<PAGE>

                                                                   Exhibit 10.17

                      [Vitria Technology, Inc. Letterhead]


July 31, 2002

Mr. John Wheeler


PERSONAL AND CONFIDENTIAL

Dear John:

     This letter sets forth the substance of the separation agreement (the
"Agreement") which Vitria Technology Inc. (the "Company") is offering to you to
aid in your employment transition.

SEPARATION DATE:  7/31/02

SEVERANCE AMOUNT:

     o    Three months of pay, subject to standard deductions and withholdings

     o    Medical, dental and vision benefits through 11/30/02

RETURN DATE:  You will have until August 21, 2002 to accept this
              Waiver/Severance Agreement.

     In accordance with the Age Discrimination in Employment Act (the "ADEA"),
you have a period of 21 days in which to consider the terms of this Agreement
and 7 days, after signing this Agreement, in which you may choose to revoke your
acceptance of its terms. If you exercise this right of revocation, you must put
the revocation in writing and deliver or mail it to the Company within the seven
(7) day revocation period. A mailed revocation must be postmarked within the
seven (7) day revocation period and properly addressed to the Company, to the
attention of the individual who has signed this letter. You are advised to
consult an attorney before waiving any rights that you may have under the ADEA.
Eight (8) days after both parties have signed this Agreement (the "Effective
Date"), its terms will automatically become effective provided that you have
returned the Agreement to the individual who has signed this letter, unless you
have revoked your acceptance of the terms. The Company will mail the severance
payment to you ten (10) business days after the Effective Date.

     1.   SEPARATION. Your last day of employment with the Company is 7/31/02
(the "Separation Date"). You will be paid all accrued salary, and all accrued
and unused vacation earned through the Separation Date, subject to standard
deductions and withholdings. You are entitled to these payments regardless of
whether you sign this Agreement.

<PAGE>
July 31, 2002
Page 2


     2.   SEVERANCE. Although the Company has no policy or procedure requiring
payment of any severance benefits, if you sign this Agreement and comply with
your obligations herein, the Company will make the severance payment as set
forth above.

     3.   HEALTH INSURANCE. To the extent provided by the federal COBRA law or,
if applicable, state insurance laws, and by the Company's current group health
insurance policies, you will be eligible to continue your group health insurance
benefits at your own expense. Later, you may be able to convert to an individual
policy through the provider of the Company's health insurance, if you wish.

     4.   OTHER COMPENSATION OR BENEFITS. You acknowledge that except as
expressly provided in this Agreement, you will not receive any additional
compensation, severance or benefits after the Separation Date.

     5.   STOCK OPTIONS. You expressly acknowledge and agree that your Company
stock options cease vesting the day after the Separation Date. Subject to
approval by the Board of Directors, you will have the right to exercise vested
shares up to 7/31/03.

     6.   EXPENSE REIMBURSEMENTS. You agree that within thirty (30) days of the
Separation Date, you will submit your final documented expense reimbursement
statement to Human Resources reflecting all business expenses you incurred
through the Separation Date, if any, for which you seek reimbursement. The
Company will reimburse you for these expenses pursuant to its regular business
practice.

     7.   RETURN OF COMPANY PROPERTY. You agree to return to the Company on or
before the Separation Date or on a date otherwise agreed to in writing with the
Company, all Company property which you have had in your possession at any time,
including, but not limited to, Company files, notes, drawings, records, business
plans and forecasts, financial information, specifications, computer-recorded
information, tangible property (including, but not limited to, computers),
credit cards, entry cards, identification badges and keys; and any materials of
any kind which contain or embody any proprietary or confidential information of
the Company (and all reproductions thereof). Failure to return Company property
as specified herein shall entitle Vitria to withhold severance benefits pursuant
to this Agreement.

     8.   PROPRIETARY INFORMATION OBLIGATIONS. Both during and after your
employment you will refrain from any use or disclosure of the Company's
proprietary or confidential information or materials, and you acknowledge that
you continue to be bound by the terms of the Company's Employee Agreement for
Proprietary Information, Inventions, Non-Solicitation and Dispute Resolution
attached hereto as Exhibit A.

     9.   CONFIDENTIALITY. The provisions of this Agreement shall be held in
strictest confidence by you and the Company and shall not be publicized or
disclosed in any manner whatsoever; provided, however, that (a) you may disclose
this Agreement to your immediate family; (b) the parties may disclose this
Agreement in confidence to their respective attorneys, accountants, auditors,
tax preparers, and financial advisors; (c) the Company may disclose this
Agreement as necessary to fulfill standard or legally required corporate
reporting or

<PAGE>
July 31, 2002
Page 3


disclosure requirements; and (d) the parties may disclose this Agreement insofar
as such disclosure may be necessary to enforce its terms or as otherwise
required by law.

     10.  NONDISPARAGEMENT. You agree that you will not at any time disparage
the Company or its directors, officers, shareholders, agents, or employees in
any manner likely to be harmful to the personal or business reputation of it or
them, and the Company (through its officers and directors) agrees that it will
not disparage you in any manner likely to be harmful to your personal or
business reputation, provided that both you and the Company shall respond
accurately and fully to any question, inquiry, or request for information when
required by legal process.

     11.  RELEASE. In exchange for the consideration provided to you by this
Agreement that you are not otherwise entitled to receive, you hereby generally
and completely release the Company and its directors, officers, employees,
shareholders, partners, agents, attorneys, predecessors, successors, parent and
subsidiary entities, insurers, affiliates, and assigns from any and all claims,
liabilities and obligations, both known and unknown, that arise out of or are in
any way related to events, acts, conduct, or omissions occurring prior to or on
the date you sign this Agreement. This general release includes, but is not
limited to: (1) all claims arising out of or in any way related to your
employment with the Company or the termination of that employment; (2) all
claims related to your compensation or benefits from the Company, including
salary, bonuses, commissions, vacation pay, expense reimbursements, severance
pay, fringe benefits, stock, stock options, or any other ownership interests in
the Company; (3) all claims for breach of contract, wrongful termination, and
breach of the implied covenant of good faith and fair dealing; (4) all tort
claims, including claims for fraud, defamation, emotional distress, and
discharge in violation of public policy; and (5) all federal, state, and local
statutory claims, including but not limited to claims for discrimination,
harassment, retaliation, attorneys' fees, or other claims arising under the
federal Civil Rights Act of 1964 (as amended), the federal Americans with
Disabilities Act of 1990, the federal Age Discrimination in Employment Act of
1967 (as amended) ("ADEA"), and the California Fair Employment and Housing Act
(as amended).

     12.  ADEA WAIVER. [For employees 40 years of age or older.] You acknowledge
that you are knowingly and voluntarily waiving and releasing any rights you may
have under the ADEA. You also acknowledge that the consideration given for the
waiver and release in the preceding paragraph hereof is in addition to anything
of value to which you are already entitled. You further acknowledge that you
have been hereby advised, as required by the ADEA, that your waiver and release
do not apply to any rights or claims that may arise after the execution date of
this Agreement.

     13.  SECTION 1542 WAIVER. In giving the releases set forth in this
Agreement, which includes claims which may be unknown to you at present, you
acknowledge that you have read and understand Section 1542 of the California
Civil Code which reads as follows: "A general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor." You hereby expressly waive and relinquish all
rights and benefits under that Section and any law of any jurisdiction of
similar effect with respect to your release of any unknown or unsuspected
claims.

<PAGE>
July 31, 2002
Page 4


     14.  MISCELLANEOUS. This Agreement, including Exhibit A, constitutes the
complete, final and exclusive embodiment of the entire agreement between you and
the Company with regard to this subject matter. It is entered into without
reliance on any promise or representation, written or oral, other than those
expressly contained herein, and it supersedes any other such promises,
warranties or representations. This Agreement may not be modified or amended
except in writing signed by both you and a duly authorized officer of the
Company. This Agreement shall bind the heirs, personal representatives,
successors and assigns of both you and the Company, and inure to the benefit of
both you and the Company, their heirs, successors and assigns. If any provision
of this Agreement is determined to be invalid or unenforceable, in whole or in
part, this determination will not affect any other provision of this agreement
and the provision in question shall be modified by the court so as to be
rendered enforceable. This Agreement shall be deemed to have been entered into
and shall be construed and enforced in accordance with the laws of the State of
California as applied to contracts made and to be performed entirely within
California.

<PAGE>
July 31, 2002
Page 5


If this Agreement is acceptable to you, please sign below and return to me.

I wish you the best in your future endeavors.

                                   Sincerely,

                                   VITRIA TECHNOLOGY, INC.

                                   By: /s/ MONA RICHMOND
                                      -----------------------------------------
                                           Mona Richmond
                                           Director of Human Resources

Accepted and Agreed:


/s/ JOHN WHEELER
------------------------------
JOHN WHEELER

07/31/02
------------------------------
Date

<PAGE>

                                    Exhibit A

                             Vitria Technology, Inc.

                 EMPLOYEE AGREEMENT FOR PROPRIETARY INFORMATION,
               INVENTIONS, NONSOLICITATION AND DISPUTE RESOLUTION

     In consideration of my employment or continued employment by VITRIA
TECHNOLOGY, INC. (the "Company"), and the compensation now and hereafter paid to
me, I hereby agree as follows:

1.   NONDISCLOSURE

     1.1  Recognition of Company's Rights; Nondisclosure. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

     1.2  Proprietary Information. The term "Proprietary Information" shall mean
any and all confidential and/or proprietary knowledge, data or information of
the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.

     1.3  Third Party Information. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.

     1.4  No Improper Use of Information of Prior Employers and Others. During
my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or other
property belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.

2.   ASSIGNMENT OF INVENTIONS.

     2.1  Proprietary Rights. The term "Proprietary Rights" shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.

     2.2  Prior Inventions. Inventions, if any, patented or unpatented, which I
made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit B (Previous Inventions) attached hereto a complete list of
all Inventions that I have, alone or jointly with others,

                                       1

<PAGE>

conceived, developed or reduced to practice or caused to be conceived, developed
or reduced to practice prior to the commencement of my employment with the
Company, that I consider to be my property or the property of third parties and
that I wish to have excluded from the scope of this Agreement (collectively
referred to as "Prior Inventions"). If disclosure of any such Prior Invention
would cause me to violate any prior confidentiality agreement, I understand that
I am not to list such Prior Inventions in Exhibit B but am only to disclose a
cursory name for each such invention, a listing of the party(ies) to whom it
belongs and the fact that full disclosure as to such inventions has not been
made for that reason. A space is provided on Exhibit B for such purpose. If no
such disclosure is attached, I represent that there are no Prior Inventions. If,
in the course of my employment with the Company, I incorporate a Prior Invention
into a Company product, process or machine, the Company is hereby granted and
shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide
license (with rights to sublicense through multiple tiers of sublicenses) to
make, have made, modify, use and sell such Prior Invention. Notwithstanding the
foregoing, I agree that I will not incorporate, or permit to be incorporated,
Prior Inventions in any Company Inventions without the Company's prior written
consent.

     2.3  Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "Company Inventions."

     2.4  Nonassignable Inventions. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under Section 2870
of the California Labor Code (hereinafter "Section 2870"). I have reviewed the
notification on Exhibit A (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

     2.5  Obligation to Keep Company Informed. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.

     2.6  Government or Third Party. I also agree to assign all my right, title
and interest in and to any particular Invention to a third party, including
without limitation the United States, as directed by the Company.

     2.7  Works for Hire. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).

     2.8  Enforcement of Proprietary Rights. I will assist the Company in every
proper way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition, I
will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company with respect to
Proprietary Rights relating to such Company Inventions in any and all countries
shall continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company's request on such assistance.

     In the event the Company is unable for any reason, after reasonable effort,
to secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all

                                       2

<PAGE>

other lawfully permitted acts to further the purposes of the preceding paragraph
with the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.

3.   RECORDS. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.

4.   NONSOLICITATION. It is understood that you will gain knowledge and make
contacts with clients of the Company and prospective clients of the Company in
the course of your employment that would provide you with an unfair advantage
over the Company, as compared to a normally competitive situation, in soliciting
business from said clients and prospective clients upon termination of your
employment with the Company. In recognition of this fact, you agree that upon
termination of employment, that you will not engage in unfair competition
against the Company. Unfair competition is agreed to include without limitation
the following specific prohibitions:

     4.1  You shall not interfere with existing client relationships of the
Company (i.e., clients where at least one project has been conducted in the last
two years), and shall not solicit or attempt to take away any business of the
Company that is either under way or about to begin at the termination of this
Agreement.

     4.2  For a period of one (1) year following the termination of employment,
you shall not interfere or compete in any way with any proposal efforts of the
Company already in progress (that is, a proposal sent to or being then currently
developed for a specific client or clients, or contemplated to be submitted to a
specific client or clients by the Company within 1 year) at the termination of
this Agreement.

     4.3  For a period of one (1) year following termination of employment, you
shall not make use of any of your personal relationships or business contacts
developed during the course of employment with the Company and utilized for
business purposes within the two years prior to termination, for the benefit or
yourself or another, in a competitive manner with respect to the business of the
Company. Notwithstanding the foregoing, the Company and you agree that there is
no restriction on your right, upon termination, to send general announcements of
any new employment or to contact in the same manner all potential customers of
your new employer without selecting or devoting special attention to the
Company's clients or prospective clients.

5.   ADDITIONAL ACTIVITIES. I agree that during the period of my employment by
the Company I will not, without the Company's express written consent, engage in
any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for two (2) years after the date
of termination of my employment by the Company I will not induce any employee of
the Company to leave the employ of the Company.

6.   NO CONFLICTING OBLIGATION. I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence information acquired by me in confidence or
in trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any agreement either written or oral in conflict
herewith.

7.   RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together with all copies thereof, and any
other material containing or disclosing any Company Inventions, Third Party
Information or Proprietary Information of the Company. I further agree that any
property situated on the Company's premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice. Prior to
leaving, I will cooperate with the Company in completing and signing the
Company's termination statement (attached).

8.   LEGAL AND EQUITABLE REMEDIES. Because my services are personal and unique
and because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.

9.   NOTICES. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent


                                       3

<PAGE>

by certified or registered mail, three (3) days after the date of mailing.

10.  NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.

11.  DISPUTE RESOLUTION. To ensure rapid and economical resolution of any and
all disputes directly or indirectly arising out of or in any way connected with
your employment with the Company or the termination of that employment, with the
sole exception of disputes involving the terms set forth in sections 1 and 2 of
this Agreement, (collectively, the "Arbitrable Claims"), the Company and you
agree that any and all such disputes, whether of law or fact of any nature
whatsoever, shall be resolved by final and binding arbitration under the
Judicial Arbitration and Mediation Service ("JAMS") Rules of Practice and
Procedure. The Arbitrable Claims shall include, but not be limited to: any and
all such claims related to salary, bonuses, commissions, stock, stock options,
or any other ownership interests in the Company, vacation pay, fringe benefits,
expense reimbursements, severance benefits, or any other form of compensation;
claims pursuant to any federal, state, or local law or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as amended;
the federal Age Discrimination in Employment Act of 1967, as amended; the
federal Americans with Disabilities Act of 1990, as amended; the California Fair
Employment and Housing Act, as amended; tort law; contract law; wrongful
discharge; discrimination; fraud; defamation; emotional distress; and breach of
the implied covenant of good faith and fair dealing. You and the Company
acknowledge and agree that any and all rights they may otherwise have to resolve
such Arbitrable Claims by jury trial, by a court, or in any forum other than
JAMS, are hereby expressly waived.

12.  GENERAL PROVISIONS.

     12.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will
be governed by and construed according to the laws of the State of California,
as such laws are applied to agreements entered into and to be performed entirely
within California between California residents. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in Santa Clara
County, California for any lawsuit filed there against me by Company arising
from or related to this Agreement.

     12.2 Severability. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.

     12.3 Successors and Assigns. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.

     12.4 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.

     12.5 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.

     12.6 Waiver. No waiver by the Company of any breach of this Agreement shall
be a waiver of any preceding or succeeding breach. No waiver by the Company of
any right under this Agreement shall be construed as a waiver of any other
right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.

     12.7 Entire Agreement. The obligations pursuant to Sections 1 and 2 of this
Agreement shall apply to any time during which I was previously employed, or am
in the future employed, by the Company as a consultant if no other agreement
governs nondisclosure and assignment of inventions during such period. This
Agreement, combined with the offer letter signed and accepted by the employee,
constitutes the final, complete and exclusive agreement of the parties with
respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by a duly authorized officer of the company. Any subsequent
change or changes in my duties, salary or compensation will not affect the
validity or scope of this Agreement.

     This Agreement shall be effective as of the first day of my employment with
the Company, namely: July 9, 2001.

                                       4

<PAGE>

     I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.


Dated:  07/08/01
      ----------------------------------------------------


/s/ John A. Wheeler
----------------------------------------------------------
Signature

John A. Wheeler
----------------------------------------------------------
(Printed Name)


ACCEPTED AND AGREED TO:

VITRIA TECHNOLOGY, INC.


By:  /s/ Edward Sweeney
   -------------------------------------------------------

Title:  Vice President, Human Resources
      ----------------------------------------------------


----------------------------------------------------------
(Address)

----------------------------------------------------------


                                       5

<PAGE>

                                    EXHIBIT A

                         LIMITED EXCLUSION NOTIFICATION

     THIS IS TO NOTIFY you in accordance with Section 2872 of the California
Labor Code that the foregoing Agreement between you and the Company does not
require you to assign or offer to assign to the Company any invention that you
developed entirely on your own time without using the Company's equipment,
supplies, facilities or trade secret information except for those inventions
that either:

     (1)  Relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company;

     (2)  Result from any work performed by you for the Company.

     To the extent a provision in the foregoing Agreement purports to require
you to assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.

     This limited exclusion does not apply to any patent or invention covered by
a contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

     I ACKNOWLEDGE RECEIPT of a copy of this notification.

                                    By:  John A. Wheeler
                                       ----------------------------------------
                                         (Printed Name of Employee)

                                    Date:  07/08/01
                                         --------------------------------------
WITNESSED BY:


----------------------------------
(Printed Name of Representative)

Dated:
      ----------------------------

<PAGE>

                                    EXHIBIT B

TO:       Vitria Technology, Inc.

FROM:     John A. Wheeler
        -------------------------

DATE:     07/08/01
        -------------------------

SUBJECT:  Previous Inventions
        -------------------------

     1.   Except as listed in Section 2 below, the following is a complete list
of all inventions or improvements relevant to the subject matter of my
employment by Vitria Technology, Inc. (the "Company") that have been made or
conceived or first reduced to practice by me alone or jointly with others prior
to my engagement by the Company:

     |X|  No inventions or improvements.

     |_|  See below:

          ----------------------------------------------------------------------


          ----------------------------------------------------------------------


          ----------------------------------------------------------------------


|_|  Additional sheets attached.


     2.   Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):

     Invention or Improvement       Party(ies)       Relationship

1.
     -----------------------------  ---------------  ---------------------------
2.
     -----------------------------  ---------------  ---------------------------
3.
     -----------------------------  ---------------  ---------------------------

|_|  Additional sheets attached.