<PAGE>

                                                                   EXHIBIT 10.29

July 14, 2004

VIA HAND-DELIVERY

Sonja Wilkerson
[Address]
[Address]

Dear Sonja:

This letter sets forth the substance of the separation agreement (the
"Agreement") that Vitria Technology, Inc. (the "Company") is offering to you to
aid in your employment transition. The terms of this Agreement supersede any and
all prior letter agreements executed between you and the Company related to your
separation.

      1.    SEPARATION DATE AND TRANSITION PERIOD. Your last day of employment
with the Company will be August 31, 2004, (the "Separation Date"). During the
period beginning on the date this Agreement becomes effective until the
Separation Date (the "Transition Period"), you will continue to serve as Vice
President of Human Resources of the Company. You will continue to devote your
full work efforts to the Company and will exercise your best professional
efforts to perform your current duties. During the Transition Period, you will
receive your current salary and benefits, your unvested stock options will
continue to vest, and all other terms and conditions of your employment will
apply (including your obligation to abide by Vitria's policies and procedures).
During the Transition Period, you will report to the Company's Chief Financial
Officer and you will personally and directly coordinate employment searches to
fill various executive positions in the Company.

      2.    ACCRUED SALARY AND PAID TIME OFF. On the Separation Date, the
Company will pay you all accrued salary, and all accrued and unused vacation
earned through the Separation Date, subject to standard payroll deductions and
withholdings. You are entitled to these payments by law.

      3.    SEVERANCE PAYMENTS. Although the Company has no obligation to do so,
if you sign this Agreement and allow it to become effective, and if on the
Separation Date you sign the Separation Date Release attached hereto as EXHIBIT
A and allow it to become effective, then within ten (10) business days after the
Separation Date, the Company will pay you, as severance, the equivalent of
twenty-three (23) weeks of your current base salary payable in bi-monthly
installments over a twenty-three (23) week period, subject to standard payroll
deductions and withholdings.

<PAGE>

                                                                   July 14, 2004

      4.    HEALTH INSURANCE. To the extent provided by federal COBRA law and
the Company's current group health insurance policies, you are eligible to
continue your current 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 timely elect coverage under COBRA and comply
with all of your obligations under this Agreement, then the Company will pay the
premiums necessary to continue your current health insurance benefits for six
(6) months following the Separation Date.

      5.    STOCK OPTIONS. You expressly acknowledge and agree that your Company
stock options cease vesting the day after the Separation Date. You must exercise
vested options pursuant to the terms of Vitria Technology, Inc.'s Equity
Incentive Plan, within ninety (90) days after the Separation Date.

      6.    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, with the sole
exception of any benefit the right to which has vested under the express terms
of a Company benefit plan document.

      7.    EXPENSE REIMBURSEMENTS. You agree that, within thirty (30) days of
the Separation Date, you will submit a documented expense reimbursement
statement 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.

      8.    RETURN OF COMPANY PROPERTY. By the Separation Date, you must return
to the Company all Company documents (and all copies thereof) and other Company
property in your possession or control, including, but not limited to: Company
files, notes, memoranda, correspondence, agreements, draft documents, notebooks,
logs, drawings, records, plans, proposals, reports, forecasts, financial
information, sales and marketing information, research and development
information, personnel information, specifications, computer-recorded
information, tangible property and equipment, credit cards, entry cards,
identification badges and keys; and any materials of any kind that contain or
embody any proprietary or confidential information of the Company (and all
reproductions thereof in whole or in part). You agree to make a diligent search
for any Company documents and property (as described above) in your possession
or control prior to the Effective Date.

      9.    PROPRIETARY INFORMATION OBLIGATIONS. You acknowledge your continuing
obligations under your Proprietary Information and Inventions Agreement, a copy
of which is attached hereto as EXHIBIT B.

      10.   CONFIDENTIALITY. The provisions of this Agreement will be held in
strictest confidence by you and the Company and will 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 disclosure

                                       2
<PAGE>

                                                                   July 14, 2004

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.

      11.   NONDISPARAGEMENT. Both you and the Company (through its directors
and officers) agree not to disparage the other party, and the other party's
officers, directors, employees, shareholders and agents, in any manner likely to
be harmful to them or their business, business reputation or personal
reputation; provided that both you and the Company may respond accurately and
fully to any question, inquiry or request for information when required by legal
process. You also agree that you will not voluntarily assist any person in
bringing or pursuing legal action against the Company, its agents, successors,
representatives, employees and related and/or affiliated companies based on
events occurring prior to the Separation Date.

      12.   RELEASE. In exchange for the severance benefits set forth in
Sections 3 and 4, and other benefits you are receiving under the terms of this
Agreement to which you would not otherwise be entitled, you hereby generally and
completely release the Company and its directors, officers, employees,
shareholders, partners, agents, attorneys, predecessors, successors, parent or
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 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 or 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
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"), the California Fair Employment
and Housing Act, and the California Labor Code.

      13.   WAIVER OF UNKNOWN CLAIMS. In giving this release, which includes
claims that 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
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
claims herein.

      14.   ADEA WAIVER. You hereby acknowledge that you are knowingly and
voluntarily waiving and releasing any rights you may have under the ADEA, and
that the consideration given for the foregoing waiver is in addition to anything
of value to which you were already entitled. You have been advised by this
writing, as required by the ADEA that: (a) your waiver and release do not apply
to any claims that may arise after your signing of this Agreement; (b) you
should consult with an attorney prior to executing this release; (c) you have
twenty-one (21) days within which to

                                       3
<PAGE>

                                                                   July 14, 2004

consider this release (although you may choose to voluntarily execute this
release earlier); (d) you have seven (7) days following the execution of this
release to revoke the Agreement; and (e) this Agreement will not be effective
until the eighth day after this Agreement has been signed both by you and by the
Company ("Effective Date").

      15.   MISCELLANEOUS. This Agreement, together with EXHIBITS A AND B,
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
or representations. This Agreement may not be modified or amended except in a
writing signed by both you and a duly authorized officer of the Company. This
Agreement will 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. The failure to enforce any breach
of this Agreement shall not be deemed to be a waiver of any other or subsequent
breach. For purposes of construing this Agreement, any ambiguities shall not be
construed against either party as the drafter. 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 will be modified by the court so as to be rendered
enforceable in a manner consistent with the intent of the parties insofar as
possible. This Agreement will be deemed to have been entered into and will 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. This
Agreement may be executed in counterparts which shall be deemed to be part of
one original, and facsimile signatures shall be equivalent to original
signatures.

                                       4
<PAGE>

                                                                   July 14, 2004

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

I wish you the best in your future endeavors.

Sincerely,

VITRIA TECHNOLOGY, INC.

By: /s/ Dale Skeen
    ---------------------------------
        Dale Skeen
        Chief Executive Officer

AGREED:

/s/ Sonja Wilkerson
-------------------------------------
Sonja Wilkerson

Exhibit A:        Separation Date Release

Exhibit B:        Proprietary Information and Inventions Agreement

                                       5
<PAGE>
                                                                   July 14, 2004

                                    EXHIBIT A

                             SEPARATION DATE RELEASE

I understand that, pursuant to the separation letter agreement between me and
Vitria Technology, Inc. (the "Company"), which I signed on
________________________, 2004 (the "Agreement"), I am required to sign this
Separation Date Release ("Release") as a condition for receiving the severance
benefits set forth in paragraphs 3 and 4 of the Agreement. I further understand
that, regardless of whether I sign this Release, the Company will pay me all
accrued salary and vacation earned through my Separation Date, to which I am
entitled by law.

I hereby generally and completely release the Company and its directors,
officers, employees, shareholders, partners, agents, attorneys, predecessors,
successors, parent or 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
prior to or on the date I sign this Agreement. This general release includes,
but is not limited to: (1) all claims arising out of or in any way related to my
employment with the Company or the termination of that employment; (2) all
claims related to my 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 or
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 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"), or the
California Fair Employment and Housing Act (as amended).

I hereby acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under the ADEA, and that the consideration given for the
foregoing waiver is in addition to anything of value to which I was already
entitled. I have been advised by this writing, as required by the ADEA that: (a)
my waiver and release do not apply to any claims that may arise after my signing
of this Agreement; (b) I should consult with an attorney prior to executing this
release; (c) I have twenty-one (21) days within which to consider this release
(although I may choose to voluntarily execute this release earlier); (d) I have
seven (7) days following the execution of this release to revoke the Agreement;
and (e) this Agreement will not be effective until the eighth day after this
Agreement has been signed both by me and by the Company.

I UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN
CLAIMS. In giving this release, which includes claims that may be unknown to me
at present, I acknowledge that I have read and understand Section 1542 of the
California Civil Code

                                       6
<PAGE>

                                                                   July 14, 2004

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." I expressly waive and relinquish all rights and benefits under
that section and any law of any jurisdiction of similar effect with respect to
my release of any unknown or unsuspected claims I may have against the Company.

HAVING READ AND UNDERSTOOD THE FOREGOING, I HEREBY AGREE TO THE TERMS AND
CONDITIONS STATED ABOVE.

______________________________              ______________________________, 2004
Sonja Wilkerson                                   Date

                                       7
<PAGE>

                                                                   July 14, 2004

                                    EXHIBIT B

                PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

                                       8