market Value of the Stock at the date of
grant of this Option.

         3. EXERCISE OF OPTION. Subject to the earlier expiration of this Option
as herein provided, this Option may be exercised, by written notice (in the form
prescribed by the Company from time to time) to the Company at its principal
executive office addressed to the attention of its President (or such other
officer or employee of the Company as the Company may designate from time to
time), at any time and from time to time after the date of grant hereof, but,
except as otherwise provided below, this Option shall not be exercisable for
more than a percentage of the aggregate number of shares offered by this Option
determined by the number of full years from the date of grant hereof to the date
of such exercise, in accordance with the following schedule:

                                                        PERCENTAGE OF SHARES
                    EXERCISE DATE                       THAT MAY BE PURCHASED
                    -------------                       ---------------------
                  less than 3 months                                0%
       3 months or more, but less than 6 months                  6 1/4%
       6 months or more, but less than 9 months                 12 1/2%
       9 months or more, but less than 12 months                18 3/4%
      12 months or more, but less than 15 months                    25%
      15 months or more, but less than 18 months                31 1/4%
      18 months or more, but less than 21 months                37 1/2%

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      21 months or more, but less than 24 months                43 3/4%
      24 months or more, but less than 27 months                    50%
      27 months or more, but less than 30 months                56 1/4%
      30 months or more, but less than 33 months                62 1/2%
      33 months or more, but less than 36 months                68 3/4%
      36 months or more, but less than 39 months                    75%
      39 months or more, but less than 42 months                81 1/4%
      42 months or more, but less than 45 months                87 1/2%
      45 months or more, but less than 48 months                93 3/4%
                  48 months or more                                100%

Notwithstanding the foregoing, in the event Employee takes an unpaid leave of
absence from the Company (a) Employee's right to exercise this Option shall be
suspended three months after the beginning of such leave, (b) Employee's right
to exercise this Option shall be reinstated if Employee returns to active
employment with the Company within 12 months after the beginning of such leave,
and (c) if Employee does not return to active employment with the Company within
12 months after the beginning of such leave, then, for purposes of this Option,
Employee shall be considered to have terminated employment on the date such
leave began. Further, notwithstanding the exercise schedule set forth above, (i)
while Employee is on an unpaid leave of absence, further vesting of shares stops
and this Option is exercisable (to the extent provided in the preceding
sentence) only as to the number of shares Employee was entitled to purchase
hereunder as of the date such leave began, and (ii) if Employee returns to
active employment with the Company within 12 months after the beginning of such
leave, then the exercise schedule set forth above shall be reinstated (subject
to the provisions of clause (i) of this sentence).

         This Option is not transferable otherwise than by bequest or the laws
of descent and distribution. This Option may be exercised only while Employee
remains an employee of the Company and will terminate and cease to be
exercisable upon Employee's termination of employment with the Company, except
that:

               (a) If Employee's employment with the Company terminates by
         reason of long-term disability (within the meaning assigned to such
         term by Employee's employer for Employee's job description and primary
         location of employment), then this Option may be exercised by Employee
         (or Employee's estate or the person who acquires this Option by will or
         the laws of descent and distribution or otherwise by reason of the
         death of Employee) at any time during the period of one year following
         such termination, but only as to the number of shares Employee was
         entitled to purchase hereunder as of the date Employee's employment so
         terminates.

               (b) If Employee dies while in the employ of the Company, then
         Employee's estate, or the person who acquires this Option by will or
         the laws of descent and distribution or otherwise by reason of the
         death of Employee, may exercise this Option at any time during the
         period of one year following the date of Employee's death, as follows:
         (i) if Employee had attained age 65 at the time of Employee's death,
         then this Option may be exercised in full; and (ii) if Employee had not
         attained age 65 at the time

                                      -2-

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         of Employee's death, then this Option may be exercised only as to
         the number of shares Employee was entitled to purchase hereunder as of
         the date of Employee's death.

               (c) If Employee's employment with the Company terminates for any
         reason other than as described in (a) or (b) above, then, unless such
         employment is terminated for cause or as otherwise provided in
         Paragraph 7 below, this Option may be exercised by Employee at any time
         during the period of three months following such termination, or by
         Employee's estate (or the person who acquires this Option by will or
         the laws of descent and distribution or otherwise by reason of the
         death of Employee) during a period of one year following Employee's
         death if Employee dies during such three-month period, but in each case
         only as to the number of shares Employee was entitled to purchase
         hereunder upon exercise of this Option as of the date Employee's
         employment so terminates. As used in this paragraph, the term "cause"
         shall mean Employee (i) has been convicted of a misdemeanor involving
         moral turpitude or of a felony, (ii) has engaged in gross negligence or
         willful misconduct in the performance of the duties of Employee's
         employment, (iii) has willfully disregarded any written corporate
         policies established by the Company, or (iv) has materially breached
         any material provision of any written agreement between Employee and
         the Company or any of its Affiliates.

         This Option shall not be exercisable in any event after the expiration
of ten years from the date of grant hereof, and this Option shall not become
exercisable with respect to any additional shares after termination of
Employee's employment. Except as provided in Paragraph 4, the purchase price of
shares as to which this Option is exercised shall be paid in full at the time of
exercise in cash (including check, bank draft or money order payable to the
order of the Company). No fraction of a share of Stock shall be issued by the
Company upon exercise of an Option; rather, Employee shall provide a cash
payment for such amount as is necessary to effect the issuance of only whole
shares of Stock. Unless and until a certificate or certificates representing
such shares shall have been issued by the Company to Employee, Employee (or the
person permitted to exercise this Option in the event of Employee's death) shall
not be or have any of the rights or privileges of a stockholder of the Company
with respect to shares acquirable upon an exercise of this Option.

         4. CASHLESS EXERCISE. Employee (or the person permitted to exercise
this Option in the event of Employee's death) may direct, in a properly executed
written notice, a cashless exercise of this Option pursuant to the procedures
established by the Committee and in effect on the date of such exercise of this
Option. Notwithstanding the foregoing, the Company shall not be required to
comply with, and may unilaterally terminate, the right of Employee (or such
person) to request a cashless exercise of this Option if, as a result of a
change in the accounting rules and/or legal requirements applicable to the
Company or Employee, or the interpretation thereof, compliance with such
provisions will result in the imposition of adverse financial reporting
requirements on the Company or other adverse consequences to the Company or
Employee.

         5. WITHHOLDING OF TAX. To the extent that the exercise of this Option
or the disposition of shares of Stock acquired by exercise of this Option
results in compensation income or wages to Employee for federal, state, local or
foreign tax purposes, Employee shall deliver to the Company at the time of such
exercise or disposition such amount of money as the Company

                                      -3-

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may require to meet its obligation under applicable tax laws or regulations. No
exercise of this Option shall be effective until Employee (or the person
entitled to exercise this Option, as applicable) has made arrangements approved
by the Company to satisfy all applicable minimum tax withholding requirements of
the Company.

         6. STATUS OF STOCK. The Company intends to register for issuance under
the Securities Act of 1933, as amended (the "Act"), the shares of Stock
acquirable upon exercise of this Option, and to keep such registration effective
throughout the period this Option is exercisable. In the absence of such
effective registration or an available exemption from registration under the
Act, issuance of shares of Stock acquirable upon exercise of this Option will be
delayed until registration of such shares is effective or an exemption from
registration under the Act is available. The Company intends to use its
reasonable efforts to ensure that no such delay will occur. In the event
exemption from registration under the Act is available upon an exercise of this
Option, Employee (or the person permitted to exercise this Option in the event
of Employee's death), if requested by the Company to do so, will execute and
deliver to the Company in writing an agreement containing such provisions as the
Company may require to assure compliance with applicable securities laws.

         Employee agrees that the shares of Stock which Employee may acquire by
exercising this Option will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable federal, state, or foreign
securities laws. Employee also agrees that (a) the certificates representing the
shares of Stock purchased under this Option may bear such legend or legends as
the Company deems appropriate in order to assure compliance with applicable
securities laws, (b) the Company may refuse to register the transfer of the
shares of Stock purchased under this Option on the stock transfer records of the
Company if such proposed transfer would in the opinion of counsel satisfactory
to the Company constitute a violation of any applicable securities law, and (c)
the Company may give related instructions to its transfer agent, if any, to stop
registration of the transfer of the shares of Stock purchased under this Option.

         7. OBLIGATIONS UPON TERMINATION OF EMPLOYMENT. In connection with
Employee's employment by the Company, the Company or an Affiliate thereof shall
provide Employee with access to the confidential information of the Company and
its Affiliates, or shall provide Employee the opportunity to develop business
good will inuring to the benefit of the Company and its Affiliates, or shall
entrust business opportunities to Employee. Employee has agreed, and hereby
agrees, as specified in more detail in Employee's Invention and Non-Disclosure
Agreement with the Company, to maintain the confidentiality of the Company's and
its Affiliates' information and to exercise the highest measures of fidelity and
loyalty in the protection and preservation of the Company's and its Affiliates'
goodwill and business opportunities. As part of the consideration for the Option
granted to Employee hereunder; to protect the Company's and its Affiliates'
confidential information, the business good will of the Company and its
Affiliates that has been and will in the future be developed in Employee, or the
business opportunities that have been and will in the future be disclosed or
entrusted to Employee by the Company and its Affiliates; and as an additional
incentive for the Company and Employee to enter into this Agreement, the Company
and Employee agree that if Employee during the 12 months following the
termination of Employee's employment with the Company in any geographic area or
market where the Company or any of its Affiliates are conducting

                                      -4-

<PAGE>

business as of the date of termination of the employment relationship or have
during the previous 12 months conducted such business:

               (a) engages in any business competitive with the business
         conducted by the Company or any of its Affiliates; or

               (b) renders advice or services to, or otherwise assists, any
         other person, association, or entity who is engaged, directly or
         indirectly, in any business competitive with the business conducted by
         the Company or any of its Affiliates with respect to such competitive
         business; or

               (c) directly or indirectly solicits or accepts business
         competitive with the business conducted by the Company or any of its
         Affiliates from any customers or prospects of the Company or any of its
         Affiliates; or

               (d) induces any employee of the Company or any of its Affiliates
         to terminate his or her employment with the Company or any such
         Affiliate or hires or assists in the hiring of any such employee by any
         person,

then (i) this Option shall immediately terminate and cease to be exercisable and
(ii) the Company shall be entitled to recover from Employee, and Employee shall
pay to the Company, an amount of money equal to A multiplied by B, where A
equals the amount of the gain, if any, that Employee received from the exercise
of this Option during the period beginning on the date that is one year before
the date of Employee's termination of employment with the Company and ending on
the date this Option terminates and ceases to be exercisable as provided herein,
and B equals the fraction X divided by Y, where X equals 365 minus the number of
consecutive days following Employee's termination of employment with the Company
during which Employee remained in compliance with the restrictive covenants set
forth in this Paragraph 7, and Y equals 365.

         If any of the restrictions set forth in this Paragraph 7 are found by a
court to be unreasonable, or overly broad as to geographic area or time, or
otherwise unenforceable, the parties intend for such restrictions to be modified
by the court so as to be reasonable and enforceable and, as so modified, to be
fully enforced.

         8. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, Employee
shall be considered to be in the employment of the Company as long as Employee
remains an employee of either the Company, an Affiliate, or a corporation or a
parent or subsidiary of such corporation assuming or substituting a new option
for this Option. Without limiting the scope of the preceding sentence, it is
expressly provided that Employee shall be considered to have terminated
employment with the Company at the time of the termination of the "Affiliate"
status under the Plan of the entity or other organization that employs Employee.
Any question as to whether and when there has been a termination of such
employment, and the cause of such termination, shall be determined by the
Committee and its determination shall be final. Unless otherwise provided in a
written employment agreement, nothing herein shall modify the at-will nature of
the employment relationship between Employee and the Company.

                                      -5-

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         9. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of any successors to the Company and all persons lawfully claiming
under Employee.

         10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, UNITED STATES OF AMERICA,
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.

                                     BMC SOFTWARE, INC.

                                     By:  /s/ JEROME ADAMS
                                         -------------------------------------
                                          JEROME ADAMS
                                          SR. VICE PRESIDENT, ADMINISTRATION

                                          ------------------------------------
                                          EMPLOYEE

                                     -6-<PAGE>
                                                                  EXHIBIT 10.10

                               BMC SOFTWARE, INC.
                 SHORT-TERM INCENTIVE PERFORMANCE AWARD PROGRAM

                              I. PURPOSE OF PROGRAM

         This BMC Software, Inc. Short-Term Incentive Performance Award Program
(the "Program") has been adopted by the Compensation Committee of the Board of
Directors of BMC Software, Inc., a Delaware corporation (the "Company"), to
implement in part the Performance Award provisions of the BMC Software, Inc.
2002 Employee Incentive Plan (as amended from time to time, the "Employee
Incentive Plan"). The Program is intended to provide a method for attracting,
motivating, and retaining key employees to assist in the development and growth
of the Company and its Affiliates. The Program and Awards hereunder shall be
subject to the terms of the Employee Incentive Plan, including the limitations
on the maximum value of Awards contained therein.

                        II. DEFINITIONS AND CONSTRUCTION

         2.1 DEFINITIONS. Where the following words and phrases are used in the
Program, they shall have the respective meanings set forth below, unless the
context clearly indicates to the contrary:

         (a) "Affiliate" means any corporation, partnership, limited liability
company or partnership, association, trust or other organization which, directly
or indirectly, controls, is controlled by, or is under common control with, the
Company.

         (b) "Award" means, with respect to each Participant for a Performance
Period, such Participant's opportunity to earn a Payment Amount for such
Performance Period upon the satisfaction of the terms and conditions of the
Program. Awards hereunder constitute Performance Awards (as such term is defined
in the Employee Incentive Plan) under the Employee Incentive Plan.

         (c) "Award Notice" means a written notice issued by the Company to a
Participant evidencing such Participant's receipt of an Award with respect to a
Performance Period.

         (d) "Base Amount" means, with respect to each Participant for a
Performance Period, the annual base rate of pay paid or payable in cash by the
Company and the Affiliates to or for the benefit of the Participant for services
rendered or labor performed as in effect on the earlier of (i) the date of the
Participant's termination of employment with the Company if a Change in Control
occurs during such Performance Period and the Participant's employment with the
Company terminates on or after the date of such Change in Control and during
such Performance Period, (ii) the date of the Participant's termination of
employment with the Company if such termination is by reason of death,
Disability or Retirement, or (iii) the last day of such Performance Period;
provided, however, that if "Base Amount" is to be determined pursuant to clause
(i) of this sentence, then in no event shall such amount be less than the
Participant's annual base rate of pay paid or payable in cash by the Company and
the Affiliates to or for the benefit of the Participant for services rendered or
labor performed as in effect on the day

<PAGE>

immediately preceding the date of the Change in Control. Base Amount shall be
determined without reduction for amounts a Participant could have received in
cash in lieu of (A) elective deferrals under the Company's 1994 Deferred
Compensation Plan or (B) elective contributions made on such Participant's
behalf by the Company or an Affiliate pursuant to a qualified cash or deferred
arrangement (as defined in section 401(k) of the Code) or pursuant to a plan
maintained under section 125 of the Code.

         (e) "Base Amount Multiplier" means, with respect to each Participant
for a Performance Period, a percentage assigned to such Participant by the
Committee for such Performance Period.

         (f) "Board" means the Board of Directors of the Company.

         (g) "Change in Control" means (i) the acquisition by any person or
entity (including a "group" as contemplated by Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) of at least 50% of the Company's
outstanding voting stock, (ii) an unapproved change in the majority of the
Board, (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, or
(iv) shareholder approval of the Company's liquidation, dissolution, or sale of
substantially all of its assets.

         (h) "Code" means the Internal Revenue Code of 1986, as amended.

         (i) "Committee" means a committee of the Board comprised solely of two
or more outside directors (within the meaning of the term "outside directors" as
used in section 162(m) of the Code and applicable interpretative authority
thereunder and within the meaning of the term "Non-Employee Director" as defined
in Rule 16b-3). Such committee shall be the Compensation Committee of the Board
unless and until the Board designates another committee of the Board to serve as
the Committee.

         (j) "Company" means BMC Software, Inc., a Delaware corporation.

         (k) "Disability" or "Disabled" means, with respect to a Participant,
such Participant's disability entitling him or her to benefits under the
Company's group long-term disability plan.

         (l) "Effective Date" means April 1, 2003.

         (m) "Eligible Employee" means any individual who is an employee of the
Company or an Affiliate.

         (n) "Employee Incentive Plan" means the BMC Software, Inc. 2002
Employee Incentive Plan, as amended from time to time.

         (o) "EPS" means, with respect to a Performance Period, the non-GAAP
earnings per share of common stock of the Company for such Performance Period as
reported by the Company in its quarterly earnings press release which equals
reported earnings per share of common stock of the Company for such Performance
Period, calculated in accordance with generally accepted accounting principles
("GAAP"), but adjusted as follows:

                                      -2-

<PAGE>

                  (i)      Exclude acquisition related expenses for acquired
                           research and development;

                  (ii)     Exclude amortization of acquired technology and
                           intangibles;

                  (iii)    Exclude the earnings or losses generated with respect
                           to assets or businesses acquired during such
                           Performance Period from the date of close of such
                           acquisition to the last day of such Performance
                           Period;

                  (iv)     Add or subtract the earnings or losses that would
                           have been generated with respect to assets or
                           businesses divested during such Performance Period
                           from the date of close of such divestiture to the
                           last day of the Performance Period (the amount of
                           such earnings and losses for such period shall be
                           based on budgeted revenues and expenses established
                           as of the first day of such Performance Period); and

                  (v)      Exclude or add the effect of any non-recurring
                           extraordinary items;

provided, that no such adjustment shall be made to earnings per share calculated
in accordance with GAAP to the extent that the EPS Targets established by the
Committee for such Performance Period reflect that the Committee considered the
adjustment, or event leading to the adjustment, in establishing such targets. In
addition, EPS for a Performance Period shall be calculated without regard to any
change in GAAP accounting standards that takes effect during such Performance
Period unless the EPS Targets established by the Committee for such Performance
Period reflect that the Committee considered such change in establishing such
targets. EPS for each Performance Period shall be rounded to the nearest penny.

         (p) "EPS Targets" means, with respect to a Performance Period, the EPS
goals for such Performance Period that have been established by the Committee in
accordance with Article V. There shall be four such EPS goals for each
Performance Period, as follows: (i) the "Threshold EPS Target;" (ii) the "Lower
Level EPS Target;" (iii) the "Upper Level EPS Target;" and (iv) the "Stretch
Level EPS Target."

         (q) "Lower Level EPS Target" shall have the meaning assigned to such
term in Section 2.1(p).

         (r) "Participant" means an Eligible Employee who has received an Award
under the Program with respect to a Performance Period pursuant to Section 4.1.

         (s) "Participation Fraction" means, with respect to each Participant
for a Performance Period:

                  (i)      if the Participant has been continuously employed by
                           the Company from the first day of such Performance
                           Period through the last day of such Performance
                           Period, a fraction, the numerator of which is the
                           number of days in the period beginning on the first
                           day of such Performance Period and ending on the last
                           day of such Performance Period (but excluding

                                      -3-

<PAGE>

                           any days in such period during which the Participant
                           is on a voluntary personal leave of absence), and the
                           denominator of which is the number of days in such
                           Performance Period; and

                  (ii)     if (A) the Participant's employment with the Company
                           terminates during such Performance Period by reason
                           of death, Disability or Retirement or (B) a Change
                           in Control occurs during such Performance Period and
                           the Participant's employment with the Company
                           terminates on or after the date of such Change in
                           Control and during such Performance Period for any
                           reason whatsoever, a fraction, the numerator of which
                           is the number of days in the period beginning on the
                           first day of such Performance Period and ending on
                           the date of such Participant's termination of
                           employment (but excluding any days in such period
                           during which the Participant is on a voluntary
                           personal leave of absence), and the denominator of
                           which is the number of days in such Performance
                           Period.

         (t) "Payment Amount" means, with respect to each Participant for a
Performance Period, an amount equal to (A) such Participant's Base Amount for
such Performance Period multiplied by (B) such Participant's Base Amount
Multiplier for such Performance Period multiplied by (C) the Payout Percentage
for such Performance Period multiplied by (D) such Participant's Participation
Fraction for such Performance Period. Notwithstanding the foregoing, a
Participant's Payment Amount for a Performance Period shall be subject to
reduction as provided in Section 6.1 and may not exceed the amount specified in
Section 6.5.

         (u) "Payout Percentage" means, with respect to a Performance Period, a
percentage determined in accordance with the following schedule based on the EPS
actually achieved for such Performance Period:

<TABLE>
<CAPTION>
                                                      Payout Percentage for the Performance Period:
                                                      ---------------------------------------------
                EPS for                 April 1, 2003       July 1, 2003        Oct. 1, 2003        Jan. 1, 2004
        the Performance Period               to                  to                  to                  to
        ----------------------
                                        June 30, 2003      Sept. 30, 2003      Dec. 31, 2003        Mar. 31, 2004
<S>                                     <C>                <C>                 <C>                  <C>
   Less than the Threshold EPS
   Target for the Performance Period          0%                  0%                  0%                   0%

   Equal to the Threshold EPS
   Target for the Performance Period          6%                  8%                 12%                  14%

   Equal to the Lower Level EPS
   Target for the Performance Period          9%                 12%                 18%                  21%
</TABLE>

                                      -4-

<PAGE>

<TABLE>
<CAPTION>

<S>                                          <C>                <C>                 <C>                  <C>

   Equal to the Upper Level EPS
   Target for the Performance Period         15%                 20%                 30%                  35%

   Equal to or greater than the
   Stretch Level EPS Target for the          18%                 24%                 36%                  42%
   Performance Period
</TABLE>

Notwithstanding the above schedule, if the EPS actually achieved for the
Performance Period exceeds a particular EPS Target for the Performance Period
but is less than the next highest EPS Target for the Performance Period, then
the Payout Percentage for the Performance Period shall be an interpolated
percentage that is between the relevant percentages set forth in the above
schedule. To illustrate, if the Lower Level EPS Target for the Performance
Period January 1, 2004 to March 31, 2004 is $.21, the Upper Level EPS Target is
$.27, and the EPS actually achieved is $.23, then the Payout Percentage for such
Performance Period would equal 26%.

         (v) "Performance Period" means each three-month period commencing on
the first day of each April, July, October and January; provided, however, that
the first Performance Period shall begin on the Effective Date.

         (w) "Program" means this BMC Software, Inc. Short-Term Incentive
Performance Award Program, as amended from time to time.

         (x) "Retirement" means a Participant's termination of employment with
the Company for any reason whatsoever after attaining the age of 65.

         (y) "Stretch Level EPS Target" shall have the meaning assigned to such
term in Section 2.1(p).

         (z) "Threshold EPS Target" shall have the meaning assigned to such term
in Section 2.1(p).

         (aa) "Upper Level EPS Target" shall have the meaning assigned to such
term in Section 2.1(p).

         2.2 NUMBER, GENDER, HEADINGS, AND PERIODS OF TIME. Wherever appropriate
herein, words used in the singular shall be considered to include the plural,
and words used in the plural shall be considered to include the singular. The
masculine gender, where appearing in the Program, shall be deemed to include the
feminine gender. The headings of Articles, Sections, and Paragraphs herein are
included solely for convenience. If there is any conflict between such headings
and the text of the Program, the text shall control. All references to Articles,
Sections, and Paragraphs are to this Program unless otherwise indicated. Any
reference in the Program to a period or number of days, weeks, months, or years
shall mean, respectively, calendar days, calendar weeks, calendar months, or
calendar years unless expressly provided otherwise.

                                       -5-

<PAGE>

                               III. ADMINISTRATION

         3.1      ADMINISTRATION BY THE COMMITTEE.  The Program shall be
administered by the Committee.

         3.2 POWERS OF THE COMMITTEE. The Committee shall supervise the
administration and enforcement of the Program according to the terms and
provisions hereof and shall have the sole discretionary authority and all of the
powers necessary to accomplish these purposes. The Committee shall have all of
the powers specified for it under the Program, including, without limitation,
the power, right, or authority: (a) to designate an Eligible Employee as a
Participant with respect to a Performance Period in accordance with Section 4.1,
(b) from time to time to establish rules and procedures for the administration
of the Program, which are not inconsistent with the provisions of the Program or
the Employee Incentive Plan, and any such rules and procedures shall be
effective as if included in the Program, (c) to construe in its discretion all
terms, provisions, conditions, and limitations of the Program and any Award, (d)
to correct any defect or to supply any omission or to reconcile any
inconsistency that may appear in the Program in such manner and to such extent
as the Committee shall deem appropriate, and (e) to make all other
determinations necessary or advisable for the administration of the Program. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Program or in any Award or Award Notice in the manner and
to the extent it shall deem expedient to carry it into effect.

         3.3 COMMITTEE DECISIONS CONCLUSIVE; STANDARD OF CARE. The Committee
shall, in its sole discretion exercised in good faith (which, for purposes of
this Section 3.3, shall mean the application of reasonable business judgment),
make all decisions and determinations and take all actions necessary in
connection with the administration of the Program. All such decisions,
determinations, and actions by the Committee shall be final, binding, and
conclusive upon all persons. The Committee shall not be liable for any action or
determination taken or made in good faith or upon reliance in good faith on the
records of the Company or information presented to the Committee by the
Company's officers, employees, or other persons (including the Company's outside
auditors) as to matters the Committee reasonably believes are within such other
person's professional or expert competence. If a Participant disagrees with any
decision, determination, or action made or taken by the Committee, then the
dispute will be limited to whether the Committee has satisfied its duty to make
such decision or determination or take such action in good faith. No liability
whatsoever shall attach to or be incurred by any past, present or future
stockholders, officers or directors, as such, of the Company or any of its
Affiliates, under or by reason of the Program or the administration thereof, and
each Participant, in consideration of receiving benefits and participating
hereunder, expressly waives and releases any and all claims relating to any such
liability.

                       IV. PARTICIPATION AND AWARD NOTICES

         4.1 PARTICIPATION. The Committee shall, from time to time, in its sole
discretion designate the Eligible Employees who shall become Participants in the
Program with respect to a Performance Period; provided, however, that (a) any
such designation with respect to the Performance Period that begins on the
Effective Date must be made on or before April 22, 2003, and (b) any such
designation with respect to any other Performance Period must be made on or

                                      -6-

<PAGE>

before the first day of such Performance Period. The Committee shall designate
the Base Amount Multiplier that shall apply to each Participant with respect to
his participation in the Program.

         4.2 AWARD NOTICES. The Company shall provide an Award Notice to each
Eligible Employee who becomes a Participant under the Program as soon as
administratively feasible after such Eligible Employee becomes a Participant. An
Award Notice may specify one or more Performance Periods with respect to which
the Participant may participate in the Program. Further, an Award Notice may
provide that the Participant shall continue to participate in the Program for
successive Performance Periods until notified otherwise by the Committee or, if
earlier, the date upon which he terminates employment with the Company. An Award
Notice shall specify the Participant's Base Amount Multiplier, which may be
changed on a prospective basis by the Committee upon written notice to the
Participant at any time prior to the commencement of a Performance Period.

                                 V. EPS TARGETS

         5.1 ESTABLISHMENT OF EPS TARGETS. The Committee shall, in its sole
discretion, establish the EPS Targets for each Performance Period. The EPS
Targets for a Performance Period shall be established by the Committee on or
before the 22nd day of such Performance Period; provided, however, that if the
EPS Targets for a Performance Period are established on or after the first day
of such Performance Period, then the EPS that will be achieved for such
Performance Period must be substantially uncertain at the time such EPS Targets
are so established. Further, if the Committee has established EPS Targets for a
Performance Period, then the Committee may, in its sole discretion, adjust
upward or downward any of such EPS Targets so long as such adjustment is made on
or before the 22nd day of such Performance Period and, if such adjustment is
made on or after the first day of such Performance Period, then the EPS that
will be achieved for such Performance Period must be substantially uncertain at
the time such adjustment is made. Subject to the foregoing, the EPS Targets
established by the Committee for a Performance Period may include alternative
targets that are contingent on the occurrence or non-occurrence of a specified
event. For example, the EPS Targets for a Performance Period may include (a) one
set of targets that will apply if an acquisition, divestiture or other specified
corporate event occurs during the Performance Period and (b) a separate set of
targets that will apply if such acquisition, divestiture or other specified
corporate event does not occur during the Performance Period.

         5.2 SUBDIVISION OR CONSOLIDATION OF SHARES; STOCK DIVIDENDS. If, prior
to the last day of a Performance Period, the Company shall effect a subdivision
or consolidation of shares of its common stock or the payment of a stock
dividend on its common stock without receipt of consideration by the Company,
then the EPS Targets for such Performance Period shall be proportionately
adjusted by the Committee in a manner that reflects such event; provided,
however, that no such adjustment shall be made if the EPS Targets established by
the Committee for such Performance Period reflect that the Committee considered
such event in establishing such targets.

                                      -7-

<PAGE>

                               VI. AWARD PAYMENTS

         6.1 DETERMINATIONS AND CERTIFICATION BY THE COMMITTEE. As soon as
administratively feasible after the end of each Performance Period, the
Committee shall determine (a) the EPS actually achieved for such Performance
Period, (b) the Payout Percentage for such Performance Period, and (c) the
Payment Amount, if any, with respect to such Performance Period for each
Participant. Notwithstanding any provision herein to the contrary, at any time
prior to the date an amount is paid to or for the benefit of a Participant
pursuant to Section 6.2 with respect to a Performance Period, the Committee may,
in its sole discretion, reduce the Payment Amount that would otherwise be
payable pursuant to Section 6.2 (but not Section 6.3) to such Participant for
such Performance Period based on the Committee's view of such Participant's
performance and/or the Company's performance during such Performance Period. Any
such reduction may be made with respect to one or more Participants and not
other Participants, and the magnitude of such reductions may vary among
individual Participants. The Committee's determinations pursuant to the
preceding provisions of this Section 6.1 for each Performance Period and any
other material terms relating to the payment of an Award shall be certified by
the Committee in writing and delivered to the Secretary of the Company no later
than six weeks after the last day of such Performance Period. For purposes of
the preceding sentence, approved minutes of the Committee meeting in which the
certification is made shall be treated as a written certification.

         6.2 ELIGIBILITY FOR PAYMENT OF AWARDS. Upon the Committee's written
certification in accordance with Section 6.1 that a Payment Amount for a
Performance Period is due under the Program, each Participant who has received
an Award with respect to such Performance Period and who has remained
continuously employed by the Company or an Affiliate (or was on a voluntary
personal leave of absence approved by the Company) from the first day of such
Performance Period until the last day of such Performance Period shall be
entitled to the Payment Amount applicable to such Participant's Award for such
Performance Period. Further, if a Participant received an Award with respect to
such Performance Period and his employment with the Company terminated during
such Performance Period by reason of death, Disability or Retirement, then such
Participant shall be entitled to the Payment Amount applicable to such
Participant's Award for such Performance Period. Except as provided in the
preceding sentence or in Section 6.3, if a Participant's employment with the
Company terminates for any reason whatsoever prior to the last day of a
Performance Period, then such Participant shall not be entitled to receive any
payment under the Program with respect to his or her Award for such Performance
Period. Without limiting the scope of the preceding sentence, if a Participant's
employment with the Company terminates during a Performance Period by reason of
death, Disability or Retirement, then such Participant shall not be entitled to
any payment under the Program with respect to any subsequent Performance Period.
Payment of the amount to which a Participant becomes entitled pursuant to this
Section 6.2 shall be made by the Company as soon as administratively feasible
after the Committee's written certification that a Payment Amount is due under
the Program.

         6.3 CHANGE IN CONTROL. Upon the occurrence of a Change in Control, the
provisions of Sections 6.1 and 6.2 shall cease to apply with respect to the
Performance Period during which such Change in Control occurs and the Company
shall be required to pay a Payment Amount (as determined below) for such
Performance Period to each Participant who is employed by the

                                      -8-

<PAGE>

Company on the day immediately prior to the Change in Control (or who is on a
voluntary personal leave of absence at such time that has been approved by the
Company or who has terminated employment with the Company during such
Performance Period and prior to such Change in Control by reason of death,
Disability or Retirement). For purposes of this Section 6.3, the Payment Amount
for each Participant who is entitled to a payment pursuant to this Section 6.3
shall be calculated as if the EPS actually achieved for such Performance Period
was equal to the Upper Level EPS Target for such Performance Period. The Payment
Amount determined under this Section 6.3 shall be paid to each eligible
Participant as soon as administratively feasible after the last day of the
Performance Period in which the Change in Control occurs; provided, however,
that (a) with respect to a Participant whose employment with the Company
terminated during such Performance Period and prior to the Change in Control by
reason of death, Disability or Retirement, then such payment shall be paid to
such Participant as soon as administratively feasible after the date of the
Change in Control, and (b) with respect to a Participant whose employment with
the Company terminated during such Performance Period and on or after the date
of the Change in Control for any reason whatsoever, then such payment shall be
paid to such Participant as soon as administratively feasible after the date of
his termination of employment.

         6.4 FORM OF PAYMENT OF AWARDS. All payments to be made under the
Program to a Participant with respect to an Award for a Performance Period shall
be paid in a single lump sum cash payment.

         6.5 MAXIMUM PAYMENT AMOUNT. In no event shall the Payment Amount for
any Performance Period that is paid to or on behalf of any one individual under
this Program exceed $1,000,000.

                    VII. TERMINATION AND AMENDMENT OF PROGRAM

         The Committee may amend the Program at any time and from time to time;
provided, however, that the Program may not be amended after the last day of a
Performance Period in a manner that would impair the rights of any Participant
with respect to any outstanding Award pertaining to such Performance Period
without the consent of such Participant. The Committee may at any time prior to
the last day of a Performance Period terminate the Program (in its entirety or
as it applies to one or more specified Affiliates) with respect to such
Performance Period and subsequent Performance Periods. Notwithstanding the
foregoing, the Program may not be amended or terminated in contemplation of or
in connection with a Change in Control, nor may any Participant's participation
herein be terminated in contemplation of or in connection with a Change in
Control, unless adequate and effective provision for the making of all payments
otherwise payable pursuant to Section 6.3 of the Program with respect to such
Change in Control shall be made in connection with any such amendment or
termination. The Committee shall remain in existence after the termination of
the Program for the period determined necessary by the Committee to facilitate
the termination of the Program, and all provisions of the Program that are
necessary, in the opinion of the Committee, for equitable operation of the
Program during such period shall remain in force.

                                      -9-

<PAGE>

                         VIII. MISCELLANEOUS PROVISIONS

         8.1 NO EFFECT ON EMPLOYMENT RELATIONSHIP. For all purposes of the
Program, a Participant shall be considered to be in the employment of the
Company as long as he remains employed on a full-time basis by the Company or
any Affiliate. Without limiting the scope of the preceding sentence, it is
expressly provided that a Participant shall be considered to have terminated
employment with the Company at the time of the termination of the "Affiliate"
status under the Program of the entity or other organization that employs the
Participant. Nothing in the adoption of the Program, the grant of Awards, or the
payment of amounts under the Program shall confer on any person the right to
continued employment by the Company or any Affiliate or affect in any way the
right of the Company (or an Affiliate, if applicable) to terminate such
employment at any time. Unless otherwise provided in a written employment
agreement, the employment of each Participant shall be on an at-will basis, and
the employment relationship may be terminated at any time by either the
Participant or the Participant's employer for any reason whatsoever, with or
without cause. Any question as to whether and when there has been a termination
of a Participant's employment for purposes of the Program, and the reason for
such termination, shall be determined solely by and in the discretion of the
Committee, and its determination shall be final, binding, and conclusive on all
parties.

         8.2 PROHIBITION AGAINST ASSIGNMENT OR ENCUMBRANCE. No Award or other
right, title, interest, or benefit hereunder shall ever be assignable or
transferable, or liable for, or charged with any of the torts or obligations of
a Participant or any person claiming under a Participant, or be subject to
seizure by any creditor of a Participant or any person claiming under a
Participant. No Participant or any person claiming under a Participant shall
have the power to anticipate or dispose of any Award or other right, title,
interest, or benefit hereunder in any manner until the same shall have actually
been distributed free and clear of the terms of the Program. Payments with
respect to an Award shall be payable only to the Participant (or (a) in the
event of a Disability that renders such Participant incapable of conducting his
or her own affairs, any payment due under the Program to such Participant shall
be made to his or her duly appointed legal representative and (b) in the event
of the death of a Participant, any payment due under the Program to such
Participant shall be made to his or her estate). The provisions of the Program
shall be binding on all successors and permitted assigns of a Participant,
including without limitation the estate of such Participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the Participant's creditors.

         8.3 UNFUNDED, UNSECURED PROGRAM. The Program shall constitute an
unfunded, unsecured obligation of the Company to make payments of incentive
compensation to certain individuals from its general assets in accordance with
the Program. Each Award granted under the Program merely constitutes a mechanism
for measuring such incentive compensation and does not constitute a property
right or interest in the Company, any Affiliate, or any of their assets. Neither
the establishment of the Program, the granting of Awards, nor any other action
taken in connection with the Program shall be deemed to create an escrow or
trust fund of any kind.

         8.4 NO RIGHTS OF PARTICIPANT. No Participant shall have any security or
other interest in any assets of the Company or any Affiliate or in the
securities issued by the Company or any Affiliate as a result of participation
in the Program. Participants and all persons claiming under

                                      -10-

<PAGE>

Participants shall rely solely on the unsecured promise of the Company set forth
herein, and nothing in the Program, an Award or an Award Notice shall be
construed to give a Participant or anyone claiming under a Participant any
right, title, interest, or claim in or to any specific asset, fund, entity,
reserve, account, or property of any kind whatsoever owned by the Company or any
Affiliate or in which the Company or any Affiliate may have an interest now or
in the future; but each Participant shall have the right to enforce any claim
hereunder in the same manner as a general creditor. Neither the establishment of
the Program nor participation hereunder shall create any right in any
Participant to make any decision, or provide input with respect to any decision,
relating to the business of the Company or any Affiliate.

         8.5 TAX WITHHOLDING. The Company and the Affiliates shall deduct and
withhold, or cause to be withheld, from a Participant's payment made under the
Program, or from any other payment to such Participant, an amount necessary to
satisfy any and all tax withholding obligations arising under applicable local,
state, federal, or foreign laws associated with such payment. The Company and
the Affiliates may take any other action as may in their opinion be necessary to
satisfy all obligations for the payment and withholding of such taxes.

         8.6 NO EFFECT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in
the Program or any Participant's Award or Award Notice shall prevent the Company
or any Affiliate from adopting or continuing in effect other or additional
compensation arrangements affecting any Participant. Nothing in the Program
shall be construed to affect the provisions of any other compensation plan or
program maintained by the Company or any Affiliate.

         8.7 AFFILIATES. The Company may require any Affiliate employing a
Participant to assume and guarantee the Company's obligations hereunder to such
Participant, either at all times or solely in the event that such Affiliate
ceases to be an Affiliate.

         8.8 GOVERNING LAW. The Program shall be construed in accordance with
the laws of the State of Texas.

         IN WITNESS WHEREOF, the undersigned officer of the Company acting
pursuant to authority granted to him by the Committee has executed this
instrument as of the 22nd day of April, 2003, effective as of the Effective
Date.

                                  BMC SOFTWARE, INC.

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

                                     -11-

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