**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 Delawarecorporation (the “Company”), and [_________] (the “Executive”).
**WHEREAS**, the Executive is presently employed by the Company;
     **WHEREAS**, the Board of Directors of the Company (the “Board”) recognizesthat the Executive’s contribution to the growth and success of the Company hasbeen and continues to be substantial;
     **WHEREAS**, the Board desires to provide for certain arrangements in theevent that the Executive’s employment with the Company is terminated undercertain circumstances; and
     **WHEREAS**, the Company and the Executive desire to enter into this Agreementon the terms and conditions set forth below.
     **NOW, THEREFORE**, in consideration of the promises and the respectivecovenants and agreements of the parties herein contained, and of the continuedemployment of the Executive by the Company, the parties hereto, intending to belegally bound, do hereby agree as follows:
     1. Definitions. For purposes of this Agreement:
          (a) “Cause” shall mean the Executive’s (i) theft, fraud, materialdishonesty or gross negligence in the conduct of the Company’s business, (ii)continuing neglect of the Executive’s duties and responsibilities that has amaterial adverse effect on the Company (which neglect is not cured withinfifteen (15) days after receipt of written notice by the Executive specifyingthe particulars of such neglect), or (iii) conviction of a felony (notinvolving an automobile). For purposes of this Agreement, any purportedtermination of the Executive’s employment shall be presumed to be other thanfor Cause, unless the notice of termination includes a copy of a resolutionduly adopted by the Board which finds Cause to exist and specifies theparticulars thereof in detail.
          (b) “Good Reason” shall mean (i) a decrease in the Executive’s basesalary, (ii) a reduction or change in the Executive’s authorities, duties orjob responsibilities, or (iii) a geographic relocation of the Executive withoutthe Executive’s consent more than thirty (30) miles from the current locationof the Executive’s office as of the date hereof.
          (c) A “Change in Control” shall be deemed to have occurred if (A) anyperson (as such term is used in Sections 13(d) and 14(d) of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), is or becomes the“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directlyor indirectly, of securities of the Company representing fifty percent (50%) ormore 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 thisAgreement, individuals who at the beginning of such period constitute the Boardcease for any reason to
 

 

constitute at least a majority thereof, unless the election of each directorwho was not a director at the beginning of such period has been approved inadvance by directors representing at least two-thirds of the directors then inoffice who were directors at the beginning of the period, (C) the shareholdersof the Company approve a merger or consolidation involving the Company thatwould result in a change of ownership of a majority of the outstanding sharesof capital stock of the Company, or (D) the shareholders of the Company approvea plan of liquidation or dissolution of the Company or the sale or dispositionby the Company of all or substantially all the Company’s assets.
          (d) The “Date of Termination” with respect to any purported termination ofthe Executive’s employment means the date specified as such in the Notice ofTermination. In the case of termination of the Executive’s employment (i) bythe Company for Cause or (ii) by the Executive for any reason, the Date ofTermination shall be a date not less than seven (7) days from the date theNotice of Termination is given. In the case of termination of the Executive’semployment by the Company without Cause, the Date of Termination shall be adate not less than thirty (30) days from the date the Notice of Termination isgiven.
          (e) “Notice of Termination” means a written notice of termination ofemployment by the terminating party, which notice shall specify a Date ofTermination 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 theCompany, with or without Cause, by delivery of a Notice of Termination to theExecutive. The Executive’s employment may be terminated at any time by theExecutive, with or without Good Reason, by delivery of a Notice of Terminationto the Company.
          (b) In the event the Company terminates the Executive’s employment withoutCause, or in the event the Executive terminates the Executive’s employment forGood Reason, then the Company shall pay the Executive’s base salary through thedate of such termination and shall continue to pay to the Executive theExecutive’s base salary, plus all benefits provided to the Executiveimmediately prior to the date of the Notice of Termination until the firstanniversary of the Date of Termination; provided, however, that the Company’sobligations under this Section 2(b) shall cease upon the Executive’scommencement of full-time employment with another employer.
          (c) If there is a Change in Control of the Company or there has been apublic announcement of a Change in Control of the Company (provided, however,that consummation of the Change in Control of the Company shall be a conditionprecedent to the effectiveness of this provision) and at any time within one(1) year after the consummation of a Change in Control (i) the Companyterminates the Executive’s employment without Cause, or (ii) the Executiveterminates the Executive’s employment for Good Reason, then (x) the Companyshall 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 daysafter 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
- 2 -

 

effect immediately prior to the occurrence of the circumstance giving rise tothe Notice of Termination given in respect thereof and (B) the maximum bonus orincentive compensation amount for which the Executive is eligible to be awardedpursuant to any bonus or incentive compensation plan, calculated based upon thebonus period in which the Date of Termination and annualized to the extent thatsuch bonus period does not reflect a twelve (12) month period and (C) for [atwelve (12)] [an eighteen (18)] month period after the Date of Termination, theCompany shall administer and pay for the Executive’s life, disability, accidentand health insurance benefits substantially similar to those which Executive isreceiving immediately prior to the Notice of Termination.
          (d) In the event of the death of the Executive, this Agreement shallterminate, and shall be of no further force or effect; provided, however, thatnotwithstanding the foregoing, the death of the Executive shall not in any wayaffect any payment obligations of the Company pursuant to Section 2(b) orSection 2(c) hereof which exist at the time of such death.
     3. Successors; Binding Agreement. This Agreement and all rights of theExecutive hereunder shall inure to the benefit of and be enforceable by theExecutive’s personal or legal representatives, executors, administrators,successors, heirs, distributees, devisees and legatees. If the Executiveshould die while any amounts would still be payable to the Executive hereunderif the Executive had continued to live, all such amounts, unless otherwiseprovided herein, shall be paid in accordance with the terms of this Agreementto the Executive’s devisee, legatee, or other designee or, if there be no suchdesignee, to the Executive’s estate.
     4. Notice. For the purposes of this Agreement, notices, demands and allother communications provided for in this Agreement shall be in writing andshall be deemed to have been duly given when delivered by hand delivery or viareputable overnight delivery service, or (unless otherwise specified) mailed byUnited States registered mail, return receipt requested, postage prepaid,addressed, if to the Executive, to the Executive’s home address as it appearson the records of the Company, and if to the Company, to the Company’sexecutive headquarters, or to such other address as either party may havefurnished to the other in writing in accordance herewith, except that noticesof change of address shall be effective only upon receipt.
     5. Prior Agreement. All prior agreements between the Company and theExecutive with respect to the subject matter hereof (except for stock optionagreements), including without limitation the Executive Agreement, dated as of[___], by and between the Company and the Executive, are hereby supersededand terminated effective as of the date hereof and shall be without furtherforce or effect. This Agreement is intended to be, and shall be, a completeintegration of all prior agreements and discussions between the Company and theExecutive with respect to the subject matter hereof (except as set forth instock option agreements between the Company and the Executive).
     6. Employment of Executive. Nothing in this Agreement shall be construedas constituting a commitment, guarantee, agreement or understanding of any kindor nature that the Company shall continue to employ the Executive, nor shallthis Agreement affect in any way the right of the Company to terminate theemployment of the Executive at any time and for any reason. By the Executive’sexecution of this Agreement, the Executive acknowledges and agrees that theExecutive’s employment is “at will.” No change of the Executive’s duties as an
- 3 -

 

employee of the Company shall result in, or be deemed to be, amodification of any of the terms of this Agreement.
     7. Gross-Up for Excess Parachute Payments. In the event of a Change ofControl, or other event constituting a change in the ownership or effectivecontrol of the Company or ownership of a substantial portion of the assets ofthe Company described in Section 280G(b)(2)(A)(i) of the United States InternalRevenue Code of 1986, as amended (the “Code”), the Company, at its soleexpense, shall cause its independent auditors promptly to review all payments,accelerations, distributions and benefits that have been made to or providedto, and are to be made, or may be made, to or provided to, the Executive underthis Agreement, and any other agreement or plan benefiting the Executive(collectively the “Original Payments”), to determine the applicability ofSection 4999 of the Code to the Executive in connection with such event (otherthan under this Section 7). If the Company’s independent auditors determinethat the Original Payments are subject to excise taxes under Section 4999 ofthe Code (the “Excise Tax”), then an additional amount shall be paid to theExecutive (the “Gross-Up Amount”) such that the net proceeds of the Gross-UpAmount to the Executive, after deduction of the Excise Tax (including interestand penalties) and any federal, state and local income taxes and employmenttaxes (including interest and penalties) upon the Gross-Up Amount, shall beequal to the Excise Tax on the Original Payments. The Company’s independentauditors will perform the calculations in conformity with the foregoingprovisions 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 Amountand any income and employment taxes (including, without limitation, penaltiesand interest) imposed on any Gross-Up Amount payable hereunder. If nodetermination by the Company’s independent auditors is made prior to the timethe Executive is required to file a tax return reflecting Excise Taxes on anyportion of the Original Payment(s), the Executive will be entitled to receive aGross-Up Amount calculated on the basis of the Excise Tax that the Executivereports in such tax return, within thirty (30) days after the filing of suchtax return. The Executive agrees that, for the purposes of the foregoingsentence, the Executive is not required to file a tax return until theExecutive has obtained the maximum number and length of filing extensionsavailable, and Executive shall have provided a copy of the relevant portions ofsuch tax return to the Company not less than ten (10) days prior to filing suchtax return. If any tax authority finally determines that a greater Excise Taxshould be imposed upon the Original Payments or the Gross-Up Amount than isdetermined by the Company’s independent auditors or reflected in theExecutive’s tax returns, the Executive shall be entitled to receive the anadditional Gross-Up Amount calculated on the basis of the additional amount ofExcise Tax determined to be payable by such tax authority (including relatedpenalties and interest) from the Company within thirty (30) days after suchdetermination. The Executive shall cooperate with the Company as it mayreasonably requested to permit the Company (at its sole expense) to contest thedetermination of such taxing authority to minimize the amount payable underthis Section 7. If any tax authority finally determines the Excise Tax payableby the Executive to be less than the amount taken into account hereunder incalculating the Gross-Up Amount, the Executive shall repay to the Company,within thirty (30) days after the Executive’s receipt of a tax refund resultingfrom that determination, to the extent of such refund, the portion of theGross-Up Amount attributable to such reduction (including the refunded portionof Gross-Up Amount attributable to the Excise Tax and federal, state and localincome and employment taxes
- 4 -

 

imposed on the Gross-Up Amount being repaid, less any additional incometax resulting from receipt of such refund).
     8. Counsel Fees. The Company also shall pay to the Executivereimbursement for all legal fees and expenses incurred by the Executive indisputing in good faith any issue hereunder relating to the termination of theExecutive’s employment, in seeking in good faith to obtain or enforce anybenefit or right provided by this Agreement or in connection with review ofdeterminations made under Section 7, and any tax audit or proceeding to theextent attributable to the potential application of section 4999 of the Code toany payment or benefit provided by the Company to the Executive. Suchreimbursement payments shall be made within five (5) days after delivery of theExecutive’s written requests for payment accompanied with such evidence of feesand expenses incurred as the Company reasonably may require.
     9. No Mitigation. The Company agrees that, if the Executive’s employmentis terminated during the term of this Agreement, the Executive is not requiredto seek other employment or to attempt in any way to reduce any amounts payableto the Executive by the Company. Further, the amount of any payment providedhereunder 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 toin 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 heretoof, or compliance with, any condition or provision of this Agreement to beperformed by such other party shall be deemed a waiver of similar or dissimilarprovisions or conditions at the same or at any prior or subsequent time. Noagreements or representations, oral or otherwise, express or implied, withrespect to the subject matter hereof have been made by either party which arenot set forth expressly in this Agreement. The validity, interpretation,construction and performance of this Agreement shall be governed by the laws ofthe Commonwealth of Virginia, without regard to provisions thereof relating tochoice of law or conflicts of law. This Agreement may be executed in two ormore counterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument. This Agreement may beexecuted by facsimile signatures.
     11. Validity. The invalidity or unenforceability of any provision orprovisions of this Agreement shall not affect the validity or enforceability ofany other provision of this Agreement, which shall remain in full force andeffect.
**[Signatures appear on following page.]**
- 5 -

 

     **IN WITNESS WHEREOF**, the parties have executed this Executive Agreement onthe date and year first above written.       WEBMETHODS, INC., a Delaware corporation         By:    Name:    Title:             EXECUTIVE: