Highlights and Frequently Asked Questions (FAQs) about the BMC Software, Inc. 2006 Employee Stock Purchase Plan (ESPP) BMC has arranged with Fidelity Investments to maintain individual employee accounts for those who elect to participate. Fidelity will maintain the accounts and mail a confirmation following each transaction. These FAQs will explain some aspects of the ESPP. For complete information, please log into Fidelity NetBenefits at www.netbenefits.com or contact a Fidelity representative by phone at 1-877-BMC-4849 (1-800-544-0275 outside North America), or at the local toll-free number assigned to your country. If for some reason a representative is unable to help you, you may contact the ERC (Employee Resource Center) by logging a Remedy Helpdesk ticket from http://helpdesk.bmc.com on the BMC intranet. Participation by eligible employees is entirely voluntary and BMC will make no recommendations to its employees regarding participation in the Plan. Note: The ESPP is a qualified Section 423 stock purchase plan under the tax laws of the United States. Because it is specially designed to accommodate the tax structure of the US, much of the information listed here is specific to the US. All participants US and non-us are solely responsible for all individual tax reporting and for understanding how the ESPP may be treated in their local tax jurisdiction. Offering Period Under the Plan, the shares will be purchased at the end of each six-month offering period using after-tax amounts that had been withheld during the period via regular payroll deductions. The offering period will be a six-month period beginning each year on January 1 and July 1. Discount The shares of BMC Software (the "Stock") are purchased at a 15% discount from the fair market value (average of the day's high and low sales price) of the Stock on the first day of the offering period or the last day of the offering period, whichever amount is less. For example, if the average sales price on July 1 is US$50.125, and on December 30 (let's assume December 31 is a holiday) the average sales price is US$60.125, your purchase price will be US$42.606 (85% of $50.125). The value of the total discount is not taxable to US employees until the shares are sold. In other countries the discount may be taxable upon share purchase. Employees outside the US should check with a tax advisor regarding taxability of the discount amount. Eligibility All employees of BMC and its participating subsidiary corporations who are scheduled to work more than 20 hours a week and who are employed as of the first day of an offering period are eligible to participate in the Plan. However, you may not be able to enroll in the current offering period if your hire date occurs within a week from the enrollment deadline. Officers of the Company are not eligible to participate in the Plan.
Fidelity will open and maintain individual brokerage accounts for participants in the Plan, accept contributions, and purchase on behalf of participating employees whole and/or fractional shares of BMC Software at the discounted price. BMC will pay all fees to Fidelity on purchases made through payroll deduction. Commissions and charges in connection with sales or purchases made other than by payroll deduction will be payable by the employee. Deduction Authorization You may designate up to 10% of your "eligible compensation" to be withheld from your pay. The amount of the deduction must be at least US$25.00 per pay period and may not exceed US$21,250 per calendar year (as required by the IRS.). All amounts withheld are "after-tax." Eligible compensation means base pay, overtime, commissions and bonuses. It does not include expense reimbursements and allowances, fringe benefits, moving expenses, employer 401(k) matching contributions, or stock option gains. Eligible employees may participate only through payroll deduction. Employees on approved unpaid leave of absence may not continue participating in the Plan. BMC will send to Fidelity a list of the amounts deducted for each employee. Fidelity will maintain the employee accounts by crediting full and/or fractional shares, mailing statements after each transaction and sending annual reports, proxy statements and any other material issued by BMC Software to each stockholder of one or more shares. Dividends and/or any stock splits with respect to shares held in the employee's account will be credited to the account without charge. The employee may instruct Fidelity to sell a part or all of the full shares and the fractional interest shares held in the employee's account. Upon request, Fidelity will deposit into the brokerage account all sale proceeds, less the brokerage commission and any transfer taxes, registration fees or other normal charges which are customarily paid by sellers of shares. The relationship between Fidelity and the employee is the normal relationship of a broker and client. BMC does not assume any responsibility in this respect. There will be no charge to the employees for Fidelity s custody of stock certificates, or in connection with notices, proxies or other such material. FAQs What is purpose of the Plan? The purpose of the Plan is to give eligible employees the opportunity to voluntarily purchase BMC Stock at a favorable price and upon favorable terms. Participants purchase shares at a 15% discount from the lower of the beginning or ending share price, and receive a discount on brokerage fees. BMC pays all administrative fees relating to the purchase of Stock through the ESPP.
Is there a guarantee against loss under the Plan? No. There is no guarantee against loss due to market fluctuations. The investor, in seeking the benefits of share ownership, must also accept the risks. How is this Plan different from our 401(k) Retirement Plan? Unlike the 401(k) Plan, your contributions to the ESPP are made with after-tax dollars. Therefore, your contributions to the ESPP will not reduce your annual W-2 taxable income. Also unlike the 401(k), when you sell your Stock there is no early withdrawal penalty. Gains realized upon the sale of your shares may be subject to specific tax treatment depending on how long you owned the Stock. Please refer to the Plan Prospectus or consult a tax professional for details. When can I join the Plan? You may enroll online from May 15 to June 15 before the July-December offering period, and from November 15 to December 15 before the January-June offering period. Payroll deductions will start as of July 1 and January 1. May I change the amount of my payroll deduction? Not during an offering period. You can increase or decrease the amount of your payroll deduction only during the semi-annual enrollment periods (beginning May 15 and November 15). Changes can only take effect for the next offering period. You may stop contributing to the plan at any time; however (see How Do I Withdraw from the Plan below). How are the shares purchased? Shares are purchased every six months at the end of the offering period and will be deposited in your Fidelity account. Fidelity will purchase from BMC Software as many whole and/or fractional shares as the money deducted from your pay will allow. Any small money amounts left over from fractional purchases will remain in your account and be used toward future purchases. How much do I pay for the shares? Stock prices fluctuate by the minute depending upon the supply and demand of the Stock. The price you pay will be 85% of the beginning or ending fair market value (which is defined as the average of the high and low sales prices that day) for the offering period, whichever is less. You do not pay any brokerage fees, transfer fees, or other costs for purchases made through the ESPP. May I transfer purchased shares from Fidelity to a separate brokerage account? For tax purposes, BMC tracks all shares sold prior to a two-year holding period. As such, shares may not be transferred until two years have elapsed from the offering start date in which the shares were purchased (or eighteen months from the purchase date). To transfer shares, you must contact a Fidelity phone representative at 1-877-BMC-4849 (1-800-544-0275 outside North America). You may sell your shares at any time, however.
Will I automatically receive share certificates when I purchase shares under the Plan? No. Certificates for shares of BMC Stock purchased under the ESPP will be held by Fidelity for safekeeping (without charge), but can be delivered to you upon written request. There is a charge for issuance of the certificates. The number of shares credited to your account under the Plan will be shown on your statement of account. This safekeeping feature protects against loss, theft, or destruction of stock certificates. What must I do to sell my Stock? Log into Fidelity NetBenefits at www.netbenefits.com to access your brokerage account and follow the instructions to trade stock. You can also call a Fidelity representative at 1-877-BMC-4849 (1-800-544-0275 outside North America) to initiate an order to sell. Remember, all transactions in BMC Stock are subject to BMC's Securities Trading Policy. Please contact the Legal Department regarding this policy if you have any questions. If the shares of BMC Stock held in your Fidelity account were acquired pursuant to the ESPP, then, unless you terminate employment, they may only be sold after the stock purchase is complete and the shares have been placed into your account. How do I withdraw from the Plan? You may withdraw from the Plan by requesting a withdrawal on NetBenefits or by contacting a Fidelity Representative by phone at 1-877-BMC-4849 (1-800-544-0275 outside North America). Your withdrawal request must be initiated before the start of the last pay period in the current offering period, otherwise Stock will be purchased for you with amounts withheld during the offering period. Once you withdraw, you may not resume participation until the next open enrollment period in May or November. Your contributions will be refunded to you via Payroll as soon as administratively feasible. May I continue in the Plan after I leave the Company? No. Because shares purchased under the Plan are based on payroll deductions, your participation in the Plan must be terminated upon your retirement, resignation, death, or other termination of employment. However, you may continue to maintain your account with Fidelity and make direct purchases if you wish. You will pay the entire cost of each transaction. What kind of records do I need to keep for tax purposes? It is very important to keep all statements and confirmations that Fidelity sends to you, as the information on the statements will verify your actual cost of the shares of Stock. Certain historical purchase information is also available on NetBenefits. When you sell the Stock, you will need to know your cost in order to compute the proper amount of gain or loss on the sale. May I name a beneficiary for my ESPP account? No. The balance of your ESPP account would be paid directly to your estate. You do, however, have the option to establish a beneficiary for any positions you own in the Fidelity brokerage
account, including BMC shares. Please go to NetBenefits.com for more information or call a Fidelity representative. Terms and Conditions All provisions of the constitution, rules and regulations and all customs and usage of the exchange or marketplace where transactions are executed, as from time to time in effect shall apply. Periodic payments for your account up to 10% of your eligible pay, not to exceed US$21,250 per calendar year with a minimum of US$25.00 per pay period will be made through payroll deductions by BMC, for the purchase of BMC Stock. Upon purchase of these shares, full and fractional shares will be allocated to your account on the basis of the discounted purchase price per share. All transactions in BMC Stock are subject to the Company's Securities Trading Policy. Your pro-rata share of stock dividends and stock splits, if any, shall be credited to your account. Cash dividends and proceeds of sales of rights and other distributions received for your account, if any, will be paid to you by Fidelity. In the absence of receiving timely instructions from you with respect to tenders or exchanges, Fidelity is authorized to tender or exchange your shares whenever in its opinion it would be in your best interest to do so. Fees for purchases made through payroll deductions will be paid by BMC. Commissions on purchases other than by payroll deductions and on sales will be charged to you at the special plan rates prevailing at Fidelity at the time of the transaction. You have the option to revise your payroll deduction within the specified limits, or withdraw from the Plan on NetBenefits.com or by phone through a Fidelity representative. If you terminate your payroll deduction, Fidelity shall continue to maintain the account for a reasonable period of time unless you elect to close it. You may at any time direct that all or part of the shares be sold or that a certificate for all or part of the full shares held in your account be registered in your name and mailed to you subject to the certificate withdrawal fee. Also, you may deposit in your account any additional shares of BMC Stock owned by you to be held by Fidelity in "street name." Copies of annual reports, proxy statements and any other material issued to stockholders will be mailed to you provided the balance in your account is one share or more. In the event BMC or Fidelity is advised of your death or legal incapacity, your account will be closed to future purchases and any securities and cash shall be held, pending receipt of instructions and supporting documents from your legal representative. BMC Software reserves the right to discontinue the ESPP at any time it deems advisable. Fidelity may also discontinue its services as operating broker for the Plan upon written notice to you. Global Human Resources May 2007