Document:

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                                                                    EXHIBIT 10.5

                              TIBCO SOFTWARE INC.

                           1998 DIRECTOR OPTION PLAN
               (as amended and restated effective as of the date
of obtaining stockholder approval in May 1999, adjusted to account for the 1:2
     reverse split on July 13, 1999 and the 3:1 split on February 7, 2000)

    1.  Purposes of the Plan.  The purposes of this 1998 Director Option Plan
        --------------------
are to attract and retain the best available personnel for service as Directors
(as defined herein) of the Company, to provide additional incentive to Directors
of the Company to serve as Directors, and to encourage their continued service
on the Board.

    2.   Definitions.  As used herein, the following definitions shall apply:
         -----------

         (a) "Administrator" means the Compensation Committee that shall be
              -------------
administering the Plan in accordance with Section 4 hereof.

         (b) "Applicable Laws" means the requirements relating to the
              ---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are granted under the Plan.

         (c) "Board" means the Board of Directors of the Company.
              -----

         (d) "Code" means the Internal Revenue Code of 1986, as amended.
              ----

         (e) "Common Stock" means the common stock of the Company.
              ------------

         (f) "Company" means TIBCO Software Inc., a Delaware corporation.
              -------

         (g) "Compensation Committee"  means a compensation committee appointed
              ----------------------
by the Board.

         (h) "Director" means (1) a member of the Board or (2) Reuters Group PLC
              --------
or any of its designated wholly-owned subsidiaries.

         (i) "Disability" means total and permanent disability as defined in
              ----------
Section 22(e)(3) of the Code.

         (j) "Employee" means any person, including Directors, employed by the
              --------
Company or Subsidiary of the Company.  Neither service as a Director nor payment
of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
<PAGE>

         (k) "Exchange Act" means the Securities Exchange Act of 1934, as
              ------------
amended.

         (l) "Fair Market Value" means, as of any date, the value of Common
              -----------------
Stock determined as follows:

             (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

             (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or

             (iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.

         (m) "FASB Rule Change Effective Date" means the date of issuance of the
              -------------------------------
Financial Accounting Standards Board's interpretation of APB Opinion No. 25,
based on the proposed interpretation issued on March 31, 1999.

         (n) "Inside Director" means a Director who is an Employee.
              ---------------

         (o) "Option" means a stock option granted pursuant to the Plan.
              ------

         (p) "Option Agreement" means a written or electronic agreement between
              ----------------
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant.  The Option Agreement is subject to the terms and conditions of
the Plan.

         (q) "Optioned Stock" means the Common Stock subject to an Option.
              --------------

         (r) "Optionee" means a Director who holds an Option granted under the
              --------
Plan.

         (s) "Outside Director" means a Director who is not an Employee;
              ----------------
provided, however, that with respect to representatives of Reuters Group PLC,
Reuters Group PLC or any of its designated wholly-owned subsidiaries or
designated representatives thereof shall be deemed Outside Directors.

         (t) "Parent" means a "parent corporation," whether now or hereafter
              ------
existing, as defined in Section 424(e) of the Code.

         (u) "Plan" means this 1998 Director Option Plan.
              ----
<PAGE>

         (v) "Share" means a share of the Common Stock, as adjusted in
              -----
accordance with Section 11 below.

         (w) "Subsidiary" means a "subsidiary corporation," whether now or
              ----------
hereafter existing, as defined in Section 424(f) of the Code.

    3.   Stock Subject to the Plan.  Subject to the provisions of Section 11 of
         -------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 2,475,000 Shares (the "Pool").  The Shares may be
authorized but unissued, or reacquired Common Stock.

         If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated).  However, Shares that have actually been issued under the Plan,
shall not be returned to the Plan and shall not become available for future
distribution under the Plan.

    4.   Administration of the Plan.
         --------------------------

         (a) The Plan shall be administered by the Compensation Committee, which
shall be constituted to comply with Applicable Laws.

         (b) Powers of the Administrator.  Subject to the provisions of the Plan
             ---------------------------
and subject to the approval of any relevant authorities, the Administrator shall
have the authority in its discretion:

             (i)   to determine the Fair Market Value;

             (ii)  to select the Directors to whom Options may from time to
time be granted hereunder;

             (iii) to determine the number of Shares to be covered by an
Option granted to a Director;

             (iv)  to approve forms of agreement for use under the Plan;

             (v)   to determine the terms and conditions, of any Option granted
to a Director. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

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             (vi)   to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(e) instead of Common Stock;

             (vii)  to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

             (viii) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld.  The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined.  All elections by Optionees to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and

             (ix)   to construe and interpret the terms of the Plan and
Options.

         (c) Effect of Administrator's Decision.  All decisions, determinations
             ----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.

         (d) Procedure for Grants to Outside Directors. Except as otherwise
             -----------------------------------------
provided in Section 4, all grants of Options to Outside Directors under this
Plan shall be automatic and nondiscretionary and shall be made strictly in
accordance with the following provisions:

             (i)    No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors; provided, however that any
Outside Director may decline to receive an automatic Option grant hereunder by
providing written notice to the Administrator prior to such automatic Option
grant.

             (ii)   Each Outside Director shall be automatically granted an
Option to purchase 450,000 Shares (the "First Option") on the date on which such
person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.

             (iii)  Each Outside Director shall be automatically granted an
Option to purchase 60,000 Shares (a "Subsequent Option") on the date of the
annual meeting of the shareholders of each year provided he or she is then an
Outside Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.

                                      -4-
<PAGE>

             (iv)   Reuters Group PLC or, at the direction of Reuters Group PLC,
any of its wholly owned subsidiaries shall be automatically granted an Option to
purchase 150,000 Shares upon the date of obtaining stockholder approval of the
Plan in May, 1999 (the "Reuters Initial Grants"), or a greater number of Shares
as determined by the Administrator.

             (v)    Reuters Group PLC or any of its wholly owned subsidiaries
receiving Options hereunder may assign or transfer their Options to
representatives of Reuters Group PLC or any of its wholly owned subsidiaries who
are also Outside Directors or to a Reuters employee shareholder trust.

             (vi)   The terms of a First Option granted hereunder shall be as
follows:

                    (A) the term of the First Option shall be ten (10) years.

                    (B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 9 and 11 hereof.

                    (C) unless otherwise determined by the Administrator, the
exercise price per Share shall be 100% of the Fair Market Value per Share on the
date of grant of the First Option.

                    (D) subject to Section 11 hereof, the First Option shall
become exercisable as to one-third of the Shares subject to the First Option on
each anniversary of its date of grant, so that 100% of the First Option is
exercisable after three years, provided that the Optionee continues to serve as
a Director on such dates.

             (vii)  The terms of a Subsequent Option granted hereunder shall
be as follows:

                    (A) the term of the Subsequent Option shall be ten (10)
years.

                    (B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 9 and 11 hereof.

                    (C) unless otherwise determined by the Administrator, the
exercise price per Share shall be 100% of the Fair Market Value per Share on the
date of grant of the Subsequent Option.

                    (D) subject to Section 11 hereof, the Subsequent Option
shall become exercisable as to one-third of the Shares subject to the Subsequent
Option on each anniversary of its date of grant, so that 100% of the Subsequent
Option is exercisable after three years, provided that the Optionee continues to
serve as a Director on such dates.

                                      -5-
<PAGE>

             (viii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis.  No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Compensation Committee or the stockholders to increase the number
of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.

     5.  Eligibility.
         -----------

         (a) Options may be granted only to Directors.

         (b) Neither the Plan nor any Option shall confer upon any Optionee any
right with respect to continuation of service as a Director or nomination to
serve as a Director, nor shall it interfere in any way with any rights which the
Director or the Company may have to terminate the Director's relationship with
the Company at any time.

     6.  Term of Plan. The amendment and restatement of the Plan shall become
         ------------
effective upon the date of stockholder approval of the Plan in May 1999;
provided, however, that amendments that would cause the Plan or Options granted
hereunder to fail to comply with applicable California "blue sky" securities
laws shall not be effective until the IPO Effective Date.  It shall continue in
effect for a term of ten (10) years from the date of obtaining stockholder
approval of the Plan in May, 1999, unless terminated earlier under Section 13 of
the Plan.

     7.  Term of Option.  The term of each Option granted to an Inside Director
         --------------
shall be stated in the Option Agreement; provided, however, that the term shall
be no more than ten (10) years from the date of grant thereof.

     8.  Consideration.  The consideration to be paid for the Shares to be
         -------------
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator. Such consideration may consist of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

     9.  Exercise of Option.
         ------------------

         (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
             -----------------------------------------------
hereunder shall be exercisable according to the terms hereof at such times and
under such conditions

                                      -6-
<PAGE>

as determined by the Administrator and set forth in the Option Agreement. Unless
the Administrator provides otherwise, vesting of Options granted hereunder shall
be tolled during any unpaid leave of absence. An Option may not be exercised for
a fraction of a Share.

         An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised.  Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan.  Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option.  The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised.  No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 11 of the Plan.

         Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

         (b) Termination of Continuous Status as a Director.  Subject to Section
             ----------------------------------------------
11 hereof, in the event an Optionee's status as a Director terminates (other
than upon the Optionee's death or Disability, the Optionee may exercise his or
her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term).  To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.

         (c) Disability of Optionee.  In the event Optionee's status as a
             ----------------------
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term).  To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.

         (d) Death of Optionee.  In the event of an Optionee's death, the
             -----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration

                                      -7-
<PAGE>

of its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of death, and to the extent that the Optionee's
estate or a person who acquired the right to exercise such Option does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

         (e) Reuters Representatives. Notwithstanding the foregoing, options
             -----------------------
granted to Reuters Group PLC or any of its wholly-owned subsidiaries are not
affected by the termination, death or disability of any of its representative
directors so long as Reuters Group PLC or any of its affiliates, but excluding
the Company, shall have the ability to nominate a Director.

         (f) Buyout Provisions.  The Administrator may at any time offer to buy
             -----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

    10.  Non-Transferability of Options.  Unless determined otherwise by the
         ------------------------------
Administrator, and except for Reuters Group PLC and its wholly-owned
subsidiaries, Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.  If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

    11.  Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
         ----------------------------------------------------------------

         (a) Changes in Capitalization.  Subject to any required action by the
             -------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company.  The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration."  Such adjustment shall be made by the Compensation Committee,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

         (b) Dissolution or Liquidation.  In the event of the proposed
             --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction.  The Administrator in its discretion may

                                      -8-
<PAGE>

provide for an Optionee to have the right to exercise his or her Option until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option would not otherwise be
exercisable. To the extent it has not been previously exercised, an Option will
terminate immediately prior to the consummation of such proposed action.

         (c) Merger or Asset Sale.  In the event of a merger of the Company with
             --------------------
or into another corporation or the sale of substantially all of the assets of
the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation").  If an Option is assumed or substituted for, the
Option or equivalent option shall continue to be exercisable as provided in
Section 4 hereof for so long as the Optionee serves as a Director or a director
of the Successor Corporation.  Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable.  Thereafter, the Option
or option shall remain exercisable in accordance with Sections 9(b) through (d)
above.

     If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable.  In such event the Compensation Committee shall notify the Optionee
that the Option shall be fully exercisable for a period of thirty (30) days from
the date of such notice, and upon the expiration of such period the Option shall
terminate.

     For the purposes of this Section 11(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

    12.  Time of Granting Options.  The date of grant of an Option shall, for
         ------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Director to whom an Option is
so granted within a reasonable time after the date of such grant.

    13.  Amendment and Termination of the Plan.
         -------------------------------------

                                      -9-
<PAGE>

         (a) Amendment and Termination.  The Compensation Committee may at any
             -------------------------
time amend, alter, suspend or terminate the Plan.

         (b) Stockholder Approval.  The Compensation Committee shall obtain
             --------------------
stockholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.

         (c) Effect of Amendment or Termination.  No amendment, alteration,
             ----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

    14.  Conditions Upon Issuance of Shares.
         ----------------------------------

         (a) Legal Compliance.  Shares shall not be issued pursuant to the
             ----------------
exercise of an Option  unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

         (b) Investment Representations.  As a condition to the exercise of an
             --------------------------
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

    15.  Inability to Obtain Authority.  The inability of the Company to obtain
         -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

    16.  Reservation of Shares.  The Company, during the term of this Plan,
         ---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

                                      -10-<PAGE>

                                                                 Exhibit 10.10
                            EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of January 1997, by
                                                    ---        -------
and between Richard Tavan, (the "EMPLOYEE") and TIBCO Software Inc. (the
            --------------
"EMPLOYER").

I.  EMPLOYMENT

EMPLOYER employs EMPLOYEE, and EMPLOYEE accepts employment with EMPLOYER, on the
terms and conditions set forth in this Agreement.

II.  TERMS OF EMPLOYMENT

The employment relationship between EMPLOYEE and EMPLOYER in an at will basis
may be terminated as follows:

(A)  Either party may terminate for any reason whatsoever, or for no reason and
     without cause, upon the giving of (I) two weeks' written notice to the
     other party or (ii) pay equal to two (2) weeks of EMPLOYEE'S salary in lieu
     of such notice; or

(B)  At any time, EMPLOYER may terminate EMPLOYEE without prior notice if
     EMPLOYEE materially fails to perform any obligation or duty owed to
     EMPLOYER.

III.  DUTIES

EMPLOYEE shall perform such tasks and duties as may be assigned by EMPLOYER,
from time to time.  At all times EMPLOYEE shall follow all of EMPLOYER's legal
instructions and directions and shall abide by all of EMPLOYER'S rules and
procedures in force from time to time while employed.  EMPLOYEE shall devote his
full time, attention, skill and efforts to the tasks and duties assigned by
EMPLOYER.  Without the prior written consent of EMPLOYER, EMPLOYEE shall not
provide services, for compensations, to any other person or business while
employed by EMPLOYER.

IV.  COMPENSATION

As compensation for all services to be rendered by EMPLOYEE  to EMPLOYER,
EMPLOYEE shall be paid a salary at the annual rate of One Hundred Eighty Three
                                                      ------------------------
Thousand Six Hundred Dollars ($183,600.00) as of February 1, 1997.  Said salary
--------------------          -----------
shall be payable in accordance with EMPLOYER's standard procedures.  EMPLOYER
shall withhold from any amounts payable as compensation all federal, state,
municipal or other taxes as are required by any law, regulation or ruling.

(A)  EMPLOYEE understands and agrees that EMPLOYEE's salary may be adjusted by
     EMPLOYER prospectively, and at its sole discretion from time to time,
     without affecting the remaining terms of this Agreement.

(B)  EMPLOYEE understands and agrees that any other compensation that may be
     paid to EMPLOYEE for services rendered, or to be rendered, (whether by way
     of any incentive payment, opportunity to acquire stock or any other form of
     additional compensation0 shall rest in the sole discretion of EMPLOYER.

V.  PROPERTY RIGHTS; DUTY TO DISCLOSE

EMPLOYEE hereby acknowledges and agrees to be bound by the provisions of the
EMPLOYER's "Non-Disclosure/Assignment Agreement" attached hereto as Exhibit A
and made a part hereof by this

                                       1
<PAGE>

reference as though set forth in full herein. The provisions of Exhibit A
shall survive any termination of this Agreement.

VI.  NONSOLICITATION OF EMPLOYEES

EMPLOYEE specifically agrees that during the term of this Agreement and for a
period of one (1) year thereafter, EMPLOYEE shall not, directly or indirectly,
either for himself or for any other person, firm, corporation, or other legal
entity, solicit any then employee of EMPLOYER to leave the employment of
EMPLOYER.

VII.  NO ASSIGNMENT

This Agreement may not be assigned by EMPLOYEE without the written consent of
EMPLOYER.  This Agreement shall be binding on the heirs, executors,
administrators, personal representatives, successors and assigns of EMPLOYEE and
EMPLOYER.

VIII.  GOVERNING LAW

This Agreement shall be governed by and construed and enforced in accordance
with and subject to the laws of the State where the EMPLOYEE was principally
rendering services for EMPLOYER.

IX.  NOTICES

All notices or other communications provided for by this Agreement shall be made
in writing and shall be deemed properly delivered when delivered (i) personally
or (ii) by the mailing of such notice by registered or certified mail, postage
prepaid, or (iii) by Federal Express or similar commercial delivery service to
the parties at the addresses set forth on the signature page of this Agreement
(or to such other address as one party designates to the other in writing).

X.  ENTIRE AGREEMENT AND WAIVER

This Agreement including exhibits hereto is the entire agreement between the
parties relating to EMPLOYEE's employment.  It supersedes all prior agreements,
arrangements, negotiations and understandings related thereto.  No waiver of any
term, provision or condition of this Agreement shall be deemed to be, or shall
constitute, a waiver of any other term, provision or condition herein, whether
or not similar.  No such waiver shall be binding unless in writing and signed by
the waiving party.

XI.  AMENDMENTS

No supplement, modification or amendment of any term, provision or condition of
this Agreement shall be binding or enforceable unless evidenced in writing
executed by the parties hereto.

XII.  COUNTERPARTS

This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

XIII.  REFORMATION/SEVERABILITY

If any provision of this Agreement is declared invalid by any tribunal, then
such provision shall be deemed automatically adjusted to the minimum extent
necessary to conform to the requirements for validity as declared at such time
and, as so adjusted, shall be deemed a provision of this Agreement as though
originally included herein.  In the event that the provision invalidated is of
such a nature that it cannot be so adjusted, the provision shall be deemed
deleted from this Agreement as though such

                                       2
<PAGE>

provision had never been included herein. In either case, the remaining
provisions of this Agreement shall remain in effect.

After carefully reading and considering the foregoing provisions and Exhibit A,
EMPLOYEE has voluntarily signed this Agreement on as of the date first above
written.

EMPLOYER:                                                 EMPLOYEE:

TIBCO Software Inc.                                       /s/ Richard Tavan
-------------------                                       ----------------------
Name of EMPLOYER                                          EMPLOYEE Signature

3165 Porter Drive                                         20297 Hickory Hill Way
-----------------                                         ----------------------
Address                                                   Address

Palo Alto, CA 94304                                       Saratoga, CA 95070
-------------------                                       ----------------------
City, State Zip                                           City, State Zip

By:  /s/ illegible                                        408-867-5797
     ---------------                                      ----------------------
                                                          Telephone
Its
   ---------------------

                                       3
<PAGE>

                                  EXHIBIT A

                     NON-DISCLOSURE/ASSIGNMENT AGREEMENT

Richard Tavan, ("EMPLOYEE") is employed, or is being hired, by TIBCO Software
-------------
Inc. ("the COMPANY") and may learn, or has learned, information which the
COMPANY keeps secret from its competitors and others.  As a condition of
employment or continued employment, EMPLOYEE agrees to the terms of this
Agreement.

I.  PROPRIETARY INFORMATION DEFINED

The Term "Proprietary Information" means the following classes of information
relating to the COMPANY's business:

(A)  Trade secrets and other proprietary and confidential information which are
     owned by the COMPANY and which have to do with:

     (1)  the operation of the COMPANY's business, consisting, for example,
          and not intending to be inclusive, of its lists or other
          identifications of clients or prospective clients of the COMPANY
          (and key individuals employed or engaged by such clients or
          prospective clients), the nature and type of services rendered to
          such clients (or proposed to be rendered to prospective clients),
          fees charged or to be charged, proposals, inventions, methodologies,
          algorithms, formulae, processes, compilations of information, form
          and content of data bases, designs, drawings, models, equipment,
          results of research proposals, job notes, reports, records,
          specifications, software, firmware and procedures used in, or
          related to, the COMPANY's products; and

     (2)  the COMPANY's relations with its employees, including without
          limitation, salaries, job classifications and skill levels;

(B)  Financial, sales and marketing data compiled by the COMPANY as well as the
     COMPANY's financial, sales and marketing plans and strategies, customer
     lists and non-public pricing;

(C)  All ideas, concepts, information and written material about a client
     disclosed to EMPLOYEE by the COMPANY, or acquired from a client of the
     COMPANY, and all financial, accounting, statistical, personnel and business
     data and plans of clients, are and shall remain the sole and exclusive
     property and proprietary information of the COMPANY, or said client;

(D)  Any other information designated by the COMPANY to be confidential, secret
     and/or proprietary.

II.  OBLIGATION TO KEEP CONFIDENTIAL

EMPLOYEE acknowledges and agrees that all Proprietary Information that comes
into EMPLOYEE's possession (including any information originated or developed by
EMPLOYEE while employed by the COMPANY) is secret and is the exclusive property
of the COMPANY.  EMPLOYEE agrees to use the Proprietary Information only in
connection with EMPLOYEE's work for the COMPANY.  EMPLOYEE agrees, while
                                                                   -----
employed with the COMPANY and thereafter, to hold the Proprietary Information in
----------------------------------------
confidence and agrees not to disclose or reveal, in any matter, any Proprietary
Information to any person or entity.

III.  RETURN OF INFORMATION

                                       4
<PAGE>

EMPLOYEE agrees, upon the request of the COMPANY or upon leaving the employ of
the COMPANY, to return promptly to the COMPANY the original and all copies of
any documents, reports, notes or other materials incorporating or reflecting, in
any way, any Proprietary Information in the possession or under the control of
EMPLOYEE.

IV.  INVENTION BELONGS TO THE COMPANY

EMPLOYEE acknowledges and agrees that any inventions, discoveries or
improvements which EMPLOYEE has conceived or made or may conceive or make during
EMPLOYEE's employment with the COMPANY, whether made individually or jointly
with others, which:

     (1)  relate or pertain to, or are in any way connected with, the systems,
          products, apparatus or methods utilized, or are the subject of
          research or development (actual or anticipated) by the COMPANY: or

     (2)  utilize equipment, supplies, facilities or Proprietary Information
          belonging to the COMPANY (collectively the "Inventions") shall be
          the sole exclusive property of the COMPANY and the Inventions shall
          be deemed to be works for hire.

(A)  EMPLOYEE agrees to make prompt and full disclosure to the COMPANY of all
     inventions, discoveries or improvements made by EMPLOYEE during the term of
     the Agreement, solely or jointly with others, whether or not such
     invention, discovery or improvement will actually become the property of
     the COMPANY pursuant to this Agreement.  EMPLOYEE agrees to make such
     disclosures with the understanding and the agreement of the COMPANY that,
     as to any invention, discovery or improvement to which the COMPANY is not
     entitled, the COMPANY and that such disclosed will be received and held
     strictly in confidence by the COMPANY and that such disclosure is for the
     sole purpose of determining whether or not rights to such invention,
     discovery or improvement is the property of the COMPANY.

(B)  To the extent EMPLOYEE would be deemed to be an owner of any of the rights
     in the Invention, EMPLOYEE hereby assigns to the COMPANY all such rights in
     the Inventions.  EMPLOYEE hereby agrees to execute and sign any and all
     applications, assignments or other instruments which the COMPANY may deem
     necessary in order to enable it, at its expense, to apply for, prosecute
     and obtain Letters of Patent, trademarks, copyright or other legal
     protections in the United States or foreign countries for the Intentions,
     or in order to assign or convey to or vest in the COMPANY the sole and
     exclusive right, title and interest in and to the Inventions.

(C)  The obligations contained in this Paragraph 4, except for the requirements
     as to disclosure, do not apply to any rights EMPLOYEE may have acquired in
     connection with an invention, discovery or improvement for which no
     equipment, supplies, facility or trade secret information of the COMPANY
     was used and which was developed entirely on the EMPLOYEE's own time, and
     provided that such invention, discovery or improvement does not: (i) relate
     directly or indirectly to the business of the COMPANY or to the COMPANY's
     actual or demonstrable anticipated research or development; and (ii) result
     from any work performed by EMPLOYEE for, or on behalf of, the COMPANY.

V.  INJUNCTIVE RELIEF

EMPLOYEE acknowledges and agrees that, because any use or disclosure of the
COMPANY's Proprietary Information other than for the COMPANY's benefit and
without the COMPANY's prior written consent would cause irreparable injury to
the COMPANY, in addition to any other remedies available, will be entitled to
obtain an injunction to enforce the provisions of this Agreement.

VI.  REFORMATION/SEVERABILITY

                                       5
<PAGE>

If any provision of this agreement is declared invalid by any tribunal, then
such provision shall be deemed automatically adjusted to the minimum extent
necessary to conform to the requirements for validity as declared at such time
and, as so adjusted, shall be deemed a provision of this Agreement as though
originally included herein.  In the event that the provision invalidated is of
such a nature that it cannot be so adjusted, the provision shall be deemed
deleted from this Agreement as though such provision had never been included
herein.  In either case, the remaining provisions of this Agreement shall remain
in effect.

NOTE:  POLICY STATEMENT AGAINST THE USE OF TRADE SECRETS OF OTHERS.

It is the practice and policy of COMPANY not to use the trade secrets of others.
Thus, EMPLOYEE should not use any information which any prior employer
identified specifically as a trade secret or as Proprietary Information.
However, EMPLOYEE is not required to maintain the confidentiality of any
information which is:

     (1)  known to EMPLOYEE prior to the disclosure by the prior employer; or

     (2)  known, or becomes known, to third parties knowledgeable in the
          industry without the fault or negligence of EMPLOYEE; or

     (3)  subsequently rightly received from a third party without restrictions
          regarding the secrecy or confidentiality; or

     (4)  independently developed by EMPLOYEE or by EMPLOYEE without recourse
          to the "trade secret" of another; or

     (5)  furnished by a prior employer to a third party without restriction or
          obligation to maintain the secrecy or the confidentiality of such
          information; or

     (6)  approved for release by the owner of the "trade secret" information.

I acknowledge that I have read and understood the above terms and conditions and
agree to be bound thereby.  In addition, I acknowledge a receipt of a copy of
this Agreement.

Date:  June 10 1997
       ------------

Signature:  /s/ Richard Tavan
            -----------------

Name (printed):  Richard Tavan
                 -------------

Mailing Address:  20297 Hickory Hill Way, Saratoga, CA  95070
                  -------------------------------------------

Phone Number:  408-867-5797
               ------------

                                       6

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