Document:

Prepared by R.R. Donnelley Financial -- 2002 Share Option Plan

 EXHIBIT 10.34 
  
 SMARTFORCE PLC 
  
 2002 SHARE OPTION PLAN 
  
 1.     Purposes of the Plan.    The purposes of this 2002 Share Option Plan are:

  

	 	•
	 
	to attract and retain the best available personnel for positions of substantial responsibility, 
 

  

	 	•
	 
	to provide additional incentive to Employees, Inside Directors and Consultants, and 
 

  

	 	•
	 
	to promote the success of the Company’s business. 
 

  
 Options granted under the Plan may be Incentive Share Options or Nonstatutory Share Options, as determined by the Administrator at the time of grant. 

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

  
 (a)  “Administrator” means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan. 
  
 (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 Ordinary Shares are listed or quoted and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan and the laws of Ireland. 
  
 (c)  “Board ” means the Board of Directors of the Company. 
  
 (d)  “Change in Control” means the occurrence of any of the following events: 

 
 (i)  Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then
outstanding voting securities; or 
  
 (ii)  The consummation of the sale or disposition by
the Company of all or substantially all of the Company’s assets; 
  
 (iii)  A change
in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the effective
date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election
or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or 
  
 (iv)  The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by
the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation. 
  
 (e)  “Code” means the Internal Revenue Code of 1986, as amended. 
  
 (f)  “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan. 
 

 1 

  
 (g)  “Company” means SmartForce Public
Limited Company, a public limited company organized under the laws of Ireland. 
  
 (h)  “Consultant” means any natural person, including an advisor, engaged by the company or a Parent or Subsidiary to render services to such entity. 
  

(i)  “Director” means a member of the Board. 
  
 (j)  “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code. 
  
 (k)  “Employee” means any person, including Officers and Directors, employed by the Company or
any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Share Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, then three (3) months following the 91st day of such leave any Incentive Share Option held by the Optionee shall cease to be treated as an Incentive Share Option and shall be treated for tax
purposes as a Nonstatutory Share Option. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company. 
  

(l)  “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 (m)  “Fair Market Value” means, as of any date, the value of Ordinary Shares determined as
follows: 
  
 (i)  If the Ordinary Shares are 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 Ordinary Shares (or the closing bid, if no
sales were reported) as quoted on such exchange or system on the day prior to the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 
  
 (ii)  If the Ordinary Shares are regularly quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share shall be the mean between the high bid and low asked prices for Ordinary Shares on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems
reliable; or 
  
 (iii)  In the absence of an established market for Ordinary Shares, the
Fair Market Value shall be determined in good faith by the Administrator. 
  
 (n)  “Incentive Share Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. 

 
 (o)  “Inside Director” means a Director who is an Employee. 
  
 (p)  “Nonstatutory Share Option” means an Option not intended to qualify as an Incentive Share
Option. 
  
 (q)  “Notice of Grant” means a written or electronic notice
evidencing certain terms and conditions of an individual Option. The Notice of Grant is part of the Option Agreement. 
  
 (r)  “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 
  
 (s)  “Option” means an option for Ordinary Shares granted pursuant to the Plan. 

 
 (t)  “Option Agreement” means an 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. 
 

 2 

  
 (u)  “Option Exchange
Program” means a program whereby outstanding Options are surrendered in exchange for Options with a lower exercise price. 
  
 (v)  “Optioned Share” means one of the Ordinary Shares subject to an Option. 
  
 (w)  “Optionee” means the holder of an outstanding Option granted under the Plan. 
  
 (x)  “Ordinary Shares” means the Ordinary Shares and/or related American Depository
Shares of the Company. 
  
 (y)  “Parent” means a “parent
corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. 
  
 (z)  “Plan” means this 2002 Share Option Plan. 
  
 (aa)  “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. 
  
 (bb)  “Section 16(b)” means Section 16(b) of the Exchange Act. 
  
 (cc)  “Service Provider” means an Employee, Inside Director or Consultant. 

 
 (dd)  “Share” means a share of the Ordinary Shares, as adjusted in accordance with
Section 13 of the Plan. 
  
 (ee)  “Subsidiary” means a “subsidiary
corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code. 
  
 3.    Ordinary Shares Subject to the Plan.    Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Ordinary Shares that may be optioned and sold under the
Plan is 2,350,000 Ordinary Shares. The Ordinary Shares shall be authorized, but unissued Ordinary Shares. 
  
 If an
Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Ordinary Shares which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated); provided, however, that Ordinary Shares that have actually been issued under the Plan, upon exercise of an Option, shall not be returned to the Plan and shall not become available for future
distribution under the Plan. 
  
 4.    Administration of the Plan. 

 
 (a)  Procedure. 
  
 (i)  Multiple Administrative Bodies.    Different Committees with respect to different groups of Service Providers may
administer the Plan. 
  
 (ii)  Section 162(m).    To the extent
that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more
“outside directors” within the meaning of Section 162(m) of the Code. 
  
 (iii)  Rule 16b-3.    To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements
for exemption under Rule 16b-3. 
  
 (iv)  Other
Administration.    Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws. 
 

 3 

  
 (b)  Powers of the
Administrator.    Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

  
 (i)  to determine the Fair Market Value; 
  
 (ii)  to select the Service Providers to whom Options may be granted hereunder; 
  
 (iii)  to determine the number of Ordinary Shares to be covered by each Option granted hereunder; 

 
 (iv)  to approve forms of agreement for use under the Plan; 
  
 (v)  to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option granted
hereunder. 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 Ordinary Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; 
  

(vi)  to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Ordinary Shares
covered by such Option shall have declined since the date the Option was granted; 
  
 (vii)  to institute an Option Exchange Program; 
  
 (viii)  to
construe and interpret the terms of the Plan and awards granted pursuant to the Plan; 
  
 (ix)  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 satisfying applicable foreign laws; 

 
 (x)  to modify or amend each Option (subject to Section 14(c) of the Plan), including the
discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan; 
  
 (xi)  to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option previously granted by the Administrator; 
  
 (xii)  to make all other determinations deemed necessary or advisable for administering the Plan. 

 
 (c)  Effect of Administrator’s Decision. The Administrator’s decisions,
determinations and interpretations shall be final and binding on all Optionees and any other holders of Options. 
  
 5.    Eligibility.    Nonstatutory Share Options may be granted to Service Providers. Incentive Share Options may be granted only to Employees. 
  
 6.    Limitations. 
  
 (a)  Each Option shall be designated in the Option Agreement as either an Incentive Share Option or a Nonstatutory Share Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Ordinary Shares with respect to which Incentive Share Options are exercisable for the first time by the Optionee during any calendar year (under all plans of
the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Share Options. For purposes of this Section 6(a), Incentive Share Options shall be taken into account in the order in which they were granted.
The Fair Market Value of the Ordinary Shares shall be determined as of the time the Option with respect to such Ordinary Shares is granted. 
  
 (b)  Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee’s right or the Company’s right to terminate such relationship at any time, with or without cause. 
 

 4 

  
 (c)  The following limitations shall apply to grants of
Options: 
  
 (i)  No Service Provider shall be granted, in any fiscal year of the Company,
Options to purchase more than 1,500,000 Ordinary Shares. 
  
 (ii)  In connection with his
or her initial service, a Service Provider may be granted Options to purchase up to an additional 500,000 Ordinary Shares, which shall not count against the limit set forth in subsection (i) above. 
  
 (iii)  The foregoing limitations shall be adjusted proportionately in connection with any change in the
Company’s capitalization as described in Section 12. 
  
 (iv)  If an Option is
cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 12), the cancelled Option will be counted against the limits set forth in subsections (i) and (ii) above. For
this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. 
  
 7.    Term of Plan.    Subject to Section 18 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 14 of the Plan. 
  
 8.    Term of Option.    The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Share Option, the term shall be up to ten (10) years from the date
of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Share Option granted to an Optionee who, at the time the Incentive Share Option is granted, owns Ordinary Shares representing more than
ten percent (10%) of the total combined voting power of all classes of Ordinary Shares of the Company or any Parent or Subsidiary, the term of the Incentive Share Option shall be five (5) years from the date of grant or such shorter term as may be
provided in the Option Agreement. 
  
 9.  Option Exercise Price and Consideration. 

 
 (a)  Exercise Price.    The per share exercise price for the Ordinary
Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following: 
  
 (i)  In the case of an Incentive Share Option 
  
 (A)  granted to an Employee who, at the time the Incentive Share Option is granted, owns Ordinary Shares representing more than ten percent (10%) of the voting power of all classes of Ordinary Shares of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. 
  
 (B)  granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant. 
  
 (ii)  In the case of a Nonstatutory Share Option, the per Share
exercise price shall be determined by the Administrator, subject to compliance with Applicable Laws. In the case of a Nonstatutory Share Option intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of
the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. 
  
 (iii)  Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate
transaction, subject to compliance with Applicable Laws. 
  
 (b)  Waiting Period and
Exercise Dates.    At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be
exercised. 
 

 5 

  
 (c)  Form of
Consideration.    The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment, subject to compliance with Applicable Laws. In the case of an Incentive Share
Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: 
  
 (i)  cash; 
  
 (ii)  check;

  
 (iii)  promissory note; 
  
 (iv)  consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;

  
 (v)  a reduction in the amount of any Company liability to the Optionee, including any
liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement; 
  
 (vi)  any combination of the foregoing methods of payment; or 
  
 (vii)  such other consideration and method of payment for the issuance of Ordinary Shares to the extent permitted by Applicable Laws. 
  
 10.    Exercise of Option. 
  
 (a)  Procedure for Exercise; Rights as a Shareholder.    Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and
under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be suspended 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 Ordinary 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 (i) the Optionee, or if requested by the Optionee,
in the name of the Optionee and his or her spouse, or in the name of a third party as the Optionee’s nominee to hold the shares issued on exercise on Optionee’s behalf and subject to the Optionee’s directions. Until the Ordinary
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 Shareholder shall exist with respect to the
Optioned Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Ordinary 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 12 of the Plan. 
  
 Exercising an
Option in any manner shall decrease the number of Ordinary Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Ordinary Shares as to which the Option is exercised. 
  
 (b)  Termination of Relationship as a Service Provider.    If an Optionee ceases to
be a Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following
the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the
 
 

 6 

 
Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the
Ordinary Shares covered by such Option shall revert to the Plan. 
  
 (c)  Disability of
Optionee.    If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Ordinary Shares covered by the unvested portion of the Option shall revert
to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Ordinary Shares covered by such Option shall revert to the Plan. 
  
 (d)  Death of Optionee.    If an Optionee dies while a Service Provider, the Option
may be exercised following the Optionee’s death within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the
expiration of the term of such Option as set forth in the Option Agreement), by the Optionee’s designated beneficiary, provided such beneficiary has been designated prior to the Optionee’s death in a form acceptable to the Administrator.
If no such beneficiary has been designated by the Optionee, then such Option may be exercised by the personal representative of the Optionee’s estate or by the person(s) to whom the Option is transferred pursuant to the Optionee’s will or
in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s death. If, at the time of death, the
Optionee is not vested as to his or her entire Option, the Ordinary Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall
terminate, and the Ordinary Shares covered by such Option shall revert to the Plan. 
  
 11.    Transferability of Options.    Unless determined otherwise by the Administrator, an Option 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. 
  
 12.    Adjustments Upon Changes in
Capitalization, Merger or Change in Control. 
  
 (a)  Changes in
Capitalization.    Subject to any required action by the shareholders of the Company, the number of Ordinary Shares that 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 and the number of Ordinary Shares as well as the price per Ordinary Shares covered by each such outstanding Option shall be proportionately adjusted for any increase
or decrease in the number of issued Ordinary Shares resulting from a share split, reverse share split, share dividend, combination or reclassification of the Ordinary Shares, or any other increase or decrease in the number of issued Ordinary Shares
effected without receipt of consideration by the Company; provided, however, that 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 Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Ordinary Shares 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 provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the
Optioned Shares
 
 

 7 

 
covered thereby, including Ordinary 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 Change in
Control.    In the event of a merger of the Company with or into another corporation, or a Change in Control, each outstanding Option shall be assumed or an equivalent option or right substituted by the successor corporation
or a Parent or Subsidiary of the successor corporation. 
  
 In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Shares, including Ordinary Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option shall be fully vested and exercisable for
a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. 
  
 For the purposes of this subsection (c), the Option shall be considered assumed if, following the merger or Change in Control, the option or right confers the right to purchase or receive, for each Share subject to the Option
immediately prior to the merger or Change in Control, the consideration (whether Ordinary Shares, cash, or other securities or property) received in the merger or Change in Control by holders of Ordinary Shares 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 Ordinary Shares); provided, however, that if such consideration received in the merger
or Change in Control 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 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 Ordinary Shares in the merger or Change in Control. 

 
 13.    Date of Grant.    The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after
the date of such grant. 
  
 14.    Amendment and Termination of the Plan. 

 
 (a)  Amendment and Termination.    The Board may at any time amend, alter,
suspend or terminate the Plan. 
  
 (b)  Shareholder
Approval.    The Company shall obtain shareholder 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. 
  
 15.    Conditions Upon Issuance of Shares. 
  
 (a)  Legal Compliance.    Ordinary 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 Ordinary
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 Company may require the person exercising such Option to represent and warrant
at the time of any such exercise that the
 
 

 8 

 
Ordinary Shares are being purchased only for investment and without any present intention to sell or distribute such Ordinary Shares if, in the opinion of counsel for the Company, such a
representation is required. 
  
 16.    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
Ordinary Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Ordinary Shares as to which such requisite authority shall not have been obtained. 
  
 17.    Reservation of Shares.    The Company, during the term of this Plan, will at all
times reserve and keep available such number of Ordinary Shares as shall be sufficient to satisfy the requirements of the Plan. 
  
 18.    Shareholder Approval.    The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder
approval shall be obtained in the manner and to the degree required under Applicable Laws. 
 

 9Prepared by R.R. Donnelley Financial -- Offer Letter dtd April 10, 2002

 Exhibit 10.29 
  

	*
	 
	Represents confidential information for which Ariba, Inc. is seeking confidential treatment with the Securities and Exchange Commission 

  
 ARIBA, INC. 
 807 11th Avenue 
 Sunnyvale, CA 94089 
  
 April 10, 2002 
  
 Mr. Kevin Costello 
 [*] 

 
 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 
  

 
 [*]

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