Document:

exv10w9

 

Exhibit 10.9

WEBMETHODS, INC.

DEFERRED COMPENSATION PLAN

FOR DIRECTORS

	1.  	Purpose 

     The Company desires and intends to recognize the value to the Company of the past and present
services of its Directors, to encourage their continued service to the Company and to be able to
attract and retain superior Directors by adopting and implementing this Plan to provide such
Directors an opportunity to defer compensation otherwise payable to them from the Company. The
Company desires to allow such Directors an opportunity to invest in the Common Shares of the
Company by providing that amounts deferred under this Plan are on a quarterly basis treated as
invested in Common Shares during the deferral period and distributed in common shares at the end of
the deferral period. The Company intends that for amounts deferred under the Plan after December
31, 2004, the Plan will be administered in conformity with deferred compensation rules of Section
409A of the Internal Revenue Code of 1986, as amended.

	2.  	Certain Definitions

     The following terms will have the meanings provided below.

     A. “Beneficiary” means the person or persons designated in writing as such and filed
with the Company at any time by a Participant. Any such designation may be withdrawn or changed in
writing (without the consent of the Beneficiary), but only the last designation on file with the
Company shall be effective.

     B. “Board” means the Board of Directors of the Company.

     C. “Code” means the Internal Revenue Code of 1986, as amended , or its successor.

     D. “Common Shares” means the shares of Common Stock, par value $.01, of
the Company.

     E. “Company” means webMethods, Inc., a Delaware corporation, and any
successor entity.

     F. “Deferred Compensation Account” means the separate Deferred
Compensation Account established for each Participant pursuant to Section 4 of the
Plan, which Deferred Compensation Account shall consist of a “Cash Account” and “Stock
Account.”

     G. “Director” means any director of the Company who receives compensation
from the Company for his or her services as a director.

     H. “Effective Date” means September 30, 2004.

 

 

     I. “Eligible Compensation” means, to the extent applicable to any given
Participant, the annual retainer and meeting fees otherwise payable in cash, and
receivable for service as a Director, but not any other compensation or expense
reimbursement.

     J. “Fair Market Value” of the Common Shares means, if the Common Shares
are traded on The Nasdaq National Market or The Nasdaq SmallCap Market or are listed on
a national securities exchange, the closing price for the day of determination as
quoted on such market or exchange which is the primary market or exchange for trading
of the Common Shares or if no trading occurs on such date, the last day on which
trading occurred; if the Common Shares are regularly quoted by a recognized securities
dealer but selling prices are not reported, Fair Market Value shall be the mean between
the high and the low asked prices for the Common Shares for the day of determination;
or in the absence of an established market for the Common Shares, Fair Market Value
shall be determined by the Plan Administrator in good faith.

     K. “Participant” has the meaning specified in Section 3 of the Plan.

     L. “Plan” means the webMethods, Inc. Deferred Compensation Plan for
Directors, as reflected in this document, as the same may be amended from time to time
after the Effective Date.

     M. “Plan Administrator” means the Chief Financial Officer of the Company.

     N. “Post-2004 Deferrals” mean amounts deferred under the Plan after
December 31, 2004.

     O. “Trading Day” means a day on which the principal exchange or market on
which the Common Stock is traded is open for business.

	3.  	Participants

     Each Director on the Effective Date is eligible for participation in the Plan on the Effective
Date. Each individual who becomes a Director after the Effective Date is eligible for
participation in the Plan as of the date on which he or she becomes a Director. A Participant
shall continue to participate in the Plan until his or her status as a Participant is terminated by
a complete distribution of his or her Deferred Compensation Account pursuant to the terms of the
Plan.

	4.  	Deferred Compensation Accounts

     A. Establishment of Deferred Compensation Accounts. The Company will establish a
Deferred Compensation Account for each Participant. Each Deferred Compensation Account shall
include a Cash Account and Stock Account.

     B. Election of Participant. A Participant may elect to have all or a portion of his
or her Eligible Compensation which is to be paid to him or her by the Company allocated to his or
her Deferred Compensation Account and paid on a deferred basis pursuant to the terms of the

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Plan. To exercise such an election, the Participant must advise the Company of his or her
election, in writing, on a form (a “Deferral Notice”) and within the following time periods:

	 	(i)  	A nominee for election for Director (who is not at the time of nomination a
sitting Director) may file a Deferral Notice any time before election to the Board and
before being entitled to receive any compensation for service on the Board or a
committee. The Deferral Notice shall be effective upon such person’s election to the
Board. Effective as of January 1, 2005, a new Participant’s election to defer
compensation must be made not later than 30 days after the Participant becomes eligible
to participate in the Plan.
	 
	 	(ii)  	A sitting Director who has never filed Deferral Notice may file a Deferral
Notice at any time during the year. Such Deferral Notice shall not be effective until
January 1 of the following year; provided, that a Deferral Notice filed within thirty
(30) days of the Effective Date shall be effective as of the date filed.
	 
	 	(iii)  	A sitting Director who has revoked his or her Deferral Notice in accordance
with the following paragraph may again file a Deferral Notice at any time during the
year, but the election will not be effective until January 1 of the following year.

Such Deferral Notice shall apply only to Eligible Compensation payable to, or earned by, the
Participant after the date on which the Deferral Notice is received by the Company. A Participant
may elect to change a prior election with respect to his or her Deferral Notice by completing a new
Deferral Notice, but such election shall not, however, be effective until January 1 of the
following year. A participant may elect to revoke a Deferral Notice at any time, but such election
shall not be effective until the first day of the next calendar quarter, or if later, with respect
to Post-2004 Deferrals, the earliest date on which such revocation may be effective in accordance
with Section 409A(a) of the Code. Unless changed or revoked, a Deferral Notice shall continue in
effect until the end of the participant’s service as a Director.

     C. Maintenance of Deferred Compensation Account. When a Participant has elected under
Section 4(b) to have Eligible Compensation credited to his or her Deferred Compensation Account, as
of the date any Eligible Compensation would have otherwise been payable absent the filing of a
Deferral Notice, the Company will allocate to the Participant’s Cash Account the amount of Eligible
Compensation specified in the Deferral Notice. As of the first Trading Day of each calendar
quarter, the balance of the amount credited to the Participant’s Cash Account shall be divided by
the then Fair Market Value of the Common Shares. Upon completion of this calculation, each
Participant’s Stock Account shall be credited with the resulting number of Common Shares (carried
to three decimals) and the Participant’s Cash Account reduced to zero. As necessary to properly
administer the Plan the Plan Administrator shall maintain separate Cash Accounts and Stock Accounts
for a Participant’s Post-2004 Deferrals.

     D. Adjustment of Account Balances. The Cash Account of each Participant shall be
credited with cash dividends on the number of Common Shares credited to the Participant’s Stock
Account at the times and equal in amount to the cash dividends actually paid with respect to Common
Shares on and after the date credited to the Stock Account. No interest or earnings shall be
credited to amounts in a Participant’s Cash Account.

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     E. Stock Account Adjustments. The number of Common Shares in the Stock Account of
each Participant shall be adjusted from time to time to reflect stock splits, stock dividends or
other changes in the Common Shares resulting from a change in the Company’s capital structure.

     F. Participant’s Rights in Accounts. A Participant’s only right with respect to his
or her Deferred Compensation Account (and amounts allocated thereto) will be to receive payments in
accordance with the provisions of Section 5 of the Plan.

	5.  	Payment of Deferred Benefits

     A. Time of Payment. Subject to earlier distribution in accordance with Section 11
hereof, distribution of a Participant’s Deferred Compensation Account shall be made as soon as
practicable following the Participant’s termination of service as a Director. Notwithstanding the
preceding sentence, with respect to Post-2004 Deferrals, distribution shall be made as soon as
practicable following a separation from service as provided in Section 409A(a) of the Code and
distribution to a Participant who is a “key employee” within the meaning of Section 416(i) of the
Code (determined without regard to paragraph 5 thereof) shall not be made prior to six months
following the Participant’s separation from service (or, if earlier the date of the Participant’s
death).

     B. Method of Distribution. A Participant’s Deferred Compensation Account shall be
distributed to the Participant in a single lump sum transfer of the whole number of Common Shares
(plus cash representing the value of any fractional share) as credited to the Participant’s Stock
Account and cash for amount credited to the Participant’s Cash Account.

     C. Hardship Distributions. Prior to the time a Participant’s Deferred Compensation
Account becomes payable, the Plan Administrator, in his or her sole discretion, may elect to
distribute all or a portion of the whole Common Shares (plus cash representing the value of any
fractional share) credited to such account in the event such Participant requests a distribution
due to severe financial hardship. For purposes of this Plan, severe financial hardship shall be
deemed to exist in the event the Plan Administrator determines that a Participant needs a
distribution to meet immediate and heavy financial needs resulting from a sudden or unexpected
illness or accident of the Participant or a member of the Participant’s family, loss of the
Participant’s property due to casualty or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Participant. No distribution
shall be made due to a severe financial hardship under this Section, to the extent such hardship
may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation
of the Participant’s assets, to the extent liquidation of such assets would not by itself cause
severe hardship, or by cessation of deferrals under the Plan. A distribution based on financial
hardship shall not exceed the smaller of (i) the amount of cash and the number of whole Common
Shares (plus cash representing the value of any fractional share) credited to the Participant’s
Deferred Compensation Account or (ii) the amount of cash and the number of whole Common Shares
credited to the Participant’s Deferred Compensation Account with a Fair Market Value (determined as
of the date of distribution) equal to the amount needed to meet the financial hardship. The amount
necessary to satisfy a hardship distribution shall first be distributed from a Participant’s Cash
Account. For withdrawal requests with respect to Post-2004 Deferrals, this

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Section shall be applied in conformity with the “unforeseeable emergency” rules of Section
409A(a)(2) of the Code.

     D. Designation of Beneficiary. Upon the death of a Participant prior to the
distribution of his or her Deferred Compensation Account, such Deferred Compensation Account shall
be paid to the Beneficiary designated by the Participant in a single lump sum transfer of cash and
shares of Common Stock as provided in Section 5.B. hereof, as soon as practicable after the
Participants’ death. If there is no designated Beneficiary or no designated Beneficiary surviving
at a Participant’s death, payment of the Participant’s Deferred Compensation Account shall be made
to the Participant’s estate.

     E. Taxes. In the event any taxes are required by law to be withheld or paid from any
payments made pursuant to the Plan, the Plan Administrator shall deduct such amounts from such
payments and shall transmit the withheld amounts to the appropriate taxing authority.

	6.  	Assignment or Alienation

     The right of a Participant, Beneficiary or any other person to the payment of a benefit under
this Plan may not be assigned, transferred, pledged or encumbered except by will or by the laws of
descent and distribution.

	7.  	Plan Administration

     The Plan Administrator will have the right to interpret and construe the Plan and to determine
all questions of eligibility and of status, rights and benefits of Participants and all other
persons claiming benefits under the Plan. In all such interpretations and constructions, the Plan
Administrator’s determination will be based upon uniform rules and practices applied in a
nondiscriminatory manner and will be binding upon all persons affected thereby. Subject to the
provisions of Section 8 below, any decision by the Plan Administrator with respect to any such
matters will be final and binding on all parties. The Plan Administrator will have absolute
discretion in carrying out his or her responsibilities under this Section 7.

	8.  	Clams Procedure

     A. Filing Claims. Any Participant or Beneficiary entitled to benefits under the Plan
will file a claim request with the Plan Administrator.

     B. Notification to Claimant. If a claim request is wholly or partially denied, the
Plan Administrator will furnish to the claimant a notice of the decision within ninety (90) days in
writing and in a manner calculated to be understood by the claimant, which notice will contain the
following information:

	 	(i)  	the specific reason or reasons for the denial;
	 
	 	(ii)  	specific reference to pertinent Plan provisions upon which the denial is based;

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	 	(iii)  	a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or information
is necessary; and
	 
	 	(iv)  	an explanation of the Plan’s claims review procedure describing the steps to be
taken by a claimant who wishes to submit his or her claims for review.

     C. Review Procedure. A claimant or his or her authorized representative may, with
respect to any denied claim:

	 	(i)  	request a review upon a written application filed within sixty (60) days after
receipt by the claimant of written notice of the denial of his or her claim;
	 
	 	(ii)  	review pertinent documents; and
	 
	 	(iii)  	submit issues and comments in writing. Any request or submission will be in
writing and will be directed to the Plan Administrator (or his or her designee).
The Plan Administrator (or his or her designee) will have the sole responsibility
for the review of any denied claim and will take all steps appropriate in the light
of the Plan Administrator’s findings.

     D. Decision on Review. The Plan Administrator (or his or her designee) will render a
decision upon review. If special circumstances (such as the need to hold a hearing on any matter
pertaining to the denied claim) warrant additional time, the decision will be rendered as soon as
possible, but not later than one hundred twenty (120) days after receipt of the request for review.
Written notice of any such extension will be furnished to the claimant prior to the commencement
of the extension. The decision on review will be in writing and will include specific reasons for
the decision, written in a manner calculated to be understood by the claimant, as well as specific
references to the pertinent provisions of the Plan on which the decision is based. If the decision
on review is not furnished to the claimant within the time limits prescribed above, the claim will
be deemed denied on review.

	9.  	Unsecured And Unfunded Obligation 

     Notwithstanding any provision herein to the contrary, the benefits offered under the Plan
shall constitute an unfunded, unsecured promise by the Company to pay benefits determined hereunder
which are accrued by Participants while such Participants are Directors. No Participant,
Beneficiary or any other person shall have any interest in any particular assets of the Company or
shares of common stock by reason of the right to receive a benefit under the Plan and any such
Participant, Beneficiary or other person shall have only the rights of a general unsecured creditor
of the Company with respect to any rights under the Plan. Nothing contained in the Plan shall
constitute a guaranty by the Company or any other entity or person that the assets of the Company
will be sufficient to pay any benefit hereunder. All expenses and fees incurred in the
administration of the Plan shall be paid by the Company.

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	10.  	Amendment And Termination Of The Plan

     The Company reserves the right, by a resolution of the Board, to amend the Plan at any time,
and from time to time, in any manner which it deems desirable. The Company also reserves the
right, by a resolution of the Board, to terminate this Plan at any time without providing any
advance notice to any Participant; and in the event of any Plan termination and subject to Section
17 of the Plan, the Company reserves the right to then distribute all amounts allocated to
Participants’ Deferred Compensation Accounts. However, other than an amendment to comply with
Section 409A of the Code, no amendment to or termination of the Plan will adversely affect the
benefit that any Participant has accrued under the Plan until the later of (i) the effective date
of that amendment or, if applicable, the effective date of Plan termination or (ii) the date that
the amendment is adopted or, if applicable, the date that the Plan is terminated.

	11.  	Binding Upon Successors 

     The Plan shall be binding upon and inure to the benefit of the Company, its successors and
assigns and the Participants and their heirs, executors, administrators and legal representatives.
In the event of the merger or consolidation of the Company with or into any other corporation, or
in the event substantially all of the assets of the Company shall be transferred to another
corporation, then, subject to Section 17 of the Plan, either (i) the Plan shall be terminated and
amounts allocated to Participant’s Deferred Compensation Accounts distributed to Participants or
(ii) the successor corporation resulting from the merger or consolidation, or the transferee of
such assets, as the case may be, shall, as a condition to the consummation of the merger,
consolidation or transfer, assume the obligations of the Company hereunder and shall be substituted
for the Company hereunder.

	12.  	No Guarantee Of Plan Permanency

     This Plan does not contain any guarantee of provisions for continued service on the Board to
any Director or Participant nor is it guaranteed by the Company to be a permanent plan

	13.  	Gender 

     Any reference in the Plan made in the masculine pronoun shall apply to both men and women.

	14.  	Incapacity Of Recipient

     In the event that a Participant or Beneficiary is declared incompetent and a guardian,
conservator or other person legally charged with the care of his or her person or of his or her
estate is appointed, any benefits under the Plan to which such Participant or Beneficiary is
entitled shall be paid to such guardian, conservator or other person legally charged with the care
of his person or his estate. Except as provided hereinabove, when the Plan Administrator, in his
or her sole discretion, determines that a Participant or Beneficiary is unable to manage his or her
financial affairs, the Plan Administrator may, but shall not be required to, direct the Company to
make distribution(s) to any one or more of the spouse, lineal ascendants or descendants or other
closest living relatives of such Participant or Beneficiary who demonstrates to the satisfaction of
the Plan Administrator the propriety of making such distribution(s). Any payment made under

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this Section 14 shall be in complete discharge of any liability under the Plan for such
payment. The Plan Administrator shall not be required to see to the application of any such
distribution made to any person.

	15.  	Governing Law

     This Plan shall be construed in accordance with and governed by the laws of the State of
Delaware

	16.  	Inability To Locate Participant Or Beneficiary

     Each Participant is obliged to keep the Plan Administrator apprised of his or her current
mailing address and that of his or her Beneficiary. The Plan Administrator’s obligation to search
for any Participant or Beneficiary is limited to sending a registered or certified letter to the
Participant’s or Beneficiary’s last known address. Any amounts credited to the Deferred
Compensation Account of any Participant or Beneficiary that does not present himself or herself to
the Plan Administrator will be forfeited no later than 12 months after that benefit otherwise would
have been payable. However, this forfeited benefit will be restored and paid if the Plan
Administrator subsequently receives a claim for benefits which is approved under the procedures
described in Section 8.

	17.  	Special Rules for Post-2004 Deferrals

     With respect to Post-2004 Deferrals, the Plan shall be administered in conformity with Section
409A of the Code. Furthermore, it is intended that notwithstanding any provision of the Plan to the
contrary, with respect to Post-2004 Deferrals, no acceleration of benefits shall be made in
violation of Section 409A(a)(3) of the Code unless otherwise permitted by Section 409A of the Code
or applicable regulatory authority.

     IN WITNESS WHEREOF, the Company has caused this Plan to be executed by a duly authorized
officer as of the Effective Date.

	 	 	 	 	 	 
	 	 	WEBMETHODS, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Its:	 	 
	

	 	 	 	 

Adopted August 26, 2004

Amended November 3, 2004

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EXHIBIT A

WEBMETHODS, INC. DEFERRED COMPENSATION PLAN FOR DIRECTORS

DEFERRAL NOTICE

     1. Election To Defer

     In accordance with the provisions of the webMethods, Inc. Deferred Compensation Plan for
Directors (the “Plan”), I hereby elect to defer ___percent (i.e., 25%, 50%, 75% or 100%) of
the annual retainer and meeting fees payable to me for services as a Director of webMethods, Inc.
This election shall be effective as provided in Section 4.B of the Plan. This election supersedes
any prior deferral election made by me and shall remain in effect until terminated or otherwise
amended.

     2. Acknowledgment of Payment Terms

     I hereby acknowledge that all amounts credited to my Deferred Compensation Account in the Plan
will be distributed to me as soon as practicable after the earlier of my termination of service as
a Director or the termination of the Plan; provided that my deferral after December 31, 2004 will
be distributed as soon as practical after I have had a “separation from service” and if I am a “key
employee” within in the meaning of Section 416(i) of the Internal Revenue Code of 1986 (determined
without regard to paragraph 5 thereof) that my distribution will be made six months after my
separation from service (or, if earlier, the date of my death). I understand that all amounts
credited to my Deferred Compensation Account will be paid out in a single lump sum in the event of
my death.

     3. Designation of Beneficiary

     I hereby designate _________as my primary Beneficiary and _________
as my contingent Beneficiary(ies) to receive any amounts payable under the Plan in the event of my
death.

     4. Acknowledgment

     I hereby acknowledge that (i) my election to defer my annual retainer and meeting fees under
the Plan is irrevocable with respect to amounts which are deferred under the Plan and shall remain
in effect until terminated or modified, (ii) the Plan is unfunded and unsecured, and is maintained
primarily for the purpose of providing deferred compensation to Directors and that I have no rights
or claims to receive amounts credited to my Deferred Compensation Account other than those
specifically granted by the terms of the Plan, and (iii) I am solely responsible for ensuring that
the Plan Administrator’s files contain my current mailing address and that of my Beneficiary.

	 	 	 	 	 	 
	 

	 	Signed:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	 	 	 
	

	 	Date:	 	 
	

	 	 	 	 

9exv10w10

 

EXHIBIT 10.10

CONSULTING AGREEMENT

     THIS CONSULTING AGREEMENT (this “Agreement”) is made effective for all
purposes and in all respects as of the date set forth below, by and between (i)
webMethods, Inc., a Delaware corporation (the “Corporation”) and (ii) Phillip
Merrick (“Consultant”).

     WHEREAS, the Corporation desires to engage Consultant to perform certain
duties as shall be assigned to Consultant by the Corporation from time to time;

WHEREAS, Consultant desires to be so engaged by the Corporation;

     WHEREAS, the Corporation and Consultant desire to set forth in writing the
terms and conditions of their agreements and understandings; and

     NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
herein contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:

     1. Duties of Consultant. Consultant shall undertake and assume the
responsibility of performing for and on behalf of the Corporation such duties
as shall be assigned to Consultant by the Chief Executive Officer of the
Corporation, subject to the availability of Consultant and the other
limitations set forth herein; provided, that Consultant shall make himself
available for at least twenty (20) hours per month. Consultant covenants and
agrees that, at all times during the term of this Agreement, Consultant shall
devote such amount of Consultant’s time as shall be required for Consultant to
perform promptly, efficiently and professionally the duties assigned to
Consultant by the Corporation hereunder. Consultant covenants and agrees that
Consultant shall not, directly or indirectly, engage or participate in any
activities at any time during the term of this Agreement in conflict with the
best interests of the Corporation. Consultant shall not be required to render
any written reports to the Corporation, unless, in his sole discretion,
Consultant deems written reports to be necessary.

     2. Term of Engagement. The term of Consultant’s engagement hereunder (the
“Term”) shall commence as of the date hereof and shall continue for a term of
one year thereafter (unless prior to such date either the Corporation or
Consultant shall provide written notice to the other of its desire to terminate
such engagement as the result of material breach hereof by the other party to
this Agreement). Notwithstanding the foregoing, the termination of
Consultant’s engagement for any reason shall not terminate or in any way affect
Consultant’s covenants and obligations set forth in Sections 5 through 11
hereof.

     3. Compensation. As and for compensation for the services to be rendered
to or on behalf of the Corporation by Consultant hereunder, and subject to
compliance by Consultant with all of Consultant’s representations, covenants
and agreements set forth in this Agreement, the Corporation shall pay
Consultant during the Term Thirty Thousand Dollars ($30,000) monthly on the
last date each month on which the Corporation normally is scheduled to pay
consultants. During the Term, the Corporation shall pay premiums so that
Consultant shall continue to participate in the medical, dental and vision
insurance plans that the Corporation provides to its

 

 

then-current U.S. employees. During the Term hereof, the Corporation will
provide to Consultant the services of Consultant’s former executive assistant,
or similar support in the event that the former executive assistant leaves the
employment of the Corporation.

     4. Expenses Incurred. During the Term, the Corporation shall pay or
promptly reimburse Consultant for all reasonable travel, telephone and other
business expenses paid or incurred by Consultant in connection with the
performance of Consultant’s duties hereunder (which expenses must be
pre-approved by the Corporation), upon presentation of expense statements,
vouchers or other evidence of expenses.

     5. Treatment of Information.

          5.1 Consultant acknowledges that, in and as a result of Consultant’s
engagement by the Corporation, Consultant shall or may be making use of,
acquiring and adding to confidential information of a special and unique nature
and value relating to such matters as the Corporation’s trade secrets; business
plans and strategies; acquisition plans, proposals and prospects; procedures;
manuals; confidential reports and communications; and lists of and information
relating to contacts and clients. Consultant further acknowledges that any
information and materials received by the Corporation from third parties
(including, without limitation, business partners, customers and prospective
customers of the Corporation) in confidence (or subject to non-disclosure or
similar covenants) shall be deemed to be and shall be confidential information
within the meaning of this Section 5. As a material inducement to the
Corporation to engage (or to continue to engage) Consultant and to pay to
Consultant compensation for such services to be rendered to the Corporation by
Consultant (it being understood and agreed by the parties hereto that such
compensation shall also be paid and received in consideration hereof),
Consultant covenants and agrees that Consultant shall not, except with the
prior written consent of the Corporation, or except if Consultant is acting on
behalf or as a consultant of the Corporation solely for the benefit of the
Corporation in connection with the Corporation’s business and in accordance
with the Corporation’s business practices and policies, at any time during or
following the term of Consultant’s engagement by the Corporation, directly or
indirectly, disclose, divulge, reveal, report, publish, transfer or use, for
any purpose whatsoever, any of such information which has been obtained by or
disclosed to Consultant as a result of Consultant’s engagement by the
Corporation, including any of the information referred to in Section 6 hereof.

          5.2 Disclosure of any such information of the Corporation shall not be
prohibited if such disclosure is directly pursuant to a valid and existing
order of a court or other governmental body or agency within the United States;
provided, however, that (i) Consultant shall first have given prompt notice to
the Corporation of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) the Corporation shall
have been afforded a reasonable opportunity to prevent or limit any such
disclosure.

     6. Definition of Protected Information.

          6.1 For purposes of this Agreement, the term “Protected Information” shall
mean all of the information referred to in Section 5 hereof and all of the
materials and information of the Corporation (whether or not reduced to writing
and whether or not patentable

 

 

or protectable by copyright) which Consultant receives, receives access
to, conceives, creates or develops or has received, received access to,
conceived, created or developed, in whole or in part, directly or indirectly,
in connection with Consultant’s engagement by the Corporation or in the course
of Consultant’s engagement by the Corporation (in any capacity whatsoever) or
through the use of any of the Corporation’s facilities or resources.

          6.2 Failure to mark any of the Protected Information as confidential,
proprietary or Protected Information shall not affect its status as part of the
Protected Information under the terms of this Agreement.

          6.3 For purposes of this Agreement, the term “Protected Information” shall
not include information which is or becomes publicly available without breach
of (i) this Agreement, (ii) any other agreement or instrument to which the
Corporation is a party or a beneficiary or (iii) any duty owed to the
Corporation by Consultant or any third party; provided, however, that
Consultant hereby acknowledges and agrees that, except as otherwise provided in
Section 5 hereof, if Consultant shall seek to disclose, divulge, reveal,
report, publish, transfer or use, for any purpose whatsoever, any Protected
Information, Consultant shall bear the burden of proving that any such
information shall have become publicly available without any such breach.

     7. Ownership of Information. Consultant covenants and agrees that all
right, title and interest in any Protected Information shall be and shall
remain the exclusive property of the Corporation. Consultant agrees
immediately to disclose to the Corporation all Protected Information developed
in whole or in part by Consultant during the term of Consultant’s engagement by
the Corporation and to assign to the Corporation any right, title or interest
Consultant may have in such Protected Information. Consultant agrees to
execute any instruments and to do all other things reasonably requested by the
Corporation (both during and after Consultant’s engagement by the Corporation)
in order to vest more fully in the Corporation all ownership rights in those
items hereby transferred by Consultant to the Corporation.

     8. Materials. All notes, data, tapes, reference items, sketches,
drawings, memoranda, records and other materials in any way relating to any of
the information referred to in Sections 5 and 6 hereof (including, without
limitation, any Protected Information) or to the Corporation’s business shall
belong exclusively to the Corporation and Consultant agrees to turn over to the
Corporation all copies of such materials in Consultant’s possession or under
Consultant’s control at the request of the Corporation or, in the absence of
such a request, upon the termination of Consultant’s engagement with the
Corporation.

     9. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions hereof shall not affect the validity and enforceability of the other
provisions hereof.

     10. No Prior Agreements. Consultant represents that Consultant’s
performance of all the terms of this Agreement and any services to be rendered
as a consultant to the Corporation do not and shall not breach any fiduciary or
other duty or any covenant, agreement or understanding (including, without
limitation, any agreement relating to any proprietary information, knowledge or
data acquired by Consultant in confidence, trust or otherwise prior to
Consultant’s engagement by the Corporation) to which Consultant is a party or
by the terms of which Consultant may be

 

 

bound. Consultant covenants and agrees that Consultant shall not disclose
to the Corporation, or induce the Corporation to use, any such proprietary
information, knowledge or data belonging to any previous employer or client or
others. Consultant further covenants and agrees not to enter into any
agreement or understanding, either written or oral, in conflict with the
provisions of this Agreement.

     11. Independent Contractor.

          11.1 Consultant shall at all times be an independent contractor hereunder,
and not a co-venturer, agent, employee or representative of the Corporation,
and no act, action or omission to act of Consultant shall in any way be binding
upon or obligate the Corporation. Consultant shall serve only as a consultant
and advisor to the Corporation and shall not have any authority in any other
capacity, except as specifically stated herein. Consultant covenants and
agrees that he shall not represent to any third party that he is an officer,
agent or employee of the Corporation. No change in Consultant’s duties as a
consultant of the Corporation shall result in, or be deemed to be, a
modification of the terms of this Agreement.

          11.2 It is understood and agreed by the parties hereto that Consultant
shall not be treated as an employee for Federal or state tax purposes.
Consultant hereby represents and warrants to the Corporation that Consultant is
an independent contractor for Federal, state and local tax purposes. Further,
Consultant hereby covenants and agrees to pay any and all Federal, state and
local taxes required by law to be paid by an independent contractor, including,
without limitation, any taxes imposed by the Self Employment Contribution Act.

          11.3 The Corporation hereby acknowledges and agrees that Consultant may
engage directly or indirectly in other businesses and ventures, and shall not
be required to perform any services under this Agreement when, or for such
periods in which, the rendering of services shall unduly interfere with
Consultant’s other businesses and ventures. These undertakings of Consultant
shall not permanently preempt Consultant’s availability during the Term.

     12. Burden and Benefit; the Corporation. This Agreement shall be binding
upon, and shall inure to the benefit of, the Corporation and Consultant, and
their respective heirs, personal and legal representatives, successors and
assigns. As used in this Agreement, the term “the Corporation” shall also
include any corporation or entity which is a parent, subsidiary or affiliate of
the Corporation. Consultant hereby consents to the enforcement of any and all
of the provisions of this Agreement by or for the benefit of the Corporation
and any such other corporation or entity as to any Protected Information.

     13. Governing Law. In view of the fact that the principal office of the
Corporation is located in the Commonwealth of Virginia, it is understood and
agreed that the construction and interpretation of this Agreement shall at all
times and in all respects be governed by the substantive laws of the
Commonwealth of Virginia.

     14. Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by courier service (with proof of service),
facsimile transmission, hand delivery or certified or registered mail (return
receipt requested, first-class postage prepaid), in the case of

 

 

Consultant, to Consultant’s address as shown on the Corporation’s records,
and, in the case of the Corporation, to its principal office to the attention
of General Counsel.

     15. Entire Agreement. This Agreement contains the entire agreement and
understanding by and between the Corporation and Consultant with respect to the
subject matter hereof, and no representations, promises, agreements or
understandings, written or oral, not herein contained shall be of any force or
effect. No change or modification hereof shall be valid or binding unless the
same is in writing and signed by the party intended to be bound. No waiver of
any provision of this Agreement shall be valid unless the same is in writing
and signed by the party against whom such waiver is sought to be enforced;
moreover, no valid waiver of any provision of this Agreement at any time shall
be deemed a waiver of any other provision of this Agreement at such time or
shall be deemed a valid waiver of such provision at any other time.

     16. Headings. The headings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting,
construing or enforcing any of the provisions of this Agreement.

     IN WITNESS WHEREOF, the Corporation and Consultant have duly executed this
Agreement as of the day and year set forth below.

Effective Date: October 3, 2004

	 	 	 	 	 
	

	 	CORPORATION:	 	 
	

	 	 	 	 
	

	 	webMethods, Inc.	 	 
	

	 	 	 	 
	

	 	/S/ DAVID MITCHELL	 	 
	

	 	
 	 	 
	

	 	By: David Mitchell	 	 
	

	 	Title: President and CEO	 	 
	

	 	 	 	 
	

	 	CONSULTANT:	 	 
	

	 	 	 	 
	

	 	/S/ PHILLIP MERRICK	 	 
	

	 	
 	 	 
	

	 	Phillip Merrick

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