Common use of Economic Risks Clause in Contracts

Economic Risks. If your employment terminates prior to the grant of the New Options, you will receive neither a New Option nor the return of your cancelled option. Once your option is cancelled, it cannot be restored, and you will not be granted a New Option if you are not an employee of Agile or one of its subsidiaries on the date the New Options are granted. Accordingly, if your employment terminates for any reason prior to the grant of the New Options, you will have the benefit of neither the cancelled option nor the New Option. If our stock price increases after the date your tendered options are cancelled, your cancelled options might have been worth more than the New Options that you have received in exchange for them. For example, if you tender for cancellation options with a $35.00 exercise price, and Agile's stock appreciates to $50.00 when the New Options are granted, your New Option will have a higher exercise price than the cancelled option. Participation in the offer will make you ineligible to receive any option grants until May 20, 2002, at the earliest. Employees are generally eligible to receive option grants at any time that the Board of Directors or Compensation Committee chooses to make them. However, if you participate in the offer, you will not be eligible to receive any option grants until May 20, 2002, at the earliest. If we enter into a merger or other similar transaction, either before or after the expected date of grant of the New Options, you might receive New Options with limited potential for future value or no New Options at all. If our shares are acquired in a cash merger, your New Option exercise price may be close to the cash price being paid for our shares, resulting in very limited future price appreciation potential. Furthermore, the Board of Directors has reserved the right to not grant the New Options if that were to become necessary or appropriate to complete a transaction that the Board believes to be in the best interests of the Company and our stockholders. Tax-Related Risks for U.S. Residents Your New Option will be a nonstatutory stock option, whereas your cancelled option may have been an incentive stock option. Even if your cancelled option was an incentive stock option, your New Option will be a nonstatutory stock option. In general, nonstatutory stock options are less favorable to you from a tax perspective. For more detailed information, please read the rest of the Offer to Exchange, and see the tax disclosures set forth in the prospectuses for the Agile Software Corporation 1995 Stock Option Plan and the Agile Software Corporation 2000 Nonstatutory Stock Option Plan. Even if you elect not to participate in the option exchange program, your incentive stock options may be affected. We believe that you will not be subject to current U.S. federal income tax as a result of not electing to participate in the option exchange program. We also believe that the option exchange program will not change the U.S. federal income tax treatment of subsequent exercises of your outstanding incentive stock options (and sales of shares acquired upon exercise of such options) if you do not participate in the option exchange program. However, the IRS may characterize the option exchange program as a "modification" of those incentive stock options, even if you decline to participate. A successful assertion by the IRS of this position could extend the options' holding period to qualify for favorable tax treatment and cause a portion of your incentive stock options to be treated as nonstatutory stock options. Tax-Related Risks for Non-U.S. Residents We believe that you will not be subject to additional tax solely by virtue of your participation in the offer and your tender of Eligible Options for replacement with New Options. However, the tax legislation in most of the countries outside of the United States does not specifically address the tax consequences of the tender of Eligible Options for replacement with New Options. Consequently, although it appears that you will not be subject to any additional tax liability if you participate in the offer, we cannot be certain of this result. It is possible that you may be subject to tax on the value of the New Options upon grant or on some other basis or that you may lose the ability to claim preferential tax treatment in connection with your New Options. We therefore strongly recommend that you consult with your tax advisor as to the tax consequences of participating in the offer. Please also be sure to read the disclosure applicable to the country in which you live and work, found in Sections 15 through 20 of this Offer to Exchange. If you are eligible for this replacement because you are an employee living or working in the United States, Canada, France, Germany, Japan, Taiwan or the United Kingdom, but are also subject to the tax laws in another country, you should be aware that there may be other tax and social insurance consequences which may apply to you. You should be certain to consult your own tax advisors to discuss these consequences. Additional tax considerations for residents in the United Kingdom. If you were granted options before 6 April 1999, you will not be subject to National Insurance Contributions ("NICs") on the option spread at exercise of your old options. However, any New Options that you receive pursuant to the offer will be subject to NICs. In addition, if you tender your Eligible Options for replacement with New Options, you may be required to agree to enter into a joint election (once the form of election is approved by the Inland Revenue) which will provide that you will pay the employer's portion of the NIC liability arising on the exercise of any New Options granted to you. The amount of the employer's liability is currently 11.9% of the option spread at exercise; it is our understanding that you will be entitled to deduct the employer's portion of the NIC payments that you make for the purposes of calculating the amount of the gain subject to income tax on the exercise of the New Options. Business-Related Risks For a description of risks related to Agile's business, please see Section 24 of this Offer to Exchange.