Document:

Severance Agreement by and between Registrant and James W. Frankola

 Exhibit 10.40 
  
 SEVERANCE AGREEMENT 
  
 THIS AGREEMENT is entered into as of December 31, 2003, by and between JAMES
W. FRANKOLA (the “Employee”) and ARIBA, INC., a Delaware corporation (including any successor that becomes bound by this Agreement, the “Company”). 
  

	 	1.	TERMINATION BENEFITS WITHIN 12 MONTHS AFTER A CHANGE IN CONTROL. 

  

	 	(a)	Qualifying Terminations. This Section 1 shall apply if: 

  
 (i) The Company terminates the Employee’s employment with the Company for a reason other than Cause or Permanent Disability within 12
months after a Change in Control (as such terms are defined below); or 
  
 (ii) The Employee resigns for Good Reason (as defined below) within 12 months after a Change in Control. 
  
 (b) Severance Payment. If this Section 1 applies, then the Employee shall be entitled to receive a severance payment from the Company. The amount
of such payment shall be equal to 200% of the sum of (i) the Employee’s base salary at the annual rate in effect when his employment terminates plus (ii) the Employee’s annual target bonus for the fiscal year in which his employment
terminates. Such payment shall be made in a lump sum in cash on the date the Employee’s employment terminates under Subsection (a)(i) above or not later than the date three business days after his employment terminates under Subsection (a)(ii)
above. 
  
 (c) Acceleration of Vesting. If this Section 1
applies, then all of the Equity held by the Employee at the time of the termination of his employment shall become fully and unconditionally vested, fully exercisable and fully transferable (except for transfer restrictions imposed by law). For this
purpose, the Employee’s “Equity” shall consist of (i) all shares of the capital stock of the Company (“Stock”), (ii) all options and other rights to purchase shares of Stock, (iii) all stock units, performance units or
phantom shares whose value is measured by the value of shares of Stock and (iv) all stock appreciation rights whose value is measured by increases in the value of shares of Stock. 
  
 (d) Extension of Option Exercise Period. If this Section 1 applies, then all options and other rights to purchase
shares of Stock and all stock appreciation rights measured by the value of Stock that are held by the Employee at the time of the termination of his employment shall remain exercisable until the earlier of (i) the date 24 months after the
termination of the Employee’s employment or (ii) the date such options or rights would have expired if the Employee’s employment had not terminated. 
  

(e) Definition of “Board.” For purposes of this Agreement, “Board” shall mean the Board of Directors of the Company.

  

	*	CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT. SUCH PORTIONS WERE OMITTED FROM THIS FILING AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. 

 (f) Definition of “Cause.” For purposes of this Section 1 only, “Cause”
shall mean any intentional misconduct that materially injures the Company and its subsidiaries, taken as a whole, or has a material adverse effect on the business or affairs of the Company and its subsidiaries, taken as a whole. 
  
 (g) Definition of “Change in Control.” For purposes
of this Section 1 only, a “Change in Control” shall be determined as follows: 
  
 (i) The consummation of a merger or consolidation of the Company, or any subsidiary of the Company, with or into another entity or any
other corporate reorganization, if immediately after such transaction the Ownership Percentage (as defined below) of persons who were not stockholders of the Company immediately before such transaction is 30% or more; provided, however, that if such
percentage is less than 50%, a majority of the Incumbent Directors may determine prior to the consummation of such transaction that a Change of Control has not occurred after considering all relevant factors; 
  
 (ii) The sale, transfer or other disposition of all or
substantially all of the Company’s assets; 
  
 (iii) A change in the composition of the Board, as a result of which fewer than two-thirds of the incumbent directors are directors who either (A) had been directors of the Company on the date hereof (the “original directors”) or
(B) were elected, or nominated for election, to the Board with the approval of at least a majority of the sum of (I) the original directors who were still in office at the time of the election or nomination and (II) the directors whose election or
nomination was previously so approved (collectively, the “Incumbent Directors”); or 
  
 (iv) Any transaction as a result of which any person is the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing at least 25% of the total voting power represented by the Company’s then outstanding voting securities. 
  
 For purposes of this Subsection (g), the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, but shall exclude (A) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Parent or Subsidiary and (B) a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company. 
  
 For purposes of Paragraph (i) above, the term “Ownership Percentage” means the percentage of the voting power of the outstanding securities of (A) the
continuing or surviving entity and (B) any direct or indirect parent corporation of such continuing or surviving entity. 
  
 For purposes of the proviso in Paragraph (i) above, the factors to be considered by the Board in determining that a Change in Control has not occurred shall
include, without limitation: 
  
 (A) The
Ownership Percentage; 
  

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 (B) Whether there is a change in the composition of the Board of Directors of the Company
or the continuing or surviving entity; 
  
 (C)
Whether there is a change in the management of the Company or the continuing or surviving entity; 
  
 (D) The extent of the anticipated change in the business, operations or assets of the Company or the continuing or surviving entity;

  
 (E) The level of severance benefits available
to comparable management at any entity other than the Company resulting from any transaction specified in Paragraphs (i) through (iv) above; and 
  
 (F) Whether treating the transaction as a Change in Control for purposes of this Agreement is necessary or desirable for purposes of
achieving the business objectives of the transaction specified in Paragraphs (i) through (iv) above. 
  
 A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same
proportions by the persons who held the Company’s securities immediately before such transaction. 
  
 (h) Definition of “Good Reason.” For purposes of this Section 1 only, “Good Reason” shall mean (i) the failure of the
Company’s successor or its parent to appoint the Employee as the Chief Financial Officer or Chief Executive Officer of a corporation whose equity securities are publicly traded on the New York Stock Exchange, the American Stock Exchange or the
National Market System of the Nasdaq Stock Market (or any successor of the foregoing), (ii) a reduction in his level of compensation (including base salary, fringe benefits and participation in bonus or incentive programs) or (iii) a relocation of
his place of employment by more than 50 miles, provided and only if such failure, reduction or relocation is effected by the Company without his consent. Clause (i) in the preceding sentence shall apply only if the Employee was the Company’s
Chief Financial Officer or Chief Executive Officer immediately prior to the Change in Control. 
  
 (i) Definition of “Permanent Disability.” For all purposes under this Agreement, “Permanent Disability” shall mean that the Employee, at the time notice is given, has failed to
perform the duties of his position with the Company for a period of not less than 180 consecutive days (or such longer period as may be required by law) as the result of his incapacity due to physical or mental injury, disability or illness.

  

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	 	2.	TERMINATION BENEFITS BEFORE, OR MORE THAN 12 MONTHS AFTER, A CHANGE IN CONTROL. 

  
 (a) Qualifying Terminations. This Section 2 shall only apply if: 
  
 (i) Section 1 does not apply; 
  
 (ii) Either (A) the Company terminates the Employee’s
employment with the Company for a reason other than Cause or Permanent Disability or (B) the Employee resigns for Good Reason; and 
  
 (iii) Either (A) the Employee and the Company have executed a reciprocal general release (in the form attached hereto as Exhibit A)
of all known and unknown claims that they may then have against each other and have agreed not to prosecute any legal action or other proceeding based on such claims or (B) the Company (at its sole discretion) has determined to waive the requirement
of a reciprocal general release. 
  
 The foregoing notwithstanding, the Employee
and the Company shall not be required to release any claims that they may have against each other arising under (i) the Indemnification Agreement dated September 11, 2002, between the Employee and the Company or (ii) any rights to indemnification,
advancement of expenses or repayment arising under the Company’s Amended and Restated Certificate of Incorporation or the Company’s Amended and Restated Bylaws, in each case as currently in effect or as subsequently amended. 
  
 (b) Severance Pay. If this Section 2 applies, then the Employee shall
be entitled to receive severance payments from the Company for a period of 12 months following the termination of his employment (the “Continuation Period”). Such severance payments shall be made in accordance with the Company’s
standard payroll procedures. The annual rate of such severance payments shall be equal to the sum of (i) the Employee’s base salary at the annual rate in effect when his employment terminates plus (ii) the Employee’s annual target bonus
for the fiscal year in which his employment terminates. In addition to any other remedies that may be available to the Company, severance payments shall cease immediately if the Employee fails to comply with the covenants set forth in Section 3
below. 
  
 (c) Acceleration of Vesting. If this Section 2
applies, then: 
  
 (i) The vested portion of all
restricted shares of Stock held by the Employee at the time of the termination of his employment shall at all times thereafter be determined by adding 12 months to his actual period of service with the Company. 
  
 (ii) The Employee shall continue to vest in the Equity held
by him at the time of the termination of his employment (other than restricted shares of Stock) during the Continuation Period, subject to his compliance with the covenants set forth in Section 3 below. The monthly rate of vesting during the
Continuation Period shall be the same as prior to the termination of the Employee’s employment. 
  
 (d) Extension of Option Exercise Period. If this Section 2 applies, then all options and other rights to purchase shares of Stock and all stock
appreciation rights measured by the value of Stock that are held by the Employee at the time of the termination of his employment shall remain exercisable until the earlier of: 
  

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 (i) The later of (A) the date 12 months after the termination of the Employee’s
employment or (B) with respect to any increment of options or rights that becomes exercisable later than nine months after the termination of the Employee’s employment, the date three months after such increment becomes exercisable; or

  
 (ii) The date the options or rights would
have expired if the Employee’s employment had not terminated. 
  
 (e) Definition of “Cause.” For purposes of this Section 2 only, “Cause” shall mean: 
  
 (i) Any gross negligence or intentional misconduct that materially injures the Company and its subsidiaries, taken as a whole, or has a
material adverse effect on the business or affairs of the Company and its subsidiaries, taken as a whole; 
  
 (ii) Any unauthorized use or disclosure by the Employee of the Company’s confidential information or trade secrets resulting from
gross negligence that materially injures the Company and its subsidiaries, taken as a whole, or has a material adverse effect on the business or affairs of the Company and its subsidiaries, taken as a whole; 
  
 (iii) A failure by the Employee to comply with the
Company’s written policies or rules that materially injures the Company and its subsidiaries, taken as a whole, or has a material adverse affect on the business or affairs of the Company and its subsidiaries, taken as a whole, provided that the
Board shall have given Employee notice of such failure and an opportunity to cure such failure, if curable; or 
  
 (iv) The Employee’s conviction of, or plea “guilty” or “no contest” to, a felony under the laws of the United
States or any state thereof. 
  
 With respect to acts or omissions described in
Paragraphs (i) and (iii) above, “Cause” shall only be deemed to exist following written notice to the Employee from the Company and his failure to cure such acts or omissions within 30 days of receipt of such written notice. 
  
 (f) Definition of “Good Reason.” For purposes of this
Section 2 only, “Good Reason” shall mean (i) a requirement that the Employee serve in any position other than the Company’s Chief Financial Officer or Chief Executive Officer, (ii) a reduction in his level of compensation (including
base salary, fringe benefits and participation in bonus or incentive programs) or (iii) a relocation of his place of employment by more than 50 miles, provided and only if such requirement, reduction or relocation is effected by the Company without
his consent. Clause (i) in the preceding sentence shall apply only if the Employee resigns in writing within 90 days after receiving written notice that he is required to serve in any position other than the Company’s Chief Financial Officer or
Chief Executive Officer. 
  

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	 	3.	COVENANTS. 

  
 (a) Non-Solicitation. During his employment with the Company and, if Section 2 applies, during the Continuation Period, the Employee shall not
directly or indirectly, personally or through others, solicit or attempt to solicit the employment of any employee of the Company or any of the Company’s affiliates, whether on the Employee’s own behalf or on behalf of any other person or
entity. The term “employment” for purposes of this Subsection (a) means to enter into an arrangement for services as a full-time or part-time employee, independent contractor, agent or otherwise. The Employee and the Company agree that
this provision is reasonably enforced as to any geographic area in which the Company conducts its business. 
  
 (b) Non-Competition. The Employee agrees that, during his employment with the Company and during the Continuation Period (if any), he shall not:

  
 (i) Directly or indirectly, individually or
in conjunction with others, engage in activities that compete with the Company or work for any entity that is part of the Company’s Market; 
  
 (ii) Solicit, serve, contract with or otherwise engage any existing or prospective customer, client or account of the Company on behalf of
any entity that is part of the Company’s Market; or 
  
 (iii) Cause or attempt to cause any existing or prospective customer, client or account of the Company to divert from, terminate, limit or in any manner modify, or fail to enter into, any actual or potential business
relationship with the Company. The Employee and the Company agree that this provision is reasonably enforced with reference to any geographic area in which the Company maintains any such relationship. 
  
 For purposes of this Subsection (b), the Company’s “Market” shall mean (i) all
companies that derive their revenue primarily from e-procurement and/or spend management software sales or sales of software or services aiding companies in sourcing and/or spend management activities and (ii) those companies set forth on Exhibit
B attached hereto. The Employee and the Company agree that the Company’s Market is global in scope. 
  
 (c) Cooperation and Non-Disparagement. The Employee agrees that, during the Continuation Period, he shall cooperate with and assist the Company in
every reasonable respect in facilitating the transition of his duties to his successor; provided that the Employee shall not be required to devote more than 20 hours per month to providing such assistance and cooperation. The Employee further agrees
that, during the Continuation Period, he shall not in any way or by any means disparage the Company, the members of the Board or the Company’s officers and employees. 
  
 (d) Disclosure. The Employee agrees that, during the Continuation Period, he shall inform any new employer or other
person or entity with whom the Employee enters into a business relationship, before accepting employment or entering into a business relationship, of the existence of this Section 3. 
  

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 (e) Construction. If any provision set forth in this Section 3 is not enforceable under the laws
of the state in which the Employee is employed following the termination of his employment with the Company, nothing in this Agreement shall prohibit the Employee from engaging in such lawful conduct; provided, however, that if the Employee elects
to do so, his rights to any of the benefits set forth in Section 2 shall terminate immediately. 
  

	 	4.	PARACHUTE PAYMENTS. 

  
 (a) Parachute Gross-Up Payment. If it is determined that any cash payment of any type to the Employee or for his benefit by the Company, any of its
affiliates, any person who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company’s assets (within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”), and the regulations thereunder) or any affiliate of such person, whether paid or payable pursuant to the terms of this Agreement or otherwise (the “Total Payments”), would be subject to the excise tax imposed by section
4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax and any such interest or penalties are collectively referred to as the “Excise Tax”), then the Employee shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount calculated to ensure that after the Employee pays all taxes (and any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments. For purposes of this Section 4, the Excise Tax and any related gross-up benefits shall be determined based on cash compensation,
before consideration of the taxable compensation (if any) related to restricted shares of Stock or options to purchase Stock and arising from this Agreement. 
  
 (b) Determination by Accountant. All determinations and calculations required to be made under this Section 4 shall be made by an independent
accounting firm selected by the Employee from among the largest five accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed
supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, to the Employee and the Company within five business days after the Employee or the Company made a request (if the Employee reasonably believes that
any of the Total Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written statement that it has concluded that no Excise Tax is payable
(including the reasons therefor) and that the Employee has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid to the Employee within five business
days after the Determination has been delivered to him or the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Employee, absent manifest error. 
  
 (c) Over- and Underpayments. As a result of uncertainty in the application of section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should have been made (“Underpayment”) or that Gross-Up Payments will have been made by the Company that should not
have been made (“Overpayment”). In either event, the Accounting Firm shall 

  

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determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the Company shall promptly pay the amount of such
Underpayment to the Employee or for his benefit. In the case of an Overpayment, the Employee shall, at the direction and expense of the Company, take such steps as are reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company, and otherwise reasonably cooperate with the Company to correct such Overpayment, provided, however, that (i) the Employee shall in no event be obligated to return to
the Company an amount greater than the net after-tax portion of the Overpayment that the Employee has retained or has recovered as a refund from the applicable taxing authorities and (ii) this provision shall be interpreted in a manner consistent
with the intent of Subsection (a) above, which is to make the Employee whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Employee’s repaying to the
Company an amount that is less than the Overpayment. 
  
 (d)
Limitation on Parachute Payments. Any other provision of this Section 4 notwithstanding, if the Excise Tax could be avoided by reducing the Total Payments by $25,000 or less, then the Total Payments shall be reduced to the extent necessary to
avoid the Excise Tax and no Gross-Up Payment shall be made. If the Accounting Firm determines that the Total Payments are to be reduced under the preceding sentence, then the Company shall promptly give the Employee notice to that effect and a copy
of the detailed calculation thereof. The Employee may then elect, in his sole discretion, which and how much of the Total Payments are to be eliminated or reduced (as long as after such election no Excise Tax shall be payable), and the Employee
shall advise the Company in writing of his election within 10 days of receipt of notice. If the Employee make no such election within such 10-day period, then the Company may elect which and how much of the Total Payments are to be eliminated or
reduced (as long as after such election no Excise Tax shall be payable), and it shall notify the Employee promptly of such election. 
  

	 	5.	EMPLOYMENT AT WILL. 

  
 The Employee’s employment with the Company shall be “at will,” meaning that either the Employee or the Company shall be entitled to
terminate the Employee’s employment at any time and for any reason, with or without Cause. Any contrary representations that may have been made to the Employee shall be superseded by this Agreement. This Agreement shall constitute the full and
complete agreement between the Employee and the Company on the “at will” nature of the Employee’s employment, which may only be changed in an express written agreement signed by the Employee and a duly authorized officer of the
Company. 
  

	 	6.	SUCCESSORS. 

  
 (a) Company’s Successors. This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, reorganization, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets. For all purposes under this Agreement, the term “Company” shall include any successor to the
Company’s business and/or assets that becomes bound by this Agreement. 
  

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 (b) Employee’s Successors. This Agreement and all rights of the Employee hereunder shall
inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 
  

	 	7.	ARBITRATION. 

  
 (a) Scope of Arbitration Requirement. The parties hereby waive their rights to a trial before a judge or jury and agree to arbitrate before a
neutral arbitrator any and all claims or disputes arising out of this Agreement and any and all claims arising from or relating to the Employee’s employment with the Company, including (but not limited to) claims against any current or former
employee, director or agent of the Company, claims of wrongful termination, retaliation, discrimination, harassment, breach of contract, breach of the covenant of good faith and fair dealing, defamation, invasion of privacy, fraud,
misrepresentation, constructive discharge or failure to provide a leave of absence, claims regarding commissions, stock options or bonuses, infliction of emotional distress or unfair business practices, or any tort or tort-like causes of action.

  
 (b) Exceptions. The foregoing notwithstanding, the
following are the only claims that may be resolved in any appropriate forum (including courts of law) as required by applicable laws then in effect: (i) claims concerning workers’ compensation benefits; and (ii) claims concerning unemployment
insurance. 
  
 (c) Procedure. The arbitrator’s
decision shall be written and shall include the findings of fact and law that support the decision. The arbitrator’s decision shall be final and binding on both parties, except to the extent applicable law allows for judicial review of
arbitration awards. The arbitrator may award any remedies that would otherwise be available to the parties if they were to bring the dispute in court. The arbitration shall be conducted in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association; provided, however that the arbitrator shall allow the discovery authorized by the California Arbitration Act or the discovery that the arbitrator deems necessary for the parties to
vindicate their respective claims or defenses. The arbitration shall take place in Santa Clara County or, at the Employee’s option, the county in which the Employee primarily worked with the Company at the time when the arbitrable dispute or
claim first arose. 
  
 (d) Costs. The parties shall share
the costs of arbitration equally, except that the Company shall bear the cost of the arbitrator’s fee and any other type of expense or cost that the Employee would not be required to bear if he were to bring the dispute or claim in court. Both
the Company and the Employee shall be responsible for their own attorneys’ fees, and the arbitrator may not award attorneys’ fees unless a statute or contract at issue specifically authorizes such an award. 
  

	 	8.	MISCELLANEOUS PROVISIONS. 

  
 (a) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the 

  

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home address that he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its Secretary. 
  
 (b) Entire Agreement. This Agreement supersedes and replaces any prior agreements, representations or understandings, whether written, oral or implied, between the Employee and the Company with respect to the
subject matter hereof, including (without limitation) Paragraph 5 of the offer letter dated October 16, 2001. For the avoidance of doubt, Paragraph 6 of such offer letter shall not be superseded by this Agreement and shall remain in effect.

  
 (c) Modifications and Waivers. No provision of this
Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. 
  
 (d) Withholding Taxes. All payments made under this Agreement shall be
subject to reduction to reflect taxes or other charges required to be withheld by law. 
  
 (e) Choice of Law and Severability. This Agreement is executed by the parties in the State of California and shall be interpreted in accordance with the laws of such State (except their provisions governing the
choice of law). If any provision of this Agreement becomes or is deemed invalid, illegal or unenforceable in any jurisdiction by reason of the scope, extent or duration of its coverage, then such provision shall be deemed amended to the extent
necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision shall be stricken and the remainder of this Agreement
shall continue in full force and effect. Should there ever occur any conflict between any provision contained in this Agreement and any present or future statue, law, ordinance or regulation contrary to which the parties have no legal right to
contract, then the latter shall prevail but the provision of this Agreement affected thereby shall be curtailed and limited only to the extent necessary to bring it into compliance with applicable law. All the other terms and provisions of this
Agreement shall continue in full force and effect without impairment or limitation. 
  
 (f) No Assignment. This Agreement and all rights and obligations of the Employee hereunder are personal to the Employee and may not be transferred or assigned by the Employee at any time; provided that Employee
may assign his rights hereunder pursuant to any property settlement resulting from the dissolution of his marriage on the condition that such rights shall be conditioned upon Employee’s performance of his obligations hereunder as if no such
assignment had occurred. The Company may assign its rights under this Agreement to any entity that assumes the Company’s obligations hereunder in connection with any sale or transfer of all or a substantial portion of the Company’s assets
to such entity. 
  

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 (g) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument. 
  
 IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, on January 12, 2004, effective as of the day and year first above written.

  

			
	

	
	 ARIBA, INC.

		
	By	 	 
	 	 	

	 Title:
	 	 
	 	 	

  

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 EXHIBIT A 
 FORM OF RELEASE 
  
 ARIBA, INC. 
 807 11TH AVENUE 
 SUNNYVALE, CA 94089 
  
 [Date] 
  
 Mr. James W. Frankola 
 [Address] 
  
 Dear Jim: 
  
 This letter (the “Agreement”) confirms the agreement between you and Ariba, Inc. (the “Company”) regarding the termination of your employment with the Company. 
  
 1. Termination Date. Your employment with the Company will
terminate on                     , 20     (the “Termination Date”). 
  
 2. Effective Date and Rescission. You have up to 21 days after you
received this Agreement to review it. You are advised to consult an attorney of your own choosing (at your own expense) before signing this Agreement. Furthermore, you have up to seven days after you signed this Agreement to revoke it. If you wish
to revoke this Agreement after signing it, you may do so by delivering a letter of revocation to me. If you do not revoke this Agreement, the eighth day after the date you signed it will be the “Effective Date.” Because of the seven-day
revocation period, no part of this Agreement will become effective or enforceable until the Effective Date. 
  
 3. Salary and Vacation Pay. On the Termination Date, the Company will pay you
$             (less all applicable withholding taxes and other deductions). This amount represents all of your salary earned through the Termination Date and all of your accrued but
unused vacation time or PTO. You acknowledge that, if you did not execute this Agreement, you would not be entitled to receive any additional money from the Company. The only payments and benefits that you are entitled to receive from the Company in
the future are those specified in this Agreement. 
  
 4.
Severance Benefits. In consideration of executing this Agreement, you will receive from the Company the severance benefits described in Section 2 of the Severance Agreement dated as of December 31, 2003, between you and the Company (the
“Severance Agreement”). As described in Section 2 of the Severance Agreement, the continuation of such severance benefits is subject to your compliance with the covenants described in Section 3 of the Severance Agreement. 
  
 5. Release of Your Claims. In consideration of receiving the severance
benefits described in Section 2 of the Severance Agreement, you waive, release and promise 

  

 
never to assert any claims or causes of action, whether or not now known, against the Company or its predecessors, successors or past or present
subsidiaries, stockholders, directors, officers, employees, consultants, attorneys, agents, assigns and employee benefit plans with respect to any matter, including (without limitation) any matter related to your employment with the Company or the
termination of that employment, including (without limitation) claims to attorneys’ fees or costs, claims of wrongful discharge, constructive discharge, emotional distress, defamation, invasion of privacy, fraud, breach of contract or breach of
the covenant of good faith and fair dealing and any claims of discrimination or harassment based on sex, age, race, national origin, disability or any other basis under Title VII of the Civil Rights Act of 1964, the California Fair Employment and
Housing Act, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act and all other laws and regulations relating to employment. However, this release bars only those claims that arose prior to the execution of this
Agreement. Execution of this Agreement does not bar: 
  
 (a) Any claim that arises hereafter, including (without limitation) a claim for breach of this Agreement; 
  
 (b) Any claim arising under the Indemnification Agreement dated September 11, 2002, between you and the Company, as amended (the
“Indemnification Agreement”); or 
  
 (c) Any claim to indemnification or advancement of expenses arising under the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate”), or the Company’s Amended and Restated Bylaws, as
amended (the “Bylaws”). 
  
 6. Release of the
Company’s Claims. The Company waives, releases and promises never to assert any claims or causes of action, whether or not now known, against you or your successors, agents or assigns with respect to any matter, including (without
limitation) any matter related to your employment with the Company or the termination of that employment, including (without limitation) claims to attorneys’ fees or costs and claims of defamation, fraud, breach of contract or breach of the
covenant of good faith and fair dealing. However, this release bars only those claims that arose prior to the execution of this Agreement. Execution of this Agreement does not bar: 
  
 (a) Any claim that arises hereafter, including (without limitation) a claim for breach of this Agreement;

  
 (b) Any claim arising under the
Indemnification Agreement; or 
  
 (c) Any claim
to repayment arising under the Certificate or the Bylaws. 
  
 7.
Waiver. You and the Company expressly waive and release any and all rights and benefits under Section 1542 of the California Civil Code (or any analogous law of any other state), 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.” 
  

 13 

 8. Promise Not To Sue. You agree that you will never, individually or with any other person,
commence, aid in any way (except as required by legal process) or prosecute, or cause or permit to be commenced or prosecuted, any action or other proceeding based on any claim that has been released pursuant to Section 5 above. The Company agrees
that it will never, individually or with any other person, commence, aid in any way (except as required by legal process) or prosecute, or cause or permit to be commenced or prosecuted, any action or other proceeding based on any claim that that has
been released pursuant to Section 6 above. 
  
 9. No
Admission. Nothing contained in this Agreement will constitute or be treated as an admission by you or the Company of liability, any wrongdoing or any violation of law. 
  
 10. Proprietary Information and Invention Agreement. At all times in the future, you will remain bound by your
Proprietary Information and Invention Agreement with the Company. This Agreement may be modified only in a written document signed by you and a duly authorized officer of the Company. 
  
 11. Company Property. You represent that you have returned to the Company all property that belongs to the Company,
including (without limitation) copies of documents that belong to the Company and files stored on your computer(s) that contain information belonging to the Company. 
  
 12. Severability. If any term of this Agreement is held to be invalid, void or unenforceable, the remainder of this
Agreement will remain in full force and effect and will in no way be affected, and the parties will use their best efforts to find an alternate way to achieve the same result. 
  
 13. Choice of Law. This Agreement will be construed and interpreted in accordance with the laws of the State of
California (other than their choice-of-law provisions). 
  
 14.
Execution. This Agreement may be executed in counterparts, each of which will be considered an original, but all of which together will constitute one agreement. Execution of a facsimile copy will have the same force and effect as execution
of an original, and a facsimile signature will be deemed an original and valid signature. 
  
 Please indicate your agreement with the above terms by signing below. 
  

			
	Very truly yours,
	
	ARIBA, INC.
		
	By:	 	 
	 	 	

	 Title:
	 	 
	 	 	

  

 14 

 I agree to the terms of this Agreement, and I am voluntarily signing this release of all claims. I acknowledge that I
have read and understand this Agreement, and I understand that I cannot pursue any of the claims and rights that I have waived in this Agreement at any time in the future. 
  

			
	
	

	Signature of James W. Frankola
	Dated:	 	 
	 	 	

  

 15 

 EXHIBIT B 
  

LIST OF COMPANIES 
  
 [*] 
  

	*	CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT. SUCH PORTIONS WERE OMITTED FROM THIS FILING AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. 

  
  

 16Offer Letter by and between Registrant and Kevin Costello

 Exhibit 10.29 
  

	*	 	CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT. SUCH PORTIONS WERE OMITTED FROM THIS FILING AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. 

  
 ARIBA, INC. 
 807 11th Avenue 
 Sunnyvale, CA 94089 
  
 April 10, 2002 
  
 Mr. Kevin Costello 
 320 Falls Point Trail 
 Alpharetta, GA 30022 
  
 Dear Kevin: 
  
 Ariba, Inc. (the “Company”) is
pleased to offer you employment on the following terms: 
  
 1.  Position and Start Date.    Your initial title will be Executive Vice President. You will report to the Company’s Chief Executive Officer as long as you are employed by
the Company. Your employment with the Company will start promptly after you have satisfied all applicable obligations imposed by your former employer as a condition to starting employment, including (without limitation) all notice requirements.

  
 2.  Representations and
Covenants.    By signing this letter agreement, you (a) confirm that you do not improperly have in your possession or under your control any information or property belonging to any current or former employers and (b) agree
to comply with any rules or guidelines adopted by the Company in order to ensure compliance with any contractual commitments or other legal obligations to current or former employers. If you are individually named as a defendant in a lawsuit that
includes one or more claims directly related to your joining the Company or directly arising out of your activities for the Company that are within the scope of your employment (each, a “Claim”), then the Company agrees to pay the
reasonable attorneys’ fees and out-of-pocket expenses that you incur solely in defending the portion or portions of such lawsuit that directly relate to a Claim, provided that (a) you notify the Company’s Chief Executive Officer in writing
within a prompt reasonable time after receiving notice of any threatened or actual institution of any Claim, (b) you in good faith allow the Company to participate in the investigation, preparation, defense and settlement of any Claim and to
participate in the selection of legal counsel to represent you in any Claim, (c) you fully cooperate with the Company regarding its participation in the investigation, preparation, defense and settlement of any Claim, (d) the Company shall have no
obligation to pay any of your attorneys’ fees that are incurred after you voluntarily terminate your employment with the Company and (e) the Company’s obligation to pay any of your attorneys’ fees that are incurred after the Company
terminates your employment for Cause (as defined in Paragraph 24) shall be limited to $250,000 (in addition to any such attorneys’ fees that shall have been incurred prior to such termination). You represent and warrant that as of the date that
you sign this letter agreement, you have not, personally or through your agent, received any notice of any threatened or actual institution of any Claim. The Company will not pay any damages, settlement amounts 

  

 Mr. Kevin Costello 
 April 10, 2002 
 Page 2 
  

 
or any other sums or relief for which you are held personally liable. The Company’s obligation under this Paragraph 2 will not apply to any claim or
lawsuit brought by the Company against you. 
  
 3.  Salary.    The Company will pay you a starting salary at the rate of $450,000 per year, payable in accordance with the Company’s standard payroll schedule. This salary will not be reduced.

  
 4.  Bonus.    You will be eligible to be considered for an incentive bonus for each fiscal year of the Company. The bonus (if any) will be awarded based on objective or subjective criteria established by
the Company’s Chief Executive Officer and approved by the Compensation Committee of the Company’s Board of Directors (the “Committee”). Your target bonus will be equal to $150,000 per year. The bonus for a fiscal year will be
paid after the Company’s books for that year have been closed and will be paid only if the Company employs you at the time of payment. The determinations of the Committee with respect to your bonus will be final and binding. 
  
 5.  Employee
Benefits.    As a regular employee of the Company, you will be eligible to participate in a number of Company-sponsored benefits. These benefits are described in the employee benefit summary that I have enclosed with this
letter agreement. In addition, you will be entitled to paid vacation in accordance with the Company’s vacation policy, as in effect from time to time. 
  
 6.  Restricted Stock.    Subject to the approval of the Committee, you will be granted 125,000
restricted shares of the Company’s Common Stock (the “Restricted Shares”). You will not be required to pay for the Restricted Shares. Except as described below, the Restricted Shares will be subject to the terms and conditions
applicable to restricted shares granted under the Company’s 1999 Equity Incentive Plan (the “Plan”), as described in the Plan and the applicable Restricted Stock Agreement. Except as described below, the Restricted Shares will be
forfeited and will revert to the Company (without any payment to you) in the event that your service terminates for any reason before the Restricted Shares vest. Any remaining unvested Restricted Shares will vest in full on the date when you
complete five years of continuous service with the Company. Prior to that date, the Restricted Shares will vest as follows: 
  
 (a)  50% of the Restricted Shares will vest on the date when one or more milestones established by the Company’s Chief
Executive Officer and approved by the Committee are attained; and 
  
 (b)  100% of the Restricted Shares will vest on the date when the Company achieves not less than $5,000,000 of incremental quarterly revenue directly from your business unit (whether or not the milestones
described in Subparagraph (a) above have been attained). 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 3 
  

 In the event that the Company is subject to a Change in Control (as defined in the Plan), the
Restricted Shares will vest on an accelerated basis, as described in the applicable Restricted Stock Agreement. In addition, all of the Restricted Shares will vest if the Company terminates your employment for any reason other than Cause (as defined
in Paragraph 24 below) or if you resign from the Company within 12 months after: 
  
 (a)  The Company over your written objection has required that you report to anyone other than its Chief Executive Officer;

  
 (b)  The Company has reduced your
base salary below $450,000 per year; or 
  
 (c)  The Company over your written objection has required that you relocate your principal place of employment more than 50 miles from the location in Atlanta where you commenced your employment with the Company. 
  
 7.  Stock
Option.    Subject to the approval of the Committee, you will be granted an option to purchase 1,500,000 shares of the Company’s Common Stock (the “Option”). The exercise price per share will be equal to the
fair market value per share on the date the Option is granted or on your first day of employment, whichever is later. The Option will be subject to the terms and conditions applicable to options granted under the Plan, as described in the Plan and
the applicable Stock Option Agreement. The Option will become exercisable for 25% of the option shares after 12 months of continuous service with the Company, and the balance will become exercisable in equal monthly installments over the next 36
months of continuous service. For purposes of the preceding sentence only, your service with the Company will be deemed to commence on the date when you sign this letter agreement. In the event that the Company is subject to a Change in Control (as
defined in the Plan), the Option will become exercisable on an accelerated basis, as described in the applicable Stock Option Agreement. 
  
 8.  Severance Pay.    The Company will continue to pay your cash compensation for a period of 12
months following the termination of your employment (the “Continuation Period”) if the Company terminates your employment for any reason other than Cause or Permanent Disability (as defined in Paragraph 24 below) or if you resign from the
Company within 12 months after: 
  
 (a)  The Company over your written objection has required that you report to anyone other than its Chief Executive Officer; 
  
 (b)  The Company has reduced your base salary below $450,000 per year; or 
  
 (c)  The Company over your written objection has
required that you relocate your principal place of employment more than 50 miles from the location in Atlanta where you commenced your employment with the Company. 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 4 
  

 For this purpose, your “cash compensation” will be deemed to be the sum of: 
  
 (a)  Your base salary at the rate in effect at the
time of the termination of your employment; plus 
  
 (b)  The lesser of (i) the sum of your actual bonuses for the last four completed fiscal quarters preceding the termination of your employment or (ii) your target bonuses for those four completed fiscal quarters. 
  
 Your cash compensation will be paid in accordance with the Company’s
standard payroll procedures. However, this Paragraph 8 will not apply unless you (a) sign a general release of claims (in a form prescribed by the Company) of all known and unknown claims that you may then have against the Company or persons
affiliated with the Company and (b) have returned all Company property. In addition, all payments under this Paragraph 8 will be discontinued immediately if you fail to comply with Paragraph 15, 16, 17 or 18 below. 
  
 9.  Loans.    When you
sign this letter agreement and the applicable Promissory Note, a copy of which is attached to this letter as Exhibit A1, the Company will make an unsecured loan to you in the amount of $400,000 (the “First Loan”). As soon as
reasonably practicable (but in no event later than 30 days) after you start providing substantial services as an employee of the Company and you sign the applicable Promissory Note, a copy of which is attached to this letter as Exhibit A2,
the Company will make another unsecured loan to you in the amount of $600,000 (the “Second Loan” and, together with the First Loan, the “Loans”). The Loans will bear interest at the lowest rate that will not cause interest to be
imputed for tax purposes, as prescribed by the Internal Revenue Service for the month in which each Loan is made. Interest will be compounded annually. The principal amount of the Loans and accrued interest will be forgiven in full if the Company is
subject to a “Change in Control,” as defined in the Plan. The principal amount of the Loans and accrued interest will also be forgiven in full if the Company terminates your employment for any reason other than Cause or if you resign from
the Company within 12 months after: 
  
 (a)  The Company over your written objection has required that you report to anyone other than its Chief Executive Officer; 
  
 (b)  The Company has reduced your base salary below $450,000 per year; or 
  
 (c)  The Company over your written objection has
required that you relocate your principal place of employment more than 50 miles from the location in Atlanta where you commenced your employment with the Company. 
  
 In addition, one-third of the principal amount of each Loan and all accrued interest will be forgiven after 12 months of
continuous service as a full-time employee of the Company, and the balance will be forgiven in equal monthly installments over the next 24 months of continuous 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 5 
  

 service as a full-time employee of the Company. The principal amount of the First Loan and accrued
interest, if not forgiven, will be payable in full on July 30, 2002, if for any reason you have not become an employee of the Company on a full-time basis on or before that date, unless the Company has revoked this offer on or before that date. The
principal amount of both Loans and accrued interest, if not forgiven, will immediately be payable in full if your employment with the Company terminates. The remaining terms and conditions of the Loans are described in the applicable Promissory
Notes, copies of which are attached to this letter as Exhibit A1 and Exhibit A2. 
  
 You will be solely responsible for the income taxes attributable to the forgiveness of the Loans. As a condition of the forgiveness of any
part of the Loans, you will be required to make arrangements satisfactory to the Company for the payment of the payroll and withholding taxes attributable to the loan forgiveness. If you fail to make such arrangements, the applicable part of the
Loans will not be forgiven. In addition, you agree that the Company may withhold payroll and withholding taxes attributable to loan forgiveness from any other compensation payable to you. 
  
 In the event that you recover all or any part of your
capital account from Arthur Andersen LLP or any related entity (collectively, “Andersen”), excluding payments or reimbursements for services rendered to Andersen in the current year, you will promptly (but in no event later than 30 days
after receipt of such payment) pay that amount to the Company net of (a) any financial obligations that you incur by reason of your designation as a partner in Andersen and (b) applicable taxes, as reasonably estimated by you. The Company will apply
any payment first to principal and interest under the Loans. Any additional payment will be for the Company’s account and will be treated as reimbursement for loan forgiveness. You agree to notify the Company promptly if you recover all or any
part of your capital account from Andersen. 
  
 10.  Revocation of Offer.    If the Company revokes this offer after you have signed this letter agreement, then the principal amount of the First Loan and accrued interest will be forgiven in full. In
addition, if the Company revokes this offer after you have signed this letter agreement but before you receive the Second Loan, then the Company within 15 days of such revocation will make a cash payment to you in the amount of $600,000 in lieu of
the Second Loan and in lieu of any other payments or damages. If the Company revokes this offer after you have signed this letter agreement and after you have received the Second Loan, then the principal amount of the Second Loan and accrued
interest will be forgiven in full. This Paragraph 10 will not apply unless you (a) sign a general release of claims (in a form prescribed by the Company) of all known and unknown claims that you may then have against the Company or persons
affiliated with the Company and (b) have returned all Company property. You will be solely responsible for the income taxes attributable to the forgiveness of a Loan. As a condition of the forgiveness of any part of a Loan, you will be required to
make arrangements satisfactory to the Company for the payment of the payroll and withholding taxes attributable to the loan forgiveness. If you fail to make such arrangements, such Loan will not be forgiven. In addition, you agree that the Company
may withhold payroll and withholding taxes attributable to loan 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 6 
  

 forgiveness from any other compensation payable to you, including (without limitation) the cash
payment in lieu of the Second Loan. 
  
 11.  Compliance with Commitments and Obligations.    Within two business days after accepting this employment offer, you will provide the Company with a copy or complete description of any
post-resignation restrictions on business activities that you have to Andersen or any other third party. You agree to cooperate with the Company in any way reasonably requested by the Company to (a) ensure that you comply with any such restrictions
and (b) assist the Company in any negotiation, discussion or other proceeding with any such third party. 
  
 12.  Employee Agreement; Insider Trading Policy.    You will be required, as a condition of your
employment with the Company, to sign the Company’s standard Employee Agreement, a copy of which is enclosed. You also agree to comply in every respect with the Company’s Insider Trading Policy, a copy of which is enclosed. 
  
 13.  Employment
Relationship.    Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time
and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this offer. This is the full and complete agreement between you and the Company on this term. Subject to the terms of this
letter agreement, your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, but the “at will” nature of your employment may only be changed in an
express written agreement signed by you and the Chief Executive Officer of the Company. 
  
 14.  Outside Activities.    While you render services to the Company, you agree that you will not
engage in any other employment, consulting or other business activity without the prior written consent of the Company. While you render services to the Company, you also will not assist any person or entity in competing with the Company, in
preparing to compete with the Company or in hiring any employees or consultants of the Company. 
  
 15.  Non-Solicitation.    While you render services to the Company and during the Continuation Period
(if any), you agree that you will not directly or indirectly, personally or through others, solicit or attempt to solicit the employment of any employee of the Company or any of the Company’s affiliates, whether on your own behalf or on behalf
of any other person or entity. The term “employment” for purposes of this Paragraph 15 means to enter into an arrangement for services as a full-time or part-time employee, independent contractor, agent or otherwise. You and the Company
agree that this provision is reasonably enforced as to any geographic area in which the Company conducts its business. 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 7 
  

 16.  Non-Competition.    While you render
services to the Company and during the Continuation Period (if any), you agree that you will not: 
  
 (a)  Directly or indirectly, individually or in conjunction with others, engage in activities that compete with the Company or
work for any entity that is part of the Company’s Market; 
  
 (b)  Solicit, serve, contract with or otherwise engage any existing or prospective customer, client or account of the Company on behalf of any entity that is part of the Company’s Market; or 

 
 (c)  Cause or attempt to cause any existing or
prospective customer, client or account of the Company to divert from, terminate, limit or in any manner modify, or fail to enter into, any actual or potential business relationship with the Company. 
  
 You and the Company agree that this provision is reasonably enforced with
reference to any geographic area in which the Company maintains any such relationship. For purposes of this Paragraph 16, the Company’s “Market” means (i) all companies, entities or business units that derive their revenue primarily
from sales of e-procurement software or services or sales of software or services aiding companies in sourcing activities and (ii) the companies set forth on the list attached to this letter as Exhibit B. You and the Company agree that the
Company’s Market is global in scope. 
  
 17.  Cooperation and Non-Disparagement.    You agree that, during the Continuation Period, you will cooperate with the Company in every reasonable respect and will use your best efforts to assist the
Company with the transition of your duties to your successor. You further agree that, during the Continuation Period, you will not in any way or by any means disparage the Company, the members of the Company’s Board of Directors or the
Company’s officers and employees. 
  
 18.  Disclosure.    You agree that, during the Continuation Period, you will inform any new employer or other person or entity with whom you enter into a business relationship, before accepting
employment or entering into a business relationship, of the existence of Paragraphs 15, 16 and 17 above. 
  
 19.  Withholding Taxes.    All forms of compensation referred to in this letter agreement are subject
to reduction to reflect applicable withholding and payroll taxes and other deductions required by law. 
  
 20.  Entire Agreement.    This letter agreement, including Exhibits A1, A2 and B, the Plan, and the
Restricted Stock Agreement, Stock Option Agreement, Employee Agreement and Insider Trading Policy referred to above, which are incorporated herein by reference (collectively, the “Letter Agreement”), constitute the entire agreement between
you and the Company concerning the subject matter of the Letter Agreement. The Letter Agreement supersedes any prior communications, agreements or understandings, whether oral or written, between you and the Company relating to the subject matter of
the Letter Agreement. In the 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 8 
  

 event of any conflict between this letter agreement and the Employee Agreement, this letter agreement
will govern. 
  
 21.  Severability.    If any provision of this letter agreement becomes or is deemed invalid, illegal or unenforceable in any applicable jurisdiction by reason of the scope, extent or duration of its
coverage, then that provision will be deemed amended to the minimum extent necessary to conform to applicable law so as to be valid and enforceable or, if the provision cannot be so amended without materially altering the intention of the parties,
then the provision will be stricken and the remainder of this letter agreement will continue in full force and effect. If any provision of this letter agreement is rendered illegal by any present or future statute, law, ordinance or regulation
(collectively, the “Law”), then that provision will be curtailed or limited only to the minimum extent necessary to bring the provision into compliance with the Law. All the other terms and provisions of this letter agreement will continue
in full force and effect without impairment or limitation. 
  
 22.  Arbitration.    You and the Company agree to waive any rights to a trial before a judge or jury and agree to arbitrate before a neutral arbitrator any and all claims or
disputes arising out of this letter agreement and any and all claims arising from or relating to your employment with the Company, including (but not limited to) claims against any current or former employee, director or agent of the Company, claims
of wrongful termination, retaliation, discrimination, harassment, breach of contract, breach of the covenant of good faith and fair dealing, defamation, invasion of privacy, fraud, misrepresentation, constructive discharge or failure to provide a
leave of absence, or claims regarding commissions, stock options or bonuses, infliction of emotional distress or unfair business practices. 
  
 The arbitrator’s decision must be written and must include the findings of fact and law that support the decision. The
arbitrator’s decision will be final and binding on both parties, except to the extent applicable law allows for judicial review of arbitration awards. The arbitrator may award any remedies that would otherwise be available to the parties if
they were to bring the dispute in court. The arbitration will be conducted in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association; provided, however that the arbitrator must allow the
discovery authorized by the California Arbitration Act or the discovery that the arbitrator deems necessary for the parties to vindicate their respective claims or defenses. The arbitration will take place in Santa Clara County or, at your option,
the county in which you primarily worked with the Company at the time when the arbitrable dispute or claim first arose. 
  
 You and the Company will share the costs of arbitration equally, except that the Company will bear the cost of the arbitrator’s fee
and any other type of expense or cost that you would not be required to bear if you were to bring the dispute or claim in court. Both the Company and you will be responsible for their own attorneys’ fees, and the arbitrator may not award
attorneys’ fees unless a statute or contract at issue specifically authorizes such an award. 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 9 
  

 This arbitration provision does not apply to (a) workers’ compensation or
unemployment insurance claims or (b) claims concerning the validity, infringement or enforceability of any trade secret, patent right, copyright or any other trade secret or intellectual property held or sought by either you or the Company (whether
or not arising under the Employee Agreement between you and the Company). 
  
 If an arbitrator or court of competent jurisdiction (the “Neutral”) determines that any provision of this arbitration provision is illegal or unenforceable, then the Neutral shall modify or replace the
language of this arbitration provision with a valid and enforceable provision, but only to the minimum extent necessary to render this arbitration provision legal and enforceable. 
  
 23. Choice of Law. This letter agreement will be interpreted in accordance with the laws of the State
of California (except their provisions regarding the choice of law). 
  
 24.  Definitions.    The following definitions will apply for all purposes under this letter agreement: 
  
 “Cause” means: 
  
 (a)  An unauthorized use or disclosure of the Company’s confidential information or trade
secrets, which use or disclosure causes material harm to the Company; 
  
 (b)  A material breach of a material agreement between you and the Company, including (without limitation) the Letter Agreement; 
  
 (c)  A material failure to comply with the Company’s written policies or rules; 

 
 (d)  A conviction of, or plea of
“guilty” or “no contest” to, a felony under the laws of the United States or any State, other than a conviction or plea arising out of your association with Andersen; 
  
 (e)  Gross negligence or willful misconduct; or 
  
 (f)  A continued unauthorized absence from work,
whether voluntary or involuntary. 
  
 With respect to
Subparagraphs (b), (c), (e) and (f) above, “Cause” will only be deemed to exist following written notice to you from the Company and your failure to cure within 30 days of receipt of the written notice. 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 10 
  

 “Permanent Disability” means that you are unable to perform the essential functions
of your position, with or without reasonable accommodation, for a period of at least 120 consecutive days because of a physical or mental impairment. 
  
 *  *  *  *  * 
  
 We hope that you will accept our offer to join the Company. You may indicate your agreement with these terms and accept this offer by signing and dating
both the enclosed duplicate original of this letter agreement and the enclosed Employee Agreement and returning them to me. This offer, if not accepted, will expire at the close of business on April 30, 2002. As required by law, your employment with
the Company is contingent upon your providing legal proof of your identity and authorization to work in the United States. Your employment is also contingent upon your starting work with the Company not later than July 30, 2002, and your delivering
all required notices of termination or withdrawal to your current employer not later than April 30, 2002. 
  
 If you have any questions, please call me. 
  

									
	 	 	 	 	 Very truly yours,
  
 Ariba, Inc.

					
	 	 	 	 	 	 	By:	 	 /s/    BOB
CALDERONI        

	 	 	 	 	 	 	 	 	Chief Executive Officer
	 I have read and accept this employment offer:
	 	 	 	 
				
	 /s/    KEVIN
COSTELLO        

	 	 	 	 	 	 
	Signature of Kevin Costello	 	 	 	 	 	 
					
	Dated:	 	 4/12/02

	 	 	 	 	 	 

  
  
 Enclosures 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 11 
  

 Exhibit A1 
  
  
 Form of Promissory Note 

 PROMISSORY NOTE 
  

			
	 $400,000.00
	 	 April 12, 2002
 Sunnyvale, California

  
  
 FOR VALUE RECEIVED, the undersigned Borrower promises to pay to Ariba, Inc. (the “Company”) at its principal executive offices the principal sum
of four hundred thousand dollars ($400,000), together with interest from the date of this Note on the unpaid principal balance, upon the terms and conditions specified below. 
  
 1.  Term.    The principal balance of this Note and all accrued and unpaid interest to
date, if not forgiven, shall be due and payable in full on July 30, 2002, if for any reason the Borrower has not become an employee of the Company on a full-time basis on or before such date, unless the Company has revoked its employment offer on or
before such date. The principal balance of this Note and all accrued and unpaid interest to date, if not forgiven as described below, shall also be due and payable in full at the close of business on the date when the Borrower’s employment with
the Company terminates. 
  
 2.  Rate of
Interest.    Interest shall accrue under this Note on any unpaid principal balance at the rate of 2.88% per annum, compounded annually. 
  

3.  Prepayment.    Prepayment of principal and interest may be made at any time, without penalty. 
  
 4.  Events of Acceleration.    The
entire unpaid principal sum and accrued interest under this Note shall become immediately due and payable upon: 
  
 (a)  The failure of the Borrower to pay when due the principal balance and accrued interest under this Note; 
  
 (b)  The filing of a petition by or against the
Borrower under any provision of the Bankruptcy Reform Act (Title 11 of the United States Code), as amended or recodified from time to time, or under any other law relating to bankruptcy, insolvency, reorganization or other relief for debtors;

  
 (c)  The appointment of a receiver,
trustee, custodian or liquidator of or for any part of the assets or property of the Borrower; 
  
 (d)  The execution by the Borrower of a general assignment for the benefit of creditors; 
  
 (e)  The insolvency of the Borrower or the
Borrower’s failure to pay his or her debts as they become due; or 
  

 (f)  Any attachment or like levy on any property of the Borrower. 

 
 5.  Forgiveness.    The principal
amount of this Note and accrued interest shall be forgiven in full if: 
  
 (a)  The Company is subject to a “Change in Control,” as defined in the Ariba, Inc. 1999 Equity Incentive Plan; 
  
 (b)  The Company revokes the employment offer set forth in the letter agreement dated April 10,
2002 (the “Offer Letter”), after the Borrower has executed the Offer Letter, provided that the Borrower signs a general release of claims (in a form prescribed by the Company) of all known and unknown claims that he may then have against
the Company or persons affiliated with the Company and has returned all Company property; 
  
 (c)  The Company terminates the Borrower’s employment for any reason other than Cause (as defined below); or 
  
 (d)  The Borrower resigns from the Company within
12 months after: 
  
 (i)  The Company
over the Borrower’s written objection has required that the Borrower report to anyone other than the Company’s Chief Executive Officer; 
  
 (ii)  The Company has reduced the Borrower’s base salary below $450,000 per year; or 
  
 (iii)  The Company over the Borrower’s
written objection has required that the Borrower relocate his principal place of employment more than 50 miles from the location in Atlanta where he commenced his employment with the Company. 
  
 In addition, one-third of the principal amount of this Note and all accrued interest shall be
forgiven after the Borrower completes 12 months of continuous service as a full-time employee of the Company, and the balance shall be forgiven in equal monthly installments over the Borrower’s next 24 months of continuous service as a
full-time employee of the Company. 
  
 The Borrower shall be
solely responsible for the income taxes attributable to the forgiveness of this Note. As a condition of the forgiveness of any part of this Note, the Borrower shall make arrangements satisfactory to the Company for the payment of the payroll and
withholding taxes attributable to the forgiveness of such part. If the Borrower fails to make such arrangements, the applicable part of this Note shall not be forgiven. In addition, the Borrower agrees that the Company may withhold payroll and
withholding taxes attributable to loan forgiveness from any other compensation payable to him. 
  

 2 

 “Cause” shall mean: 
  
 (a)  An unauthorized use or disclosure of the Company’s confidential information or trade
secrets, which use or disclosure causes material harm to the Company; 
  
 (b)  A material breach of a material agreement between the Borrower and the Company, including (without limitation) the Offer Letter and the documents incorporated therein by reference; 
  
 (c)  A material failure to comply with the
Company’s written policies or rules; 
  
 (d)  A conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State, other than a conviction or plea arising out of the Borrower’s association with
Arthur Andersen LLP or a related entity; 
  
 (e)  Gross negligence or willful misconduct; or 
  
 (f)  A continued unauthorized absence from work, whether voluntary or involuntary. 
  
 With respect to Subparagraphs (b), (c), (e) and (f) above, “Cause” shall only be deemed to exist following written notice to the Borrower from the Company and
his failure to cure within 30 days of receipt of the written notice. 
  
 6.  Full Recourse.    This Note shall be unsecured. The Borrower shall be personally liable for the payment in full of any indebtedness owing under this Note. The Company shall have recourse to any and
all assets of the Borrower to satisfy the Borrower’s obligations hereunder. 
  
 7.  Collection and Attorneys’ Fees.    If any action is instituted to collect this Note, the Borrower promises to pay all reasonable costs and expenses (including reasonable
attorney’s fees) incurred by the Company in connection with such action. 
  
 8.  Waiver.    No previous waiver and no failure or delay by the Company or the Borrower in acting with respect to the terms of this Note shall constitute a waiver of any breach,
default or failure of condition under this Note or the obligations evidenced thereby. A waiver of any term of this Note or of any of the obligations evidenced thereby must be made in writing and signed by a duly authorized officer of the Company and
shall be limited to the express terms of such waiver. The Borrower hereby expressly waives presentment and demand for payment when any payments are due under this Note. 
  
 9.  Conflicting Agreements.    In the event of any inconsistencies between the terms of
this Note and the terms of any other document related to the loan evidenced by this Note, the terms of this Note shall prevail. 
  

 3 

 10.  Governing Law.    This Note shall be construed in accordance
with the laws of the State of California (without regard to their choice-of-law provisions). 
  

									
	 	 	 	 	 
			
	 Kevin Costello

	 	 	 	 /s/    KEVIN COSTELLO

	 Name of Borrower
	 	 	 	 Signature of Borrower

					
	 	 	 	 	 	 	Address:	 	      

					
	 	 	 	 	 	 	 	 	      

  
  

 4 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 12 
  

 Exhibit A2 
  
  
 Form of Promissory Note 

 PROMISSORY NOTE 
  

			
	 $600,000.00
	 	 May 21, 2002
 Sunnyvale, California

  
  
 FOR VALUE RECEIVED, the undersigned Borrower promises to pay to Ariba, Inc. (the “Company”) at its principal executive offices the principal sum
of six hundred thousand dollars ($600,000), together with interest from the date of this Note on the unpaid principal balance, upon the terms and conditions specified below. 
  
 1.  Term.    The principal balance of this Note and all accrued and unpaid interest to
date, if not forgiven as described below, shall be due and payable in full at the close of business on the date when the Borrower’s employment with the Company terminates. 
  
 2.  Rate of Interest.    Interest shall accrue under this Note on any unpaid principal
balance at the rate of 3.21% per annum, compounded annually. 
  
 3.  Prepayment.    Prepayment of principal and interest may be made at any time, without penalty. 
  
 4.  Events of Acceleration.    The entire unpaid principal sum and accrued interest under this Note shall become
immediately due and payable upon: 
  
 (a)  The failure of the Borrower to pay when due the principal balance and accrued interest under this Note; 
  
 (b)  The filing of a petition by or against the Borrower under any provision of the Bankruptcy Reform Act (Title 11 of the
United States Code), as amended or recodified from time to time, or under any other law relating to bankruptcy, insolvency, reorganization or other relief for debtors; 
  
 (c)  The appointment of a receiver, trustee, custodian or liquidator of or for any part of the
assets or property of the Borrower; 
  
 (d)  The execution by the Borrower of a general assignment for the benefit of creditors; 
  
 (e)  The insolvency of the Borrower or the Borrower’s failure to pay his or her debts as they become due; or 
  
 (f)  Any attachment or like levy on any property
of the Borrower. 
  

 5.  Forgiveness.    The principal amount of this Note and accrued
interest shall be forgiven in full if: 
  
 (a)  The Company is subject to a “Change in Control,” as defined in the Ariba, Inc. 1999 Equity Incentive Plan; 
  
 (b)  The Company revokes the employment offer set forth in the letter agreement dated April 10, 2002 (the “Offer
Letter”), after the Borrower has executed the Offer Letter, provided that the Borrower signs a general release of claims (in a form prescribed by the Company) of all known and unknown claims that he may then have against the Company or persons
affiliated with the Company and has returned all Company property; 
  
 (c)  The Company terminates the Borrower’s employment for any reason other than Cause (as defined below); or 
  
 (d)  The Borrower resigns from the Company within 12 months after: 
  
 (i)  The Company over the Borrower’s written
objection has required that the Borrower report to anyone other than the Company’s Chief Executive Officer; 
  
 (ii)  The Company has reduced the Borrower’s base salary below $450,000 per year; or 
  
 (iii)  The Company over the Borrower’s
written objection has required that the Borrower relocate his principal place of employment more than 50 miles from the location in Atlanta where he commenced his employment with the Company. 
  
 In addition, one-third of the principal amount of this Note and all accrued interest shall
be forgiven after the Borrower completes 12 months of continuous service as a full-time employee of the Company, and the balance shall be forgiven in equal monthly installments over the Borrower’s next 24 months of continuous service as a
full-time employee of the Company. 
  
 The Borrower shall be
solely responsible for the income taxes attributable to the forgiveness of this Note. As a condition of the forgiveness of any part of this Note, the Borrower shall make arrangements satisfactory to the Company for the payment of the payroll and
withholding taxes attributable to the forgiveness of such part. If the Borrower fails to make such arrangements, the applicable part of this Note shall not be forgiven. In addition, the Borrower agrees that the Company may withhold payroll and
withholding taxes attributable to loan forgiveness from any other compensation payable to him. 
  
 “Cause” shall mean: 
  
 (a)  An unauthorized use or disclosure of the Company’s confidential information or trade secrets, which use or disclosure causes material harm to the Company; 
  

 2 

 (b)  A material breach of a material agreement between the Borrower and the
Company, including (without limitation) the Offer Letter and the documents incorporated therein by reference; 
  
 (c)  A material failure to comply with the Company’s written policies or rules; 
  
 (d)  A conviction of, or plea of
“guilty” or “no contest” to, a felony under the laws of the United States or any State, other than a conviction or plea arising out of the Borrower’s association with Arthur Andersen LLP or a related entity; 
  
 (e)  Gross negligence or willful misconduct; or

  
 (f)  A continued unauthorized
absence from work, whether voluntary or involuntary. 
  
 With respect to
Subparagraphs (b), (c), (e) and (f) above, “Cause” shall only be deemed to exist following written notice to the Borrower from the Company and his failure to cure within 30 days of receipt of the written notice. 
  
 6.  Full Recourse.    This Note shall be
unsecured. The Borrower shall be personally liable for the payment in full of any indebtedness owing under this Note. The Company shall have recourse to any and all assets of the Borrower to satisfy the Borrower’s obligations hereunder.

  
 7.  Collection and Attorneys’
Fees.    If any action is instituted to collect this Note, the Borrower promises to pay all reasonable costs and expenses (including reasonable attorney’s fees) incurred by the Company in connection with such action.

  
 8.  Waiver.    No
previous waiver and no failure or delay by the Company or the Borrower in acting with respect to the terms of this Note shall constitute a waiver of any breach, default or failure of condition under this Note or the obligations evidenced thereby. A
waiver of any term of this Note or of any of the obligations evidenced thereby must be made in writing and signed by a duly authorized officer of the Company and shall be limited to the express terms of such waiver. The Borrower hereby expressly
waives presentment and demand for payment when any payments are due under this Note. 
  
 9.  Conflicting Agreements.    In the event of any inconsistencies between the terms of this Note and the terms of any other document related to the loan evidenced by this Note,
the terms of this Note shall prevail. 
  

 3 

 10.  Governing Law.    This Note shall be construed in accordance
with the laws of the State of California (without regard to their choice-of-law provisions). 
  

									
	 	 	 	 	 
			
	 Kevin Costello

	 	 	 	 /s/    KEVIN COSTELLO

	 Name of Borrower
	 	 	 	 Signature of Borrower

					
	 	 	 	 	 	 	Address:	 	      

					
	 	 	 	 	 	 	 	 	      

  

 4 

 Mr. Kevin Costello 
 April 10, 2002 
 Page 13 
  

 Exhibit B 
  
 [*] 
 B2E Markets 
 Emptoris 
 Free Market 
 Frictionless Commerce 
 Oracle 
 PeopleSoft 
 SAP A.G. 
  

	*	 	CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT. SUCH PORTIONS WERE OMITTED FROM THIS FILING AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.

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