EXHIBIT 10.5

EXECUTIVE AGREEMENT

     THIS EXECUTIVE AGREEMENT (this “Agreement”) is made effective as of the
__th day of ______ 200_, by and between webMethods, Inc., a Delaware corporation
(the “Company”), and [_________] (the “Executive”).

WHEREAS, the Executive is presently employed by the Company;

     WHEREAS, the Board of Directors of the Company (the “Board”) recognizes
that the Executive’s contribution to the growth and success of the Company has
been and continues to be substantial;

     WHEREAS, the Board desires to provide for certain arrangements in the event
that the Executive’s employment with the Company is terminated under certain
circumstances; and

     WHEREAS, the Company and the Executive desire to enter into this Agreement
on the terms and conditions set forth below.

     NOW, THEREFORE, in consideration of the promises and the respective
covenants and agreements of the parties herein contained, and of the continued
employment of the Executive by the Company, the parties hereto, intending to be
legally bound, do hereby agree as follows:

     1. Definitions. For purposes of this Agreement:

          (a) “Cause” shall mean the Executive’s (i) theft, fraud, material
dishonesty or gross negligence in the conduct of the Company’s business, (ii)
continuing neglect of the Executive’s duties and responsibilities that has a
material adverse effect on the Company (which neglect is not cured within
fifteen (15) days after receipt of written notice by the Executive specifying
the particulars of such neglect), or (iii) conviction of a felony (not involving
an automobile). For purposes of this Agreement, any purported termination of the
Executive’s employment shall be presumed to be other than for Cause, unless the
notice of termination includes a copy of a resolution duly adopted by the Board
which finds Cause to exist and specifies the particulars thereof in detail.

          (b) “Good Reason” shall mean (i) a decrease in the Executive’s base
salary, (ii) a reduction or change in the Executive’s authorities, duties or job
responsibilities, or (iii) a geographic relocation of the Executive without the
Executive’s consent more than thirty (30) miles from the current location of the
Executive’s office as of the date hereof.

          (c) A “Change in Control” shall be deemed to have occurred if (A) any
person (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company’s then outstanding securities,
(B) during any period of two (2) consecutive years during the term of this
Agreement, individuals who at the beginning of such period constitute the Board
cease for any reason to

 

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constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period, (C) the shareholders of the
Company approve a merger or consolidation involving the Company that would
result in a change of ownership of a majority of the outstanding shares of
capital stock of the Company, or (D) the shareholders of the Company approve a
plan of liquidation or dissolution of the Company or the sale or disposition by
the Company of all or substantially all the Company’s assets.

          (d) The “Date of Termination” with respect to any purported
termination of the Executive’s employment means the date specified as such in
the Notice of Termination. In the case of termination of the Executive’s
employment (i) by the Company for Cause or (ii) by the Executive for any reason,
the Date of Termination shall be a date not less than seven (7) days from the
date the Notice of Termination is given. In the case of termination of the
Executive’s employment by the Company without Cause, the Date of Termination
shall be a date not less than thirty (30) days from the date the Notice of
Termination is given.

          (e) “Notice of Termination” means a written notice of termination of
employment by the terminating party, which notice shall specify a Date of
Termination and the particular facts and circumstances of such termination,
including the existence of Cause or Good Reason.

     2. Termination of Employment.

          (a) The Executive’s employment may be terminated at any time by the
Company, with or without Cause, by delivery of a Notice of Termination to the
Executive. The Executive’s employment may be terminated at any time by the
Executive, with or without Good Reason, by delivery of a Notice of Termination
to the Company.

          (b) In the event the Company terminates the Executive’s employment
without Cause, or in the event the Executive terminates the Executive’s
employment for Good Reason, then the Company shall pay the Executive’s base
salary through the date of such termination and shall continue to pay to the
Executive the Executive’s base salary, plus all benefits provided to the
Executive immediately prior to the date of the Notice of Termination until the
first anniversary of the Date of Termination; provided, however, that the
Company’s obligations under this Section 2(b) shall cease upon the Executive’s
commencement of full-time employment with another employer.

          (c) If there is a Change in Control of the Company or there has been a
public announcement of a Change in Control of the Company (provided, however,
that consummation of the Change in Control of the Company shall be a condition
precedent to the effectiveness of this provision) and at any time within one
(1) year after the consummation of a Change in Control (i) the Company
terminates the Executive’s employment without Cause, or (ii) the Executive
terminates the Executive’s employment for Good Reason, then (x) the Company
shall pay the Executive’s base salary through the Date of Termination, (y) shall
pay to the Executive, in a lump sum in cash within ten (10) business days after
the Date of Termination, an amount equal to [one (1)] [one and one half (1 1/2)]
times the sum of (A) the Executive’s base salary in

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effect immediately prior to the occurrence of the circumstance giving rise to
the Notice of Termination given in respect thereof and (B) the maximum bonus or
incentive compensation amount for which the Executive is eligible to be awarded
pursuant to any bonus or incentive compensation plan, calculated based upon the
bonus period in which the Date of Termination and annualized to the extent that
such bonus period does not reflect a twelve (12) month period and (C) for [a
twelve (12)] [an eighteen (18)] month period after the Date of Termination, the
Company shall administer and pay for the Executive’s life, disability, accident
and health insurance benefits substantially similar to those which Executive is
receiving immediately prior to the Notice of Termination.

          (d) In the event of the death of the Executive, this Agreement shall
terminate, and shall be of no further force or effect; provided, however, that
notwithstanding the foregoing, the death of the Executive shall not in any way
affect any payment obligations of the Company pursuant to Section 2(b) or
Section 2(c) hereof which exist at the time of such death.

     3. Successors; Binding Agreement. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to the Executive hereunder if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive’s devisee, legatee, or other designee or, if there be no such
designee, to the Executive’s estate.

     4. Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered by hand delivery or via
reputable overnight delivery service, or (unless otherwise specified) mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed, if to the Executive, to the Executive’s home address as it appears on
the records of the Company, and if to the Company, to the Company’s executive
headquarters, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.

     5. Prior Agreement. All prior agreements between the Company and the
Executive with respect to the subject matter hereof (except for stock option
agreements), including without limitation the Executive Agreement, dated as of
[___], by and between the Company and the Executive, are hereby superseded and
terminated effective as of the date hereof and shall be without further force or
effect. This Agreement is intended to be, and shall be, a complete integration
of all prior agreements and discussions between the Company and the Executive
with respect to the subject matter hereof (except as set forth in stock option
agreements between the Company and the Executive).

     6. Employment of Executive. Nothing in this Agreement shall be construed as
constituting a commitment, guarantee, agreement or understanding of any kind or
nature that the Company shall continue to employ the Executive, nor shall this
Agreement affect in any way the right of the Company to terminate the employment
of the Executive at any time and for any reason. By the Executive’s execution of
this Agreement, the Executive acknowledges and agrees that the Executive’s
employment is “at will.” No change of the Executive’s duties as an

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employee of the Company shall result in, or be deemed to be, a modification of
any of the terms of this Agreement.

     7. Gross-Up for Excess Parachute Payments. In the event of a Change of
Control, or other event constituting a change in the ownership or effective
control of the Company or ownership of a substantial portion of the assets of
the Company described in Section 280G(b)(2)(A)(i) of the United States Internal
Revenue Code of 1986, as amended (the “Code”), the Company, at its sole expense,
shall cause its independent auditors promptly to review all payments,
accelerations, distributions and benefits that have been made to or provided to,
and are to be made, or may be made, to or provided to, the Executive under this
Agreement, and any other agreement or plan benefiting the Executive
(collectively the “Original Payments”), to determine the applicability of
Section 4999 of the Code to the Executive in connection with such event (other
than under this Section 7). If the Company’s independent auditors determine that
the Original Payments are subject to excise taxes under Section 4999 of the Code
(the “Excise Tax”), then an additional amount shall be paid to the Executive
(the “Gross-Up Amount”) such that the net proceeds of the Gross-Up Amount to the
Executive, after deduction of the Excise Tax (including interest and penalties)
and any federal, state and local income taxes and employment taxes (including
interest and penalties) upon the Gross-Up Amount, shall be equal to the Excise
Tax on the Original Payments. The Company’s independent auditors will perform
the calculations in conformity with the foregoing provisions and will provide
the Executive with a copy of their calculations. The intent of the parties is
that the Company shall be solely responsible for, and shall pay, any Excise Tax
on the Original Payment(s) and Gross-Up Amount and any income and employment
taxes (including, without limitation, penalties and interest) imposed on any
Gross-Up Amount payable hereunder. If no determination by the Company’s
independent auditors is made prior to the time the Executive is required to file
a tax return reflecting Excise Taxes on any portion of the Original Payment(s),
the Executive will be entitled to receive a Gross-Up Amount calculated on the
basis of the Excise Tax that the Executive reports in such tax return, within
thirty (30) days after the filing of such tax return. The Executive agrees that,
for the purposes of the foregoing sentence, the Executive is not required to
file a tax return until the Executive has obtained the maximum number and length
of filing extensions available, and Executive shall have provided a copy of the
relevant portions of such tax return to the Company not less than ten (10) days
prior to filing such tax return. If any tax authority finally determines that a
greater Excise Tax should be imposed upon the Original Payments or the Gross-Up
Amount than is determined by the Company’s independent auditors or reflected in
the Executive’s tax returns, the Executive shall be entitled to receive the an
additional Gross-Up Amount calculated on the basis of the additional amount of
Excise Tax determined to be payable by such tax authority (including related
penalties and interest) from the Company within thirty (30) days after such
determination. The Executive shall cooperate with the Company as it may
reasonably requested to permit the Company (at its sole expense) to contest the
determination of such taxing authority to minimize the amount payable under this
Section 7. If any tax authority finally determines the Excise Tax payable by the
Executive to be less than the amount taken into account hereunder in calculating
the Gross-Up Amount, the Executive shall repay to the Company, within thirty
(30) days after the Executive’s receipt of a tax refund resulting from that
determination, to the extent of such refund, the portion of the Gross-Up Amount
attributable to such reduction (including the refunded portion of Gross-Up
Amount attributable to the Excise Tax and federal, state and local income and
employment taxes

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imposed on the Gross-Up Amount being repaid, less any additional income tax
resulting from receipt of such refund).

     8. Counsel Fees. The Company also shall pay to the Executive reimbursement
for all legal fees and expenses incurred by the Executive in disputing in good
faith any issue hereunder relating to the termination of the Executive’s
employment, in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement or in connection with review of determinations made
under Section 7, and any tax audit or proceeding to the extent attributable to
the potential application of section 4999 of the Code to any payment or benefit
provided by the Company to the Executive. Such reimbursement payments shall be
made within five (5) days after delivery of the Executive’s written requests for
payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require.

     9. No Mitigation. The Company agrees that, if the Executive’s employment is
terminated during the term of this Agreement, the Executive is not required to
seek other employment or to attempt in any way to reduce any amounts payable to
the Executive by the Company. Further, the amount of any payment provided
hereunder shall not be reduced by any compensation earned by the Executive.

     10. Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Virginia, without regard to provisions thereof relating to choice of law or
conflicts of law. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may be executed by
facsimile signatures.

     11. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

[Signatures appear on following page.]

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     IN WITNESS WHEREOF, the parties have executed this Executive Agreement on
the date and year first above written.

              WEBMETHODS, INC., a Delaware corporation                   By:    
   

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Name:        

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Title:        

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                  EXECUTIVE:                    

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[NAME]