Exhibit (a)(3)
April 12, 2001
Dear Employee Option Holder:
Due to today’s difficult market conditions, many of our employees hold stock options with an exercise price that exceeds the current market price of our common stock. Because our Board of Directors recognizes that the Company’s option plan may not currently be providing performance incentives for its valued employees, the Board has considered a number of ways to provide employees with the benefit of options that over time may have a greater potential to increase in value.
Accordingly, I am happy to announce that the Board of Directors has approved a program to offer employees the opportunity to exchange outstanding options granted prior to March 31, 2001 under our Amended and Restated Stock Option Plan and the Active Software, Inc. 1999 Stock Plan with an exercise price of $40.00 or more for new options we will grant under the webMethods Amended and Restated Stock Option Plan. You may tender options for all or any portion of the shares of common stock subject to your options, however, if you were granted any options after November 9, 2000 and you wish to participate in this offer, you must tender any options you received after such date even if such option grants have an exercise price below $40.00. You also have the right to choose not to tender any of your options. This offer expires at 5 p.m. Eastern Daylight Time on Friday, May 11, 2001.
The number of shares of common stock subject to the new options will be equal to the number of shares subject to the options that you tender and we accept for exchange, as adjusted for any stock splits, stock dividends and similar events. We will grant the new options on the date of the first meeting of the compensation committee of the Board of Directors which is at least six months and one day following the date we accept and cancel the tendered options, but no later than December 31, 2001. Unfortunately, we are not able to simply reprice your current options, offer an immediate grant date, or carry forward current market prices to the grant date because doing so would mandate additional and unfavorable compensation expenses under our accounting and financial reporting requirements.
You must be an employee of the Company or one of its subsidiaries from the date you tender options through the date we grant the new options in order to receive new options. If you do not remain an employee, you will not receive any new options or any other consideration for the options tendered by you and cancelled by the Company.
The terms and conditions of new options will be substantially the same as the terms and conditions of your current option(s) granted under the webMethods Amended and Restated Stock Option Plan, except as specified in the Offer, and will include the following terms:
| • | the per share exercise price of any new options granted to you will equal the last reported sale price of our common stock on the Nasdaq National Market on the date we grant the new options; and | |
| • | any new options granted to you will have a vesting schedule that approximates the vesting schedule of your tendered options. |
There is no way to predict what the price of our common stock will be during the next six months or thereafter. It is possible that the market price of our common stock on the date of grant of any new options issued to you will be higher than the current exercise price of your options. It is also possible that you will no longer be employed with webMethods or any of its subsidiaries at the anticipated time of such new option grant. For these reasons, you should make a decision to tender only after careful, considered thought.
The Board of Directors makes no recommendation as to whether you should tender or refrain from tendering your options in the offer. You must make your own decision whether to tender your options.
This offer is being made under the terms and subject to the conditions of an offer to exchange and a related letter of transmittal which you should have received with this letter. Copies of these documents will also be available in the Fairfax and Sunnyvale offices or by requesting copies from optionexchange@webmethods.com. You should read carefully the entire offer to exchange and letter of transmittal before you decide whether to tender all or any portion of your options. A tender of options involves risks which are discussed in the offer to exchange.
To tender options, you will be required to properly complete, sign and return to us the letter of transmittal and any other documents specified in that letter by the expiration date of the Company’s offer. You must deliver a properly completed and signed paper copy or facsimile copy of the documents. E-mail delivery will not be accepted.
If you have any questions about the offer, please contact optionexchange@webmethods.com or by facsimile at (703) 460-5955. We thank you for your continued efforts on behalf of webMethods, Inc.
| Sincerely, | |
| Phillip Merrick | |
| Chairman and Chief Executive Officer |