AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1999 REGISTRATION NO. 333- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- ARIBA, INC. (Exact name of registrant as specified in its charter) <TABLE> <S> <C> <C> DELAWARE 7372 77-0439730 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of Classification Code Number) Identification incorporation or organization) Number) </TABLE> 1314 CHESAPEAKE TERRACE SUNNYVALE, CALIFORNIA 94089 (408) 543-3800 (Address, including zip code, and telephone number, including area code, of the Registrant's principal executive offices) KEITH J. KRACH PRESIDENT AND CHIEF EXECUTIVE OFFICER ARIBA, INC. 1314 CHESAPEAKE TERRACE SUNNYVALE, CALIFORNIA 94089 (408) 543-3800 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ COPIES TO: BROOKS STOUGH JEFFREY R. VETTER CRAIG M. SCHMITZ EDWARD M. URSCHEL DAVID W. KLING PAMELA A. SERGEEFF STEVEN P. CHEN Fenwick & West LLP Gunderson Dettmer Stough Two Palo Alto Square Villeneuve Franklin & Hachigian, LLP Palo Alto, California 94306 155 Constitution Drive (650) 494-0600 Menlo Park, California 94025 (650) 321-2400 -------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. -------------------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ______ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ______ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ______ If delivery of this prospectus is expected to be made pursuant to Rule 434, please check the following box. / / -------------------------- CALCULATION OF REGISTRATION FEE <TABLE> <CAPTION> PROPOSED MAXIMUM TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE <S> <C> <C> Common Stock, $0.002 par value per share.......................................... $50,000,000 $13,900 </TABLE> (1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o). -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE. -------------------------------------------------------------------------------- --------------------------------------------------------------------------------

PROSPECTUS (SUBJECT TO COMPLETION) ISSUED , 1999 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SHARES [LOGO] COMMON STOCK ----------------- ARIBA, INC. IS OFFERING SHARES OF COMMON STOCK. THIS IS OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND $ PER SHARE. ------------------- WE HAVE APPLIED TO LIST OUR COMMON STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "ARBA." ------------------- INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 6. ------------------- PRICE $ A SHARE ------------------- <TABLE> <CAPTION> UNDERWRITING PRICE TO DISCOUNTS AND PUBLIC COMMISSIONS PROCEEDS TO ARIBA ------------------ ------------------ ------------------ <S> <C> <C> <C> PER SHARE.......................................... $ $ $ TOTAL.............................................. $ $ $ </TABLE> THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ARIBA HAS GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP TO AN ADDITIONAL SHARES OF COMMON STOCK TO COVER OVER-ALLOTMENTS. MORGAN STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE SHARES OF COMMON STOCK TO PURCHASERS ON , 1999. ------------------- MORGAN STANLEY DEAN WITTER BT ALEX. BROWN DAIN RAUSCHER WESSELS A DIVISION OF DAIN RAUSCHER INCORPORATED MERRILL LYNCH & CO. , 1999

EDGAR description of artwork: Inside cover graphics of prospectus -- These diagrams include illustrations that depict the process of buying operating resources using the Registrant's Ariba ORMS products and Ariba.com network. The diagrams and illustrations indicate that the Ariba ORMS product may be accessed by employees, approvers and administrative personnel within the buying organization through the use of a corporate intranet and that these buyers may then interface directly with suppliers through the Ariba.com network on the Internet. Screen shots of the Registrant's user interface are included. These diagrams also illustrate how buyers and supplier conduct commerce through the Ariba.com network on the Internet. These diagrams also includes logos of customers and supplier partners of the Registrant. Inside back cover of prospectus -- This page depicts logos of various customers, suppliers and strategic partners of the Registrant. The logos are distributed throughout the page. Outside back cover of prospectus -- This page depicts the Registrant's trademarked logo in the middle of the page. 2

TABLE OF CONTENTS <TABLE> <CAPTION> PAGE ----- <S> <C> Prospectus Summary............................. 4 Risk Factors................................... 6 Special Note Regarding Forward-Looking Statements................................... 18 Use of Proceeds................................ 19 Dividend Policy................................ 19 Capitalization................................. 20 Dilution....................................... 21 Selected Consolidated Financial Data........... 22 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 23 <CAPTION> PAGE ----- <S> <C> Business....................................... 35 Management..................................... 51 Certain Transactions........................... 61 Principal Stockholders......................... 62 Description of Capital Stock................... 64 Shares Eligible for Future Sale................ 67 Underwriters................................... 69 Legal Matters.................................. 71 Experts........................................ 71 Additional Information......................... 71 Index to Consolidated Financial Statements..... F-1 </TABLE> We were incorporated in Delaware on September 17, 1996. Our principal executive offices are located at 1314 Chesapeake Terrace, Sunnyvale, California 94089, and our telephone number is (408) 543-3800. The information on our web site is not incorporated by reference into this prospectus. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock. UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus. In this prospectus, "Ariba," "we," "us," and "our" refer to Ariba, Inc. Unless otherwise indicated, all information contained in this prospectus (1) assumes that the underwriters' over-allotment option is not exercised, (2) reflects the 2-for-1 split of the common stock effected in March 1999 and the 2-for-1 split of the common stock to be effected prior to the closing of this offering, (3) except as noted in the consolidated financial statements, gives effect to the conversion of all outstanding shares of preferred stock into 17,845,176 shares of common stock effective upon the closing of this offering, and (4) reflects the exercise of a warrant to purchase 524,400 shares of common stock prior to the closing of this offering. 3

PROSPECTUS SUMMARY YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING SOLD IN THIS OFFERING AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. ARIBA Ariba is a leading provider of intranet- and Internet-based business-to-business electronic commerce solutions for operating resources. Operating resources are the goods and services required to operate a company, such as information technology and telecommunications equipment, professional services, MRO (Maintenance, Repair and Operations) supplies, facilities and office equipment, and expense items. Operating resources are often the largest segment of corporate expenditures, representing approximately 33% of an average company's revenues, according to Killen & Associates. Today, most organizations buy operating resources through paper-based processes that have remained largely unautomated by the information technology advances of the last 30 years. With the recent widespread adoption of intranets and the acceptance of the Internet as a business communications platform, organizations can now automate enterprise-wide and inter-organizational commerce activities. As a result, Internet-based business-to-business electronic commerce is expected to grow rapidly from $43 billion in 1998 to $1.3 trillion in 2003, exceeding business-to-consumer electronic commerce by a factor of nine to one in 2003, according to Forrester Research. This market is expected to create a substantial demand for intranet- and Internet-based commerce applications. According to International Data Corporation, the worldwide market for Internet-based electronic commerce procurement and order management applications will experience tremendous growth, increasing from $187 million in 1998 to $8.5 billion in 2003. Ariba is pioneering the use of intranets and the Internet to automate the procurement and management of operating resources. Our Operating Resource Management System, Ariba ORMS, enables organizations to automate the procurement cycle within their intranets, lowering the costs associated with operating resources. Our recently launched Ariba.com network is a global business-to-business electronic commerce network for operating resources that enables buyers and suppliers to automate transactions on the Internet. Together, Ariba ORMS and Ariba.com combine intranet-based network applications with an Internet-based network to create a business-to-business electronic commerce solution for operating resources that benefits both buyers and suppliers. Since we began marketing Ariba ORMS in March 1997, it has been licensed by large, multinational industry leaders and public sector organizations including Chevron, Cisco Systems, FedEx, General Motors, Hewlett-Packard, Philips, The State of California, U S WEST and Visa. Our objective is to create the leading Internet-based business-to-business electronic commerce network for operating resources. Our strategy to achieve this objective is to leverage the buying power of a large multinational customer base to attract leading operating resource suppliers to our Ariba.com network. We believe a growing number of suppliers in our Ariba.com network will in turn draw more buyers to our network. We also believe this growth cycle will help create a network effect, where the value to each participant in the network increases with the addition of each new participant, increasing the overall value of our Ariba solution. 4

THE OFFERING <TABLE> <S> <C> Common stock offered............................ shares Common stock to be outstanding after this shares offering...................................... Use of proceeds................................. For working capital and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol.......... ARBA </TABLE> The foregoing information is based on 37,216,996 shares outstanding as of March 31, 1999. This information does not include (1) 8,105,260 shares of common stock subject to outstanding options under our 1996 stock plan as of March 31, 1999 and (2) 570,944 shares of common stock issuable upon exercise of outstanding warrants, 524,400 of which will be exercised prior to the closing of this offering. After March 31, 1999, we granted options to purchase an additional 1,872,200 shares of common stock. See "Capitalization," "Management--1999 Equity Incentive Plan," "--Employee Stock Purchase Plan," "--1999 Directors' Stock Option Plan" and Note 3 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED SEPTEMBER SIX MONTHS ENDED 30, MARCH 31, -------------------- -------------------- 1997 1998 1998 1999 --------- --------- --------- --------- (UNAUDITED) <S> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Total revenues............................................................ $ 760 $ 8,363 $ 1,215 $ 16,338 Gross profit (loss)....................................................... (180) 6,825 688 13,579 Operating expenses........................................................ 4,772 18,346 6,255 21,894 Loss from operations...................................................... (4,952) (11,521) (5,567) (8,315) Net loss.................................................................. (4,679) (10,953) (5,299) (8,128) Basic and diluted net loss per share...................................... $ (7.31) $ (1.90) $ (1.19) $ (.84) Weighted average shares used in computing basic and diluted net loss per share................................................................... 640 5,762 4,456 9,694 Pro forma basic and diluted net loss per share............................ $ (.29) Shares used in computing pro forma basic and diluted net loss per share... 28,064 </TABLE> Shares used in computing pro forma basic and diluted net loss per share include the shares used in computing basic and diluted net loss per share adjusted for the conversion of preferred stock to common stock, as if the conversion occurred at the date of original issuance, and the exercise of a warrant for 524,400 shares of common stock, as if the exercise occurred on October 1, 1998. The following table presents actual summary consolidated balance sheet data at March 31, 1999, and as adjusted consolidated balance sheet data which has been adjusted to reflect the conversion of convertible preferred stock outstanding at March 31, 1999 into 17,845,176 shares of common stock, the exercise of a warrant to purchase 524,400 shares of common stock at an exercise price of $3.30 per share and the sale of shares of common stock at an assumed initial public offering price of $ per share and the application of the estimated net proceeds. See "Use of Proceeds" and "Capitalization." <TABLE> <CAPTION> MARCH 31, 1999 ---------------------- <S> <C> <C> ACTUAL AS ADJUSTED --------- ----------- (UNAUDITED) CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term investments.......................................... $ 21,433 $ Working capital............................................................................ 3,843 Total assets............................................................................... 35,055 Long-term debt, net of current portion..................................................... 646 Total stockholders' equity................................................................. 7,650 </TABLE> 5

RISK FACTORS THIS OFFERING AND AN INVESTMENT IN OUR COMMON STOCK INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE INVESTING IN OUR COMMON STOCK. OUR BUSINESS AND RESULTS OF OPERATIONS COULD BE SERIOUSLY HARMED BY ANY OF THE FOLLOWING RISKS. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. RISKS RELATED TO OUR BUSINESS ARIBA IS AN EARLY-STAGE COMPANY. OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS. Ariba was founded in September 1996 and has a limited operating history. We began shipping our first product, the Ariba Operating Resource Management System, or Ariba ORMS, in June 1997 and began to operate our Ariba.com network in March 1999. Our limited operating history makes an evaluation of our future prospects very difficult. We will encounter risks and difficulties frequently encountered by early-stage companies in new and rapidly evolving markets. These risks include our: - Limited number of customers that have implemented and are using our Ariba ORMS products; - Substantial dependence on our Ariba ORMS software products; - Need to successfully introduce and grow our Ariba.com network; - Need to expand our sales and professional services organizations; - Need to build strategic partnerships and relationships; - Need to compete in a highly competitive market; - Need to manage rapidly expanding operations; and - Need to attract and retain key personnel. If we do not successfully address these risks, our business would be seriously harmed. THE MARKET FOR OUR SOLUTIONS IS AT AN EARLY STAGE. WE NEED A CRITICAL MASS OF LARGE BUYING ORGANIZATIONS AND THEIR SUPPLIERS TO IMPLEMENT OUR SOLUTIONS. The market for Internet-based operating resource applications and services is at an early stage of development. Our success depends on a significant number of large buying organizations implementing Ariba ORMS and linking with suppliers over the Internet through our Ariba.com network. The implementation of Ariba ORMS by large buying organizations is complex, time consuming and expensive. In many cases, these organizations must change established business practices and conduct business in new ways. Our ability to attract additional customers for our Ariba ORMS products will depend on leveraging our existing customers as reference accounts. As of March 31, 1999, only 31 customers had licensed our Ariba ORMS solution and only one customer was buying operating resources through our Ariba.com network. Accordingly, our operating resource solutions may not achieve significant market acceptance. Unless a critical mass of large buying organizations and their suppliers join our Ariba.com network, our solutions may not achieve widespread market acceptance and our business would be seriously harmed. WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE. We incurred net losses of $4.7 million in fiscal 1997 and $11.0 million in fiscal 1998. As of March 31, 1999, we had an accumulated deficit of approximately $23.8 million. We expect to derive substantially all of our revenues for the foreseeable future from licensing Ariba ORMS. Although these revenues have grown in recent quarters, we may not be able to sustain these growth rates. In fact, we may not have any revenue 6

growth, and our revenues could decline. Over the longer term, we expect to derive revenues from our Ariba.com network, which is based on an unproven business model. Moreover, we expect to incur significant sales and marketing, research and development, and general and administrative expenses. In the future, we expect to incur substantial non-cash costs relating to the amortization of deferred compensation which will contribute to our net losses. As a result, we expect to incur significant losses for the foreseeable future. See "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT. IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS OR INVESTORS, THE MARKET PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY. Our quarterly operating results have varied significantly in the past and will likely vary significantly in the future. We believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicators of future performance. Our operating results will likely fall below the expectations of securities analysts or investors in some future quarter or quarters. Our failure to meet these expectations would likely adversely affect the market price of our common stock. Our quarterly operating results may vary depending on a number of factors, including: - Demand for both our Ariba ORMS and Ariba.com network solutions; - Actions taken by our competitors, including new product introductions and enhancements; - Delays or reductions in spending for, or the implementation of, application software by our potential customers as companies attempt to stabilize their computer systems prior to January 1, 2000 in order to reduce the risk of computer system problems associated with the Year 2000; - Ability to scale our network and operations infrastructure; - Ability to develop, introduce and market new products and enhancements to our existing products on a timely basis; - Changes in our pricing policies or those of our competitors; - Ability to expand our sales and marketing operations, including hiring additional sales personnel; - Size and timing of sales of our products and services; - Success in maintaining and enhancing existing relationships and developing new relationships with strategic partners, including systems integrators and other implementation partners; - Compensation policies that compensate sales personnel based on achieving annual quotas; - Ability to control costs; - Technological changes in our markets; - Deferrals of customer orders in anticipation of product enhancements or new products; - Customer budget cycles and changes in these budget cycles; and - General economic factors. Our quarterly revenues are especially subject to fluctuation because they depend on the sale of a small number of relatively large orders for our Ariba ORMS products and related services. As a result, our quarterly operating results may fluctuate significantly if we are unable to complete one or more substantial sales in any given quarter. In many cases, we recognize revenues from product sales on a percentage of completion basis. Accordingly, our ability to recognize these revenues is subject to delays associated with our customers' ability to complete the implementation of Ariba ORMS in a timely manner. In some cases, 7

we recognize revenues on a subscription basis over the life of the subscriptions specified in the contract, which is typically 12 months. Therefore, if we do not book a sufficient number of large orders in a particular quarter, our revenues in future periods could be lower than expected. We have not fully developed our business model for our Ariba.com network. As this business model evolves, the potential for fluctuations in our quarterly results could increase. Furthermore, our quarterly revenues may be affected significantly by other revenue recognition policies and procedures. These policies and procedures may evolve or change over time based on applicable accounting standards and how these standards are interpreted. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." We plan to increase our operating expenses to expand our sales and marketing operations, fund greater levels of research and development, develop new partnerships, make tenant improvements to our new facilities, increase our professional services and support capabilities and improve our operational and financial systems. If our revenues do not increase along with these expenses, our business, operating results and financial condition could be seriously harmed and net losses in a given quarter could be even larger than expected. In addition, because our expense levels are relatively fixed in the near term and are based in part on expectations of our future revenues, any decline in our revenues to a level that is below our expectations would have a disproportionately adverse impact on our operating results. WE EXPECT TO DEPEND ON OUR ARIBA ORMS SOLUTION FOR SUBSTANTIALLY ALL OF OUR REVENUES FOR THE FORESEEABLE FUTURE. Our Ariba ORMS products and related services accounted for all of our revenues in fiscal 1998 and for the six months ended March 31, 1999. We anticipate that revenues from our Ariba ORMS products and related services will continue to constitute substantially all of our revenues for the foreseeable future. Consequently, a decline in the price of, or demand for, our Ariba ORMS solution, or its failure to achieve broad market acceptance, would seriously harm our business. IMPLEMENTATION OF OUR ARIBA ORMS SOLUTION BY LARGE CUSTOMERS IS COMPLEX, TIME CONSUMING AND EXPENSIVE. WE FREQUENTLY EXPERIENCE LONG SALES AND IMPLEMENTATION CYCLES. Ariba ORMS is an enterprise-wide solution that must be deployed with many users within a buying organization. Its implementation by large buying organizations is complex, time consuming and expensive. In many cases, our customers must change established business practices and conduct business in new ways. In addition, they must generally consider a wide range of other issues before committing to purchase our product, including product benefits, integration, interoperability with existing computer systems, scalability, functionality and reliability. Furthermore, because we are one of the first companies to offer an Internet-based operating resource management system, many customers will be addressing these issues for the first time in the context of managing and procuring operating resources. As a result, we must educate potential customers on the use and benefits of our products and services. In addition, we believe that the purchase of our products is often discretionary and generally involves a significant commitment of capital and other resources by a customer. It frequently takes several months to finalize a sale and requires approval at a number of management levels within the customer organization. The implementation and deployment of our products requires a significant commitment of resources by our customers and third-party and/or our professional services organizations. Because we target large customers, our sales cycles range from four to 24 months and average approximately nine months. 8

OUR ARIBA.COM NETWORK WAS ONLY RECENTLY INTRODUCED AND IS AT AN EARLY STAGE OF DEVELOPMENT AND MARKET ACCEPTANCE. WE HAVE NOT ESTABLISHED OUR PRICING AND REVENUE MODEL FOR OUR ARIBA.COM NETWORK. In March 1999, we began operating our Ariba.com network. As of March 31, 1999, only one customer was buying operating resources through our Ariba.com network from a limited number of online suppliers. Broad and timely acceptance of our Ariba.com network, which is critical to our future success, is subject to a number of significant risks. These risks include: - Operating resource management and procurement on the Internet is a new market; - Our network, which we currently host, has limited scalability; - Our need to enhance the interface between our Ariba ORMS product and our Ariba.com network; - Our need to significantly enhance the features and services of our Ariba.com network to achieve widespread commercial acceptance of our network; and - Our need to significantly expand our internal resources to support planned growth of our Ariba.com network. Although we expect to derive a significant portion of our long-term future revenue from our Ariba.com network, we have not yet established our pricing and revenue model for the services associated with our Ariba.com network. If we are unable to establish a pricing and revenue model acceptable to our customers, our Ariba.com network may not be commercially successful. This would seriously harm our business, particularly if we experience a decline in the growth or growth rate of revenues from our Ariba ORMS solution. WE PLAN TO CONTRACT WITH A THIRD PARTY TO EXPAND, HOST, MANAGE AND MAINTAIN OUR ARIBA.COM NETWORK INFRASTRUCTURE. We plan to contract with a third party to expand, host, manage and maintain our Ariba.com network infrastructure. Services provided by the third party will likely include web server hosting, maintaining communications lines and managing network data centers. We are engaged in discussions with a large third party to obtain these services but have not entered into a contract with this party. If we do not contract with this third party, we would have to obtain similar services from another provider or perform these functions ourselves. We may not successfully obtain or perform these services on a timely and cost-effective basis. If our Ariba.com network infrastructure is successfully completed by a third party, we will be entirely dependent on that party to manage and maintain our network infrastructure and to provide security for it. WE FACE INTENSE COMPETITION. IF WE ARE UNABLE TO COMPETE SUCCESSFULLY, OUR BUSINESS WILL BE SERIOUSLY HARMED. The market for our solution is intensely competitive, evolving and subject to rapid technological change. We expect the intensity of competition to increase in the future. Increased competition is likely to result in price reductions, reduced gross margins and loss of market share, any one of which could seriously harm our business. Competitors vary in size and in the scope and breadth of the products and services offered. We primarily encounter competition with respect to different aspects of our solution from Captura Software, Clarus, Commerce One, Concur Technologies, Extensity, GE Information Services, Intelysis, Netscape Communications and TRADE'ex Electronic Commerce Systems. We may also encounter competition from several major enterprise software developers, such as Oracle, PeopleSoft and SAP. In addition, because there are relatively low barriers to entry in the operating resource management software market, we expect additional competition from other established and emerging companies, as the operational resource management software market continues to develop and expand. For example, third parties that currently help implement Ariba ORMS could begin to market products and services that 9

compete with our own. We could also face competition from companies who introduce an Internet-based operating resource management solution. Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources than us, significantly greater name recognition and a larger installed base of customers. In addition, many of our competitors have well-established relationships with our current and potential customers and have extensive knowledge of our industry. In the past, we have lost potential customers to competitors for various reasons, including lower prices and other incentives not matched by us. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address customer needs. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. We also expect that competition will increase as a result of industry consolidations. We may not be able to compete successfully against our current and future competitors. WE EXPECT REVENUES FROM OUR ARIBA ORMS SOLUTION TO BE CONCENTRATED IN A RELATIVELY SMALL NUMBER OF CUSTOMERS. In fiscal 1998, five customers accounted for more than 10% of our total revenues and, in the six months ended March 31, 1999, two customers accounted for more than 10% of our total revenues. We may continue to derive a significant portion of our revenues from a relatively small number of customers in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." WE RELY ON THIRD PARTIES TO IMPLEMENT OUR ARIBA ORMS SOLUTION. We rely, and expect to rely increasingly, on a number of third parties to implement our Ariba ORMS solution at customer sites. If we are unable to establish and maintain effective, long-term relationships with our implementation providers, or if these providers do not meet the needs or expectations of our customers, our business would be seriously harmed. This strategy will also require that we develop new relationships with additional third-party implementation providers to provide these services if the number of Ariba ORMS implementations continues to increase. Our current implementation partners are not contractually required to continue to help implement Ariba ORMS. As a result of the limited resources and capacities of many third-party implementation providers, we may be unable to establish or maintain relationships with third parties having sufficient resources to provide the necessary implementation services to support our needs. If these resources are unavailable, we will be required to provide these services internally, which would significantly limit our ability to meet our customers' implementation needs. A number of our competitors, including Oracle, SAP and PeopleSoft, have significantly more well-established relationships with these third parties and, as a result, these third parties may be more likely to recommend competitors' products and services rather than our own. In addition, we cannot control the level and quality of service provided by our current and future implementation partners. WE DEPEND ON SUPPLIERS FOR THE SUCCESS OF OUR ARIBA.COM NETWORK. We expect to depend on suppliers joining our Ariba.com network. Any failure of suppliers to join our Ariba.com network in sufficient and increasing numbers would make our network less attractive to buyers and consequently other suppliers. In order to provide buyers on our Ariba.com network an organized method for accessing operating resources, we rely on suppliers to maintain web-based catalogs, indexing services and other content aggregation tools. Our inability to access and index these catalogs and services would result in our customers having fewer products and services available to them through our solution, which would adversely affect the perceived usefulness of our Ariba.com network. 10

WE DEPEND ON THE INTRODUCTION OF NEW VERSIONS OF ARIBA ORMS AND ON ENHANCING THE FUNCTIONALITY AND SERVICES OFFERED BY OUR ARIBA.COM NETWORK. If we are unable to develop new software products or enhancements to our existing products on a timely and cost-effective basis, or if new products or enhancements do not achieve market acceptance, our business would be seriously harmed. The life cycles of our products are difficult to predict because the market for our products is new and emerging, and is characterized by rapid technological change, changing customer needs and evolving industry standards. The introduction of products employing new technologies and emerging industry standards could render our existing products or services obsolete and unmarketable. For example, Ariba ORMS is written in the Java computer language. If a new software language becomes standard in our industry or is considered more robust than Java, we may need to rewrite Ariba ORMS in another language in order to remain competitive. To be successful, our products and services must keep pace with technological developments and emerging industry standards, address the ever-changing and increasingly sophisticated needs of our customers and achieve market acceptance. In developing new products and services, we may: - Fail to develop and market products that respond to technological changes or evolving industry standards in a timely or cost-effective manner; - Encounter products, capabilities or technologies developed by others that render our products and services obsolete or noncompetitive or that shorten the life cycles of our existing products and services; - Experience difficulties that could delay or prevent the successful development, introduction and marketing of these new products and services; or - Fail to develop new products and services that adequately meet the requirements of the marketplace or achieve market acceptance. WE DEPEND ON THE TIMELY RELEASE OF OUR PRODUCTS. We may fail to introduce or deliver new potential offerings on a timely basis or at all. In the past, we have experienced delays in the commencement of commercial shipments of our new releases. If new releases or potential new products are delayed or do not achieve market acceptance, we could experience a delay or loss of revenues and customer frustration. Customers may delay purchases of Ariba ORMS in anticipation of future releases. If customers defer material orders of Ariba ORMS in anticipation of new releases or new product introductions, our business would be seriously harmed. NEW VERSIONS AND RELEASES OF OUR PRODUCTS MAY CONTAIN ERRORS OR DEFECTS. Ariba ORMS is complex and, accordingly, may contain undetected errors or failures when first introduced or as new versions are released. This may result in loss of, or delay in, market acceptance of our products. We have in the past discovered software errors in our new releases and new products after their introduction. In the past, we discovered problems with respect to the ability of software written in Java to scale to allow for large numbers of concurrent users of Ariba ORMS. We have experienced delays in release, lost revenues and customer frustration during the period required to correct these errors. We may in the future discover errors, including Year 2000 errors and additional scalability limitations, in new releases or new products after the commencement of commercial shipments. In addition, a delay in the commercial release of the next version of Ariba ORMS could also slow the growth of our Ariba.com network. 11

WE COULD BE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS AND THIRD PARTY LIABILITY CLAIMS RELATED TO PRODUCTS AND SERVICES PURCHASED THROUGH OUR ARIBA.COM NETWORK. Our customers use our products and services to manage their operating resources. Any errors, defects or other performance problems could result in financial or other damages to our customers. A product liability claim brought against us, even if not successful, would likely be time consuming and costly and could seriously harm our business. Although our customer license agreements typically contain provisions designed to limit our exposure to product liability claims, existing or future laws or unfavorable judicial decisions could negate these limitation of liability provisions. We plan to have our Ariba.com network provide our customers with indices of products that can be purchased from suppliers participating in our Ariba.com network. The law relating to the liability of providers of listings of products and services sold over the Internet for errors, defects or other performance problems with respect to those products and services is currently unsettled. We will not pre-screen the types of products and services that may be purchased through our Ariba.com network. Some of these products and services could contain performance or other problems. We may not successfully avoid civil or criminal liability for problems related to the products and services sold through our Ariba.com network. Any claims or litigation could still require expenditures in terms of management time and other resources to defend ourselves. Liability of this sort could require us to implement measures to reduce our exposure to this liability, which may require us, among other things, to expend substantial resources or to discontinue certain product or service offerings or to take precautions to ensure that certain products and services are not available through our Ariba.com network. WE DEPEND ON OUR KEY PERSONNEL. Our future performance depends on the continued service of our senior management, product development and sales personnel, in particular Keith Krach, our President and Chief Executive Officer. None of these persons, including Mr. Krach, is bound by an employment agreement, and we do not carry key person life insurance. The loss of the services of one or more of our key personnel could seriously harm our business. Our future success also depends on our continuing ability to attract, hire, train and retain a substantial number of highly skilled managerial, technical, sales, marketing and customer support personnel. We are particularly dependent on hiring additional personnel to increase our direct sales and research and development organizations. In addition, new hires frequently require extensive training before they achieve desired levels of productivity. Competition for qualified personnel is intense, and we may fail to retain our key employees or to attract or retain other highly qualified personnel. PROTECTION OF OUR INTELLECTUAL PROPERTY MAY NOT BE ADEQUATE. We depend on our ability to develop and maintain the proprietary aspects of our technology. To protect our proprietary technology, we rely primarily on a combination of contractual provisions, confidentiality procedures, trade secrets, and patent, copyright and trademark laws. We license rather than sell Ariba ORMS and require our customers to enter into license agreements, which impose restrictions on their ability to utilize the software. In addition, we seek to avoid disclosure of our trade secrets, including but not limited to, requiring those persons with access to our proprietary information to execute confidentiality agreements with us and restricting access to our source code. We seek to protect our software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. We cannot assure you that any of our proprietary rights with respect to our Ariba.com network will be viable or of value in the future because the validity, enforceability and type of protection of proprietary rights in Internet-related industries are uncertain and still evolving. We have no patents, and none may be issued from our existing patent application. Our future patents, if any, may be successfully challenged or may not provide us with any competitive advantages. We may not develop proprietary products or technologies that are patentable. 12

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our software products exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop similar technology, duplicate our products or design around patents issued to us or our other intellectual property. There has been a substantial amount of litigation in the software industry and the Internet industry regarding intellectual property rights. It is possible that in the future, third parties may claim that we or our current or potential future products infringe their intellectual property. We expect that software product developers and providers of electronic commerce solutions will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business. We must now, and may in the future have to, license or otherwise obtain access to intellectual property of third parties. For example, we are currently dependent on developers' licenses from enterprise resource planning, database, human resource and other system software vendors in order to ensure compliance of our Ariba ORMS products with their management systems. We may not be able to obtain any required third party intellectual property in the future. IN ORDER TO MANAGE OUR GROWTH AND EXPANSION, WE WILL NEED TO IMPROVE AND IMPLEMENT NEW SYSTEMS, PROCEDURES AND CONTROLS. We have recently experienced a period of significant expansion of our operations that has placed a significant strain upon our management systems and resources. If we are unable to manage our growth and expansion, our business will be seriously harmed. In addition, we have recently hired a significant number of employees and plan to further increase our total headcount. We also plan to expand the geographic scope of our customer base and operations. This expansion has resulted and will continue to result in substantial demands on our management resources. Our ability to compete effectively and to manage future expansion of our operations, if any, will require us to continue to improve our financial and management controls, reporting systems and procedures on a timely basis, and expand, train and manage our employee work force. We are currently implementing new systems to manage our financial and human resources infrastructure. We may encounter difficulties in transitioning to the new enterprise resource planning software system. Even after we implement this system, our personnel, systems, procedures and controls may be inadequate to support our future operations. OUR BUSINESS COULD BE AFFECTED BY YEAR 2000 ISSUES. The risks posed by Year 2000 issues could adversely affect our business in a number of significant ways. Although we believe that our internally developed systems and technology are Year 2000 compliant, our information technology systems nevertheless could be substantially impaired or cease to operate due to Year 2000 problems. Additionally, we rely on information technology supplied by third parties, and our participating sellers also are heavily dependent on information technology systems and on their own third-party vendor systems. Year 2000 problems experienced by us or any of these third parties could materially adversely affect our business. Additionally, the Internet could face serious disruptions arising from the Year 2000 problem. 13

Many of our customers and potential customers have implemented policies that prohibit or strongly discourage making changes or additions to their internal computer systems until after January 1, 2000. We will experience fewer sales if potential customers who might otherwise purchase our Ariba ORMS product delay the purchase and implementation of Ariba ORMS until after January 1, 2000 in an effort to stabilize their internal computer systems in order to cope with the Year 2000 problem or because their information technology budgets have been diverted to address Year 2000 issues. If our potential customers delay purchasing or implementing Ariba ORMS in preparation for the Year 2000 problem, our business would be seriously harmed. In addition, because the revenues from some of our customers are recognized on a percentage of completion basis, any implementation delays by these customers caused by their needs to address Year 2000 issues will defer our ability to recognize this revenue. We cannot guarantee that any of our participating sellers or other Internet vendors will be Year 2000 compliant in a timely manner, or that there will not be significant interoperability problems among information technology systems. We also cannot guarantee that buyers and suppliers will be able to utilize our Ariba.com network without serious disruptions arising from the Year 2000 problem. Given the pervasive nature of the Year 2000 problem, we cannot guarantee that disruptions in other industries and market segments will not adversely affect our business. Moreover, the costs related to Year 2000 compliance, which thus far have not been material, could ultimately be significant. In the event that we experience disruptions as a result of the Year 2000 problem, our business could be seriously harmed. IF WE EXPAND OUR INTERNATIONAL SALES AND MARKETING ACTIVITIES, OUR BUSINESS WILL BE SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. To be successful, we believe we must expand our international operations and hire additional international personnel. Therefore, we expect to commit significant resources to expand our international sales and marketing activities. If successful, we will be subject to a number of risks associated with international business activities. These risks generally include: - Currency exchange rate fluctuations; - Seasonal fluctuations in purchasing patterns; - Unexpected changes in regulatory requirements; - Tariffs, export controls and other trade barriers; - Longer accounts receivable payment cycles and difficulties in collecting accounts receivable; - Difficulties in managing and staffing international operations; - Potentially adverse tax consequences, including restrictions on the repatriation of earnings; - The burdens of complying with a wide variety of foreign laws; - The risks related to the recent global economic turbulence and adverse economic circumstances in Asia; and - Political instability. OUR BUSINESS COULD BE AFFECTED AS A RESULT OF ANY FUTURE ACQUISITIONS. In order to remain competitive, we may find it necessary to acquire additional businesses, products or technologies. If we identify an appropriate acquisition candidate, we may not be able to negotiate the terms of the acquisition successfully, finance the acquisition, or integrate the acquired business, products or technologies into our existing business and operations. Further, completing a potential acquisition and integrating an acquired business will cause significant diversions of management time and resources. If we consummate one or more significant acquisitions in which the consideration consists of stock or other 14

securities, your equity could be significantly diluted. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash, including proceeds of this offering, to consummate any acquisition. Acquisition financing may not be available on favorable terms, or at all. In addition, we may be required to amortize significant amounts of goodwill and other intangible assets in connection with future acquisitions, which would seriously harm our business. RISKS RELATED TO THE INTERNET INDUSTRY WE DEPEND ON INCREASING USE OF THE INTERNET AND ON THE GROWTH OF ELECTRONIC COMMERCE. IF THE USE OF THE INTERNET AND ELECTRONIC COMMERCE DO NOT GROW AS ANTICIPATED, OUR BUSINESS WILL BE SERIOUSLY HARMED. Our Ariba.com network depends on the increased acceptance and use of the Internet as a medium of commerce. Rapid growth in the use of the Internet is a recent phenomenon. As a result, acceptance and use may not continue to develop at historical rates and a sufficiently broad base of business customers may not adopt or continue to use the Internet as a medium of commerce. Demand and market acceptance for recently introduced services and products over the Internet are subject to a high level of uncertainty, and there exist few proven services and products. Our business would be seriously harmed if: - Use of the Internet, the web and other online services does not continue to increase or increases more slowly than expected; - The infrastructure for the Internet, the web and other online services does not effectively support expansion that may occur; or - The Internet, the web and other online services do not create a viable commercial marketplace, inhibiting the development of electronic commerce and reducing the need for our products and services. CAPACITY CONSTRAINTS MAY RESTRICT THE USE OF THE INTERNET AS A COMMERCIAL MARKETPLACE. The Internet may not be accepted as a viable long-term commercial marketplace for a number of reasons. These include: - Potentially inadequate development of the necessary communication and network infrastructure, particularly if rapid growth of the Internet continues; - Delayed development of enabling technologies and performance improvements; - Delays in the development or adoption of new standards and protocols; and - Increased governmental regulation. SECURITY RISKS AND CONCERNS MAY DETER THE USE OF THE INTERNET FOR CONDUCTING ELECTRONIC COMMERCE. A significant barrier to electronic commerce and communications is the secure transmission of confidential information over public networks. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could result in compromises or breaches of our security systems or those of other web sites to protect proprietary information. If any well-publicized compromises of security were to occur, it could have the effect of substantially reducing the use of the web for commerce and communications. Anyone who circumvents our security measures could misappropriate proprietary information or cause interruptions in our services or operations. The Internet is a public network, and data is sent over this network from many sources. In the past, computer viruses, software programs that disable or impair computers, have been distributed and have rapidly spread over the 15

Internet. Computer viruses could be introduced into our systems or those of our customers or suppliers, which could disrupt our Ariba.com network or make it inaccessible to customers or suppliers. We may be required to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by breaches. To the extent that our activities may involve the storage and transmission of proprietary information, such as credit card numbers, security breaches, could expose us to a risk of loss or litigation and possible liability. Our security measures may be inadequate to prevent security breaches, and our business would be harmed if we do not prevent them. OUR ARIBA.COM NETWORK MAY EXPERIENCE DELAYS AS A RESULT OF HIGH VOLUMES OF TRAFFIC. Our Ariba.com network is currently operating on a limited basis. If the volume of traffic on the web site for our Ariba.com network increases, our Ariba.com network may in the future experience slower response times or other problems. In addition, users will depend on Internet service providers, telecommunications companies and the efficient operation of their computer networks and other computer equipment for access to our Ariba.com network. Each of these has experienced significant outages in the past and could experience outages, delays and other difficulties due to system failures unrelated to our systems. Any delays in response time or performance problems could cause users of our Ariba.com network to perceive this service as not functioning properly and therefore cause them to use other methods to procure their operating resources. INCREASING GOVERNMENT REGULATION COULD LIMIT THE MARKET FOR, OR IMPOSE SALES AND OTHER TAXES ON THE SALE OF, OUR PRODUCTS AND SERVICES. As Internet commerce evolves, we expect that federal, state or foreign agencies will adopt regulations covering issues such as user privacy, pricing, content and quality of products and services. It is possible that legislation could expose companies involved in electronic commerce to liability, which could limit the growth of electronic commerce generally. Legislation could dampen the growth in Internet usage and decrease its acceptance as a communications and commercial medium. If enacted, these laws, rules or regulations could limit the market for our products and services. We do not collect sales or other similar taxes in respect of goods and services purchased through our Ariba.com network. However, one or more states may seek to impose sales tax collection obligations on out-of-state companies like us that engage in or facilitate electronic commerce. A number of proposals have been made at the state and local level that would impose additional taxes on the sale of goods and services over the Internet. These proposals, if adopted, could substantially impair the growth of electronic commerce and could adversely affect our opportunity to derive financial benefit from such activities. Moreover, a successful assertion by one or more states or any foreign country that we should collect sales or other taxes on the exchange of goods and services through our Ariba.com network could seriously harm our business. Legislation limiting the ability of the states to impose taxes on Internet-based transactions has been proposed in the U.S. Congress. This legislation could ultimately be enacted into law or this legislation could contain a limited time period in which this tax moratorium will apply. In the event that the tax moratorium is imposed for a limited time period, legislation could be renewed at the end of this period. Failure to enact or renew this legislation could allow various states to impose taxes on electronic commerce, and the imposition of these taxes could seriously harm our business. RISKS RELATED TO THIS OFFERING WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE. We expect the net proceeds from this offering will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. After that, we may need to raise additional funds and we cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. If 16

we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products and services, take advantage of future opportunities, grow our business or respond to competitive pressures or unanticipated requirements, which could seriously harm our business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." OUR STOCK PRICE MAY BE VOLATILE. Prior to this offering, you could not buy or sell our common stock publicly. An active public market for our common stock may not develop or be sustained after the offering. We will negotiate and determine the initial public offering price with the representatives of the underwriters based on several factors. This price may vary from the market price of the common stock after the offering. You may be unable to sell your shares of common stock at or above the offering price. The market price of the common stock may fluctuate significantly in response to the following factors, some of which are beyond our control: - Variations in our quarterly operating results; - Changes in securities analysts' estimates of our financial performance; - Changes in market valuations of similar companies; - Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; - Loss of a major customer or failure to complete significant license transactions; - Additions or departures of key personnel; and - Fluctuations in stock market price and volume, which are particularly common among highly volatile securities of software and Internet-based companies. WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED STOCK PRICE VOLATILITY. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management's attention and resources. OUR STOCK PRICE COULD BE AFFECTED BY SHARES BECOMING AVAILABLE FOR SALE. Sales of a substantial number of shares of common stock in the public market after this offering could depress the market price of the common stock and could impair our ability to raise capital through the sale of additional equity securities. For a description of shares of our common stock that are available for future sale, see "Shares Eligible for Future Sale." PURCHASERS IN THIS OFFERING WILL INCUR IMMEDIATE, SUBSTANTIAL DILUTION. We expect that the initial public offering price of our common stock will be substantially higher than the book value per share of the outstanding common stock. As a result, investors purchasing common stock in this offering will incur immediate and substantial dilution. In the past, we issued options to acquire common stock at prices significantly below the initial public offering price. To the extent these outstanding options are ultimately exercised, there will be further dilution to investors in this offering. See "Dilution." WE HAVE IMPLEMENTED CERTAIN ANTI-TAKEOVER PROVISIONS. Provisions of our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us, even if doing so would be 17

beneficial to our stockholders. See "Description of Capital Stock--Antitakeover Effects of Provisions of the Certificate of Incorporation and Delaware Law." OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS CONTROL ARIBA. Upon completion of this offering, our executive officers, directors and principal stockholders will beneficially own, in the aggregate, approximately % of our outstanding common stock. As a result, these stockholders will be able to exercise control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could have the effect of delaying or preventing a change of control of Ariba. See "Principal Stockholders." SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Some of the statements under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and elsewhere in this prospectus constitute forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform these statements to actual results. 18

USE OF PROCEEDS We estimate that our net proceeds from the sale of the shares of common stock we are offering will be approximately $ million, or $ million if the underwriters exercise their over-allotment option in full, at an assumed initial public offering price of $ per share, after deducting underwriting discounts and commissions and after deducting estimated offering expenses of $ payable by Ariba. The primary purposes of this offering are to obtain additional equity capital, create a public market for our common stock and facilitate future access to public markets. We intend to use the net proceeds we receive from the offering for working capital and general corporate purposes. Although we may use a portion of the net proceeds to acquire technology or businesses that are complementary to our business, there are no current plans in this regard. Pending their use, we plan to invest the net proceeds in short-term, interest-bearing, investment grade securities. DIVIDEND POLICY We have not paid any cash dividends since our inception and do not intend to pay any cash dividends in the foreseeable future. 19

CAPITALIZATION The following table sets forth our capitalization as of March 31, 1999. The pro forma information reflects (1) the conversion of all shares of convertible preferred stock outstanding as of March 31, 1999 into 17,845,176 shares of common stock on completion of this offering and (2) the exercise of a warrant to purchase 524,400 shares of common stock at an exercise price of $3.30. The as adjusted information reflects the foregoing as well as the sale of the shares of common stock in this offering, at an assumed initial public offering price of $ per share and the receipt of the net proceeds from the sale of common stock after deducting the estimated expenses and underwriting discounts and commissions payable by Ariba. The outstanding share information excludes: - 8,105,260 shares of common stock issuable on exercise of outstanding options as of March 31, 1999 with a weighted average exercise price of $2.00 per share; - 46,544 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $3.18 per share; and - 1,380,700 shares of stock reserved for issuance under our stock plan as of March 31, 1999. You should read this table with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the related notes. See "Use of Proceeds" and "Management--1999 Equity Incentive Plan," "--Employee Stock Purchase Plan," and "--1999 Directors' Stock Option Plan." <TABLE> <CAPTION> MARCH 31, 1999 ------------------------------------ <S> <C> <C> <C> ACTUAL PRO FORMA AS ADJUSTED ---------- ----------- ----------- <CAPTION> (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <S> <C> <C> <C> Long-term liabilities, less current portion.......................... $ 646 $ 646 $ 646 Stockholders' equity: Convertible preferred stock, $.002 par value per share, actual--10,000,000 shares authorized, 4,461,294 shares issued and outstanding; pro forma and as adjusted-- 20,000,000 shares authorized, no shares issued and outstanding..................... 9 -- -- Common stock, $.002 par value per share, actual-- 80,000,000 shares authorized, 19,371,820 shares issued and outstanding; pro forma--200,000,000 shares authorized, 37,741,396 shares issued and outstanding; as adjusted-- 200,000,000 shares authorized, shares issued and outstanding.................. 39 75 Additional paid-in capital......................................... 49,339 51,042 Deferred stock-based compensation.................................. (17,942) (17,942) (17,942) Accumulated other comprehensive loss............................... (35) (35) (35) Accumulated deficit................................................ (23,760) (23,760) (23,760) Total stockholders' equity....................................... 7,650 9,380 ---------- ----------- ----------- Total capitalization........................................... $ 8,296 $ 10,026 $ ---------- ----------- ----------- ---------- ----------- ----------- </TABLE> 20

DILUTION The pro forma net tangible book value of our common stock as of March 31, 1999 was $9,380,000 or approximately $.25 per share. Pro forma net tangible book value per share represents the amount of our stockholders' equity, less intangible assets, divided by 37,741,396 shares of common stock outstanding after giving effect to the conversion of all outstanding shares of preferred stock into shares of common stock upon completion of this offering and the exercise of a warrant to purchase 524,400 shares of common stock at an exercise price of $3.30. Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering made hereby and the pro forma net tangible book value per share of common stock immediately after completion of this offering. After giving effect to the sale by us of shares of common stock in this offering at an assumed initial offering price of $ per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses and the application of the estimated net proceeds, our pro forma net tangible book value as of March 31, 1999, would have been $ , or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to purchasers of common stock in this offering, as illustrated in the following table: <TABLE> <S> <C> <C> Assumed initial public offering price per share............................... $ --------- Pro forma net tangible book value per share as of March 31, 1999............ $ .25 --------- Increase per share attributable to new investors............................ --------- Pro forma net tangible book value per share after this offering............... --------- Net tangible book value dilution per share to new investors................... $ --------- --------- </TABLE> The following table sets forth, on a pro forma basis, as of March 31, 1999, the number of shares of common stock, purchased from Ariba, the total consideration paid or to be paid, and the average price per share paid or to be paid by existing stockholders and by new investors of an assumed initial offering price of $ per share, before deducting the estimated expenses and underwriting discounts and commissions payable by Ariba: <TABLE> <CAPTION> SHARES PURCHASED TOTAL CONSIDERATION AVERAGE ----------------------- ------------------------ PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ------------ --------- ------------- --------- ----------- <S> <C> <C> <C> <C> <C> Existing stockholders.......................... 37,741,396% $ 27,579,000% $ .73 New stockholders............................... ------------ --------- ------------- --------- Total...................................... 100.0% $ 100.0% ------------ --------- ------------- --------- ------------ --------- ------------- --------- </TABLE> As of March 31, 1999, there were options outstanding to purchase a total of 8,105,260 shares of common stock at a weighted average exercise price of $2.00 per share under our 1996 Stock Plan. In addition, as of March 31, 1999, there were outstanding warrants to purchase a total of 570,944 shares of common stock at a weighted average exercise price of $3.29 per share, 524,400 of which will be exercised prior to the closing of this offering. After March 31, 1999, we increased the number of shares reserved for issuance under our 1996 Stock Plan by 2,600,000 shares and granted options to purchase an additional 1,872,200 shares of common stock. To the extent outstanding options or warrants are exercised, there will be further dilution to new investors. See Note 3 of Notes to Consolidated Financial Statements. 21

SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations, which are included elsewhere in this prospectus. The consolidated statement of operations data for each of the two years in the period ended September 30, 1998, and the consolidated balance sheet data at September 30, 1997 and 1998, are derived from our consolidated financial statements that have been audited by KPMG LLP, independent auditors, and are included elsewhere in this prospectus. The consolidated balance sheet data as of March 31, 1999 and the consolidated statement of operations data for the six months ended March 31, 1998 and 1999 are derived from unaudited consolidated financial statements included elsewhere in this prospectus and include, in the opinion of management, all adjustments consisting only of normal recurring adjustments, that we consider necessary for the fair presentation of our financial position and results of operations for those periods. <TABLE> <CAPTION> FISCAL YEAR ENDED SIX MONTHS ENDED SEPTEMBER 30, MARCH 31, -------------------- -------------------- 1997 1998 1998 1999 --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues: License.................................................................. $ 630 $ 6,040 $ 807 $ 10,500 Maintenance and service.................................................. 130 2,323 408 5,838 --------- --------- --------- --------- Total revenues......................................................... 760 8,363 1,215 16,338 --------- --------- --------- --------- Cost of revenues: License.................................................................. 13 165 17 250 Maintenance and service.................................................. 927 1,373 510 2,509 --------- --------- --------- --------- Total cost of revenues................................................. 940 1,538 527 2,759 --------- --------- --------- --------- Gross profit (loss)........................................................ (180) 6,825 688 13,579 --------- --------- --------- --------- Operating expenses: Sales and marketing...................................................... 2,235 10,311 3,333 11,302 Research and development................................................. 1,899 4,499 1,963 3,849 General and administrative............................................... 588 2,580 880 2,698 Amortization of stock-based compensation................................. 50 956 79 4,045 --------- --------- --------- --------- Total operating expenses............................................... 4,772 18,346 6,255 21,894 --------- --------- --------- --------- Loss from operations....................................................... (4,952) (11,521) (5,567) (8,315) Other income, net.......................................................... 273 568 268 187 --------- --------- --------- --------- Net loss................................................................... $ (4,679) $ (10,953) $ (5,299) $ (8,128) --------- --------- --------- --------- --------- --------- --------- --------- Basic and diluted net loss per share....................................... $ (7.31) $ (1.90) $ (1.19) $ (.84) --------- --------- --------- --------- --------- --------- --------- --------- Weighted average shares used in computing basic and diluted net loss per share(1)................................................................. 640 5,762 4,456 9,694 --------- --------- --------- --------- --------- --------- --------- --------- Pro forma basic and diluted net loss per share............................. $ (.29) --------- --------- Shares used in computing pro forma basic and diluted net loss per share(2)................................................................. 28,064 --------- --------- </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, -------------------- MARCH 31, 1997 1998 1999 --------- --------- ----------- (IN THOUSANDS) <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term investments.................................. $ 15,471 $ 13,932 $ 21,433 Working capital.................................................................... 13,685 8,151 3,843 Total assets....................................................................... 16,800 19,242 35,055 Long-term liabilities.............................................................. 140 647 646 Accumulated deficit................................................................ (4,679) (15,632) (23,760) Total stockholders' equity......................................................... 14,517 9,959 7,650 </TABLE> ------------------------------ (1) See Note 1 of Notes to Consolidated Financial Statements for an explanation of the determination of the number of shares used to compute basic and diluted net loss per share. (2) Shares used in computing pro forma basic and diluted net loss per share include the shares used in computing basic and diluted net loss per share adjusted for the conversion of our convertible preferred stock to common stock, as if the conversion occurred at the date of original issuance and the exercise of a warrant for 524,400 shares of common stock, as if the exercise occurred on October 1, 1998. 22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ARIBA SHOULD BE READ IN CONJUNCTION WITH "SELECTED CONSOLIDATED FINANCIAL DATA" AND ARIBA'S CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS. THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. OVERVIEW Ariba is a leading provider of intranet- and Internet-based business to business electronic commerce solutions for operating resources. We were founded in September 1996 and from that date through March 1997 were in the development stage, conducting research and developing our initial products. In March 1997, we began selling our Ariba ORMS products and related services and currently sell them primarily in the United States, and to a lesser extent in Europe, through our direct sales force. Through March 31, 1999, our revenues have been principally derived from licenses of our Ariba ORMS products, maintenance and support contracts and from the delivery of implementation consulting and training services. Customers who license our Ariba ORMS products also generally purchase maintenance contracts which provide software upgrades and technical support over a stated term, which is usually a twelve month period. Customers may purchase implementation services from us, but we expect to increasingly rely on third-party consulting organizations to deliver these services directly to our customers. We also offer fee-based training services to our customers. On October 1, 1997, we adopted Statement of Position, or SOP, 97-2, SOFTWARE REVENUE RECOGNITION, which supersedes SOP 91-1, SOFTWARE REVENUE RECOGNITION. The adoption of SOP 97-2 did not have a material effect on our operating results. SOP 97-2 generally requires revenues earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. Revenue allocated to software licenses is generally recognized upon delivery of the products or ratably over a contractual period if unspecified software products are to be delivered during that period. Starting in fiscal 1999, our standard license agreement provides customers the right to future unspecified software licenses. Accordingly, payments received from our customers upon the signing of these license agreements are deferred, and the revenue is recognized ratably over the contract period. Revenue allocated to maintenance is recognized ratably over the maintenance term and revenue allocated to training and other service elements is recognized as the services are performed. When we manage the implementation process for our customers, the services are considered essential to the functionality of the software products. Accordingly, both the software license revenue and service revenue is recognized using the percentage of completion method in accordance with the provisions of SOP 81-1, ACCOUNTING FOR PERFORMANCE OF CONSTRUCTION TYPE AND CERTAIN PRODUCTION TYPE CONTRACTS. The implementation of our products can take several months or more depending on the objectives of the customers, the complexity of the customers' information technology environments and the resources directed by the customers to the implementation projects. Customers who license our software products receive a server capacity license, one or more of the Ariba ORMS modules and adapters to interface with financial, human resource and other existing enterprise systems. The fee for the server capacity license is based on the customer's estimated annual volume of line items of purchasing transactions. The license fees for the software modules and adapters consist of individual prices for each module or adapter. The volume licensing of the server capacity allows customers to scale the total cost of their purchase of our Ariba ORMS products to their needs. The server capacity license entitles customers to execute the 23

licensed volume of line items of purchasing transactions during any annual period following their purchase of the server license. Ariba's customers generally purchase estimated server capacity at the time of the purchase of the server license. Following the initial implementation of Ariba ORMS, and based on the reporting and analysis tools available through Ariba ORMS, our customers are able to understand their annual transaction volume more fully. Customers who exceed their estimated volume can purchase additional server capacity. However, there are no recurring annual license fees. To date, three customers have purchased additional annual server capacity licenses. Our cost of license revenues include royalties due to third parties for integrated technology, the cost of manuals and product documentation, production media used to deliver our products and shipping costs, including the costs associated with the electronic transmission of software to new customers. Our cost of maintenance and service revenues includes salaries and related expenses for our customer support, implementation and training services organizations, costs of third parties contracted to provide consulting services to customers and an allocation of our facilities, communications and depreciation expenses. Our operating expenses are classified into three general categories: sales and marketing, research and development and general and administrative. We classify all charges to these operating expense categories based on the nature of the expenditures. Although each category includes expenses that are unique to the category type, there are commonly recurring expenditures that are typically included in these categories in our operating expenses, such as salaries, employee benefits, incentive compensation, bonuses, sales commissions, travel and entertainment costs, telephone, communication, rent and facilities costs, and third-party professional services fees. The sales and marketing category of operating expenses includes expenditures specific to the marketing group, such as public relations and advertising, trade shows, marketing collateral materials and customer advisory council meetings. We allocate the total costs for overhead and facilities to each of the functional areas that use the overhead and facilities services based on their headcount. These allocated charges include facility rent for the corporate office, communication charges and depreciation expense for office furniture and equipment. In connection with the granting of stock options to our employees, we recorded deferred stock-based compensation totaling approximately $22.4 million as of March 31, 1999. This amount represents the difference between the exercise price and the deemed fair value of our common stock for accounting purposes on the date these stock options were granted. This amount is included as a component of stockholders' equity and is being amortized on an accelerated basis by charges to operations over the vesting period of the options, consistent with the method described in Financial Accounting Standards Board Interpretation No. 28. During fiscal 1998, we recorded $830,000 of stock-based compensation amortization expense and, during the six months ended March 31, 1999, we recorded $3.9 million of stock-based compensation amortization expense. The amortization of the remaining deferred stock-based compensation will result in additional charges to operations through fiscal 2003. The amortization of stock-based compensation is classified as a separate component of operating expenses in our consolidated statement of operations. Although revenues consistently increased from quarter to quarter, we incurred significant costs to develop our technology and products and to recruit and train personnel for our engineering, sales, marketing, professional services and administration departments. As a result, we incurred significant losses since inception, and, as of March 31, 1999, had an accumulated deficit of $23.8 million. We believe our success is contingent on increasing our customer base, developing our Ariba ORMS products and developing our Ariba.com network. We intend to continue to invest heavily in sales, marketing and research and development. We therefore expect to continue to incur substantial operating losses for the foreseeable future. We had 232 full-time employees as of March 31, 1999 and intend to hire a significant number of employees in the future. This expansion places significant demands on our management and operational resources. To manage this rapid growth and increased demand, we must invest in and implement scalable 24

operational systems, procedures and controls. We must also be able to recruit qualified candidates to manage our expanding operations. We expect future expansion to continue to challenge our ability to hire, train, manage and retain our employees. Our limited operating history makes the prediction of future operating results very difficult. We believe that period-to-period comparisons of operating results should not be relied upon as predictive of future performance. The prospects must be considered in light of the risks, expenses and difficulties encountered by companies at an early state of development, particularly companies in new and rapidly evolving markets. We may not be successful in addressing such risks and difficulties. Although we have experienced significant percentage growth in revenues in recent periods, we do not believe that prior growth rates are sustainable or indicative of future operating results. 25

QUARTERLY RESULTS OF OPERATIONS The following tables set forth consolidated statement of operations data for each of the six quarters ended March 31, 1999, as well as the percentage of our total revenues represented by each item. This information has been derived from our unaudited consolidated financial statements. The unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements contained in this prospectus and include all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of such information. You should read this information in conjunction with our annual audited consolidated financial statements and related notes appearing elsewhere in this prospectus. You should not draw any conclusions about our future results from the results of operations for any quarter. <TABLE> <CAPTION> THREE MONTHS ENDED ----------------------------------------------------------------- DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, 1997 1998 1998 1998 1998 1999 -------- -------- -------- --------- -------- --------- (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> Revenues: License....................................................... $ 362 $ 445 $ 1,693 $ 3,540 $ 4,827 $ 5,673 Maintenance and service....................................... 126 282 770 1,145 2,025 3,813 -------- -------- -------- --------- -------- --------- Total revenues.............................................. 488 727 2,463 4,685 6,852 9,486 -------- -------- -------- --------- -------- --------- Cost of revenues: License....................................................... 4 13 87 61 53 197 Maintenance and service....................................... 333 177 362 501 902 1,607 -------- -------- -------- --------- -------- --------- Total cost of revenues...................................... 337 190 449 562 955 1,804 -------- -------- -------- --------- -------- --------- Gross profit.................................................... 151 537 2,014 4,123 5,897 7,682 Operating expenses: Sales and marketing........................................... 1,521 1,812 3,040 3,938 4,399 6,903 Research and development...................................... 919 1,044 1,197 1,339 1,649 2,200 General and administrative.................................... 392 488 551 1,149 1,201 1,497 Amortization of stock-based compensation...................... 13 66 404 473 1,113 2,932 -------- -------- -------- --------- -------- --------- Total operating expenses.................................... 2,845 3,410 5,192 6,899 8,362 13,532 -------- -------- -------- --------- -------- --------- Loss from operations............................................ (2,694) (2,873) (3,178) (2,776) (2,465) (5,850) Other income, net............................................... 174 94 151 149 106 81 -------- -------- -------- --------- -------- --------- Net loss........................................................ $(2,520) $(2,779) $(3,027) $(2,627) $(2,359) $(5,769) -------- -------- -------- --------- -------- --------- -------- -------- -------- --------- -------- --------- </TABLE> <TABLE> <CAPTION> AS A PERCENTAGE OF TOTAL REVENUES ----------------------------------------------------------------- DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, 1997 1998 1998 1998 1998 1999 -------- -------- -------- --------- -------- --------- <S> <C> <C> <C> <C> <C> <C> Revenues: License....................................................... 74.2% 61.2% 68.7% 75.6% 70.4% 59.8% Maintenance and service....................................... 25.8 38.8 31.3 24.4 29.6 40.2 -------- -------- -------- --------- -------- --------- Total revenues.............................................. 100.0 100.0 100.0 100.0 100.0 100.0 -------- -------- -------- --------- -------- --------- Cost of revenues: License....................................................... .8 1.8 3.5 1.3 .8 2.1 Maintenance and service....................................... 68.2 24.4 14.7 10.7 13.2 16.9 -------- -------- -------- --------- -------- --------- Total cost of revenues...................................... 69.1 26.2 18.2 12.0 13.9 19.1 -------- -------- -------- --------- -------- --------- Gross profit.................................................... 31.0 73.8 81.8 88.0 86.1 80.9 Operating expenses: Sales and marketing........................................... 311.7 249.2 123.4 84.1 64.2 72.8 Research and development...................................... 188.3 143.6 48.6 28.6 24.1 23.2 General and administrative.................................... 80.3 67.1 22.4 24.5 17.5 15.8 Amortization of stock-based compensation...................... 2.7 9.1 16.4 10.1 16.2 30.9 -------- -------- -------- --------- -------- --------- Total operating expenses.................................... 583.0 469.0 210.8 147.3 122.0 142.7 -------- -------- -------- --------- -------- --------- Loss from operations............................................ (552.0) (395.2) (129.0) (59.3) (36.1) (61.8) Other income, net............................................... 35.7 12.9 6.1 3.2 1.5 .9 -------- -------- -------- --------- -------- --------- Net loss........................................................ (516.3)% (382.3)% (122.9)% (56.1)% (34.4)% (60.8)% -------- -------- -------- --------- -------- --------- -------- -------- -------- --------- -------- --------- </TABLE> 26

Our quarterly operating results are expected to vary significantly from quarter to quarter and are difficult or impossible to predict. SIX QUARTERS ENDED MARCH 31, 1999 REVENUES LICENSE. Our license revenues increased in each of the six quarters ended March 31, 1999. The continuous increases resulted from the sale of new licenses of our Ariba ORMS products and the implementation of our Ariba ORMS products at existing customers. MAINTENANCE AND SERVICE. Our maintenance and service revenues also increased in each of the six quarters ended March 31, 1999. During this period of time we were directly involved in the implementation process at most of our initial customers' locations and were involved in an advisory capacity with all of our new customers. Our service revenues grew as the number of active implementations increased during this six quarter period. Our maintenance revenues grew in each quarter during the six quarters ended March 31, 1999, as the revenues from the maintenance contracts that we sold to our growing customer base were recognized over the period of the maintenance contracts. COST OF REVENUES LICENSE. As our Ariba ORMS products were being shipped to new customers, we incurred royalty costs payable to third-party software developers. Consequently, our cost of license revenues increased beginning in the fourth quarter of fiscal 1997. In the second quarter of fiscal 1998, we licensed certain report writing technology from a third-party software developer. This technology was integrated into our product releases and product upgrades beginning in June 1998. At that time, we shipped upgrades with this new technology to all of our previous customers and incurred royalty costs for those shipments. As a result, our cost of license revenues in the third quarter of fiscal 1998 was higher than the fourth quarter of that year. MAINTENANCE AND SERVICE. Beginning in the second quarter of fiscal 1997, we began to hire implementation and technical support personnel. In each subsequent quarter, we hired additional implementation and technical support personnel. In the third quarter of fiscal 1998, we began to hire training personnel to provide training services to customers and third-party implementation partners. As a direct result of additional maintenance and service personnel, our costs of maintenance and service revenues have been increasing in each quarter after the second quarter of fiscal 1997. GROSS PROFIT Our gross profit increased in each of the six quarters ended March 31, 1999. The increases were primarily due to the increase in our customer base and the incremental amounts of revenues that were recognized in each quarter. OPERATING EXPENSES SALES AND MARKETING. Our sales and marketing expenses increased in each of the six quarters ended March 31, 1999. The increases are attributable to increased sales commissions, expanded marketing programs for trade shows and customer advisory council meetings, the expansion of our regional sales office and international subsidiary locations, and the hiring of additional marketing and sales personnel. RESEARCH AND DEVELOPMENT. Our research and development expenses consistently increased in each quarter during the six quarters ended March 31, 1999. Personnel costs are the largest component of this expense category. During this period of time, we have consistently increased the number of research and development personnel to develop subsequent releases of our Ariba ORMS products. We primarily hire these people from Silicon Valley. The market for qualified people in this area is competitive, and costs associated with finding and retaining qualified personnel are high. The increased number of personnel and 27

the increased cost per person have contributed to our consistent increases in research and development expenses. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased in each of the six quarters ended March 31, 1999, as a result of the addition of finance, information technology, legal and administrative personnel and the purchase and implementation of our financial and human resource system infrastructure. RESULTS OF OPERATIONS The following table sets forth consolidated statement of operations data for each of the comparative periods indicated as a percentage of total revenues. <TABLE> <CAPTION> YEAR ENDED SIX MONTHS ENDED SEPTEMBER 30, MARCH 31, -------------------- -------------------- <S> <C> <C> <C> <C> 1997 1998 1998 1999 --------- --------- --------- --------- Revenues: License............................................................... 82.9% 72.2% 66.4% 64.3% Maintenance and service............................................... 17.1 27.8 33.6 35.7 --------- --------- --------- --------- Total revenues...................................................... 100.0 100.0 100.0 100.0 --------- --------- --------- --------- Cost of revenues: License............................................................... 1.7 2.0 1.4 1.5 Maintenance and service............................................... 122.0 16.4 42.0 15.4 --------- --------- --------- --------- Total cost of revenues.............................................. 123.7 18.4 43.4 16.9 --------- --------- --------- --------- Gross profit (loss)..................................................... (23.7) 81.6 56.6 83.1 Operating expenses: Sales and marketing................................................... 294.1 123.3 274.3 69.2 Research and development.............................................. 249.8 53.8 161.6 23.6 General and administrative............................................ 77.4 30.9 72.4 16.5 Amortization of stock-based compensation.............................. 6.6 11.4 6.5 24.8 --------- --------- --------- --------- Total operating expenses............................................ 627.9 219.4 514.8 134.0 --------- --------- --------- --------- Loss from operations.................................................... (651.6) (137.8) (458.2) (50.9) Other income, net....................................................... 35.9 6.8 22.1 1.1 --------- --------- --------- --------- Net loss................................................................ (615.7)% (131.0)% (436.1)% (49.8)% --------- --------- --------- --------- --------- --------- --------- --------- </TABLE> SIX MONTHS ENDED MARCH 31, 1998 AND 1999 REVENUES LICENSE. License revenues increased from $807,000 for the six months ended March 31, 1998 to $10.5 million for the six months ended March 31, 1999. This increase is attributable to a larger number of customers and implementations of our Ariba ORMS products. MAINTENANCE AND SERVICE. Maintenance and service revenues increased from $408,000 for the six months ended March 31, 1998 to $5.8 million for the six months ended March 31, 1999. This increase is attributable to increases in the number of active customer implementations over the previous period and a larger number of maintenance contracts. TOTAL REVENUES. During the six months ended March 31, 1998, six customers accounted for more than 10% of total revenues, and, in the six months ended March 31, 1999, two customers accounted for more than 10% of revenues. Revenues from international sales were insignificant for the six months ended 28

March 31, 1998 and $1.1 million for the six months ended March 31, 1999. Our international revenues during the six months ended March 31, 1999 were derived from sales in Canada and The Netherlands. COST OF REVENUES LICENSE. Cost of license revenues increased from $17,000 for the six months ended March 31, 1998 to $250,000 for the six months ended March 31, 1999. This increase is attributable to royalties and packaging costs for shipments to new customers and shipments of product updates to existing customers. MAINTENANCE AND SERVICE. Cost of maintenance and service revenues increased from $510,000 for the six months ended March 31, 1998 to $2.5 million for the six months ended March 31, 1999. This increase is primarily attributable to increases in the number of implementation, training and technical support personnel required to support our growing customer base. GROSS PROFIT Gross profit increased from $688,000 for the six months ended March 31, 1998 to $13.6 million for the six months ended March 31, 1999. The increase is attributable to the growth in our customer base, which contributed to increased revenues from software licenses, implementation and maintenance services. OPERATING EXPENSES SALES AND MARKETING. Sales and marketing expenses increased from $3.3 million for the six months ended March 31, 1998 to $11.3 million for the six months ended March 31, 1999. The increase in the total amount of sales and marketing expenses is attributable to increased sales commissions, an increase in the number of sales and marketing employees and increases in marketing program spending. We believe these expenses will continue to increase in absolute dollar amounts in future periods as we expect to continue to expand our sales and marketing efforts. RESEARCH AND DEVELOPMENT. Research and development expenses increased from $2.0 million for the six months ended March 31, 1998 to $3.8 million for the six months ended March 31, 1999. The increase in the total amount of research and development expenses is attributable to increases in the number of research and development personnel. To date, all software development costs have been expensed in the period incurred. We believe that continued investment in research and development is critical to attaining our strategic objectives, and, as a result, we expect research and development expenses to increase significantly in future periods. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased from $880,000 for the six months ended March 31, 1998 to $2.7 million for the six months ended March 31, 1999. This increase is attributable to a growing number of administrative employees, increased facility costs from the expanded facility required for the total incremental company headcount, hiring costs for new employees, increased communication costs particularly to remote offices, the implementation costs to install our financial and human resource systems infrastructure and professional fees. We believe general and administrative expenses will increase in absolute dollars, as we expect to add personnel to support our expanding operations, incur additional costs related to the growth of our business, and assume the responsibilities of a public company. OTHER INCOME, NET Other income, net decreased from $268,000 for the six months ended March 31, 1998 to $187,000 for the six months ended March 31, 1999. This decrease is attributable to increases in interest expense during the six months ended March 31, 1999 over the same period in the previous year. This interest expense results from capital equipment loans used to purchase computer equipment and office furniture and equipment. Other income, net consists of interest income, interest expense and other non-operating expenses. 29

FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND 1998 REVENUES LICENSE. License revenues increased from $630,000 in fiscal 1997 to $6.0 million in fiscal 1998. This increase was attributable to new customers and customer implementations of our Ariba ORMS products at a number of existing customers' locations. During fiscal 1997, three customers accounted for more than 10% of total revenues and during fiscal 1998, five customers accounted for more than 10% of total revenues. MAINTENANCE AND SERVICE. Maintenance and service revenues increased from $130,000 in fiscal 1997 to $2.3 million in fiscal 1998. This increase is attributable to increases in the number of active customer implementations over the previous year and an increase in the number of customers who purchased maintenance contracts. COST OF REVENUES LICENSE. Cost of license revenues increased from $13,000 in fiscal 1997 to $165,000 in fiscal 1998. This increase is attributable to royalties and packaging costs for shipments to new customers and shipments of product updates to existing customers. MAINTENANCE AND SERVICE. Cost of maintenance and service revenues increased from $927,000 in fiscal 1997 to $1.4 million in fiscal 1998. This increase is attributable to increases in the number of implementation, training and technical support employees required to support a larger number of customers. GROSS PROFIT We incurred a gross loss of $180,000 in fiscal 1997, and we earned a gross profit of $6.8 million in fiscal 1998. This increase is attributable to a greater amount of revenues from our growing customer base and the accrual of anticipated losses from implementation projects in fiscal 1997 and in the first quarter of fiscal 1998. During this period of time we entered into fixed-fee implementation service contracts with certain customers. Fixed-fee implementation projects can be unprofitable because of the scope of the work and the amount of changes that can occur after the project begins. In accordance with the provisions of SOP 81-1, ACCOUNTING FOR PERFORMANCE OF CONSTRUCTION TYPE AND CERTAIN PRODUCTION TYPE CONTRACTS, whenever we anticipate a loss from an implementation agreement we accrue for the estimated amount of the loss. We believed that these fixed-fee projects would be unprofitable and accordingly accrued for such losses. OPERATING EXPENSES SALES AND MARKETING. Sales and marketing expenses increased from $2.2 million in fiscal 1997 to $10.3 million in fiscal 1998. The increase is attributable to increased sales commissions, a larger number of sales and marketing employees and increases in marketing program spending. RESEARCH AND DEVELOPMENT. Research and development expenses increased from $1.9 million in fiscal 1997 to $4.5 million in fiscal 1998. This increase is attributable to the growing number of research and development personnel. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased from $588,000 in fiscal 1997 to $2.6 million in fiscal 1998. This increase is attributable to a growing number of administrative personnel, increased facility costs for the expanded facility required for the total incremental company headcount, hiring costs for new employees, increased communication costs particularly to remote offices, the implementation costs to install our financial and human resource systems infrastructure and professional fees. 30

OTHER INCOME, NET Other income, net increased from $273,000 in fiscal 1997 to $568,000 in fiscal 1998. This is attributable to an increase in interest income on our deposits in our operating and investment accounts. PROVISION FOR INCOME TAXES We incurred operating losses for all periods from inception through March 31, 1999, and therefore have not recorded a provision for income taxes. We have recorded a valuation allowance for the full amount of our net deferred tax assets, as the future realization of the tax benefit is not currently likely. As of September 30, 1998, we had net operating loss carry-forwards for federal tax purposes of approximately $11.5 million and for state tax purposes of approximately $8.3 million. These federal and state tax loss carry-forwards are available to reduce future taxable income and expire at various dates into fiscal 2012. Under the provisions of the Internal Revenue Code, certain substantial changes in our ownership may limit the amount of net operating loss carry-forwards that could be utilized annually in the future to offset taxable income. LIQUIDITY AND CAPITAL RESOURCES Since inception, we have financed our operations through private sales of preferred stock, with net proceeds of $23.2 million, bank loans and equipment leases. As of March 31, 1999, we had $21.4 million in cash, cash equivalents and short-term investments, and $3.8 million in working capital. Net cash used in operating activities was $3.1 million in fiscal 1997 and $4.9 million in fiscal 1998. Net cash from operating activities was $10.0 million in the six months ended March 31, 1999. Net cash flows from operating activities in each period reflect increasing net losses and, to a lesser extent, accounts receivable offset in part by increases in accrued compensation and liabilities. Net cash from operating activities in the six months ended March 31, 1999 reflects $14.4 million of deferred revenue from customer payments that were not recognized as revenue. Net cash used in investing activities was $1.0 million in fiscal 1997, $6.5 million in fiscal 1998 and $4.1 million in the six months ended March 31, 1999. Cash used in investing activities reflects purchases of property and equipment in each period, purchases of short-term investments in fiscal 1998 and in the six months ended March 31, 1999, and proceeds from the sale of short-term investments in the six months ended March 31, 1999. Net cash from financing activities was $19.5 million in fiscal 1997, $4.2 million in fiscal 1998, and $374,000 in the six months ended March 31, 1999. These cash flows reflect primarily proceeds from private sales of preferred stock. Capital expenditures, including capital leases, were $995,000 in fiscal 1997, $2.0 million in fiscal 1998, and $2.4 million in the six months ended March 31, 1999. Our capital expenditures consisted of purchases of operating resources to manage our operations, including computer hardware and software, office furniture and equipment and leasehold improvements. We expect that our capital expenditures will continue to increase in the future. Since inception, we have generally funded capital expenditures either through the use of working capital or with capital leases. In connection with the relocation of our headquarters, we are planning to make approximately $8.0 million in leasehold improvements. We will also need to purchase additional operating resources. We intend to enter into a loan agreement to finance these commitments. To the extent we are unable to secure this financing, we may be required to apply a portion of the proceeds from this offering toward these expenditures. We expect to experience significant growth in our operating expenses, particularly research and development and sales and marketing expenses, for the foreseeable future in order to execute our business plan. As a result, we anticipate that such operating expenses, as well as planned capital expenditures, will constitute a material use of our cash resources. In addition, we may utilize cash resources to fund acquisitions or investments in complementary businesses, technologies or product lines. We believe that the net proceeds from the sale of the common stock in this offering will be sufficient to meet our working 31

capital and operating resource expenditure requirements for at least the next two years. Thereafter, we may find it necessary to obtain additional equity or debt financing. In the event additional financing is required, we may not be able to raise it on acceptable terms or at all. YEAR 2000 READINESS The "Year 2000 issue" refers generally to the problems that some software may have in determining the correct century for the year. For example, software with date-sensitive functions that is not Year 2000 compliant may not be able to distinguish whether "00" means 1900 or 2000, which may result in failures or the creation of erroneous results. We designed all of our products to be Year 2000 compliant when configured and used in accordance with the related documentation, and provided that the underlying operating system of the host machine and any other software used with or in the host machine or our products are Year 2000 compliant. However, we have not tested our products for Year 2000 compliance. We continue to respond to customer questions about prior versions of our products on a case-by-case basis. We have defined Year 2000 compliant as the ability to: - Correctly handle date information needed for the December 31, 1999 to January 1, 2000 date change; - Function according to the product documentation provided for this date change, without changes in operation resulting from the advent of a new century, assuming correct configuration; - Respond to two-digit date input in a way that resolves the ambiguity as to century in a disclosed, defined and predetermined manner; - Store and provide output of date information in ways that are unambiguous as to century if the date elements in interfaces and data storage specify the century; and - Recognize year 2000 as a leap year. We have tested software obtained from third parties that is incorporated into our products, and we are seeking assurances from our vendors that licensed software is Year 2000 compliant. To date, we have received assurances from the vendors of our enterprise resource planning software, and technology support software as to their Year 2000 compliance. Despite testing by us and current and potential customers, and assurances from developers of products incorporated into our products, our products may contain undetected errors or defects associated with Year 2000 date functions. Known or unknown errors or defects in our products could result in delay or loss of revenues, diversion of development resources, damage to our reputation, increased service and warranty costs, or liability from our customers, any of which could seriously harm our business. Some commentators have predicted significant litigation regarding Year 2000 compliance issues, and we are aware of these lawsuits against other software vendors. Because of the unprecedented nature of this litigation, it is uncertain whether or to what extent we may be affected by it. We have initiated an assessment of our material internal information technology systems, including both our own software products and third-party software and hardware technology. We have not initiated an assessment of our non-information technology systems, although we have received a favorable assessment of the Year 2000 compliance of our new headquarters in Mountain View, California. We expect to complete testing of our information technology systems in 1999. To the extent that we are not able to test the technology provided by third-party vendors, we are seeking assurances from these vendors that their systems are Year 2000 compliant. We are not currently aware of any material operational issues or costs associated with preparing our internal information technology and non-information technology systems for the Year 2000. However, we may experience material unanticipated problems and costs caused by undetected errors or defects in the technology used in our internal information technology and non-information technology systems. 32

We do not currently have any information concerning the Year 2000 compliance status of our customers. Our current or future customers may incur significant expenses to achieve Year 2000 compliance. If our customers are not Year 2000 compliant, they may experience material costs to remedy problems, or they may face litigation costs. In either case, Year 2000 issues could reduce or eliminate the budgets that current or potential customers could have for or delay purchases of our products and services. As a result, our business could be seriously harmed. We have funded our Year 2000 plan from operating cash flows and have not separately accounted for these costs in the past. To date, these costs have not been material. We will incur additional costs related to the Year 2000 plan for administrative personnel to manage the project, outside contractor assistance, technical support for our products, product engineering and customer satisfaction. In addition, we may experience material problems and costs with Year 2000 compliance that could seriously harm our business. We have not yet fully developed a contingency plan to address situations that may result if we are unable to achieve Year 2000 readiness of our critical operations, and we do not anticipate the need to do so. The cost of developing and implementing such a plan may itself be material. Finally, we are also subject to external forces that might generally affect industry and commerce, such as utility or transportation company Year 2000 compliance failure interruptions. Year 2000 issues affecting our business, if not adequately addressed by us, our third party vendors or suppliers or our customers, could have a number of "worst case" consequences. These include: - The inability of our customers to use our products and services to procure and manage their operating resources; - Claims from our customers asserting liability, including liability for breach of warranties related to the failure of our products and services to function properly, and any resulting settlements or judgments; and - Our inability to manage our own business. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 requires disclosure of certain information regarding operating segments, products and services, geographic areas of operation and major customers. We are in the process of evaluating the effects of this change on our reporting segments. We will adopt SFAS No. 131 in fiscal 1999. In March 1998, the Accounting Standards Executive Committee (AcSEC) issued Statement of Position, or SOP, 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 establishes the accounting for costs of software products developed or purchased for internal use, including when such costs should be capitalized. We do not expect SOP 98-1 to have a material effect on our financial position, results of operations or cash flow. We will adopt SOP 98-1 in fiscal 2000. In April 1998, the AcSEC issued SOP 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES. Under SOP 98-5, the cost of start-up activities should be expensed as incurred. We expect that the adoption of SOP 98-5 will not have a material impact on our financial position, results of operations or cash flows. We will be required to adopt SOP 98-5 in fiscal 2000. In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes accounting and reporting standards for derivative financial instruments and hedging activities related to those instruments, as well as other hedging activities. Because Ariba does not currently hold any derivative instruments and does not engage in hedging activities, we expect the adoption of SFAS No. 133 will not have a material impact on our financial position, results of operations or cash flows. We will be required to adopt SFAS No. 133 in fiscal 2000. 33

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK We develop products in the United States and market our products in North America, Europe and the Asia-Pacific region. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. As all sales are currently made in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets. Our interest income is sensitive to changes in the general level of U.S. interest rates, particularly since the majority of our investments are in short-term instruments. Due to the short-term nature of our investments, we believe that there is no material risk exposure. Therefore, no quantitative tabular disclosures are required. 34

BUSINESS THE PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH FORWARD-LOOKING STATEMENTS. OVERVIEW Ariba is a leading provider of intranet- and Internet-based business-to-business electronic commerce solutions for operating resources. Our Operating Resource Management System, Ariba ORMS, enables organizations to automate the procurement cycle within their intranets, lowering the costs associated with operating resources. Our recently launched Ariba.com network is a global business-to-business electronic commerce network for operating resources that enables buyers and suppliers to automate transactions on the Internet. Together, Ariba ORMS and Ariba.com combine intranet-based network applications with an Internet-based network to create a business-to-business electronic commerce solution for operating resources that benefits both buyers and suppliers. Since we began marketing Ariba ORMS in March 1997, it has been licensed by large, multinational industry leaders and public sector organizations including Chevron, Cisco Systems, FedEx, General Motors, Hewlett-Packard, Philips, The State of California, U S WEST and Visa. Our objective is to create the leading Internet-based business-to-business electronic commerce network for operating resources. Our strategy to achieve this objective is to leverage the buying power of a large multinational customer base to attract leading operating resource suppliers to our Ariba.com network. We believe a growing number of suppliers in our Ariba.com network will in turn draw more buyers to our network. We also believe this growth cycle will help create a network effect, where the value to each participant in the network increases with the addition of each new participant, increasing the overall value of our Ariba solution. INDUSTRY BACKGROUND GROWTH OF THE INTERNET AND BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE The Internet has emerged as the fastest growing communication medium in history. With over 97 million users at the end of 1998, growing to 320 million users by 2002, as estimated by International Data Corporation, the Internet is dramatically changing how businesses and individuals communicate and share information. The Internet has created new opportunities for conducting commerce, such as business-to-consumer and person-to-person electronic commerce. Recently, the widespread adoption of intranets and the acceptance of the Internet as a business communications platform has created a foundation for business-to-business electronic commerce that will enable organizations to streamline complex processes, lower costs and improve productivity. With this foundation, Internet-based business-to-business electronic commerce is poised for rapid growth and is expected to represent a significantly larger opportunity than business-to-consumer or person-to-person electronic commerce. According to Forrester Research, business-to-business electronic commerce is expected to grow from $43 billion in 1998 to $1.3 trillion in 2003, accounting for more than 90% of the dollar value of electronic commerce in the United States. This market is expected to create a substantial demand for intranet- and Internet-based commerce applications. According to International Data Corporation, the worldwide market for Internet-based electronic commerce procurement and order management applications is expected to experience tremendous growth, increasing from $187 million in 1998 to $8.5 billion in 2003. TRADITIONAL APPROACHES TO BUYING OPERATING RESOURCES Operating resources are the goods and services required to operate a company, ranging from significant items, such as information technology, telecommunications equipment and professional 35

services, to recurring items, such as MRO (Maintenance, Repair and Operations) supplies, travel and entertainment expenses, and office equipment. Operating resource expenditures are distinct from manufacturing resource expenditures, such as raw materials and other costs of goods sold, and from human resource expenditures, such as wages, salaries and benefits. According to Killen & Associates, operating resource expenditures are often the largest segment of corporate expenditures, representing approximately 33% of an average company's total revenues. Today, most organizations buy operating resources through paper-based or semi-automated processes. These processes are costly, time consuming and complex and often include the re-keying of information, lengthy approval cycles and significant involvement of financial and administrative personnel. AMR estimates that the cost per procurement transaction ranges from $75 to $175, often exceeding the cost of the items being purchased. In addition, these time consuming processes often result in fulfillment delays to end-users, leading to productivity losses. Beyond the time and expense associated with manual processing costs, organizations suffer even greater costs when they cannot fully leverage procurement economies of scale. Most organizations lack the systems that enable them to monitor purchases and compile data necessary to negotiate better volume discounts with preferred suppliers. In addition, most organizations suffer from a problem known as "maverick buying," which occurs when personnel do not follow internal guidelines as to which suppliers to use for operating resource purchases. When preferred suppliers are not used, organizations pay a premium. AMR estimates that maverick buying accounts for one-third of operating resource expenditures, costing organizations a 15% to 27% premium on those purchases. Traditional procurement processes also result in missed revenue opportunities and additional costs to suppliers. When buyers are unable to channel purchases to preferred suppliers, these suppliers lose revenue. Suppliers also suffer from inefficient, error prone and manually-intensive order fulfillment processes. Many suppliers dedicate significant resources to the manual entry of information from faxed or phoned-in purchase orders and the manual processing of paper checks, invoices and ship notices. Suppliers also spend significant resources on customer acquisition and sales costs, including the production and distribution of paper catalogs. Without fully automated and integrated electronic commerce technologies, both buyers and suppliers incur substantial extraneous costs in conducting commerce. OPPORTUNITY FOR BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE SOLUTIONS FOR OPERATING RESOURCES Over the past 30 years, information technologies have brought automation to departmental operations such as manufacturing resource planning, financial management, sales force automation and human resource management. However, the information technology platforms that made departmental automation possible did not provide enterprise-wide connectivity within organizations or connectivity between organizations. Thus, the processes linking end-users to approvers and organizations to suppliers for operating resources are today largely paper-based. With the widespread implementation of intranets and the adoption of the Internet as a business communication platform, organizations can now automate enterprise-wide and inter-organizational commerce activities. This infrastructure creates a significant market opportunity for intranet- and Internet-based business-to-business electronic commerce solutions for operating resources. For buyers, a solution must include a user-friendly, intranet-based system that links end-users, approvers and administrative personnel with an integrated global network that connects buying organizations with suppliers. This system must be flexible enough to meet the unique business process requirements of large, multinational organizations and must be highly scalable, reliable and rapidly deployable. It must leverage an organization's existing investments in information technologies by integrating with multiple financial, human resource and enterprise resource planning systems. The system must provide data reporting and analytical tools that enable analysis of end-user spending patterns and provide insight into savings opportunities. For suppliers, the solution must be easy to implement, based on 36

open standards and leverage existing investments in on-line catalogs and order processing technologies. Additionally, the solution should offer suppliers the opportunity to expand their customer base by providing access to a critical mass of buyers. Addressing these requirements for both buyers and suppliers is critical to enabling full scale business-to-business electronic commerce for operating resources. THE ARIBA SOLUTION Ariba is a leading provider of intranet- and Internet-based business-to-business electronic commerce solutions for operating resources. Our solution consists of two components, our intranet-based Ariba ORMS (Operating Resource Management System) network application and our Internet-based Ariba.com network. Ariba ORMS is a robust, scalable and reliable network application that operates primarily within a buying organization's intranet. Ariba ORMS enables an organization to reduce processing costs and improve productivity by automating the procurement cycle and linking end-users throughout an organization with internal approvers and financial systems. Ariba ORMS also enables organizations to reduce the cost of operating resources by channeling purchases to preferred suppliers. Our recently launched Ariba.com network is a global business-to-business electronic commerce network for operating resources, enabling buyers and suppliers to automate transactions on the Internet. Together, Ariba ORMS and our Ariba.com network combine intranet-based network applications with an Internet-based network to create a business-to-business electronic commerce solution for operating resources benefiting both buyers and suppliers. We believe our solution provides the following benefits: BENEFITS TO BUYERS: SIGNIFICANTLY REDUCED PROCESSING COSTS AND INCREASED PRODUCTIVITY. By automating the operating resource procurement process, our Ariba solution allows organizations to achieve significant cost savings and productivity enhancements. Ariba ORMS is capable of streamlining and automating complex and unusual business processes. Ariba ORMS also leverages existing investments in financial, human resource and enterprise resource planning systems, which reduces or eliminates the need to manually enter data into these systems. As a result, our Ariba solution allows organizations to focus on value-added activities such as negotiating better discounts with preferred suppliers. Through our solution, end-users can order and receive requested items more quickly and with less effort, improving overall productivity. SUBSTANTIALLY REDUCED COSTS OF OPERATING RESOURCES. Our Ariba solution enables organizations to maximize procurement economies of scale, lowering the overall costs of operating resources. Ariba ORMS provides corporate-wide data, analysis and reporting tools on buying patterns, enabling organizations to negotiate more favorable contracts with preferred suppliers. Our Ariba solution in turn routes transactions to these preferred suppliers automatically. Moreover, Ariba ORMS is accessible on every desktop, is easy-to-use and streamlines the procurement process. These benefits minimize the frustration to end-users that often results in maverick buying, further enabling organizations to take advantage of negotiated discounts with preferred suppliers. BENEFITS TO SUPPLIERS: INCREASED VOLUME AND REVENUE OPPORTUNITIES. Ariba ORMS and our Ariba.com network enable buyers to channel spending to preferred suppliers, providing these suppliers the opportunity to increase revenues. Our Ariba.com network provides suppliers with greater access to new and existing customers through a global presence and availability 24 hours a day, seven days a week. In addition, by leveraging suppliers' web-based catalog capabilities, our solution enables suppliers to differentiate and market their goods and services in their preferred format. 37

REDUCED SALES COSTS. Our Ariba solution enables suppliers to reduce sales costs in several ways. By automating transactions, suppliers can reduce the costs associated with, and reduce the potential for error inherent in, paper-based ordering and payment processes. Product information can be distributed electronically, reducing the cost of printed product catalog distribution. In addition, suppliers can leverage their existing investments in electronic commerce infrastructure, including catalogs and product web pages. We believe that the benefits of Ariba ORMS and our Ariba.com network will create a growth cycle that increases the value of our Ariba solution to both buyers and suppliers over time. As buyers benefit from the efficiencies of our Ariba solution, we believe suppliers will be drawn to our Ariba.com network by the aggregated purchasing power of buyers using our network. As more suppliers offer operating resources through the network, more buyers are encouraged to join our network. THE ARIBA GROWTH STRATEGY Our objective is to create the leading Internet-based business-to-business electronic commerce network for operating resources. Key elements of our strategy to achieve this objective include: TARGET LARGE MULTINATIONAL BUYERS IN A BROAD RANGE OF INDUSTRIES. We intend to continue to target large, multinational corporations and public sector institutions, leveraging our first mover advantage with many of these organizations. We believe these organizations will be the most likely early beneficiaries of an automated, reliable, robust and scalable procurement solution and can provide strong customer references. Furthermore, we believe the large spending power these organizations can channel through our Ariba.com network will attract suppliers to the network. Finally, these organizations have demanding requirements and rigorously test our products, assisting us in designing a robust, reliable and scalable solution. CREATE A NETWORK EFFECT BY ATTRACTING THE LARGEST BUYERS AND SUPPLIERS TO OUR ARIBA.COM NETWORK. As Ariba ORMS is deployed to a critical mass of large buyers in numerous industries, we intend to leverage the buying power of these large organizations to attract suppliers to our Ariba.com network. We believe a growing number of suppliers in our Ariba.com network will in turn draw more buyers to our network. We also believe this growth cycle will help create a network effect, where the value to each participant in the network increases with the addition of each new participant, increasing the overall value of our Ariba solution. LEVERAGE AND EXTEND THE ARIBA COMMUNITY OF PARTNERS. We intend to leverage our strategic relationships with industry leaders in the areas of electronic commerce infrastructure, information technology consulting, distribution and content aggregation. We are working with these partners to accelerate our Ariba.com network rollout, provide additional customer implementation capabilities, expand our customer base and increase the content available on our Ariba.com network. These relationships allow us to focus on our core area of expertise, while leveraging the strengths of complementary technologies and the influence of these industry leaders. We believe that these relationships, as well as others that we intend to pursue, will enable the rapid and widespread deployment of our electronic commerce solution. PROVIDE SUPERIOR CUSTOMER SATISFACTION. We believe a loyal base of reference customers affords us a significant competitive advantage. Therefore, we intend to continue to focus significant resources on customer satisfaction programs. In order to foster a culture of customer satisfaction as our highest priority, all of our employees with variable compensation are paid in part based on customer satisfaction as measured by an independent third party organization. We continue to make use of a number of other programs to promote superior customer satisfaction including our customer-driven development process and our frequent customer advisory councils. EXPAND WORLDWIDE INFRASTRUCTURE. We intend to aggressively grow our global presence by expanding our worldwide field sales, marketing and services organizations. To complement this strategy, we intend to 38

continue to globalize our operations and expand our corporate and administrative infrastructure. We also intend to enter into a strategic relationship with a third party to create a worldwide infrastructure for our Ariba.com network. ARIBA PRODUCTS AND SERVICES Ariba provides a comprehensive intranet- and Internet-based business-to-business electronic commerce solution for operating resources. This solution consists of two components, Ariba ORMS and our Ariba.com network. Ariba ORMS is a network application that operates primarily within a buying organization's intranet. Ariba ORMS enables organizations to reduce processing costs and improve productivity by automating the procurement cycle, linking end-users throughout the organization with approvers and financial systems. Ariba ORMS also enables organizations to reduce the cost of operating resources by channeling purchases to preferred suppliers. As orders are generated and approved, Ariba ORMS automates commerce transactions securely with suppliers on the Internet through our Ariba.com network. Our recently launched Ariba.com network is a global business-to-business electronic commerce network for operating resources that enables buying organizations, suppliers and distributors to automate transactions on the Internet. Together, Ariba ORMS and our Ariba.com network combine intranet-based network applications with an Internet-based network to create a business-to-business electronic commerce solution for operating resources benefiting both buyers and suppliers. [EDGAR description of artwork: This diagram depicts a component-level overview of both the Registrant's Ariba ORMS product and the Ariba.com network. The diagram demonstrates that Ariba ORMS resides in the intranet of an organization and that the Ariba.com network resides on the Internet.] ARIBA ORMS Ariba ORMS is a robust, scalable and reliable network application that operates primarily within a buying organization's intranet. Ariba ORMS enables organizations to reduce processing costs and improve productivity by automating the procurement cycle, linking end-users throughout the organization with approvers and financial systems. Ariba ORMS also enables organizations to reduce the cost of operating resources channeling purchases to preferred suppliers. Ariba ORMS is designed to handle the large-scale integration of end-users, approvers and administrative personnel through web-based applications that automate procurement and finance processes. Ariba ORMS works with multiple enterprise systems 39

simultaneously, in addition to providing real-time electronic access to important procurement information, such as supplier product specifications, price lists, web sites and order status. 40

[EDGAR description of artwork: This diagram depicts a component-level view of the Registrant's Ariba ORMS product including the modules, adapters, and characteristics as described under the section, "Ariba ORMS."] The primary characteristics of Ariba ORMS are: USER FRIENDLY, WEB-BASED INTERFACES. The browser-based user interface enables users throughout an organization to take full advantage of Ariba ORMS from their desktop and with minimal training. Wizards, software that provides automated assistance, guide less experienced users through the acquisition process, while an advanced user interface makes the system more productive for experienced users. ELECTRONIC BUSINESS PROCESS AUTOMATION. Ariba ORMS provides flexible workflow capable of streamlining and automating even the most complex or unusual business processes of large, multinational organizations. This flexible workflow can be customized for the unique processes of an organization and can be tailored to respond to end-user input, system events or any extrinsic or intrinsic data in the procurement cycle. SIMULTANEOUS INTEGRATION WITH MULTIPLE ENTERPRISE SYSTEMS. Ariba ORMS integrates with leading finance, human resource management and enterprise resource planning systems from vendors such as PeopleSoft, SAP and Oracle. In addition, Ariba ORMS provides a comprehensive API (Application Programming Interface) to integrate with other legacy systems through adapters that are sold as separate products. A single Ariba ORMS installation can connect with multiple enterprise applications simultaneously through real-time or scheduled interfaces. These interfaces also enable Ariba ORMS to leverage standard user authentication and directory services such as LDAP (Lightweight Directory Access Protocol) and Microsoft's Active Directory. INFORMATION ACCESS. With powerful analytical and reporting tools, Ariba ORMS enables organizations to evaluate data collected throughout the process of acquiring, receiving and paying for operating resources. By employing these analytical tools, an organization can analyze purchasing patterns to streamline the procurement process, negotiate more favorable terms with preferred suppliers and gain insight into additional savings opportunities. ELECTRONIC COMMERCE INTEGRATION THROUGH OUR ARIBA.COM NETWORK. Ariba ORMS delivers electronic commerce integration over the Internet and through our Ariba.com network, allowing organizations to automate commerce transactions with suppliers. By adhering to open standards, Ariba ORMS provides a variety of methods for suppliers to communicate electronically with buying organizations through our Ariba.com network. Ariba ORMS also allows suppliers to leverage their existing web-based catalogs in a seamless and integrated manner. SCALABLE, MULTI-PLATFORM ARCHITECTURE. The Ariba ORMS server currently supports industry-standard approaches to high-performance databases and multi-processor hardware. Ariba ORMS currently supports Microsoft Windows NT and Unix platforms including Hewlett-Packard HP-UX and Sun Solaris. ARIBA ORMS MODULES Ariba ORMS modules are designed specifically for the procurement and management of different operating resources. Each module contains powerful reporting and data analysis tools that enable operations managers to monitor the requisition process and identify areas for cost reductions. 40

The Ariba ORMS modules are: ARIBA MRO. Ariba MRO allows organizations to manage purchases associated with maintenance, repair and operations supplies. These items are primarily ordered through electronic catalogs and may include office products, information technologies and facilities items. ARIBA SERVICES. Ariba Services are specifically designed to address the unique data collection requirements for the procurement of professional services, such as facility, legal, temporary and maintenance services. Purchasing professional services, unlike commodities, involves a number of different variables, such as scope of services needed, qualification of personnel and duration of the services. Ariba Services can integrate this data to process requisitions obtained from the end-user at various points in the requisitioning, procurement and receiving cycle. ARIBA CAPITAL EQUIPMENT. Ariba Capital Equipment addresses the specific needs of capital equipment purchases such as manufacturing, facilities or information technology equipment. The procurement of capital equipment often requires unique data such as different accounting, asset identification and tracking information. Ariba Capital Equipment can be easily configured to suit an organization's specific accounting and tracking needs. ARIBA EFORMS. Ariba eForms allow organizations to create custom forms, which can be attached to existing Ariba applications or used to create new applications for nearly any type of operating resource request. Ariba eForms are created using XML (eXtensible Markup Language), a robust definition language that allows organizations to design forms that capture information from end-users and route the information for internal approval. Each Ariba eForm can have its own approval rules and can incorporate standard data from Ariba ORMS including financial accounting and human resources information. ARIBA EXPENSE MANAGEMENT. Ariba Expense Management automates the expense reporting process associated with expenditures such as travel and entertainment. Ariba Expense Management provides a robust set of features to generate expense reports automatically from electronic credit card, travel card or procurement card data feeds and can route expense reports to functional, travel and expense managers. ARIBA P-CARD RECONCILIATION. Ariba P-Card Reconciliation provides support for the use of P-Cards, credit cards designed specifically for business procurement. P-Cards can be allocated to a given user or an accounting entity. Electronic P-Card statements from financial institutions can be read automatically by Ariba ORMS and reconciled against purchases made, flagging any exceptions or inconsistencies. ARIBA ORMS ENTERPRISE ADAPTERS Ariba ORMS enterprise adapters are designed specifically to integrate with leading finance, human resource management and enterprise resource and planning systems. Ariba ORMS enterprise adapters can provide standard integration with these systems or can be configured to integrate with custom installations of the enterprise system. These adapters enable a single Ariba ORMS installation to integrate with multiple enterprise applications simultaneously through real-time or scheduled interfaces. ARIBA SAP ADAPTER. Ariba SAP Adapter provides real-time and scheduled integration with SAP applications through standard programming interfaces for personnel, accounting, distribution, supplier and financial information. ARIBA PEOPLESOFT ADAPTER. Ariba PeopleSoft Adapter allows real-time and scheduled integration with PeopleSoft finance, distribution and human resources management systems through PeopleSoft's 41

message agent for administrative, personnel, accounting, distribution, supplier and financial information. ARIBA ORACLE ADAPTER. Ariba Oracle Adapter allows real-time and scheduled integration with Oracle applications for personnel, accounting, distribution, supplier and financial information. ARIBA AUTHENTICATION ADAPTER. Ariba Authentication Adapter provides integration with standard user authentication and directory services such as LDAP (Lightweight Directory Access Protocol) and Microsoft's Active Directory. ARIBA GENERAL API ADAPTER. Ariba General API Adapter provides integration with existing and legacy enterprise systems to interface information with Ariba ORMS on a real-time or scheduled basis. Customers who purchase our software products receive a server capacity license, one or more of the Ariba ORMS modules and adapters to interface with enterprise financial and human resource systems. The license fee for the server capacity license is based on the customer's annual volume of line items of purchasing transactions. The license fees for the software modules and adapters consist of individual prices for each module or adapter. The volume licensing of the server capacity allows customers to scale the total cost of their purchase of the Ariba ORMS system to their needs. The server capacity license entitles customers to execute the licensed volume of line items of purchasing transactions during any annual period following their purchase of the server license. Ariba's customers generally purchase estimated server capacity at the time of the purchase of the server license. Following the initial implementation of Ariba ORMS, and based on the reporting and analysis tools available through Ariba ORMS, our customers are able to understand their annual transaction volume more fully. Customers who exceed their estimated volume can purchase additional server capacity. However, there are no recurring annual license fees. To date, three customers have purchased additional annual server capacity licenses. OUR ARIBA.COM NETWORK Our Ariba.com network is an Internet-based operating resource solution designed for large-scale content integration and electronic commerce transactions. Our Ariba.com network bridges buyer and supplier networks on the Internet and offers catalog and content management, order transaction routing and multi-protocol support for numerous electronic commerce standards. Our multi-protocol network allows buyers to send transactions from Ariba ORMS in one standard format; it then automatically converts the order into the supplier's preferred transaction format, such as CXML (Commerce eXtensible Markup Language), a format used on the Internet to describe commerce data and documents, or EDI (Electronic Data Interchange), a format used to exchange data and documents electronically. This infrastructure eliminates the need for a single standard for electronic commerce and gives suppliers the freedom to transact in their preferred protocols. Our Ariba.com network also allows suppliers to leverage their existing electronic commerce infrastructure to provide information about their products and services. Suppliers can send electronic catalogs through standard formats such as CIF (Catalog Interchange Format), a format commonly used to transfer catalog information electronically, and CXML. In addition, buyers can link to a supplier's web site using a technology called CXML Punch-out. CXML Punch-out allows a buyer to select a product utilizing a supplier's web site while keeping the purchasing process within our Ariba ORMS system for internal approval, accounting and administrative controls. This feature is particularly useful for suppliers with robust web site, electronic product configuration systems and large product catalogs. In addition, suppliers can leverage their existing web-based catalog capabilities to differentiate and market their goods and services. Using our Ariba.com network, suppliers have the opportunity to eliminate distance barriers and 42

reach a large, aggregated customer base with little additional cost. A schematic of our Ariba.com network is shown below. 43

[EDGAR description of artwork: This diagram depicts a component-level view of the Registrant's Ariba.com network on the Internet. This diagram illustrates the nature of the interaction of buyers and suppliers through the Ariba.com network on the Internet. This diagram also illustrates how various communication protocols, such as CXML, HTML, EDI, CIF, and OBI, are used by Ariba.com on the Internet to allow buyers and suppliers to conduct commerce. The diagram also illustrates the primary components of the Ariba.com network as described under "The Ariba.com Network."] The key components of our Ariba.com network are: OPEN STANDARDS MULTI-PROTOCOL TRANSACTION NETWORK. Our Ariba.com network automatically routes and translates transactions between buyers and suppliers using most major electronic commerce standards, including: XML; CXML; Internet EDI; VAN EDI (Value Added Networks for EDI); a subset of the OBI standard (Open Buying on the Internet), a protocol for buying goods and services on the Internet; HTML (Hyper-Text Markup Language), a format commonly used to define content for web pages; e-mail; auto-fax and CIF. This inter-operability enables buyers to conduct business with suppliers independent of the type of web infrastructure used by the supplier. WEB-BASED CONTENT ACCESS AND INDEXING. Our Ariba.com network uses a scalable approach for content management. This approach employs indexing, rather than content aggregation, to connect buying organizations using Ariba ORMS to suppliers' existing web-based catalogs. This indexing approach eliminates the need to aggregate content in a central repository, yet provides robust and comprehensive searching tools to buyers. In addition, our Ariba.com network allows suppliers to leverage existing electronic commerce web-based catalogs through CIF, CXML and CXML Punch-out. ARIBA SUPPLIER LINK. In December 1998, we announced our Ariba Supplier Link program, an initiative to integrate supplier content into our Ariba.com network. Members of Ariba Supplier Link provide buying organizations using Ariba ORMS access to indices of millions of items from thousands of manufacturers. 44

SUPPLIER SELF-MANAGEMENT AND REGISTRATION. To conduct commerce with all buying organizations using Ariba ORMS, suppliers need only to register once and continue to manage their relationships online, in their preferred transaction standards and configurations without the need for additional software. NEWS, INFORMATION AND SERVICES. Our Ariba.com network provides news, information and services of interest to business buyers and suppliers such as sourcing, supplier, financial and industry information. Our Ariba.com network is designed for high-performance databases and multi-processing hardware and utilizes a multi-server configuration to allow workloads to be shared across multiple servers and the site to maintain availability of online service. We intend to enter into an outsourcing relationship with a third party to build and operate the network and platform infrastructure for our Ariba.com network. It will be difficult for us to operate our Ariba.com network if we are unable to contract with a third party as we would have to perform these functions ourselves or obtain similar services from another provider, and we may not successfully perform or obtain these services for our Ariba.com network on a timely and cost-effective basis. Although we expect to derive revenue from our Ariba.com network in the future, we have not yet established our pricing and revenue model for the services associated with our network. If we are unable to establish a pricing and revenue model acceptable to our customers, our Ariba.com network may not be commercially successful. As of March 31, 1999, only one customer was buying operating resources through our network from a limited number of linked suppliers. CUSTOMERS We target large, multinational market leaders in a broad range of industries. As of March 31, 1999, customers that have purchased licenses for Ariba ORMS include: <TABLE> <S> <C> Advanced Micro Devices Motorola Autodesk Nestle USA Boehringer-Ingelheim Octel Messaging Division of Lucent Bristol-Myers Squibb Technologies Cadence Design Systems Parametric Technology Corporation Caltex Philips Electronics Canadian Imperial Bank of Commerce Purdue University Chevron Seagate Technology Cisco Systems Sonoco Products Citizens Telecommunications Staples Cypress Semiconductor The State of California Earthgrains Transamerica FedEx U S WEST General Motors Visa International Hewlett-Packard Visa USA Merck </TABLE> SUPPLIERS In December 1998, we announced our Ariba Supplier Link or "ASL" program, which is an initiative to provide supplier content to Ariba ORMS customers electronically. We have over 40 members in our 45

program. These members include individual manufacturers, distributors, resellers, content management solution providers and sourcing organizations. Our ASL members include the following companies: <TABLE> <S> <C> 1.800.Batteries Interworld 1Nine Systems Ironside Technologies Anderson Unicom Group Life Technologies Barnesandnoble.com MicroAge Integration Beyond.com MicroAge Toronto Boise Cascade Office Products NCR Systemedia Group BT Office Products International Neoforma CAP Office Depot Collabria PCNet Com-Kyl PcOrder.com Compucom Reynolds and Reynolds Fatbrain.com RoweCom Contact East Saqquaro Systems Cort Furniture Rental SciQuest Data Impressions Staples Digital River Technicon Electro Rent Telepress EMAX Solution Partners US Technologies Grand & Toy ViewTek Harbinger W.W. Grainger Hewlett-Packard Wood Associates Inacom </TABLE> 46

STRATEGIC RELATIONSHIPS To ensure that we deliver a comprehensive solution to our customers, we have established strategic relationships with organizations in four general categories: hardware platforms; software platforms; electronic commerce; and systems integrators. Our hardware partners include Cisco Systems, Hewlett-Packard and Sun Microsystems. These relationships help ensure the reliability, scalability and performance of the Ariba solution on these platforms. In addition, we intend to enter into an outsourcing relationship with a third party to build and operate the network and platform infrastructure for our Ariba.com network. Our electronic commerce partners include American Express, Sterling Commerce and Visa International. We have system integrator relationships with Andersen Consulting, Deloitte & Touche, Ernst & Young, KPMG, PricewaterhouseCoopers, Cambridge Technology Partners, Computer Sciences Corporation, Core Technologies, SRA International, Tier Technologies and TSA Associates. These system integrators implement our products and often assist us with sales lead generation. We have certified and trained approximately 125 consultants in these organizations for the implementation and operation of our products. We rely, and expect to increasingly rely, on a number of third parties for implementation, support and recommendations of our products during the evaluation stage of a customer's purchase process. If we are unable to maintain or increase the number and quality of our relationships with providers that recommend, implement or support operating resources management systems, our business will be seriously harmed. A number of our competitors, including Oracle, SAP and PeopleSoft, have significantly more established relationships with such providers and, as a result, these firms may be more likely to recommend competitors' products and services rather than our products and services. Furthermore, it is possible that our current implementation partners, many of which have significantly greater financial, technical, marketing and other resources than we have, could begin to market software products and services that compete with our products and services. SALES AND IMPLEMENTATION We sell our software primarily through our worldwide direct sales organization. As of March 31, 1999, our direct sales force consisted of 57 sales professionals located in 14 domestic locations and offices in Canada, the United Kingdom and The Netherlands. Application specialists that provide pre-sales support to potential customers on product information and deployment capabilities complement our direct sales force. We plan to expand our direct sales force. During our sales process, we typically approach senior executive management teams including the chief financial officer, chief information officer and chief executive officer of our potential customers. We utilize sales teams consisting of both sales and technical professionals who work with our strategic partners to create organization-specific proposals, presentations and demonstrations that address the specific needs of each potential customer. Ariba provides professional services to augment the implementation efforts of customers and systems integrators. This organization provides professional services on the strategy, methodology and technical implementation of Ariba ORMS. As of March 31, 1999, our professional services organization consisted of 41 employees. We believe that strategic partnerships will assist us in gaining broad market acceptance as well as enhance our marketing, sales and distribution capabilities. We have therefore developed close relationships with a number of strategic integrators and technology providers. These companies have worked with us and participated in joint sales calls to several of our large accounts. See "--Strategic Relationships." 47

MARKETING We focus our marketing efforts toward educating our target market, generating new sales opportunities, and creating awareness for our business-to-business electronic commerce solutions. We conduct a variety of marketing programs worldwide to educate our target market. We have engaged in marketing activities such as business seminars, trade shows, press relations and industry analyst programs and advisory councils. Our marketing organization also serves an integral role in acquiring, organizing and prioritizing customer and industry feedback in order to help provide product direction to our development organizations. We formalized this customer-driven approach by establishing advisory council meetings, made up of numerous industry experts, to provide forums for discussing customer needs and requirements. To date, we have held ten of these events. Our most recent advisory council meeting was attended by over 800 people, including procurement, information technology and finance executives. In addition to providing information to prospective customers, advisory council meetings provide a useful forum in which to share information, test product concepts and collect data on customer and industry needs. We have also augmented advisory council meetings with a detailed product management process that surveys customer and market needs to predict and prioritize future customer requirements. We also have marketing relationships with Andersen Consulting, Cisco Systems, Hewlett-Packard, Sun Microsystems and Visa International. These relationships provide collaborative resources to help extend the reach of our presence in the marketplace. We intend to continue to pursue these programs in the future. CUSTOMER SERVICE, TRAINING AND SUPPORT We believe that customer satisfaction is essential for our long-term success and offer comprehensive customer assistance programs. Our technical support provides dependable and timely resolution of customer technical inquiries and is available to clients by telephone, over the web or by electronic mail. We use a customer service automation system to track each customer inquiry until it is resolved. Our education services group delivers education and training to our clients and partners. We offer a comprehensive series of classes to provide the knowledge and skills to successfully deploy, use and maintain our products and solutions. These courses focus on the technical aspects of our products as well as real-world business issues and processes. All of our classes include lecture, demonstration, discussion and hands-on use of our solutions. Classes are held regularly in our training facilities at our headquarters in Sunnyvale, California. Our customer support and training organizations consisted of 22 employees as of March 31, 1999. RESEARCH AND DEVELOPMENT We originally introduced Ariba ORMS in May 1997 and have released a number of product enhancements in five subsequent major releases. We introduced our Ariba.com network in March 1999 and continue to provide enhancements to this Internet platform on an ongoing basis. As of March 31, 1999, our research and development organizations were comprised of 74 employees. Our research and development operations are divided into two organizations, one focusing on Ariba ORMS and the other focusing on our Ariba.com network. Our Ariba ORMS organization has eight teams that include server and infrastructure development, user interface and application design, tools development, enterprise integration, quality assurance, documentation, release management and advanced development. Our Ariba.com network organization has five teams that include Internet applications and design, platform and infrastructure engineering, operations, quality assurance and documentation. Both the Ariba ORMS and our Ariba.com network organizations regularly share resources and collaborate on code development, quality assurance and documentation. We believe our software and Internet applications teams and core technologies represent a significant competitive advantage. The software and Internet applications development organizations include a number of key members from past engineering organizations that have developed Internet applications 47

and services, and have extensive experience with Java programming. We believe a technically skilled and highly productive development organization is a key component for the success of new product offerings. We must attract and retain highly qualified employees to further our research and development efforts. Our business could be seriously harmed if we are not able to hire and retain a sufficient number of these individuals. We cannot be sure that existing and future development efforts will be completed within our anticipated schedules or that, if completed, they will have the features or quality necessary to make them successful in the marketplace. In addition, the widespread adoption of our Ariba.com network by our customers depends in part on the adoption and implementation of the next version of our Ariba ORMS product, which is not scheduled for commercial release until later this year. Future delays in this release or problems in the development or marketing of product enhancements, Internet services or applications or new products could seriously harm the deployment of our Ariba.com network and could harm our business. Further, despite testing by us and by current and potential customers, errors could be found in our products. We may not be able to successfully correct these errors in a timely and cost effective manner. If we are not able to develop new products or enhancements to existing products or corrections on a timely and cost-effective basis, or if these new products or enhancements do not have the features or quality necessary to make them successful in the marketplace, our business will be seriously harmed. We expect that most of our enhancements to existing and future products will be developed internally. However, we currently license certain externally-developed technologies and will continue to evaluate externally-developed technologies to integrate with our solutions. These externally developed technologies, if suffering from defects, quality issues or the lack of product functionality required to make our solutions successful in the marketplace, may seriously impact and harm our business. COMPETITION The market for our solution is intensely competitive, evolving and subject to rapid technological change. The intensity of competition is expected to increase in the future. Increased competition is likely to result in price reductions, reduced gross margins and loss of market share, any one of which could seriously harm our business. Competitors vary in size and in the scope and breadth of the products and services offered. We encounter competition with respect to different aspects of our solution from a variety of vendors including Captura Software, Clarus, Commerce One, Concur Technologies, Extensity, GE Information Services, Intelysis, Netscape Communications and TRADE'ex Electronic Commerce Systems. We may also encounter competition from several major enterprise software developers, such as Oracle, PeopleSoft and SAP. In addition, because there are relatively low barriers to entry in the operating resource management software market, we expect additional competition from other established and emerging companies, as the operational resource management software market continues to develop and expand. We believe that the principal competitive factors affecting our market include a significant base of reference customers, breadth and depth of solution, critical mass of buyers and suppliers, product quality and performance, customer service, core technology, product features, ability to implement solutions and value of solution. Although we believe that our solutions currently compete favorably with respect to these factors, our market is relatively new and is evolving rapidly. We may not be able to maintain our competitive position against current and potential competitors, especially those with significantly greater financial, marketing, service, support, technical and other resources. Many of our competitors have longer operating histories, significantly greater financial, technical, marketing and other resources than us, significantly greater name recognition and a larger installed base of customers. In addition, many of our competitors have well-established relationships with our current and potential customers and have extensive knowledge of our industry. In the past, we have lost potential customers to competitors for various reasons, including lower prices and other incentives not matched by 48

us. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address customer needs. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. We also expect that competition will increase as a result of industry consolidations. We may not be able to compete successfully against our current and future competitors. INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS We depend on our ability to develop and maintain the proprietary aspects of our technology. To protect our proprietary technology, we rely primarily on a combination of contractual provisions, confidentiality procedures, trade secrets, and patent, copyright and trademark laws. We license rather than sell Ariba ORMS and require our customers to enter into license agreements, which impose restrictions on their ability to utilize the software. In addition, we seek to avoid disclosure of our trade secrets, including but not limited to, requiring those persons with access to our proprietary information to execute confidentiality agreements with us and restricting access to our source code. We seek to protect our software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. We cannot assure you that any of our proprietary rights with respect to our Ariba.com network will be viable or of value in the future since the validity, enforceability and type of protection of proprietary rights in Internet-related industries are uncertain and still evolving. We presently have one U.S. patent application pending. It is possible that the patent that we have applied for, if issued, or our potential future patents may be successfully challenged or that no patent will be issued from our patent application. It is also possible that we may not develop proprietary products or technologies that are patentable, that any patent issued to us may not provide us with any competitive advantages, or that the patents of others will seriously harm our ability to do business. We rely on technology that we license from third parties, including software that is integrated with internally developed software and used in Ariba ORMS to perform key functions. For example, we license reporting software from Actuate. If we are unable to continue to license any of this software on commercially reasonable terms, we will face delays in releases of our software until equivalent technology can be identified, licensed or developed, and integrated into our current product. These delays if they occur could seriously harm our business. Ariba and the Ariba logo are registered as trademarks in the United States. In addition, we have the following trademarks registered in one or more foreign countries: Ariba, the Ariba logo, the Ariba "boomerang" design, ORM, ORMS and Walk-Up UI. We also have filed applications to register these trademarks in several countries. We have filed trademark applications in the United States for Ariba.com and Ariba.com Network. The above mentioned trademark applications are subject to review by the applicable governmental authority, may be opposed by private parties, and may not issue. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our software products exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop similar technology, duplicate our products or design around patents issued to us or our other intellectual property. There has been a substantial amount of litigation in the software and Internet industries regarding intellectual property rights. It is possible that in the future third parties may claim that we or our current or potential future products infringe their intellectual property. We expect that software product developers 49

and providers of electronic commerce solutions will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business. EMPLOYEES As of March 31, 1999, we had a total of 232 employees, including 74 in research and development, 69 in sales and marketing, 63 in customer support, professional services and training, and 26 in administration and finance. Of these employees, 221 were located in the United States and 11 were located outside the United States. None of our employees is represented by a collective bargaining agreement, nor have we experienced any work stoppage. We consider our relations with our employees to be good. Our future operating results depend in significant part on the continued service of our key technical, sales and senior management personnel, none of whom is bound by an employment agreement. Our future success also depends on our continuing ability to attract and retain highly qualified technical, sales and senior management personnel. Competition for these personnel is intense, and we may not be able to retain our key technical, sales and senior management personnel or attract these personnel in the future. We have experienced difficulty in recruiting qualified technical, sales and senior management personnel, and we expect to experience these difficulties in the future. If we are unable to hire and retain qualified personnel in the future, this inability could seriously harm our business. FACILITIES Our principal sales, marketing, research, development and administrative office occupies approximately 33,000 square feet in Sunnyvale, California, under a lease that expires on August 31, 2004. In addition, we also lease sales and support offices in the metropolitan areas of Atlanta, Amsterdam, Boston, Chicago, Columbus, Dallas, Detroit, London, Los Angeles, Milwaukee, Minneapolis, New York, St. Louis, Toronto, Washington, D.C. and Zurich. In September 1999, we intend to move our headquarters to expanded facilities located in approximately 130,000 square feet in Mountain View, California. Our sublease for this facility expires in October 2006. 50

MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of Ariba, and their ages as of March 31, 1999, are as follows: <TABLE> <CAPTION> NAME AGE POSITION ----------------------------------------------------- --- ----------------------------------------------------- <S> <C> <C> Keith J. Krach....................................... 42 President, Chief Executive Officer and Chairman of the Board of Directors Edward P. Kinsey..................................... 42 Chief Financial Officer, Vice President-- Finance & Administration and Secretary Robert J. DeSantis................................... 35 Vice President--International Operations Rune C. Eliasen...................................... 44 Vice President--Customer Services K. Charly Kleissner.................................. 42 Vice President--Engineering Robert D. Lent....................................... 45 Vice President--Business Development Paul L. Melchiorre................................... 38 Vice President--North American Operations David L. Rome........................................ 50 Vice President--Marketing Paul C. M. Touw...................................... 34 Vice President--Corporate Strategy Paul Hegarty......................................... 34 Director Robert C. Kagle...................................... 43 Director John B. Mumford...................................... 55 Director Hatim A. Tyabji...................................... 54 Director </TABLE> KEITH J. KRACH, a co-founder of Ariba, has served as Chairman of the Board of Directors, Chief Executive Officer and President since our inception in September 1996. From March 1996 to September 1996, Mr. Krach served as an Entrepreneur in Residence at Benchmark Capital. From October 1988 to August 1995, Mr. Krach served as Chief Operating Officer of Rasna Corporation, a mechanical computer-aided design automation software company. Prior to joining Rasna, Mr. Krach held various positions with General Motors, including General Manager and Vice President of GMF Robotics. Mr. Krach holds a Bachelor of Science degree in Industrial Engineering from Purdue University and a Master of Business Administration from Harvard Business School. EDWARD P. KINSEY, a co-founder of Ariba, has served as Chief Financial Officer, Secretary and Vice President of Finance and Administration since our inception in September 1996. From October 1995 to August 1996, Mr. Kinsey served as the Chief Financial Officer and Vice President of Finance of CenterView Software, an Internet development tools company. From March 1994 to October 1996, Mr. Kinsey served as Corporate Controller of Rasna Corporation and, from July 1988 to March 1994, Mr. Kinsey served in various capacities at Zenger-Miller, Inc., a management and supervisory skills training and development company, most recently as the Chief Financial Officer and Vice President of Operations. Prior to 1988, Mr. Kinsey held management positions at Peat Marwick Mitchell and at Price Waterhouse. Mr. Kinsey is a Certified Public Accountant in California and Ohio and holds a Bachelor of Business Administration degree in Accounting from the University of Toledo. ROBERT J. DESANTIS, a co-founder of Ariba, has served as Vice President of International Operations since July 1998 and Vice President of Sales from our inception in September 1996 to July 1998. From October 1995 to September 1996, Mr. DeSantis worked as a consultant in the venture capital community. From August 1990 to October 1995, Mr. DeSantis served as Vice President of Sales and Vice President of European Operations at Rasna Corporation. Prior to joining Rasna, Mr. DeSantis served as Director of Sales for Structural Research and Analysis Corporation, a design analysis software company, and as a member of the technical staff of Hughes Aircraft Company. Mr. DeSantis holds a Bachelor of Science degree in Mechanical Engineering from the University of Rhode Island. 51

RUNE C. ELIASEN has served as Ariba's Vice President of Customer Services since March 1997. From August 1995 to February 1997, Mr. Eliasen served as Vice President of Operations at CBT Systems, Inc., a computer training development company. From March 1989 to August 1995, Mr. Eliasen served as the Vice President of Operations at Rasna Corporation. Prior to joining Rasna, Mr. Eliasen held various senior engineering management positions at General Motors and Ford Motor Company. Mr. Eliasen holds a Bachelor of Science degree in Aeronautical and Astronautical Engineering from Purdue University. K. CHARLY KLEISSNER has served as Ariba's Vice President of Engineering since July 1997. From June 1996 to July 1997, Dr. Kleissner was Vice President of Product Development at DataMind Corporation, a data mining software tools development company. From April 1994 to June 1996, Dr. Kleissner held various senior engineering management positions at NeXT Software Inc., a software development company. Prior to joining NeXT, Dr. Kleissner held various senior engineering management positions at Digital Equipment Corporation and Hewlett-Packard Company. Dr. Kleissner holds a Ph.D. in Computer Science from the University of Technology, Vienna and a Master of Science degree in Computer Science from the Institute of Technology at the University of Vienna. ROBERT D. LENT, a co-founder of Ariba, has served as Vice President of Business Development since December 1997. From January 1993 to September 1996, Mr. Lent was Vice President of U.S. Marketing for Inmac, a supplier of networking and computing equipment. Prior to joining Inmac, he held various senior product-marketing positions at Quantum, a mass storage company, and Softbridge Microsystems. Mr. Lent began his career with Deloitte & Touche LLP. Mr. Lent is a Certified Public Accountant and holds a Bachelor of Science degree in Business Administration from the University of California, Berkeley and a Master of Business Administration with distinction from the Harvard Business School. PAUL L. MELCHIORRE has served as Ariba's Vice President of North American Operations since May 1998. From December 1992 to May 1998, Mr. Melchiorre served as Senior Vice President of Global Accounts for SAP America, Inc., an enterprise software company. Prior to joining SAP, he held various sales and management positions with MAI Systems, an accounting software company, and Automatic Data Processing, a developer of business software. Mr. Melchiorre holds a Bachelor of Science degree in Marketing from Villanova University and a Master of Business Administration from Drexel University. DAVID L. ROME has served as Ariba's Vice President of Marketing since July 1997. From March 1997 to July 1997, Mr. Rome served as Vice President of Marketing at Calico Technology, an Internet company focused on enabling electronic commerce for companies selling complex products and services. From July 1990 to September 1995, Mr. Rome held several general manager positions at Lotus Development Corporation. Prior to joining Lotus, Mr. Rome held various senior sales and marketing management positions with Alliant Computer Systems, a specialized computer manufacturer, and Data General Corporation, a data storage products company. Mr. Rome holds a Bachelor of Science degree in Mechanical Engineering from Purdue University and a Master of Business Administration from Harvard Business School. PAUL C. M. TOUW, a co-founder of Ariba, has served as Vice President of Corporate Strategy since March 1997 and managed marketing and business development for Ariba from our inception in September 1996 to March 1997. From September 1995 to July 1996, Mr. Touw managed western area sales and business development for Open Market, Inc., an Internet commerce software company. From 1991 to September 1995, Mr. Touw held various senior technical and sales management positions at Rasna Corporation. Prior to joining Rasna, Mr. Touw held analyst and senior analyst positions at Westinghouse Electric Company, AEC Able Engineering, and BP Advanced Materials serving primarily in aerospace engineering and analysis roles. Mr. Touw holds a Bachelor of Science degree in Mechanical and Physics Engineering from University of the Pacific, School of Engineering. 52

PAUL HEGARTY, a co-founder of Ariba, has served as Vice President of Engineering from our inception in September 1996 to August 1997, as Chief Technical Officer from our inception to October 1998 and as a director since October 1998. From June 1996 to September 1996, Mr. Hegarty served as an Entrepreneur in Residence at Benchmark Capital. From February 1988 to May 1996, Mr. Hegarty served in various engineering capacities at NeXT Software, Inc., including Vice President of Engineering. Mr. Hegarty holds Bachelor of Science and Master of Science degrees in Electrical Engineering from Stanford University. ROBERT C. KAGLE has served as a director of Ariba since our inception in September 1996. Mr. Kagle has been a Managing Member of Benchmark Capital Management Co., L.L.C., the General Partner of Benchmark Capital Partners, L.P. and Benchmark Founders' Fund, L.P., since its founding in May 1995. Mr. Kagle also has been a General Partner of Technology Venture Investors since January 1984. Mr. Kagle currently serves as a director of publicly held companies eBay Inc. and E-Loan, and is currently a Director of the National Association of Venture Capitalists and a Trustee of Kettering University, formerly known as the General Motors Institute. Mr. Kagle holds a Bachelor of Science degree in Electrical and Mechanical Engineering from the General Motors Institute and a Master of Business Administration from the Stanford Graduate School of Business. JOHN B. MUMFORD has served as a director of Ariba since our inception in September 1996. Mr. Mumford has served as Managing Partner of Crosspoint Venture Partners since 1970. Mr. Mumford currently serves as a director of a number of private companies primarily in the information technology area. Mr. Mumford is a co-founder and director of Hello Direct, Inc., a public company, and served as a director of Office Depot, a public company, from its formation in 1986 to April 1997. Mr. Mumford was also a founding director of Inmac Corp., a public company, and served in this capacity until its merger with Micro Warehouse in 1996. Mr. Mumford holds a Bachelor of Science degree in Accounting from Arizona State University and a Master of Business Administration from Stanford University. HATIM A. TYABJI has served as a director of Ariba since January 1998. Mr. Tyabji served as President and Chief Executive Officer from 1986 to 1998 and as Chairman of the Board from 1992 to 1998 of VeriFone, Inc., a wholly-owned subsidiary of Hewlett-Packard. Prior to joining VeriFone, Mr. Tyabji served as President of the Information Systems Products and Technologies Group of Unisys Corporation, formerly known as Sperry Corporation. Mr. Tyabji holds a Bachelor of Science degree in Electrical Engineering from the College of Engineering in Poona, India and a Master of Science degree in Electrical Engineering from the State University of New York, Buffalo. He also has a Master of Business Administration in International Business from Syracuse University and is a graduate of the Stanford University Executive Program. Ariba currently has authorized five directors. Each director holds office until the next annual meeting of stockholders or until his successor is elected. Our officers serve at the discretion of the board of directors. There are no family relationships among our directors and officers. BOARD COMMITTEES The board of directors has an audit committee and a compensation committee. AUDIT COMMITTEE. The audit committee makes recommendations to the board of directors regarding the selection of independent accountants, reviews the results and scope of audit and other services provided by our independent accountants and reviews and evaluates the our audit and control functions. The audit committee currently consists of Robert C. Kagle and John B. Mumford. COMPENSATION COMMITTEE. The compensation committee reviews and makes recommendations regarding our stock plans and makes decisions concerning salaries and incentive compensation for our 53

employees and consultants. The compensation committee currently consists of Robert C. Kagle and Hatim A. Tyabji. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No member of our compensation committee serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. DIRECTOR COMPENSATION Directors currently do not receive any cash compensation from Ariba for their services as members of the board of directors, although members are reimbursed for expenses in connection with attendance at board of directors and committee meetings. Directors are eligible to participate in Ariba's stock plans, and beginning in 1999, employee directors will also be able to participate in Ariba's 1999 Equity Incentive Plan and non-employee directors will receive periodic option grants under Ariba's 1999 Directors' Stock Option Plan. On January 21, 1998, in connection with his appointment to the board of directors, Mr. Tyabji was granted an option to purchase 200,000 shares of our common stock at an exercise price of $.375 per share, subject to a four-year vesting schedule. On April 20, 1999, in connection with his service as a director and employee of Ariba, Mr. Hegarty was granted an option to purchase 544,000 shares of our common stock at an exercise price of $9.00 per share, subject to a four-year vesting schedule. See "Management--1999 Equity Incentive Plan." 54

EXECUTIVE COMPENSATION The following table sets forth compensation information for fiscal 1998 paid by Ariba for services by our Chief Executive Officer and our four other highest-paid executive officers whose total salary and bonus for such fiscal year exceeded $100,000, whom we collectively refer to as the Named Officers: SUMMARY COMPENSATION TABLE <TABLE> <CAPTION> LONG-TERM COMPENSATION --------------------- AWARDS ANNUAL COMPENSATION --------------------- ---------------------- NUMBER OF SECURITIES OTHER NAME AND PRINCIPAL POSITION SALARY($)(1) BONUS($) UNDERLYING OPTIONS(#) COMPENSATION($)(2) ---------------------------------------------- ----------- --------- --------------------- ------------------ <S> <C> <C> <C> <C> Keith J. Krach ............................... $ 106,667 $ 33,000 -- -- President, Chief Executive Officer and Director Edward P. Kinsey ............................. 106,667 36,333 -- -- Chief Financial Officer, Vice President--Finance & Administration and Secretary Robert J. DeSantis ........................... 106,667 76,605(3) 200,000 $ 6,250 Vice President--International Sales Rune C. Eliasen .............................. 106,667 33,000 -- -- Vice President--Customer Service David L. Rome ................................ 90,000 60,000 -- -- Vice President--Marketing </TABLE> ------------------------ (1) Includes amounts deferred under our 401(k) plan. (2) Represents a car allowance. (3) Includes commissions of $36,605. 55

OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth each grant of stock options during fiscal 1998 to each of the Named Officers. No stock appreciation rights were granted during the fiscal year. Each of the options listed in the table below is immediately exercisable. The shares purchasable thereunder are subject to repurchase by us at the original exercise price paid per share upon the optionee's cessation of service prior to vesting in those shares. The repurchase right lapses and the optionee vests as to 25% of the option shares upon completion of one year of service from the date of grant and the balance in a series of equal monthly installments over the next 36 months of service. The option shares will vest upon a change in control, unless our repurchase right with respect to the unvested option shares is transferred to the acquiring entity. The option shares will also vest in certain circumstances should the optionee's employment or service be involuntarily terminated following a change in control. Each of the options has a ten-year term, subject to earlier termination in the event the holder ceases providing services to us. The percentage numbers are based on an aggregate of 3,978,000 options granted to our employees under our 1996 Stock Plan during fiscal 1998. The exercise price was equal to the fair market value of our common stock as valued by the board of directors on the date of grant. The exercise price may be paid in cash, in shares of our common stock valued at fair market value on the exercise date or through a cashless exercise procedure as long as this procedure would not cause us to recognize compensation expense for financial reporting purposes. We may also finance the option exercise by accepting a full recourse note from the optionee equal to the exercise price for the purchased shares, together with any federal and state income tax liability incurred by the optionee in connection with such exercise. The potential realizable value is calculated based on a ten-year term of the option at the time of grant. Stock price appreciation of 5% and 10% is assumed because of SEC rules and does not represent our prediction of our stock price performance. The potential realizable values at 5% and 10% appreciation are calculated by assuming that the exercise price on the date of grant appreciates at the indicated rate for the entire term of the option and that the option is exercised at the exercise price and sold on the last day of its term at the appreciated price. <TABLE> <CAPTION> POTENTIAL REALIZABLE INDIVIDUAL GRANTS VALUE AT ASSUMED -------------------------------------------------------------- ANNUAL RATES OF NUMBER OF STOCK PRICE SECURITIES % OF TOTAL APPRECIATION UNDERLYING OPTIONS GRANTED TO EXERCISE FOR OPTION TERM OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------- NAME GRANTED FISCAL 1998 ($/SH) DATE 5% 10% -------------------------------- ----------- ------------------- --------------- ----------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> Keith J. Krach.................. -- -- -- -- -- -- Edward P. Kinsey................ -- -- -- -- -- -- Robert J. DeSantis.............. 200,000 5.0% $ 1.00 5/31/08 $ 125,779 $ 318,748 Rune C. Eliasen................. -- -- -- -- -- -- David L. Rome................... -- -- -- -- -- -- </TABLE> In addition to the options listed in the table, stock options were granted in fiscal 1999 to some of the Named Officers and to other executive officers under our 1996 Stock Plan for the following number of shares and at the exercise price of $2.375 per share: Mr. Krach, 400,000; Mr. DeSantis, 80,000; Mr. Eliasen, 40,000; and Mr. Kinsey, 160,000. Each of the options is immediately exercisable subject to deferral to satisfy the $100,000 limitation applicable to incentive options. The shares purchasable under the options are subject to repurchase by us at the original exercise price paid per share upon the optionee's cessation of service prior to vesting in such shares. The repurchase right lapses as to 10% of the shares upon completion of one year of service, 20% upon completion of two years of service, 30% upon completion of three years of service and the balance upon completion of four years of service from the grant date. 56

FISCAL YEAR END OPTION VALUES The following table sets forth for each of the Named Officers options exercised and the number and value of securities underlying unexercised options that are held by the Named Officers as of September 30, 1998. The heading "Vested" refers to shares no longer subject to repurchase by us, and the heading "Unvested" refers to shares subject to repurchase by us, in each case as of September 30, 1998. The value of unexercised in-the-money options at 1998 fiscal year end is based on the fair market value of our common stock at September 30, 1998, or $1.3325 per share, less the exercise price payable for these shares. <TABLE> <CAPTION> NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS END (#) AT FISCAL YEAR END ($) ---------------------- ---------------------- NAME VESTED UNVESTED VESTED UNVESTED -------------------------------------------------------------------------- ----------- --------- ----------- --------- <S> <C> <C> <C> <C> Keith J. Krach............................................................ -- -- -- -- Edward P. Kinsey.......................................................... -- -- -- -- Robert J. DeSantis........................................................ -- 200,000 -- $ 66,500 Rune C. Eliasen........................................................... -- -- -- -- David L. Rome............................................................. -- -- -- -- </TABLE> CHANGE OF CONTROL ARRANGEMENTS The compensation committee of the board of directors, as administrator of the 1999 Equity Incentive Plan, can provide for accelerated vesting of the shares of common stock subject to outstanding options held by any executive officer or director of Ariba in connection with certain changes in control of Ariba. The accelerated vesting may be conditioned on the termination of the individual's employment following the change in control event. None of the Named Officers have employment agreements with us, and they may resign and we may terminate their employment at any time. 1999 EXECUTIVE BONUS PROGRAM We have a bonus program pursuant to which selected officers and other full-time employees are eligible for annual cash bonuses based on our achievement of specified objectives. For 1999, an officer's target bonus will be awarded based on our achievement of revenue targets, customer bookings targets, income targets and customer satisfaction targets and other individual objectives to be determined by the compensation committee of the board of directors. 1999 EQUITY INCENTIVE PLAN Ariba's 1999 Equity Incentive Plan was adopted by our board of directors on April 20, 1999 and our stockholders will also be asked to approve the adoption of the plan. We have reserved 2,400,000 shares of common stock for issuance under the 1999 Equity Incentive Plan. Any shares not yet issued under our 1996 Stock Plan as of the date of this offering will also be available for grant under the 1999 Equity Incentive Plan. As of January 1 of each year, commencing with the year 2000, the number of shares we reserve for issuance under the 1999 Equity Incentive Plan will be increased automatically by 5% of the total number of shares of common stock then outstanding or, if less, by 2,000,000 shares. As of March 31, 1999, we had not granted any options under the 1999 Equity Incentive Plan. Under the 1999 Equity Incentive Plan, the eligible individuals are employees, non-employee members of the board of directors and consultants. The types of awards that may be made under the 1999 Equity Incentive Plan are options to purchase shares of common stock, stock appreciation rights, restricted shares 57

and stock units. Options may be incentive stock options that qualify for favorable tax treatment for the optionee under Section 422 of the Internal Revenue Code of 1986 or nonstatutory stock options not designed to qualify for such favorable tax treatment. With limited restrictions, if shares awarded under the 1999 Equity Incentive Plan or the 1996 Stock Plan are forfeited, then those shares will again become available for new awards under the 1999 Equity Incentive Plan. The compensation committee of our board of directors administers the 1999 Equity Incentive Plan. The committee has complete discretion to make all decisions relating to the interpretation and operation of the 1999 Equity Incentive Plan, including the discretion to determine which eligible individuals are to receive any award, and to determine the type, number, vesting requirements and other features and conditions of each award. The exercise price for incentive stock options granted under the 1999 Equity Incentive Plan may not be less than 100% of the fair market value of the common stock on the option grant date. The exercise price for non-qualified options granted under the 1999 Equity Incentive Plan may not be less than 85% of the fair market value of the common stock on the option grant date. The exercise price may be paid in cash or in outstanding shares of common stock. The exercise price may also be paid by using a cashless exercise method, a pledge of shares to a broker or promissory note. The purchase price for newly issued restricted shares awarded under the 1999 Equity Incentive Plan may be paid in cash, by promissory note or by the rendering of past or future services. The committee may reprice options and may modify, extend or assume outstanding options and stock appreciation rights. The committee may accept the cancellation of outstanding options or stock appreciation rights in return for the grant of new options or stock appreciation rights. The new option or right may have the same or a different number of shares and the same or a different exercise price. Upon certain defined events causing a change in control of Ariba, an option or other award under the 1999 Equity Incentive Plan will become fully exercisable or fully vested if the option or award is not assumed by the surviving corporation or its parent or if the surviving corporation or its parent does not substitute another award on substantially the same terms. In addition, if a change in control occurs more than 12 months after the optionee's vesting start date, then the option or award shall vest as to the lesser of: - 50% of the then remaining unvested portion of the option or award; or - the excess of (1) 75% of the total number of shares originally subject to the option or award over (2) the number of shares that had already vested. Each option or award shall fully vest after a change in control if the optionee's employment or service is terminated without his or her consent and without cause; or the optionee resigns after he or she is subject to a reduction in authority or responsibility or a reduction in compensation or benefits. Change in control includes: - a merger or consolidation of Ariba after which our then current stockholders own less than 50% of the surviving corporation; - sale of all or substantially all of the assets of Ariba; - a proxy contest that results in replacement of more than one-third of our directors over a 24-month period; or - an acquisition of 50% or more of our outstanding stock by a person other than a person related to Ariba, such as a corporation owned by the stockholders of Ariba. In the event of a merger or other reorganization, the agreement of merger or reorganization may provide that outstanding options and other awards under the 1999 Equity Incentive Plan shall be assumed 58

by the surviving corporation or its parent, shall be continued by us if Ariba is the surviving corporation, shall have accelerated vesting and then expire early, or shall be canceled for a cash payment. Our board of directors may amend or terminate the 1999 Equity Incentive Plan at any time. If our board amends the plan, stockholder approval of the amendment will be sought only if required by an applicable law. The 1999 Equity Incentive Plan will continue in effect indefinitely unless our board decides to terminate the plan earlier. EMPLOYEE STOCK PURCHASE PLAN Our board of directors adopted our Employee Stock Purchase Plan on April 20, 1999, and our stockholders will also be asked to approve the adoption of the plan. We have reserved 4,000,000 shares of common stock for issuance under the Employee Stock Purchase Plan. As of January 1 each year, we will increase the number of shares we reserve for issuance under the Employee Stock Purchase Plan automatically by 2% of the total number of shares of our common stock outstanding or, if less, 750,000 shares. The Employee Stock Purchase Plan is intended to qualify under Section 423 of the Internal Revenue Code. Two overlapping offering periods each with a duration of 24 months will commence on February 1 and August 1 each calendar year. However, the first offering period will commence on the effective date of the offering and end on July 31, 2001. Purchases of common stock will occur on January 31 and July 31 each calendar year during an offering period. The Employee Stock Purchase Plan will be administered by the compensation committee of our board of directors. Each of our employees is eligible to participate if he or she is employed by us for at least 20 hours per week and for more than five months per year. The Employee Stock Purchase Plan permits each eligible employee to purchase our common stock through payroll deductions. Each employee's payroll deductions may not exceed 15% of the employee's cash compensation. The initial period during which payroll deductions will be accumulated will begin on the effective date of this offering and end on January 31, 2000. No more than 2,000 shares may be purchased on any purchase date. The price of each share of common stock purchased under the Employee Stock Purchase Plan will be 85% of the lower of (1) the fair market value per share of common stock on the date immediately before the first date of the applicable offering period or (2) the fair market value per share of common stock on the purchase date. In the case of the first offering period, the price per share under the plan will be 85% of the price offered to the public in the offering. Employees may end their participation in the Employee Stock Purchase Plan at any time. Participation ends automatically upon termination of employment with Ariba. In the event of a change in control of Ariba, the Employee Stock Purchase Plan will end and shares will be purchased with the payroll deductions accumulated to date by participating employees. The board may amend or terminate the Employee Stock Purchase Plan at any time. If our board of directors increases the number of shares of common stock reserved for issuance under the Employee Stock Purchase Plan, we must seek the approval of our stockholders. 1999 DIRECTORS' STOCK OPTION PLAN The 1999 Directors' Stock Option Plan was adopted by our board of directors on April 20, 1999, and our stockholders will also be asked to approve the adoption of the plan. Under the 1999 Directors' Stock Option Plan, non-employee members of our board of directors will be eligible for automatic option grants. We have reserved 500,000 shares of our common stock for issuance under the 1999 Directors' Stock Option Plan. We have not yet granted any options under the 1999 Directors' Stock Option Plan. The compensation committee of the board of directors will make any administrative determinations under the 1999 Directors' Stock Option Plan. 59

The exercise price for options granted under the 1999 Directors' Stock Option Plan may be paid in cash or in outstanding shares of common stock. Options may also be exercised on a cashless basis through the same-day sale of the purchased shares. Each individual who first joins the board as a non-employee director on or after the effective date of this offering will receive at that time an option grant for 10,000 shares of our common stock. In addition, at each annual meeting of our stockholders, beginning in 2000, each non-employee director will automatically be granted at that meeting, whether or not he or she is standing for re-election at that particular meeting, a stock option to purchase 2,500 shares of our common stock. The initial option will become exercisable for 50% of the shares at the grant date and the balance after 12 months of board service. Each option will have an exercise price equal to the fair market value of our common stock on the automatic grant date. Each option will have a maximum term of ten years, but will terminate earlier if the optionee ceases to be a member of our board of directors. Each option will fully vest automatically upon a change in control. Change in control has the same meaning under this plan as it does in the 1999 Equity Incentive Plan. Our board of directors may amend or modify the 1999 Directors' Stock Option Plan at any time. The 1999 Directors' Stock Option Plan will terminate on April 19, 2009, unless the board of directors decides to terminate the plan sooner. 60

CERTAIN TRANSACTIONS Since our inception on September 17, 1996, we have issued and sold preferred stock to the following persons who are our principal stockholders, executive officers or directors. <TABLE> <CAPTION> SHARES OF SHARES OF SERIES A SERIES B PREFERRED PREFERRED INVESTOR STOCK STOCK --------------------------------------------------------------------------------- -------------- -------------- <S> <C> <C> Entities affiliated with Benchmark Capital Management Co., L.L.C................. 6,000,000 480,000 Crosspoint Venture Partners 1996................................................. 5,000,000 320,000 Keith J. Krach................................................................... 340,000 34,000 Hatim A. Tyabji.................................................................. -- 96,000 </TABLE> Shares held by all affiliated persons and entities have been aggregated. Share numbers and purchase price information are reflected on an as if converted into shares of common stock basis. See "Principal Stockholders" for more detail on shares held by these purchasers. The per share purchase price for the Series A preferred stock was $.50. The per share purchase price for the Series B preferred stock was $3.125. Robert C. Kagle, one of our directors, is an affiliate of each of the entities affiliated with Benchmark Capital Management Co., L.L.C. John B. Mumford, one of our directors, is an affiliate of Crosspoint Venture Partners 1996. In addition, we have granted options to some of our directors and executive officers. See "Management--Director Compensation," "--Option Grants in Last Fiscal Year" and "Principal Stockholders." We intend to enter into an indemnification agreement with each of our executive officers and directors. We believe that all of the transactions set forth above were made on terms no less favorable to us than could have been obtained from unaffiliated third parties. All future transactions, including loans, between us and our officers, directors, principal stockholders and their affiliates will be approved by a majority of the board of directors, including a majority of the independent and disinterested outside directors on the board of directors, and will continue to be on terms no less favorable to us than could be obtained from unaffiliated third parties. 61

PRINCIPAL STOCKHOLDERS The following table sets forth information regarding beneficial ownership of our common stock as of March 31, 1999, and as adjusted to reflect the sale of shares offered and the conversion of all outstanding shares of preferred stock into shares of common stock held by (1) each person who we know to own beneficially more than five percent of our common stock, (2) each of the Named Officers, (3) each of our directors and (4) all directors and executive officers as a group. Under the rules of the Securities and Exchange Commission, beneficial ownership includes voting or investment power with respect to securities and includes the shares issuable under stock options that are exercisable within 60 days of March 31, 1999. Shares issuable under stock options are deemed outstanding for computing the percentage of the person holding options but are not outstanding for computing the percentage of any other person. The number of shares of common stock outstanding after this offering includes shares of common stock being offered for sale by us in this offering. The percentage of beneficial ownership for the following table is based on 37,216,996 shares of common stock outstanding as of March 31, 1999 assuming conversion of all outstanding shares of preferred stock into common stock, and shares of common stock outstanding after the completion of this offering assuming no exercise of the underwriters' over-allotment option. Unless otherwise indicated, the address for each listed stockholder is: c/o Ariba, Inc., 1314 Chesapeake Terrace, Sunnyvale, California 94089. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock. <TABLE> <CAPTION> SHARES PERCENT BENEFICIALLY BENEFICIALLY OWNED OWNED ------------------------ ------------ BEFORE AFTER NAME OF BENEFICIAL OWNER NUMBER OFFERING OFFERING ------------------------------------------------------------------------------ ------------ ----------- ----------- <S> <C> <C> <C> Entities affiliated with Benchmark Capital Management Co., L.L.C.(1) ................................ 6,480,000 17.4% Crosspoint Venture Partners 1996(2) .......................................... 5,320,000 14.3 Robert C. Kagle(1)............................................................ 6,480,000 17.4 John B. Mumford(2)............................................................ 5,320,000 14.3 Keith J. Krach................................................................ 5,261,200 14.1 Robert J. DeSantis(3)......................................................... 1,921,600 5.1 Paul Hegarty(4)............................................................... 1,439,380 3.9 Edward P. Kinsey(5)........................................................... 1,228,104 3.3 Rune C. Eliasen(6)............................................................ 680,000 1.8 David L. Rome................................................................. 640,000 1.7 Hatim A. Tyabji............................................................... 296,000 * All directors and executive officers as a group(7) (13 persons)............... 26,017,760 69.9 </TABLE> ------------------------ * Less than 1%. (1) Includes 5,689,152 shares held by Benchmark Capital Partners, L.P. and 790,848 shares held by Benchmark Founders' Fund, L.P. Mr. Kagle, a director of Ariba, is a General Partner of Benchmark Capital Management Co., L.L.C., which is the general partner of each of Benchmark Capital Partners, L.P. and Benchmark Founders' Fund, L.P. Mr. Kagle disclaims beneficial ownership of the shares held by Benchmark Capital Partners, L.P. and Benchmark Founders' Fund, L.P. except to the extent of his pecuniary interest therein arising from his general partnership interest. The address of Benchmark Capital Management Co., L.L.C., is 2480 Sand Hill Road, Suite 200, Menlo Park, CA 94025. 62

(2) Mr. Mumford, a director of Ariba, is a Managing Member of Crosspoint Associates 1996, which is the general partner of Crosspoint Venture Partners 1996. Mr. Mumford disclaims beneficial ownership of the shares held by Crosspoint Venture Partners 1996 except to the extent of his pecuniary interest therein arising from his ownership interest. The address of Crosspoint Venture Partners 1996 is The Pioneer Building, 2925 Woodside Road, Woodside, CA 94062. (3) Includes options immediately exercisable for 200,000 shares. Excludes 80,000 shares subject to options not immediately exercisable. (4) Includes options immediately exercisable for 244,800 shares. Excludes 299,200 shares subject to options not immediately exercisable. (5) Includes options immediately exercisable for 42,104 shares. Also includes 20,000 shares held by Lisa J. Kinsey as Custodian for Katelind Irene Kinsey under the Uniform Transfers to Minors Act and 20,000 shares held by Lisa J. Kinsey as Custodian for Grant Stephen Kinsey under the Uniform Transfers to Minors Act. Excludes 117,896 shares subject to options not immediately exercisable. (6) Includes options immediately exercisable for 40,000 shares. (7) Includes options immediately exercisable for 1,166,380 shares. Excludes 1,177,620 shares subject to options not immediately exercisable. 63

DESCRIPTION OF CAPITAL STOCK Our authorized capital stock consists of 200,000,000 shares of common stock, $.002 par value, and 20,000,000 shares of preferred stock, $.002 par value, after giving effect to the amendment and restatement of our amended and restated certificate of incorporation to delete references to Series A, Series B and Series BB preferred stock, which will occur upon conversion of such preferred stock into common stock upon the closing of this offering, and the subsequent authorization of shares of undesignated preferred stock, as described below. COMMON STOCK As of March 31, 1999, there were 37,216,996 shares of common stock outstanding after giving effect to the conversion of our Series A, Series B and Series BB preferred stock into common stock at a four-to-one ratio that were held of record by approximately 159 stockholders. There will be shares of common stock outstanding, assuming no exercise of the underwriters' over-allotment option and assuming no exercise after March 31, 1999 of outstanding options, after giving effect to the sale of the shares of common stock to the public offered and the conversion of our Series A, Series B and Series BB preferred stock into common stock at a four-to-one ratio. Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available at times and in amounts as the board may determine from time to time. See "Dividend Policy." The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Upon the liquidation, dissolution or winding up of Ariba, the holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. The common stock has no preemptive or conversion rights and is not subject to redemption. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and nonassessable. PREFERRED STOCK On the closing of this offering, our amended and restated certificate of incorporation will authorize 20,000,000 shares of preferred stock. The board of directors has the authority to issue the preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions of each series, such as dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the right to increase or decrease the number of shares of any series, without further vote or action by the stockholders. The board of directors may issue preferred stock with voting or conversion rights that may have the effect of delaying, deferring or preventing a change in control of Ariba and could adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We currently have no plans to issue any of the preferred stock. WARRANTS As of March 31, 1999, there were warrants outstanding to purchase 570,944 shares of common stock with a weighted average exercise price of $3.29. A warrant to purchase 14,544 shares expires three years from the date of this offering. A warrant to purchase 32,000 shares expires on October 31, 2003. A warrant to purchase 524,400 shares expires upon the closing of this offering. 64

ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND DELAWARE LAW AMENDED AND RESTATED CERTIFICATE OF INCORPORATION The amended and restated certificate of incorporation provides that all stockholder actions must be effected at a duly called meeting and not by a consent in writing. This provision could discourage potential acquisition proposals and could delay or prevent a change of control of Ariba because a potential acquisition of Ariba could not be approved by the stockholders without a duly called meeting. See "Risk Factors--We Have Implemented Certain Anti-Takeover Provisions." DELAWARE TAKEOVER STATUTE We are subject to Section 203 of the Delaware General Corporation Law, which, subject to various exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder. This restriction applies unless: - the transaction is approved by the board of directors prior to the date the stockholder became an interested stockholder; - upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by (1) persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or - on or subsequent to the date the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. Section 203 defines business combination to include: - any merger or consolidation involving the corporation and the interested stockholder; - any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; - any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder, subject to various exceptions; - any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or - the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an interested stockholder as any entity or person who owns 15% or more of the outstanding voting stock of the corporation, and any entity or person affiliated with or controlling or controlled by the entity or person. REGISTRATION RIGHTS After this offering, the holders of approximately 29,850,556 shares of outstanding common stock will be entitled to rights with respect to the registration of these shares under the Securities Act. The holders of 65

registration rights are those investors that purchased shares of our Series A, Series B and Series BB preferred stock, as well as some of our present and former officers. Under the terms of the agreements between us and the holders of these registrable securities, if we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders exercising registration rights, the holders are entitled to notice of the registration and are entitled to include these shares in the registration. Some of the stockholders benefiting from these rights may also require us to file a registration statement under the Securities Act at our expense with respect to their shares of common stock, and we are required to use reasonable efforts to effect a registration. Further, holders may require us to file additional registration statements on Form S-3 at our expense. These rights are subject to conditions and limitations, including the right of the underwriters of an offering to limit the number of shares included in that registration under certain circumstances. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the common stock is . 66

SHARES ELIGIBLE FOR FUTURE SALE Prior to this offering, there has been no market for our common stock. Therefore, future sales of substantial amounts of our common stock in the public market could adversely affect market prices prevailing from time to time. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, sales of substantial amounts of our common stock in the public market after the restrictions lapse could adversely affect the prevailing market price and our ability to raise equity capital in the future. Upon completion of this offering, we will have shares of common stock outstanding, assuming no exercise of options and warrants outstanding as of March 31, 1999, and the conversion of all outstanding shares of preferred stock. Of these shares, shares sold in this offering will be freely transferable without restriction or registration under the Securities Act, except for any shares purchased by one of our existing "affiliates," as that term is defined in Rule 144 under the Securities Act. The remaining 37,216,996 shares of common stock existing are "restricted shares" as defined in Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 of the Securities Act. As a result of the contractual restrictions described below and the provisions of Rules 144 and 701, additional shares will be available for sale in the public market as follows: (1) none of the restricted shares will be eligible for immediate sale on the date of this prospectus and (2) all of the restricted shares will be eligible for sale upon expiration of lock-up agreements 120 days after the date of this prospectus subject to Rule 144. LOCK-UP AGREEMENTS Ariba, our directors and executive officers and certain of our stockholders and option holders have each agreed not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, for a period of 120 days after the date of this prospectus, without the prior written consent of Morgan Stanley & Co. Incorporated, subject to limited exceptions. Morgan Stanley & Co. Incorporated, however, may in its sole discretion, at any time without notice, release all or any portion of the shares subject to lock-up agreements. RULE 144 In general, under Rule 144 as currently in effect, beginning 90 days after this offering, a person, or persons whose shares are aggregated, who owns shares that were purchased from us, or any affiliate, at least one year previously, is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of our then-outstanding shares of common stock, which will equal approximately shares immediately after this offering, or the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice of the sale on Form 144. Sales under Rule 144 are also subject to manner of sale provisions, notice requirements and the availability of current public information about us. Any person, or persons whose shares are aggregated who is not deemed to have been one of our affiliates at any time during the three months preceding a sale, and who owns shares within the definition of "restricted securities" under Rule 144 that were purchased from us, or any affiliate, at least two years previously, would be entitled to sell the shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements. RULE 701 Subject to limitations on the aggregate offering price of a transaction and other conditions, Rule 701 may be relied upon with respect to the resale of securities originally purchased from us by our employees, 67

directors, officers, consultants or advisers prior to the date we become subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, under written compensatory benefit plans or written contracts relating to the compensation of these persons. In addition, the Securities and Exchange Commission has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of the options, including exercises after the date of this prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 90 days after the date of this prospectus, may be sold by persons other than affiliates subject only to the manner of sale provisions of Rule 144 and by affiliates under Rule 144 without compliance with its minimum holding period requirements. REGISTRATION RIGHTS Upon completion of this offering, the holders of approximately 29,850,556 shares of common stock, or their transferees, will be entitled to various rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See "Description of Capital Stock--Registration Rights." STOCK OPTIONS As of March 31, 1999, options to purchase a total of 8,105,260 shares of common stock under our 1996 Stock Plan were outstanding and exercisable. All of the shares subject to options are subject to lock-up agreements. As of March 31, 1999, warrants to purchase up to 570,944 shares of common stock were outstanding and exercisable. An additional 1,380,700 shares of common stock were available for future option grants under the 1996 Stock Plan. On April 20, 1999, we adopted, subject to stockholder approval, the 1999 Equity Incentive Plan to replace the 1996 Stock Plan, with an increase of shares available for issuance of 2,400,000 shares, plus an additional number of shares equal to 5% of the shares outstanding on January 1 of each year or, if less, 2,000,000 shares each year. In addition, on April 20, 1999, we adopted, subject to stockholder approval, the Employee Stock Purchase Plan, and reserved 4,000,000 shares of common stock for issuance, and the 1999 Directors' Stock Option Plan, and reserved 500,000 shares of common stock for issuance. See "Management--1999 Equity Incentive Plan," "--Employee Stock Purchase Plan," "--1999 Directors' Stock Option Plan" and Note 6 of Notes to Consolidated Financial Statements. We intend to file registration statements under the Securities Act covering all shares of common stock subject to outstanding options or issuable pursuant to our 1999 Equity Incentive Plan and 1999 Directors' Stock Option Plan, and 4,000,000 shares of common stock issuable under our Employee Stock Purchase Plan. We expect to file the registration statement covering shares issuable pursuant to the Employee Stock Purchase Plan on the effective date of this offering and to file the registration statement covering shares offered under the 1999 Equity Incentive Plan and 1999 Directors' Stock Option Plan approximately 30 days after the closing of this offering. Subject to Rule 144 volume limitations applicable to affiliates, shares registered under any registration statements will be available for sale in the open market, beginning 90 days after the date of the prospectus, except to the extent that the shares are subject to vesting restrictions with us or the contractual restrictions described above. See "Management--1999 Equity Incentive Plan," "--Employee Stock Purchase Plan" and "--1999 Directors' Stock Option Plan." 68

UNDERWRITERS Under the terms and subject to conditions contained in an underwriting agreement, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives, have severally agreed to purchase, and Ariba has agreed to sell to the underwriters, the respective number of shares of common stock set forth opposite the names of such underwriters below: <TABLE> <CAPTION> NUMBER NAME OF SHARES -------------------------------------------------------------------------------------- ---------------- <S> <C> Morgan Stanley & Co. Incorporated..................................................... BT Alex. Brown Incorporated........................................................... Dain Rauscher Wessels, a division of Dain Rauscher Incorporated....................... Merrill Lynch, Pierce, Fenner & Smith Incorporated................................................................ ---------------- Total............................................................................ ---------------- ---------------- </TABLE> The underwriters are offering the shares of common stock subject to their acceptance of the shares from Ariba and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by us in this offering are subject to the approval of legal matters by their counsel and to other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by us in this offering, other than those covered by the over-allotment option described below, if any such shares are taken. The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price set forth on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ per share under the public offering price. Any underwriter may allow, and such dealers may reallow, a concession not in excess of $ per share to other underwriters or to certain dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives. Ariba has granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of additional shares of common stock at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise such option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by us in this offering. To the extent such option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of common stock as the number set forth next to such underwriter's name in the preceding table bears to the total number of shares of common stock set forth next to the names of the underwriters in the preceding table. The underwriters have informed Ariba that the underwriters do not intend sales to discretionary accounts to exceed five percent of the total number of shares of common stock offered by them. Ariba has applied to list the common stock on the Nasdaq National Market under the symbol "ARBA." At our request, the underwriters have reserved for sale, at the initial public offering price, up to shares of common stock offered by us in this offering for directors, officers, employees, business associates and related persons of Ariba. The number of shares of common stock available for sale 69

to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares which are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby. Ariba, our directors and executive officers and certain of our stockholders and option holders have each agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, he, she or it will not, during the period ending 120 days after the date of this prospectus: - offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or - enter into any swap or other agreement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock. The restrictions described in the previous paragraph do not apply to: - the issuance by Ariba of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing; or - transactions by any person other than Ariba relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares. In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may over-allot in connection with the offering, creating a short position in the common stock for their own account. In addition, to cover over-allotments or to stabilize the price of the common stock, the underwriters may bid for, and purchase, shares of common stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in the offering, if the syndicate repurchases previously distributed shares of common stock in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities, and may end any of these activities at any time. Ariba and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. PRICING OF THE OFFERING Prior to this offering, there has been no public market for the shares of common stock. Consequently, the initial public offering price will be determined by negotiations between us and the representatives of the underwriters. Among the factors to be considered in determining the initial public offering price will be: - the future prospects of Ariba and its industry in general; - sales, earnings and certain other financial operating information of Ariba in recent periods; and - the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to those of Ariba. The estimated initial public offering price range set forth on the cover page of this prospectus is subject to change as a result of market conditions and other factors. 70

LEGAL MATTERS The validity of the issuance of the common stock offered by us in this offering will be passed upon for us by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo Park, California. Members of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, participating in the consideration of legal matters relating to the common stock offered by us in this offering are the beneficial owners of 12,800 shares of our common stock. Legal matters in connection with this offering will be passed upon for the underwriters by Fenwick & West LLP, Palo Alto, California. EXPERTS The consolidated financial statements as of September 30, 1997 and 1998 and for each of the years in the two-year period ended September 30, 1998 have been included in this registration statement in reliance upon the report of KPMG LLP, independent auditors, given and upon the authority of said firm as experts in accounting and auditing. ADDITIONAL INFORMATION We have filed with the Securities and Exchange Commission, Washington, D.C. 20549, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information with respect to us and our common stock, reference is made to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document referred to are not necessarily complete; reference is made in each instance to the copy of the contract or document filed as an exhibit to the registration statement. Each such statement is qualified in all respects by reference to that exhibit. The registration statement, including exhibits and schedules, may be inspected without charge at the Commission's principal office in Washington, D.C., and copies of all or any part thereof may be obtained from such office after payment of fees prescribed by the Commission. The Commission maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the site is http://www.sec.gov. 71

ARIBA, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS <TABLE> <S> <C> Form of Independent Auditors' Report................................................. F-2 Consolidated Balance Sheets.......................................................... F-3 Consolidated Statements of Operations and Other Comprehensive Income (Loss).......... F-4 Consolidated Statements of Stockholders' Equity...................................... F-5 Consolidated Statements of Cash Flows................................................ F-6 Notes to Consolidated Financial Statements........................................... F-7 </TABLE> F-1

When the recapitalization, which includes a stock split, referred to in Note 6 of the Consolidated Financial Statements has been consummated, we will be in a position to render the following report. /s/ KPMG LLP FORM OF INDEPENDENT AUDITORS' REPORT The Board of Directors Ariba, Inc.: We have audited the accompanying consolidated balance sheets of Ariba, Inc. and subsidiaries (the Company) as of September 30, 1997 and 1998, and the related consolidated statements of operations and other comprehensive income (loss), stockholders' equity, and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ariba, Inc. and subsidiaries as of September 30, 1997 and 1998, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. Mountain View, California April 22, 1999, except as to Note 6, which is as of , 1999 F-2

ARIBA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <TABLE> <CAPTION> SEPTEMBER 30, MARCH 31, 1999 -------------------- ---------------------- 1997 1998 ACTUAL PRO FORMA --------- --------- --------- ----------- (UNAUDITED) <S> <C> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents............................................. $ 15,471 $ 8,305 $ 14,615 $ 16,345 Short-term investments................................................ -- 5,627 6,818 6,818 Restricted cash....................................................... -- -- 800 800 Accounts receivable................................................... 222 2,600 6,316 6,316 Prepaid expenses and other current assets............................. 135 255 2,053 2,053 --------- --------- --------- ----------- Total current assets................................................ 15,828 16,787 30,602 32,332 Property and equipment, net............................................. 861 2,217 4,075 4,075 Other assets............................................................ 111 238 378 378 --------- --------- --------- ----------- $ 16,800 $ 19,242 $ 35,055 $ 36,785 --------- --------- --------- ----------- --------- --------- --------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable...................................................... $ 896 $ 962 $ 1,445 $ 1,445 Accrued compensation and related liabilities.......................... 115 1,704 3,759 3,759 Accrued liabilities................................................... 560 1,264 2,396 2,396 Deferred revenue...................................................... 332 4,409 18,759 18,759 Current portion of long-term debt..................................... 240 297 400 400 --------- --------- --------- ----------- Total current liabilities........................................... 2,143 8,636 26,759 26,759 Long-term debt, net of current portion.................................. 140 647 646 646 --------- --------- --------- ----------- Total liabilities................................................... 2,283 9,283 27,405 27,405 --------- --------- --------- ----------- Commitments Stockholders' equity: Convertible preferred stock, $.002 par value; actual--10,000,000 shares authorized; 4,127,900, 4,461,294 and 4,461,294 shares issued and outstanding as of September 30, 1997 and 1998, and March 31, 1999; liquidation preferences of $18,914, $23,214 and $23,214 in aggregate as of September 30, 1997 and 1998 and March 31, 1999; pro forma--20,000,000 shares authorized; no shares issued and outstanding......................................................... 8 9 9 -- Common stock, $.002 par value; actual--80,000,000 shares authorized; 18,227,400, 19,092,040 and 19,371,820 shares issued and outstanding as of September 30, 1997 and 1998 and March 31, 1999, respectively; pro forma-- 200,000,000 shares authorized; 37,741,396 shares issued and outstanding..................................................... 36 38 39 75 Additional paid-in capital............................................ 19,302 28,218 49,339 51,042 Deferred stock-based compensation..................................... (150) (2,735) (17,942) (17,942) Accumulated other comprehensive income (loss)......................... -- 61 (35) (35) Accumulated deficit................................................... (4,679) (15,632) (23,760) (23,760) --------- --------- --------- ----------- Total stockholders' equity.......................................... 14,517 9,959 7,650 9,380 --------- --------- --------- ----------- $ 16,800 $ 19,242 $ 35,055 $ 36,785 --------- --------- --------- ----------- --------- --------- --------- ----------- </TABLE> See accompanying notes to consolidated financial statements. F-3

ARIBA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <TABLE> <CAPTION> YEARS ENDED SIX MONTHS ENDED SEPTEMBER 30, MARCH 31, -------------------- -------------------- 1997 1998 1998 1999 --------- --------- --------- --------- (UNAUDITED) <S> <C> <C> <C> <C> Revenues: License....................................... $ 630 $ 6,040 $ 807 $ 10,500 Maintenance and service....................... 130 2,323 408 5,838 --------- --------- --------- --------- Total revenues.............................. 760 8,363 1,215 16,338 --------- --------- --------- --------- Cost of revenues: License....................................... 13 165 17 250 Maintenance and service....................... 927 1,373 510 2,509 --------- --------- --------- --------- Total costs of revenues..................... 940 1,538 527 2,759 --------- --------- --------- --------- Gross profit (loss)............................. (180) 6,825 688 13,579 --------- --------- --------- --------- Operating expenses: Sales and marketing........................... 2,235 10,311 3,333 11,302 Research and development...................... 1,899 4,499 1,963 3,849 General and administrative.................... 588 2,580 880 2,698 Amortization of stock-based compensation...... 50 956 79 4,045 --------- --------- --------- --------- Total operating expenses.................... 4,772 18,346 6,255 21,894 --------- --------- --------- --------- Loss from operations............................ (4,952) (11,521) (5,567) (8,315) Other income, net............................... 273 568 268 187 --------- --------- --------- --------- Net loss........................................ $ (4,679) $ (10,953) $ (5,299) $ (8,128) --------- --------- --------- --------- Other comprehensive income (loss): Unrealized gain (loss) on short-term investments................................. -- 61 -- (80) Foreign currency translation adjustment....... -- -- -- (16) --------- --------- --------- --------- Other comprehensive income (loss)............... -- 61 -- (96) --------- --------- --------- --------- Comprehensive loss.............................. $ (4,679) $ (10,892) $ (5,299) $ (8,224) --------- --------- --------- --------- --------- --------- --------- --------- Basic and diluted net loss per share............ $ (7.31) $ (1.90) $ (1.19) $ (0.84) --------- --------- --------- --------- --------- --------- --------- --------- Shares used in computing basic and diluted net loss per share................................ 639,587 5,761,912 4,455,761 9,694,493 --------- --------- --------- --------- --------- --------- --------- --------- </TABLE> See accompanying notes to consolidated financial statements. F-4

ARIBA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA) <TABLE> <CAPTION> CONVERTIBLE PREFERRED ACCUMULATED STOCK COMMON STOCK ADDITIONAL DEFERRED OTHER ---------------------- ---------------------- PAID-IN STOCK-BASED COMPREHENSIVE SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION INCOME (LOSS) --------- ----------- --------- ----------- ----------- ------------- ----------------- <S> <C> <C> <C> <C> <C> <C> <C> Issuance of common stock......... -- $ -- 14,086,400 $ 28 $ 180 $ (200) $ -- Issuance of Series A convertible preferred stock, net of issuance costs of $12.......... 3,112,800 6 -- -- 6,208 -- -- Issuance of Series B convertible preferred stock, net of issuance costs of $30.......... 1,015,100 2 -- -- 12,656 -- -- Issuance of common stock--options exercised...................... -- -- 5,339,000 10 258 -- -- Repurchase of common stock....... -- -- (1,198,000) (2) -- -- -- Amortization of stock-based compensation................... -- -- -- -- -- 50 -- Net loss......................... -- -- -- -- -- -- -- --------- ----- --------- --- ----------- ------------- --- Balances, September 30, 1997..... 4,127,900 8 18,227,400 36 19,302 (150) -- Issuance of Series B convertible preferred stock, net of issuance costs of $3........... 144,000 -- -- -- 1,798 -- -- Issuance of Series BB convertible preferred stock, net of issuance costs of $7........... 189,394 1 -- -- 2,493 -- -- Issuance of common stock--options exercised...................... -- -- 1,109,640 2 487 -- -- Repurchase of common stock....... -- -- (245,000) -- -- -- -- Deferred stock-based compensation................... 3,541 (3,541) -- Amortization of stock-based compensation................... -- -- -- -- -- 956 -- Issuance of warrants for common stock.......................... -- -- -- -- 504 -- -- Issuance of warrants for preferred stock................ -- -- -- -- 93 -- -- Other comprehensive income....... -- -- -- -- -- -- 61 Net loss......................... -- -- -- -- -- -- -- --------- ----- --------- --- ----------- ------------- --- Balances, September 30, 1998..... 4,461,294 9 19,092,040 38 28,218 (2,735) 61 Issuance of common stock--options exercised (unaudited).......... -- -- 1,461,300 3 1,872 -- -- Repurchase of common stock (unaudited).................... -- -- (1,181,520) (2) (3) -- -- Deferred stock-based compensation (unaudited).................... -- -- -- 19,252 (19,252) Amortization of stock-based compensation (unaudited)....... -- -- -- -- -- 4,045 -- Other comprehensive loss (unaudited).................... -- -- -- -- -- -- (96) Net loss (unaudited)............. -- -- -- -- -- -- -- --------- ----- --------- --- ----------- ------------- --- Balances, March 31, 1999 (unaudited).................... 4,461,294 $ 9 19,371,820 $ 39 $ 49,339 $ (17,942) $ (35) --------- ----- --------- --- ----------- ------------- --- --------- ----- --------- --- ----------- ------------- --- <CAPTION> TOTAL ACCUMULATED STOCKHOLDERS' DEFICIT EQUITY ------------ ------------- <S> <C> <C> Issuance of common stock......... $ -- $ 8 Issuance of Series A convertible preferred stock, net of issuance costs of $12.......... -- 6,214 Issuance of Series B convertible preferred stock, net of issuance costs of $30.......... -- 12,658 Issuance of common stock--options exercised...................... -- 268 Repurchase of common stock....... -- (2) Amortization of stock-based compensation................... -- 50 Net loss......................... (4,679) (4,679) ------------ ------------- Balances, September 30, 1997..... (4,679) 14,517 Issuance of Series B convertible preferred stock, net of issuance costs of $3........... -- 1,798 Issuance of Series BB convertible preferred stock, net of issuance costs of $7........... -- 2,494 Issuance of common stock--options exercised...................... -- 489 Repurchase of common stock....... -- -- Deferred stock-based compensation................... -- -- Amortization of stock-based compensation................... -- 956 Issuance of warrants for common stock.......................... -- 504 Issuance of warrants for preferred stock................ -- 93 Other comprehensive income....... -- 61 Net loss......................... (10,953) (10,953) ------------ ------------- Balances, September 30, 1998..... (15,632) 9,959 Issuance of common stock--options exercised (unaudited).......... -- 1,875 Repurchase of common stock (unaudited).................... -- (5) Deferred stock-based compensation (unaudited).................... -- -- Amortization of stock-based compensation (unaudited)....... -- 4,045 Other comprehensive loss (unaudited).................... -- (96) Net loss (unaudited)............. (8,128) (8,128) ------------ ------------- Balances, March 31, 1999 (unaudited).................... $ (23,760) $ 7,650 ------------ ------------- ------------ ------------- </TABLE> See accompanying notes to consolidated financial statements. F-5

ARIBA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) <TABLE> <CAPTION> YEARS ENDED SIX MONTHS ENDED SEPTEMBER 30, MARCH 31, -------------------- -------------------- 1997 1998 1998 1999 --------- --------- --------- --------- (UNAUDITED) <S> <C> <C> <C> <C> OPERATING ACTIVITIES: Net loss............................................. $ (4,679) $ (10,953) $ (5,299) $ (8,128) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................ 112 644 196 496 Amortization of stock-based compensation............. 50 956 79 4,045 Non-cash warrant expense............................. -- 521 7 13 Loss on disposition of property and equipment........ 22 4 -- -- Changes in operating assets and liabilities: Accounts receivable................................ (222) (2,378) 69 (3,716) Prepaid expenses and other assets.................. (246) (171) (119) (674) Accounts payable................................... 896 66 (145) 483 Accrued compensation and related liabilities....... 115 1,589 197 2,055 Accrued liabilities................................ 560 704 74 1,116 Deferred revenue................................... 332 4,077 1,177 14,350 --------- --------- --------- --------- Net cash provided by (used) in operating activities......................................... (3,060) (4,941) (3,764) 10,040 --------- --------- --------- --------- INVESTING ACTIVITIES: Purchases of property and equipment.................. (995) (896) (275) (2,033) Proceeds from the sales of short term investments.... -- -- -- 1,369 Purchases of short-term investments.................. -- (5,566) -- (2,640) Allocation to restricted cash........................ -- -- -- (800) --------- --------- --------- --------- Net cash used in investing activities................ (995) (6,462) (275) (4,104) --------- --------- --------- --------- FINANCING ACTIVITIES: Borrowings under long-term debt...................... 400 -- -- -- Repayments under long-term debt...................... (20) (544) (139) (219) Proceeds from sale of convertible preferred stock, net................................................ 18,872 4,292 1,798 -- Proceeds from sale of common stock................... 275 489 154 598 Repurchase of common stock........................... (1) -- -- (5) --------- --------- --------- --------- Net cash provided by financing activities............ 19,526 4,237 1,813 374 --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents... 15,471 (7,166) (2,226) 6,310 Cash and cash equivalents at beginning of period....... -- 15,471 15,471 8,305 --------- --------- --------- --------- Cash and cash equivalents at end of period............. $ 15,471 $ 8,305 $ 13,245 $ 14,615 --------- --------- --------- --------- --------- --------- --------- --------- Supplemental disclosures of cash flow information: Cash paid during period for interest................. $ 14 $ 120 $ 75 $ 52 --------- --------- --------- --------- --------- --------- --------- --------- Non-cash investing and financing activities: Assets recorded under capital leases............... $ -- $ 1,108 $ 1,108 $ 321 --------- --------- --------- --------- --------- --------- --------- --------- Warrants issued for financing commitments.......... $ -- $ 93 $ -- $ -- --------- --------- --------- --------- --------- --------- --------- --------- </TABLE> See accompanying notes to consolidated financial statements. F-6

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Ariba, Inc. (Ariba or the Company) is a provider of intranet- and Internet-based business-to-business electronic commerce solutions for operating resources. Ariba's Operating Resources Management System (ORMS) is a robust, scalable and reliable network application that operates primarily within a buying organization's intranet. Ariba ORMS enables organizations to automate the procurement cycle by linking enclosures throughout the organization with approvers and financial systems and by channeling purchases to preferred suppliers, enabling reduced operating costs and improved productivity. The recently launched Ariba.com network is a global business-to-business electronic commerce network for operating resources, enabling buyers and suppliers to automate transactions on the Internet. The Company was incorporated on September 17, 1996, under the laws of the state of Delaware and commenced operations on that date. The Company is headquartered in Sunnyvale, California, and has offices throughout the United States. Subsequent to year end, the Company established three wholly-owned subsidiaries, namely Ariba Canada, Inc., Ariba Technologies U.K. Limited and Ariba Technologies Nederland B.V., which are located in Canada, the United Kingdom and The Netherlands, respectively. BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared using an inception date of October 1, 1996, as no significant operating activities occurred between September 17, 1996, the date of incorporation, and September 30, 1996. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported results of operations during the reporting period. Actual results could differ from those estimates. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, the accompanying unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company's financial position as of March 31, 1999, and the results of its operations and its cash flows for the six months ended March 31, 1998 and 1999. F-7

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) FOREIGN CURRENCY TRANSLATION The functional currency for the Company's international subsidiaries is the local currency of the country in which it operates. Assets and liabilities are translated using the exchange rate at the balance sheet date. Revenues, expenses, gains, and losses are translated at the exchange rate on the date those elements are recognized. Any translation adjustments are included in other comprehensive income (loss). CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND RESTRICTED CASH The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. As of September 30, 1997 and 1998, cash equivalents consist of money market funds in the amount of $15,392,000 and $8,288,000 respectively. The Company classifies its short-term investments as "available-for-sale." Such investments are recorded at fair value based on quoted market prices, with unrealized gains and losses, which are considered to be temporary, recorded as other comprehensive income (loss) until realized. In March 1999, the Company entered into a new facilities operating lease agreement (see Note 5). As part of this agreement, the Company is required to hold a certificate of deposit as a form of security. As of March 31, 1999, the certificate of deposit amounted to $800,000, and this is classified as restricted cash. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK The carrying value of the Company's financial instruments, including cash and cash equivalents, short-term investments, accounts receivable and long-term debt approximates fair market value. Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and trade accounts receivable. Management believes the financial risks associated with these financial instruments are minimal. The Company maintains its cash and cash equivalents and short term investments with high quality financial institutions. The Company's customer base consists of businesses throughout North America. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable, as the Company's customers are large, well-established companies. To date, the Company has had no write-offs of accounts receivable. F-8

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) Significant customer information is as follows: <TABLE> <CAPTION> % OF TOTAL REVENUES ACCOUNTS RECEIVABLE ------------------------ ------------------------ 1997 1998 1997 1998 ----- ----- ----- ----- <S> <C> <C> <C> <C> Customer A...................................................... 39% -- -- -- Customer B...................................................... 28% -- -- -- Customer C...................................................... 26% -- 45% -- Customer D...................................................... -- 21% -- -- Customer E...................................................... -- 18% -- 25% Customer F...................................................... -- 13% -- -- Customer G...................................................... -- 13% -- 43% Customer H...................................................... -- 11% -- -- </TABLE> CAPITALIZED SOFTWARE Costs related to the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility of the product has been established, at which time such costs are capitalized, subject to expected recoverability. To date, the Company had not capitalized any development costs related to software products. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the equipment, generally three to five years. Equipment recorded under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the respective lease term or the estimated useful life of the asset. IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of any asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. REVENUE RECOGNITION On October 1, 1997 the Company adopted Statement of Position (SOP) 97-2, SOFTWARE REVENUE RECOGNITION, which supersedes SOP 91-1, SOFTWARE REVENUE RECOGNITION. The adoption of SOP 97-2 did not have a material effect on the Company's operating results. SOP 97-2 generally requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of the elements. License revenue allocated to software products generally is recognized upon F-9

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) delivery of the products or ratably over a contractual period if unspecified software products are to be delivered during that period. Revenue allocated to maintenance is recognized ratably over the maintenance term and revenue allocated to training and other service elements is recognized as the services are performed. If the services are considered essential to the functionality of the software products, both the software product revenue and service revenue are recognized using the percentage of completion method in accordance with the provisions of SOP 81-1, ACCOUNTING FOR PERFORMANCE OF CONSTRUCTION TYPE AND CERTAIN PRODUCTION TYPE CONTRACTS. Cost of license revenue primarily includes product, delivery and royalty costs. Cost of maintenance and service revenue consists primarily of labor costs for engineers performing implementation services and technical support personnel and facilities and equipment costs. INCOME TAXES The Company utilizes the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded to reduce deferred tax assets to an amount whose realization is more likely than not. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. STOCK-BASED COMPENSATION The Company uses the intrinsic value-based method of accounting for all of its employee stock-based compensation plans. Expense associated with stock-based compensation is being amortized on an accelerated basis over the vesting period of the individual award consistent with the method described in Financial Accounting Standards Board (FASB) Interpretation No 28. ACCUMULATED OTHER COMPREHENSIVE INCOME In June 1997, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME. SFAS No. 130 establishes standards of reporting and display of comprehensive income and its components of net income and "Other Comprehensive Income" in a full set of general purpose financial statements. "Other Comprehensive Income" refers to revenues, expenses, gains and losses that are not included in net income but rather are recorded directly in stockholders' equity. SFAS 130 was adopted by the Company in 1998. Tax effects of comprehensive income (loss) are not considered material. NET LOSS PER SHARE Basic net loss per share is computed using the weighted-average number of vested outstanding shares of common stock. Diluted net loss per share is computed using the weighted-average number of shares of F-10

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) vested common stock outstanding and, when dilutive, unvested common stock outstanding, potential common shares from options and warrants to purchase common stock using the treasury stock method and from convertible securities using the as-if-converted basis. All potential common shares have been excluded from the computation of diluted net loss per share for all periods presented because the effect would be antidilutive. Pursuant to the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 98, common stock and convertible preferred stock issued for nominal consideration, prior to the anticipated effective date of the IPO, are included in the calculation of basic and diluted net loss per share as if they were outstanding for all periods presented. To date, the Company has not had any issuances or grants for nominal consideration. Diluted net loss per share does not include the effect of the following common equivalent shares: <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30, -------------------- 1997 1998 --------- --------- <S> <C> <C> Shares issuable under stock options.................................. 653,200 3,568,960 Shares of unvested stock subject to repurchase....................... 14,781,800 10,290,760 Shares issuable pursuant to warrants to purchase common and convertible preferred stock........................................ -- 570,944 Shares of convertible preferred stock on an "as if converted" basis.............................................................. 16,511,600 17,845,176 </TABLE> The weighted-average exercise price of stock options outstanding was $0.14 and $0.77 as of September 30, 1997 and 1998, respectively. The weighted average purchase price of unvested stock was $0.05 and $0.06 as of September 30, 1997 and 1998, respectively. The weighted average exercise price of warrants was $3.29 as of September 30, 1998. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 requires disclosure of certain information regarding operating segments, products and services, geographic areas of operation, and major customers. Management is in the process of evaluating the financial reporting impact of this pronouncement. The Company will adopt SFAS No. 131 in fiscal 1999. In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes accounting and reporting standards for derivative financial instruments and hedging activities related to those instruments, as well as other hedging activities. Because the Company does not currently hold any derivative instruments and does not engage in hedging activities, the Company expects the adoption of SFAS No. 133 will not have a material impact on its financial position, results of operations or cash flows. The Company will be required to adopt SFAS No. 133 in fiscal 2000. In March 1998, the Accounting Standards Executive Committee (AcSEC) issued SOP 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 establishes the accounting for costs of software products developed or purchased for internal use, including when such costs should be capitalized. The Company does not expect SOP 98-1 to have a material effect on its financial position, results of operations or cash flows. The Company will adopt SOP 98-1 in fiscal 2000. F-11

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) In April 1998, the AcSEC issued SOP 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES. Under SOP 98-5, the cost of start-up activities should be expensed as incurred. The Company expects that the adoption of SOP 98-5 will not have a material impact on its financial position, results of operations or cash flows. The Company will be required to adopt SOP 98-5 in fiscal 2000. 2. FINANCIAL STATEMENT COMPONENTS SHORT-TERM INVESTMENTS The following is a summary of available for sale securities as of September 30, 1998 (in thousands): <TABLE> <CAPTION> GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----------- ------------- --------------- --------- <S> <C> <C> <C> <C> Government bonds............................................... $ 8,387 $ 61 -- $ 8,448 Money market funds............................................. 5,467 -- -- 5,467 -- ----------- --- --------- 13,854 61 -- 13,915 Less amounts classified as cash equivalents.................... 8,288 -- -- 8,288 -- ----------- --- --------- Securities available for sale.................................. $ 5,566 $ 61 -- $ 5,627 -- -- ----------- --- --------- ----------- --- --------- </TABLE> As of September 1998, the weighted average portfolio duration and contractual maturity was 15 months. The Company had no short term investments as of September 30, 1997. PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of September 30, 1997 and 1998 (in thousands): <TABLE> <CAPTION> SEPTEMBER 30, -------------------- 1997 1998 --------- --------- <S> <C> <C> Computer equipment and purchased software............................ $ 668 $ 1,648 Office equipment..................................................... 130 300 Furniture and fixtures............................................... 175 609 Leasehold improvements............................................... -- 416 --------- --------- 973 2,973 Less accumulated depreciation and amortization....................... 112 756 --------- --------- $ 861 $ 2,217 --------- --------- --------- --------- </TABLE> Certain computer and office equipment are recorded under capital leases that aggregated $1,108,000 as of September 30, 1998. Accumulated amortization on the assets recorded under capital leases aggregated $277,000 as of September 30, 1998. F-12

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) OTHER INCOME (NET) Other income, net, consists of the following (in thousands): <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30, -------------------- 1997 1998 --------- --------- <S> <C> <C> Interest income, net................................................... $ 289 $ 568 Other expense.......................................................... (16) -- --------- --------- $ 273 $ 568 --------- --------- --------- --------- </TABLE> 3. CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY CONVERTIBLE PREFERRED STOCK In September 1996 and May 1997, the Company issued 3,112,800 shares of Series A convertible preferred stock at $2.00 per share. From August 1997 through December 1997, the Company issued 1,159,100 shares of Series B convertible preferred stock at $12.50 per share. In April 1998, the Company issued 189,394 shares of Series BB convertible preferred stock at $13.20 per share. The rights, preferences, and privileges of the holders of Series A, B and BB convertible preferred stock are as follows: - The holders of Series A, B and BB preferred stock are entitled to receive annual dividends at the rate of $.16, $1.00 and $1.06 per share, respectively, payable when and if declared by the Company's Board of Directors, in preference and priority to any payments of dividends to holders of the Company's common stock. The dividend rights are not cumulative. No dividends have been declared or paid on preferred stock since inception of the Company. - Shares of Series A, B and BB preferred stock have a liquidation preference of $2.00, $12.50 and $13.20 per share, respectively; plus any declared but unpaid dividends. Shares of Series A also have pro rata liquidation rights with the common stock in any remaining assets after distribution to common stockholders, up to a total of $8.00 per share. - Each share of preferred stock is convertible into four shares of common stock, subject to adjustment for certain dilutive issuances, splits, or combinations. Conversion will occur upon written consent of the holders of preferred stock and automatically upon an initial public offering at a price of not less than $3.125 per share, which price increases ratably at approximately 10% annually beginning with the issuance date of the Series B preferred stock, and with aggregate proceeds equal to or exceeding $7,500,000. - Holders of Series A, B and BB preferred stock vote equally with shares of common stock on an "as if converted" basis. - Holders of Series A, B and BB preferred stock possess certain registration rights and the right to participate in future financings. F-13

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) - The Company has authorized and designated 3,112,800, 1,167,100 and 200,000 shares as Series A-1, B-1 and BB-1 preferred stock, respectively, and such shares have rights and preferences similar to the Series A, B and BB preferred stock, except that they are not entitled to antidilution protection. WARRANTS In November 1997, in connection with a lease line arrangement, the Company issued warrants to purchase 8,000 shares of the Company's Series B convertible preferred stock at a price of $12.50 per share, the fair value on the date of issuance. The warrants are immediately exercisable and expire October 31, 2003. The fair value of the warrants of $62,000 was calculated using the Black-Scholes option pricing model and is being amortized to interest expense over the term of the lease, 42 months. In June 1998, in connection with a marketing arrangement, the Company issued warrants to purchase 524,400 shares of the Company's common stock at a price of $3.30 per share. The warrants are immediately exercisable and expire on the earliest of (i) January 1, 2002, (ii) the effective date of the Company's initial public offering, (iii) on a sale or transfer by the Company of all or substantially all of its assets or (iv) on the acquisition of the Company by another entity. The fair value of the warrants of $504,000 was calculated using the Black-Scholes option pricing model and is included in sales and marketing expense for the year ended September 30, 1998. In August 1998, in connection with an additional lease line arrangement, the Company issued warrants to purchase 3,636 shares of the Company's Series BB convertible preferred stock at a price of $13.20 per share, the fair value on the date of issuance. The warrants are immediately exercisable and expire on the earliest of (i) August 26, 2005 or (ii) three years from the effective date of the Company's initial public offering. The fair value of the warrants of $31,000 was calculated using the Black-Scholes option pricing model and is being amortized to interest expense over the term of the lease, 42 months. COMMON STOCK In September 1996, 14,086,400 shares of common stock were issued to the Company's founders at $.001 per share. Upon issuance, the Company had the right to repurchase 100% of these shares at $.001 per share. These shares were issued subject to vesting based upon continued employment, with the repurchase right generally expiring ratably through September 2000. As of September 30, 1998, 6,045,200 shares of common stock issued to the Company's founders were subject to repurchase. Certain shares immediately vest upon a change in control of the Company, in an amount equal to the lesser of 50% of unvested shares or the number of unvested shares, that when added to the vested shares, equals 75% of shares purchased by that stockholder. Based on management's estimate of the fair value of these shares, the Company recorded $200,000 of deferred stock-based compensation expense. This amount is being amortized over the four-year vesting period. The Company has a right of first refusal to repurchase all vested shares of common stock at the then current fair market value. All unvested shares of common stock may be repurchased by the Company at the original issuance price upon an individual's termination of service with the Company. The right of first refusal expires upon an initial public offering of the Company's common stock. F-14

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) 1996 STOCK OPTION PLAN The Company's 1996 Stock Option Plan (the 1996 Stock Plan) authorizes the granting of incentive and nonstatutory common stock options to employees, directors, and consultants at exercise prices no less than 85% of the fair market value of the common stock on the grant date, as determined by the Board of Directors. Stock options generally vest 25% after one year of service and thereafter ratably over 36 months of service and generally have a term of 10 years. The 1996 Stock Plan also allows for exercise of unvested options. Shares of common stock issued to employees upon exercise of unvested options are subject to repurchase by the Company at the original exercise price. The Company's ability to repurchase these shares expires at a rate consistent with the vesting schedule of each option. Any right to repurchase shares upon an employee's termination of service lapses and all shares vest if the Company is subject to a change in control unless the Company's repurchase right is assumed by the acquiring entity. As of September 30, 1998, 4,245,560 shares of common stock were issued upon the exercise of unvested options subject to repurchase. Approximately 10,244,000 shares of common stock have been reserved for issuance under the 1996 Stock Plan as of September 30, 1998. As of September 1997 and 1998, the Company has 4,268,200 and 495,800 shares available for grant, respectively. On October 5, 1998 and March 16, 1999, the Board of Directors increased the number of authorized shares of common stock for issuance under the 1996 Stock Plan by 4,600,000 and 2,200,000 shares, respectively. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company uses the intrinsic value method of accounting for its employee stock-based compensation plans. Accordingly, no compensation cost is recognized for any of its stock options when the exercise price of each option equals or exceeds the fair value of the underlying common stock as of the grant date for each stock option. With respect to the stock options granted since inception through March 1999, the Company recorded deferred stock-based compensation of $22,374,000 for the difference at the grant date between the exercise price and the fair value of the common stock underlying the options. This amount is being amortized in accordance with FASB Interpretation No. 28 over the vesting period of the individual options, generally 4 years. Had compensation cost been determined in accordance with SFAS No. 123 for all of the Company's stock-based compensation plans, net loss and net loss per share would have been changed to the amounts indicated below (in thousands, except per share data): <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30, -------------------- 1997 1998 --------- --------- <S> <C> <C> Net loss: As reported......................................................... $ (4,679) $ (10,953) Pro forma........................................................... (4,685) (11,000) Basic and diluted net loss per share: As reported......................................................... (7.31) (1.90) Pro forma........................................................... $ (7.32) $ (1.91) </TABLE> F-15

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) The fair value of each stock option is estimated on the date of grant using the minimum value method with no expected dividends and the following weighted-average assumptions: <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30, -------------------- 1997 1998 --------- --------- <S> <C> <C> 2.50 2.60 Expected life......................................................... years years Risk-free interest rate............................................... 6.00% 5.50% Volatility (for nonemployees)......................................... 60% 60% </TABLE> A summary of the 1996 Stock Plan is as follows: <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30, -------------------------------------------------- SIX MONTHS ENDED MARCH 1997 1998 31, 1999 ------------------------ ------------------------ ------------------------ WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ----------- ----------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> Outstanding at beginning of period............. -- $ -- 653,200 $ .14 3,568,960 $ .77 Granted...................................... 5,976,200 .06 4,272,400 .76 6,106,800 2.53 Exercised.................................... (5,323,000) .05 (1,101,640) .45 (1,461,300) 1.32 Forfeited.................................... -- -- (255,000) .44 (109,200) .23 ----------- ----------- ----------- Outstanding at end of period................... 653,200 .14 3,568,960 .77 8,105,260 2.00 ----------- ----------- ----------- ----------- ----------- ----------- Exercisable at end of period................... 653,200 .14 3,568,960 .77 ----------- ----------- ----------- ----------- Weighted-average fair value of options granted during the period at market.................. 5,976,200 .01 1,034,000 .07 Weighted-average fair value of options granted during the period at less than market........ -- -- 3,238,400 1.18 </TABLE> The following table summarizes information about stock options outstanding as of September 30, 1998: <TABLE> <CAPTION> OUTSTANDING -------------------------------------- EXERCISABLE WEIGHTED- ----------------------- AVERAGE WEIGHTED- WEIGHTED- RANGE OF REMAINING AVERAGE AVERAGE EXERCISE NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE PRICES SHARES LIFE (YEARS) PRICE SHARES PRICE ------------------------------------------ ---------- ------------- ----------- ---------- ----------- <S> <C> <C> <C> <C> <C> $.05...................................... 380,000 8.75 $ .05 380,000 $ .05 .31 - .38................................. 806,960 9.20 .35 806,960 .35 .50 - 1.00................................ 1,629,000 9.63 .88 1,629,000 .88 1.33...................................... 753,000 9.81 1.33 753,000 1.33 ---------- ---------- .05 - 1.33................................ 3,568,960 9.47 .77 3,568,960 $ .77 ---------- ---------- ---------- ---------- </TABLE> F-16

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) The following table summarizes information about shares subject to repurchase as of September 30, 1998: <TABLE> <CAPTION> WEIGHTED- AVERAGE WEIGHTED- RANGE OF REMAINING AVERAGE EXERCISE NUMBER OF CONTRACTUAL REPURCHASE PRICES SHARES LIFE (YEARS) PRICE ------------------------------------------ ------------ ------------- ------------- <S> <C> <C> <C> $.001 - $.05.............................. 9,227,720 8.17 $ .02 $.31 - $.38............................... 846,040 9.19 .35 $.50 - $1.00.............................. 217,000 9.58 .83 ------------ $.001 - $1.00............................. 10,290,760 8.29 $ .06 ------------ ------------ </TABLE> 4. INCOME TAXES The tax effects of temporary differences that give rise to significant portions of the deferred tax assets as of September 30, 1997 and 1998, are as follows (in thousands): <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30, -------------------- 1997 1998 --------- --------- <S> <C> <C> Deferred tax assets: Accruals and reserves.................................................... $ 426 $ 1,095 Depreciation and amortization............................................ 20 87 Deferred start-up costs.................................................. 530 310 Net operating loss carryforwards......................................... 1,508 4,386 --------- --------- Total gross deferred tax assets........................................ 2,484 5,878 Less valuation allowance............................................... 2,484 5,878 --------- --------- Net deferred taxes..................................................... $ -- $ -- --------- --------- --------- --------- </TABLE> The Company has provided a valuation allowance due to the uncertainty of generating future profits that would allow for the realization of such deferred tax assets. The reconciliation between the amount computed by applying the U.S. federal statutory tax rate of 34% to income taxes and the actual provision for income taxes as of September 30, 1997 and 1998 follows (in thousands): <TABLE> <CAPTION> 1997 1998 --------- --------- <S> <C> <C> Income tax at statutory rate............................................. $ (1,591) $ (3,724) Nondeductible expenses................................................... 6 416 Net operating loss and temporary differences for which no benefit was realized............................................................... 1,585 3,308 --------- --------- Total................................................................ $ -- $ -- --------- --------- --------- --------- </TABLE> F-17

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) 4. INCOME TAXES (CONTINUED) As of September 30, 1998, the Company has net operating loss carryforwards for federal and state tax purposes of approximately $11,500,000 and $8,300,000, respectively. These federal and state carryforwards begin to expire in 2012 and 2004, respectively. The Internal Revenue Code of 1986, and applicable state tax laws, impose substantial restrictions on the ability of the Company to utilize net operating losses and tax credit carryforwards in the event of an "ownership change," as defined in Section 382 of the Internal Revenue Code. The Company's federal and state tax losses and tax credit carryover incurred through that date of change are subject to an annual limitation. F-18

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) 5. LONG-TERM DEBT AND LEASE COMMITMENTS The Company leases certain equipment and its facilities under various noncancelable operating leases. The leases expire from 1999 to 2004. The Company also leases certain computer equipment under capital leases. Future minimum lease payments under operating leases as of September 30, 1998, are as follows (in thousands): <TABLE> <CAPTION> CAPITAL OPERATING YEAR ENDING SEPTEMBER 30, LEASES LEASES ----------------------------------------------------------------------------------- --------- ----------- <S> <C> <C> 1999............................................................................... $ 361 $ 1,333 2000............................................................................... 361 951 2001............................................................................... 310 851 2002............................................................................... -- 851 2003............................................................................... -- 828 Thereafter......................................................................... -- 729 --------- ----------- Total minimum lease payments....................................................... 1,032 $ 5,543 ----------- ----------- Less amount representing imputed interest.......................................... 88 --------- Present value of minimum lease payments............................................ 944 Less current portion............................................................... 297 --------- Capital lease obligations, less current portion.................................... $ 647 --------- --------- </TABLE> Rental expense was $371,000 and $865,000 for the years ended September 30, 1997 and 1998, respectively. On November 22, 1996, the Company entered into an equipment line of credit for $400,000 with a financial institution and $380,000 was outstanding under the line of credit as of September 30, 1997. In August 1998, the Company repaid the entire amount outstanding under the line of credit and the line of credit was terminated. In November 1997, the Company entered into a lease line arrangement with a lending company in which the Company can obtain financing for up to $2,000,000. The lease term commences on January 1, 1998, and is for 42 months. Warrants to purchase up to 8,000 shares of Series B preferred stock, at an exercise price of $12.50 per share, were issued in conjunction with the lease line agreement (see Note 3). In August, 1998 the Company entered into an additional lease line arrangement with a lending company in which the Company can obtain financing for up to $1,000,000. The lease term commences on August 26, 1998, and is for 42 months. Warrants to purchase up to 3,636 shares of Series BB preferred stock, at an exercise price of $13.20 per share, were issued in conjunction with the lease line agreement (see Note 3). In March, 1999, the Company entered into a new facilities operating sublease agreement. The lease term commences on May 1, 1999 and is for 90 months. Lease payments are made on an escalating basis with the total future minimum lease payments amounting to approximately $14,319,000 over the lease term. The Company must also contribute $1,316,000 toward initial improvement costs. In addition, the Company has also entered into a sub-sublease agreement for the same facilities. The Company has subleased part of the facilities from May 1, 1999 for a period of 8 months. Minimum sub-sublease receipts total approximately $269,000. F-19

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) 6. SUBSEQUENT EVENTS INITIAL PUBLIC OFFERING AND UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET In April 1999, the Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission (SEC), that would permit the Company to sell shares of the Company's common stock in connection with a proposed initial public offering (IPO). If the offering is consummated under the terms presently anticipated, all of the outstanding shares of the Company's convertible preferred stock will automatically convert into shares of common stock on a one-for-four basis, upon closing of the proposed IPO. The conversion of the convertible preferred stock and exercise of the common stock warrants for 524,400 shares has been reflected in the accompanying unaudited pro forma consolidated balance sheet. STOCK SPLIT On both March 16, 1999 and on April 20, 1999, the Board of Directors approved a two-for-one stock split of the Company's common stock thus effecting an overall four-for-one stock split as of April 20, 1999. The accompanying consolidated financial statements have been restated to give effect to the stock splits. AUTHORIZED SHARES On April 20, 1999, the Board of Directors increased the number of authorized shares of common stock to 80,000,000, subject to stockholder approval. The accompanying consolidated financial statements have been restated to give effect to the increased authorized shares. If the offering is consummated, the authorized number of shares of common stock and preferred stock will increase to 200,000,000 and 20,000,000, respectively. EQUITY INCENTIVE PLAN The Company's Board of Directors approved the Equity Incentive Plan (the Incentive Plan) on April 20, 1999 under which 2,400,000 shares have been reserved for issuance. In addition, any shares not issued under the 1996 Stock Plan will also be available for grant. The number of shares reserved under the Incentive Plan will automatically increase annually beginning on January 1, 2000 by the lesser of 2,000,000 shares or 5% of the total amount of common stock shares outstanding. Under the Incentive Plan, eligible employees may purchase stock options, stock appreciation rights, restricted shares, and stock units. The exercise price for incentive stock options and non-qualified options may not be less than 100% and 85%, respectively, of the fair value of common stock at the option grant date. EMPLOYEE STOCK PURCHASE PLAN The Company's Board of Directors adopted the Employee Stock Purchase Plan (the Purchase Plan) on April 20, 1999 under which 4,000,000 shares have been reserved for issuance. The Purchase Plan is pending approval by the stockholders. The number of shares reserved under the Incentive Plan will automatically increase beginning on January 1 of each year by the lesser of 750,000 shares or 2% of the total amount of common stock shares outstanding. Under the Purchase Plan, eligible employees may purchase common stock in an amount not to exceed 15% of the employees cash compensation. The F-20

ARIBA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 AND 1998 (INFORMATION AS OF MARCH 31, 1999, AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED) purchase price per share will be 85% of the common stock fair value at the lower of certain plan defined dates. DIRECTORS STOCK OPTION PLAN The Company's Board of Directors adopted the Directors' Stock Option Plan (the Directors Plan) on April 20, 1999 under which 500,000 shares have been reserved for issuance. The Directors Plan is pending approval by the stockholders. Each non-employee joining the Board of Directors following the effective date of the initial public offering will automatically receive options to purchase 10,000 shares of common stock. In addition, each non-employee director will automatically receive options to purchase 2,500 shares of common stock at each annual meeting of the Board of Directors beginning after January 1, 2000. Each option will have an exercise price equal to the fair value of the common stock on the automatic grant date. F-21

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PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of common stock being registered. All amounts are estimates except the SEC registration fee and the NASD filing fees. <TABLE> <S> <C> SEC registration fee............................................... $ 13,900 NASD fee........................................................... 5,500 Nasdaq National Market initial listing fee......................... 1,000 Printing and engraving............................................. * Legal fees and expenses of the Registrant.......................... * Accounting fees and expenses....................................... * Directors and officers liability insurance......................... * Blue sky fees and expenses......................................... * Transfer agent fees................................................ * Miscellaneous...................................................... * --------- Total.......................................................... * --------- --------- </TABLE> ------------------------ * To be filed by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law authorizes a court to award or a corporation's board of directors to grant indemnification to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933 (the "Act"). Article VII of the Registrant's Bylaws provides for mandatory indemnification of its directors and officers and permissible indemnification of employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. The Registrant's Amended and Restated Certificate of Incorporation provides that, pursuant to Delaware law, its directors shall not be liable for monetary damages for breach of the directors' fiduciary duty as directors to the Registrant and its stockholders. This provision in the Amended and Restated Certificate of Incorporation does not eliminate the directors' fiduciary duty, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director's duty of loyalty to the Registrant for acts or omissions not in good faith or involving intentional misconduct, for knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director's responsibilities under any other law, such as the federal securities laws or state or federal environmental laws. The Registrant has entered into Indemnification Agreements with its officers and directors, a form of which is attached as Exhibit 10.1 hereto and incorporated herein by reference. The Indemnification Agreements provide the Registrant's officers and directors with further indemnification to the maximum extent permitted by the Delaware General Corporation Law. The Registrant maintains liability insurance for its directors and officers. Reference is also made to Section of the Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers and directors of the Registrant against certain liabilities, and Section 1.9 of the Amended and Restated Investor Rights Agreement contained in Exhibit 4.1 hereto, indemnifying certain of the Company's stockholders, including controlling stockholders, against certain liabilities. II-1

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Since our formation, we have issued and sold the following securities: 1. On September 17, 1996, we issued and sold an aggregate of 14,537,600 shares of its common stock to nine founders of the Company for an aggregate purchase price of $7,268.80. 2. On September 27, 1996, we issued and sold 12,000,000 shares of Series A Preferred Stock to a group of eight investors for an aggregate purchase price of $6,000,000. 3. On November 13, 1996, we issued and sold an aggregate of 16,000 shares of its common stock to five individuals for an aggregate purchase price of $800. 4. On May 9, 1997, we issued and sold an aggregate of 451,200 shares of its Series A Preferred Stock to one investor for an aggregate purchase price of $225,600. 5. On August 15, 1997, we issued and sold 4,060,400 shares of Series B Preferred Stock to a group of 26 investors for an aggregate purchase price of $12,688,750. 6. On October 15, 1997, we issued and sold an additional 160,000 shares of Series B Preferred Stock to an additional investor for an aggregate purchase price of $500,000. 7. On November 11, 1997, we issued and sold a warrant to purchase 32,000 shares of Series B Preferred Stock to Lighthouse Capital Partners II, L.P. 8. On December 19, 1997, we issued and sold an additional 416,000 shares of Series B Preferred Stock to an additional two investors for an aggregate purchase price of $1,300,000. 9. On April 17, 1998, we issued and sold 757,576 shares of Series BB Preferred Stock to an investor for an aggregate purchase price of $2,500,000.80. 10. On June 30, 1998, we issued and sold a warrant to purchase 524,400 shares of common stock to Chevron Corporation. 11. On July 15, 1998, we issued and sold 8,000 shares of common stock to Blanc & Otus for an aggregate purchase price of $8,000. 12. On August 26, 1998, we issued and sold a warrant to purchase 14,544 shares of Series BB Preferred Stock to Comdisco, Inc. 13. We issued and sold an aggregate of 7,885,940 shares (assuming no exercise of stock options after March 31, 1999) of common stock to employees, consultants and other service providers pursuant to stock grants and exercises of options under our 1996 Stock Plan (Exhibit 10.2). 14. We granted options to purchase 16,399,400 shares of common stock to employees, consultants and other service providers of the Company under our 1996 Stock Plan, of which 7,885,940 shares have been exercised as of March 31, 1999. The share amounts referred to in Part II of this registration statement reflect the two-for-one split of the common stock effected in March 1999 and the two-for-one split of the common stock to be effected prior to the closing of this offering and gives effect to the conversion of all outstanding shares of preferred stock into common stock effective upon the closing of this offering. The sale of the above securities was deemed to be exempt from registration under the Act in reliance upon Section 4(2) of the Act or Rule 701 promulgated under Section 3(b) of the Act as transactions by an issuer not involving any public offering or transactions pursuant to compensation benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each such transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share II-2

certificates and warrants issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits <TABLE> <CAPTION> EXHIBIT NO. DESCRIPTION ----------- --------------------------------------------------------------------------------------------------------- <C> <S> 1.1 Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation of the Registrant, as amended to date. 3.2* Form of Amended and Restated Certificate of Incorporation of the Registrant to be filed after the closing of the offering made pursuant to this Registration Statement. 3.3 Bylaws of the Registrant. 3.4* Amended and Restated Bylaws of the Registrant to be effective upon the closing of the offering made pursuant to this Registration Statement. 4.1 Amended and Restated Investors' Rights Agreement, dated April 17, 1998. 4.2* Specimen Certificate of the Registrant's common stock. 5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to the Registrant. 10.1 Form of Indemnification Agreement entered into between the Registrant and its directors and executive officers. 10.2 1996 Stock Plan, as amended. 10.3* 1999 Equity Incentive Plan. 10.4* 1999 Directors' Stock Option Plan. 10.5* Employee Stock Purchase Plan. 10.6 Industrial Complex Lease, dated August 11, 1997, by and between MP Caribbean, Inc. and the Registrant. 10.7 Lease Agreement, dated June 12, 1996, by and between Charleston Place Associates and U.S. Robotics Access Corp., as amended. 10.8 Sublease, dated February 1999, by and between 3Com Corporation, successor in interest to U.S. Robotics Access Corp., and the Registrant. 23.1 Consent of Independent Accountants (see page S-1). 23.2 Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to the Registrant. Reference is made to Exhibit 5.1. 24.1 Power of Attorney (see signature page hereto). 27.1 Financial Data Schedule </TABLE> ------------------------ * To be supplied by amendment. (b) Financial Statement Schedule Financial Statement Schedules are not listed because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. II-3

ITEM 17. UNDERTAKINGS The Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the Delaware General Corporation Law, the Amended and Restated Certificate of Incorporation or the Bylaws of the Registrant, Indemnification Agreements entered into between the Registrant and its officers and directors, the Underwriting Agreement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The Registrant hereby undertakes that: (1) For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4

SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale, State of California, on this 22nd day of April, 1999. <TABLE> <S> <C> <C> ARIBA, INC. By: /s/ KEITH J. KRACH ----------------------------------------- Keith J. Krach PRESIDENT AND CHIEF EXECUTIVE OFFICER </TABLE> POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Keith J. Krach and Edward P. Kinsey, and each of them, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective on filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated: <TABLE> <C> <S> <C> President, Chief Executive /s/ KEITH J. KRACH Officer and Chairman of ------------------------------ the Board (Principal April 22, 1999 Keith J. Krach Executive Officer) Chief Financial Officer, Vice President--Finance /s/ EDWARD P. KINSEY and Administration and ------------------------------ Secretary (Principal April 22, 1999 Edward P. Kinsey Financial and Accounting Officer) /s/ ROBERT C. KAGLE ------------------------------ Director April 22, 1999 Robert C. Kagle /s/ PAUL HEGARTY ------------------------------ Director April 21, 1999 Paul Hegarty /s/ JOHN B. MUMFORD ------------------------------ Director April 22, 1999 John B. Mumford /s/ HATIM A. TYABJI ------------------------------ Director April 22, 1999 Hatim A. Tyabji </TABLE> II-5

CONSENT OF INDEPENDENT AUDITORS We consent to the use of our form of report included herein and to the references to our firm under the headings "Experts" and "Selected Consolidated Financial Data" in the prospectus. /s/ KPMG LLP Mountain View, California April 22, 1999 S-1

INDEX TO EXHIBITS <TABLE> <CAPTION> EXHIBIT NO. EXHIBIT ------------- ----------------------------------------------------------------------------------------------------- <C> <S> 1.1 Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation of the Registrant, as amended to date. 3.2* Form of Amended and Restated Certificate of Incorporation of the Registrant to be filed after the closing of the offering made pursuant to this Registration Statement. 3.3 Bylaws of the Registrant. 3.4* Amended and Restated Bylaws of the Registrant to be effective upon the closing of the offering made pursuant to this Registration Statement. 4.1 Amended and Restated Investors' Rights Agreement, dated April 17, 1998. 4.2* Specimen Certificate of the Registrant's common stock. 5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to the Registrant. 10.1 Form of Indemnification Agreement entered into between the Registrant and its directors and executive officers. 10.2 1996 Stock Plan, as amended. 10.3* 1999 Equity Incentive Plan. 10.4* 1999 Directors' Stock Option Plan. 10.5* Employee Stock Purchase Plan. 10.6 Industrial Complex Lease, dated August 11, 1997, by and between MP Caribbean, Inc. and the Registrant. 10.7 Lease Agreement, dated June 12, 1996, by and between Charleston Place Associates and U.S. Robotics Access Corp., as amended. 10.8 Sublease, dated February 1999, by and between 3Com Corporation, successor in interest to U.S. Robotics Access Corp., and the Registrant. 23.1 Consent of Independent Accountants (see page S-1). 23.2 Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to the Registrant. Reference is made to Exhibit 5.1. 24.1 Power of Attorney (see signature page hereto). 27.1 Financial Data Schedule. </TABLE> ------------------------ * To be supplied by amendment.

Exhibit 1.1 _______________ SHARES ARIBA, INC. COMMON STOCK, $0.002 PAR VALUE UNDERWRITING AGREEMENT __________, 1999

_____________, 1999 Morgan Stanley & Co. Incorporated BT Alex. Brown Incorporated Dain Rauscher Wessels, a division of Dain Rauscher Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs and Mesdames: Ariba, Inc., a Delaware corporation (the "COMPANY"), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the "UNDERWRITERS") _______________ shares of its Common Stock, $0.002 par value (the "FIRM SHARES"). The Company also proposes to issue and sell to the several Underwriters not more than an additional ______________ shares of its Common Stock, $0.002 par value (the "ADDITIONAL SHARES") if and to the extent that you, as Managers of the offering, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "SHARES." The shares of Common Stock, $0.002 par value, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "COMMON STOCK." The Company has filed with the Securities and Exchange Commission (the "COMMISSION") a registration statement, including a prospectus, relating to the Shares. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS." If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462 Registration Statement. Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") has agreed to reserve a portion of the Shares to be purchased by it under this Agreement for sale to the Company's directors, officers, employees and business associates and other parties related to the Company (collectively, "PARTICIPANTS"), as set forth in the Prospectus under the heading "Underwriters" (the "DIRECTED SHARE PROGRAM"). The Shares to be sold by Morgan Stanley pursuant to the 1

Directed Share Program are referred to hereinafter as the "DIRECTED SHARES." Any Directed Shares not orally confirmed for purchase by any Participant by the end of the business day on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Prospectus. 1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (d) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are 2

fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (g) The shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable. (h) The Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. (i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares. (j) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). (k) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. (l) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under 3

the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. (m) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (n) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (o) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (p) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement. (q) The Company has complied with all provisions of Section 517.075, Florida Statutes relating to doing business with the Government of Cuba or with any person or affiliate located in Cuba. (r) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (1) the Company and its subsidiaries have not incurred any material liability or obligations, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (2) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (3) there has not been any material change in the capital stock, short-term 4

debt or long-term debt of the Company and its subsidiaries, except in each case as described in the Prospectus. (s) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Prospectus. (t) The Company and its subsidiaries own or possess, or can acquire on reasonable terms, all material patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse affect on the Company and its subsidiaries, taken as a whole. (u) No material labor dispute with the employees of the Company or any of its subsidiaries exists, except as described in the Prospectus, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any its principal suppliers, manufacturers or contractors that could have a material adverse effect on the Company and its subsidiaries, taken as a whole. (v) The Company and its subsidiaries are insured by the insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Prospectus. (w) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities 5

necessary to conduct their respective business, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Prospectus. (x) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (1) transactions are executed in accordance with management's general or specific authorizations; (2) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (3) access to assets is permitted only in accordance with management's general or specific authorization; and (4) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (y) The Company has reviewed its operations and that of its subsidiaries to evaluate the extent to which the business or operations of the Company or any of its subsidiaries will be affected by the Year 2000 Problem (that is, any significant risk that computer hardware or software applications used by the Company and its subsidiaries will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000); as a result of such review, (i) the Company has no reason to believe, and does not believe, that (A) there are any issues related to the Company's preparedness to address the Year 2000 Problem that are of a character required to be described or referred to in the Registration Statement or Prospectus which have not been accurately described in the Registration Statement or Prospectus and (B) the Year 2000 Problem will have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole, or result in any material loss or interference with the business or operations of the Company and its subsidiaries, taken as a whole; and (ii) the Company reasonably believes, after due inquiry, that the suppliers, vendors, customers or other material third parties used or served by the Company and such subsidiaries are addressing or will address the Year 2000 Problem in a timely manner, except to the extent that a failure to address the Year 2000 Problem by any supplier, vendor, customer or material third party would not have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole. (z) As of the date the Registration Statement became effective, the Common Stock was authorized for listing on the Nasdaq National Market upon official notice of issuance. (aa) Substantially all of the outstanding shares of Common Stock, and all securities convertible into or exercisable or exchangeable for Common Stock, are subject 6

to valid, binding and enforceable agreements (collectively, the "LOCK-UP AGREEMENTS") in substantially the form attached as EXHIBIT A. Furthermore, the Company represents and warrants to Morgan Stanley that (i) the Registration Statement, the Prospectus and any preliminary prospectus comply, and any further amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program, and that (ii) no authorization, approval, consent, license, order, registration or qualification of or with any government, governmental instrumentality or court, other than such as have been obtained, is necessary under the securities laws and regulations of foreign jurisdictions in which the Directed Shares are offered outside the United States. The Company has not offered, or caused the Underwriters to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customer's or supplier's level or type of business with the Company, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products. 2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective numbers of Firm Shares set forth in Schedule I hereto opposite its name at $______ a share (the "PURCHASE PRICE"). On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have a one-time right to purchase, severally and not jointly, up to _______________ Additional Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to exercise such option, you shall so notify the Company in writing not later than 30 days after the date of this Agreement, which notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Such date may be the same as the Closing Date (as defined below) but not earlier than the Closing Date nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be purchased as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares. The Company hereby agrees that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during the period ending 120 days after the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or 7

contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder or (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof of which the Underwriters have been advised in writing. 3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable. The Company is further advised by you that the Shares are to be offered to the public initially at $_____________ a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected by you at a price that represents a concession not in excess of $______ a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $_____ a share, to any Underwriter or to certain other dealers. 4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on ____________, 1999,(1) or at such other time on the same or such other date, not later than _________, 1999,(2) as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "CLOSING DATE." Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the notice described in Section 2 or at such other time on the same or on such other date, in any event not later than _______, 1999,(3) as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "OPTION CLOSING DATE." Certificates for the Firm Shares and Additional Shares shall be in definitive form and registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may ---------------- (1) Insert date 3 business days or, in the event the offering is priced after 4:30 p.m. Eastern Time, 4 business days after date of Underwriting Agreement. (2) Insert date 5 business days after the date inserted in accordance with note 6 above. (3) Insert date 10 business days after the expiration of the green shoe option. 8

be. The certificates evidencing the Firm Shares and Additional Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor. 5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Registration Statement shall have become effective not later than [_____] (New York City time) on the date hereof. The several obligations of the Underwriters are subject to the following further conditions: (a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Section 5(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened. 9

(c) The Underwriters shall have received on the Closing Date an opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, outside counsel for the Company, dated the Closing Date, to the effect that: (i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (iv) the shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable; (v) all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims; (vi) the Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights; (vii) this Agreement has been duly authorized, executed and delivered by the Company; 10

(viii) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or bylaws of the Company or, to the best of such counsel's knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or, to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares; (ix) the statements (A) in the Prospectus under the captions "Risk Factors - Shares Eligible for Future Sale," "Dividend Policy," "Certain Transactions," "Shares Eligible for Future Sale," "Description of Capital Stock" and "Underwriters" and (B) in the Registration Statement in Items 14 and 15, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (x) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required; (xi) the Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; and (xii) such counsel (A) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules and other financial and statistical data included therein as to which such counsel need not express any opinion) comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (B) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Registration Statement and the prospectus included therein at the time the 11

Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (C) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Underwriters shall have received on the Closing Date an opinion of Fenwick & West LLP, counsel for the Underwriters, dated the Closing Date, covering the matters referred to in Sections 5(c)(vi), 5(c)(vii), 5(c)(ix) (but only as to the statements in the Prospectus under "Description of Capital Stock" and "Underwriters") and 5(c)(xiii) above. With respect to Section 5(c)(xiii) above, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP and Fenwick & West LLP may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified. The opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP described in Section 5(c) above shall be rendered to the Underwriters at the request of the Company and shall so state therein. (e) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from KPMG LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus; PROVIDED that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof. (f) The Lock-Up Agreements, each substantially in the form of Exhibit A hereto, between you and certain shareholders, officers and directors of the Company relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due 12

authorization and issuance of the Additional Shares and other matters related to the issuance of the Additional Shares. 6. COVENANTS OF THE COMPANY. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows: (a) To furnish to you, without charge, five signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 6(c) below, as many copies of the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request. (b) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. (c) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (d) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request. (e) To make generally available to the Company's security holders and to you as soon as practicable an earning statement covering the twelve-month period ending ________, 2000 that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. 13

(f) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc., (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and all costs and expenses incident to listing the Shares on the Nasdaq National Market, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (ix) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 7 entitled "Indemnity and Contribution", and the last paragraph of Section 9 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make. (g) that in connection with the Directed Share Program, the Company will ensure that the Directed Shares will be restricted to the extent required by the National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules from sale, transfer, assignment, pledge or hypothecation for a period of three months following the date of the effectiveness of the Registration Statement. Morgan Stanley will notify the Company as 14

to which Participants will need to be so restricted. The Company will direct the transfer agent to place stop transfer restrictions upon such securities for such period of time. (h) the Company agrees: (i) to enforce the terms of each Lock-Up Agreement and (ii) issue stop-transfer instructions to the transfer agent for the Common Stock with respect to any transaction or contemplated transaction that would constitute a breach of or default under the applicable Lock-Up Agreement. In addition, without the prior written consent of Morgan Stanley, the Company agrees: (i) not to amend or terminate, or waive any right under, and Lock-Up Agreement, or take any other action that would directly or indirectly have the same effect as an amendment or termination, or waiver of any right under, any Lock-Up Agreement, that would permit any holder of shares of Common Stock, or securities convertible into or exercisable or exchangeable for Common Stock, to (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, or (ii) not to consent to any of the foregoing. (i) the Company agrees to place a restrictive legend on any shares of Common Stock acquired pursuant to the exercise, after the date hereof and prior to the expiration of the 120-day period after the date of the Prospectus, of any option granted under the Company's 1996 option plan, which legend shall restrict the transfer of such shares prior to the expiration of such 120-day period. In addition, the Company agrees that, without the prior written consent of Morgan Stanley, it will not release any stockholder or option holder from the market standoff provision imposed by the Company pursuant to its 1996 option plan earlier than 120 days after the date of the initial public offering of the Shares. (j) to pay all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program. Furthermore, the Company covenants with Morgan Stanley that the Company will comply with all applicable securities and other applicable laws, rules and regulations in each foreign jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program. 7. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably 15

incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the "INDEMNIFIED PARTY") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Morgan Stanley & Co. Incorporated, in the case of parties indemnified pursuant to Section 7(a), and by the Company, in the case of parties indemnified pursuant to Section 7(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse he indemnified party for fees and expenses of counsel as contemplated by the 16

second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in Section 7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 7(d)(i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information andopportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 7 were determined by PRO RATA allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 7(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. 17

Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The indemnity and contribution provisions contained in this Section 7 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 8. DIRECTED SHARE PROGRAM INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless Morgan Stanley and each person, if any, who controls Morgan Stanley within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act ("MORGAN STANLEY ENTITIES"), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) caused by any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of Directed Shares that the Participant agreed to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith or gross negligence of Morgan Stanley Entities. (b) In case any proceeding (including any governmental investigation) shall be instituted involving any Morgan Stanley Entity in respect of which indemnity may be sought pursuant to Section 8(a), the Morgan Stanley Entity seeing indemnity, shall promptly notify the Company in writing and the Company, upon request of the Morgan Stanley Entity, shall retain counsel reasonably satisfactory to the Morgan Stanley Entity to represent the Morgan Stanley Entity and any others the Company may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Morgan Stanley Entity shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Morgan Stanley Entity unless (i) the Company shall have agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Company and the Morgan Stanley Entity and representation of both parties by the same counsel would be inappropriate due to actual or 18

potential differing interests between them. The Company shall not, in respect of the legal expenses of the Morgan Stanley Entities in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Morgan Stanley Entities. Any such separate firm for the Morgan Stanley Entities shall be designated in writing by Morgan Stanley. The Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees to indemnify the Morgan Stanley Entities from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time a Morgan Stanley Entity shall have requested the Company to reimburse it for fees and expenses of counel as contemplated by the second and third sentences of this paragraph, the Company agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Company of the aforesaid request and (ii) the Company shall not have reimbursed the Morgan Stanley Entity in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of Morgan Stanley, effect any settlement of any pending or threatened proceeding in respect of which any Morgan Stanley Entity is or could have been a party and indemnity could have been sought hereunder by such Morgan Stanley Entity, unless such settlement includes an unconditional release of the Morgan Stanley Entities from all liability on claims that are the subject matter of such proceeding. (c) To the extent the indemnification provided for in Section 8(a) is unavailable to a Morgan Stanley Entity or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then the Company in lieu of indemnifying the Morgan Stanley Entity thereunder, shall contribute to the amount paid or payable by the Morgan Stanley Entity as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand from the offering of the Directed Shares or (ii) if the allocation provided by clause 8(c)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(c)(i) above but also the relative fault of the Company on the one hand and of the Morgan Stanley Entities on the other hand in connection with any statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand in connection with the offering of the Directed Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Directed Shares (before deducting expenses) and the total underwriting discounts and commissions received by the Morgan Stanley Entities for the Directed Shares, bear to the aggregate Public Offering Price of the Directed Shares. If the loss, claim, damage or liability is caused by an untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, the relative fault of the Company on the one hand and the Morgan Stanley Entities on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement or the omission or alleged omission relates to information supplie by the Company or by the Morgan Stanley Entities and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 19

(d) The Company and the Morgan Stanley Entities agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by PRO RATA allocation (even if the Morgan Stanley Entities were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(c). The amount paid or payable by the Morgan Stanley Entities as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by the Morgan Stanley Entities in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Morgan Stanley Entity shall be required to contribute any amount in excess of the amount by which the total price at which the Directed Shares distributed to the public were offered to the public exceeds the amount of any damages that such Morgan Stanley Entity has otherwise been required to pay. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (e) The indemnity and contribution provisions contained in this Section 8 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Morgan Stanley Entity or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Directed Shares. 9. TERMINATION. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. 10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall 20

be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; PROVIDED that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 9 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased, and arrangements satisfactory to you and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. If, on the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase Additional Shares or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 11. COUNTERPARTS. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 21

13. HEADINGS. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. Very truly yours, ARIBA, INC. By:____________________________ Name: Title: Accepted as of the date hereof Morgan Stanley & Co. Incorporated BT Alex. Brown Incorporated Dain Rauscher Wessels, a division of Dain Rauscher Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto. By: Morgan Stanley & Co. Incorporated By:__________________________ Name: Title: 22

SCHEDULE I NUMBER OF FIRM SHARES UNDERWRITER TO BE PURCHASED Morgan Stanley & Co. Incorporated BT Alex. Brown Incorporated Dain Rauscher Wessels, a division of Dain Rauscher Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated ---------------- Total ........ ---------------- ----------------

EXHIBIT A ________________, 1999 Morgan Stanley & Co. Incorporated BT Alex. Brown Incorporated Dain Rauscher Wessels, a division of Dain Rauscher Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, NY 10036 Dear Sirs and Mesdames: The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the "UNDERWRITING AGREEMENT") with Ariba, Inc., a Delaware corporation (the "COMPANY") providing for the public offering (the "PUBLIC OFFERING") by the several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of shares (the "SHARES") of the Common Stock, $0.002 par value per share, of the Company (the "COMMON STOCK"). To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 120 days after the date of the final prospectus relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (a) the sale of any Shares to the Underwriters pursuant to the Underwriting Agreement or (b) transactions relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Public Offering. In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 120 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters. Very truly yours, _______________________ (Name) _______________________ (Address)

Exhibit 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF ARIBA, INC., A DELAWARE CORPORATION The undersigned, Keith J. Krach and Edward P. Kinsey hereby certify that: ONE: They are the duly elected and acting President and Secretary, respectively, of said corporation. TWO: The name of the corporation is Ariba, Inc. and that the corporation was originally incorporated on September 17, 1996, under the name ProcureSoft, Inc., pursuant to the General Corporation Law. THREE: The Certificate of Incorporation of said corporation shall be amended and restated to read in full as follows: ARTICLE I The name of this corporation is Ariba, Inc. ARTICLE II The address of the registered office of this corporation in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. ARTICLE III The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV (A) CLASSES OF STOCK. This corporation is authorized to issue two classes of stock, to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares that this corporation is authorized to issue is fifty million (50,000,000). Forty million (40,000,000) shares shall be Common Stock, par value $.002 per share, and ten million (10,000,000) shares shall be Preferred Stock, par value $.002 per share. (B) RIGHTS, PREFERENCES AND RESTRICTIONS OF THE PREFERRED STOCK. The Preferred Stock authorized by this Amended and Restated Certificate of Incorporation may be issued from time to time in one or more series. The rights, preferences, privileges, and restrictions granted to and imposed on the Series A Preferred Stock, which series shall consist of three million one

hundred twelve thousand eight hundred (3,112,800) shares (the "Series A Preferred Stock"), the Series A-1 Preferred Stock, which series shall consist of three million one hundred twelve thousand eight hundred (3,112,800) shares (the "Series A-1 Preferred Stock"), the Series B Preferred Stock, which series shall consist of one million one hundred sixty-seven thousand one hundred (1,167,100) shares (the "Series B Preferred Stock"), the Series B-1 Preferred Stock, which series shall consist of one million one hundred sixty-seven thousand one hundred (1,167,100) shares (the "Series B-1 Preferred Stock"), the Series BB Preferred Stock, which series shall consist of two hundred thousand (200,000) shares (the "Series BB Preferred Stock"), and the Series BB-1 Preferred Stock, which series shall consist of two hundred thousand (200,000) shares (the "Series BB-1 Preferred Stock") are as set forth below in this Article IV(B). The Board of Directors is hereby authorized to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon additional series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or of any of them. Subject to compliance with applicable protective voting rights that have been or may be granted to the Preferred Stock or series thereof in Certificates of Determination or this corporation's Amended and Restated Certificate of Incorporation ("Protective Provisions"), but notwithstanding any other rights of the Preferred Stock or any series thereof, the rights, privileges, preferences and restrictions of any such additional series may be subordinated to, PARI PASSU with (including, without limitation, inclusion in provisions with respect to liquidation and acquisition preferences, redemption and/or approval of matters by vote or written consent), or senior to any of those of any present or future class or series of Preferred or Common Stock. Subject to compliance with applicable Protective Provisions, the Board of Directors is also authorized to increase or decrease the number of shares of any series, prior or subsequent to the issue of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. 1. DIVIDEND PROVISIONS. Subject to the rights of series of Preferred Stock that may from time to time come into existence, the holders of shares of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend or distribution (payable other than pursuant to a transaction covered by Section 2 or subsections 4(d)(iii), 4(e) or 4(f) hereof) on the Common Stock of this corporation, at the rate of (i) in the case of the Series A and Series A-1 Preferred Stock, $0.16 per share per annum, (ii) in the case of the Series B and Series B-1 Preferred Stock, $1.00 per share per annum, and (iii) in the case of the Series BB and Series BB-1 Preferred Stock, $1.06 per share per annum (each amount as adjusted for any stock dividends, combinations or splits with respect to such shares) or, if greater (as determined on a per annum basis and an as-converted basis for the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock), an amount equal to that paid on any other outstanding shares of this corporation, payable when, as, and if declared by the Board of Directors. Such dividends shall not be cumulative. 2. LIQUIDATION PREFERENCE. 2

(a) In the event of any liquidation, dissolution or winding up of this corporation, either voluntary or involuntary, subject to the rights of series of Preferred Stock that may from time to time come into existence, the holders of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this corporation to the holders of Common Stock by reason of their ownership thereof, (i) for the Series A and Series A-1 Preferred Stock, an amount per share equal to the sum of (A) $2.00 for each outstanding share of Series A and Series A-1 Preferred Stock (the "Original Series A Issue Price" and the "Original Series A-1 Issue Price", respectively), as adjusted for any stock dividends, combinations or splits with respect to such share, and (B) an amount equal to declared but unpaid dividends on such share; (ii) for the Series B and Series B-1 Preferred Stock, an amount per share equal to the sum of (A) $12.50 for each outstanding share of Series B and Series B-1 Preferred Stock (the "Original Series B Issue Price" and the "Original Series B-1 Issue Price", respectively), as adjusted for any stock dividends, combinations or splits with respect to such share, and (B) an amount equal to declared but unpaid dividends on such share; and (iii) for the Series BB and Series BB-1 Preferred Stock, an amount per share equal to the sum of (A) $13.20 for each outstanding share of Series BB and Series BB-1 Preferred Stock (the "Original Series BB Issue Price" and the "Original Series BB-1 Issue Price", respectively), as adjusted for any stock dividends, combinations or splits with respect to such share, and (B) an amount equal to declared but unpaid dividends on such share. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of Preferred Stock that may from time to time come into existence, the entire assets and funds of this corporation legally available for distribution shall be distributed ratably among the holders of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive. (b) Upon the completion of the distribution required by subsection (a) of this Section 2 and any other distribution that may be required with respect to series of Preferred Stock that may from time to time come into existence, the remaining assets of this corporation available for distribution to stockholders shall be distributed among the holders of Series A Preferred Stock, Series A-1 Preferred Stock and Common Stock pro rata based on the number of shares of Common Stock held by each (assuming full conversion of all such Series A Preferred Stock and Series A-1 Preferred Stock) until (i) with respect to the holders of Series A Preferred Stock and Series A-1 Preferred Stock, such holders shall have received an aggregate of $8.00 per share (including amounts paid to such holders pursuant to subsection (a) of this Section 2); thereafter, subject to the rights of series of Preferred Stock that may from time to time come into existence, if assets remain in this corporation, the holders of the Common Stock of this corporation shall receive all of the remaining assets of this corporation pro rata based on the number of shares of Common Stock held by each. (c) (i) For purposes of this Section 2, the dissolution or winding up of this corporation shall be deemed to be occasioned by, and to include, (A) the acquisition of this corporation by another entity by means of any transaction or series of related transactions 3

(including, without limitation, any reorganization, merger or consolidation) that results in the transfer of fifty percent (50%) or more of the outstanding voting power of this corporation; or (B) a sale of all or substantially all of the assets of this corporation; UNLESS this corporation's stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for this corporation's acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving entity (or its parent); provided, however, that shares of the surviving entity held by holders of the capital stock of this corporation acquired by means other than the exchange or conversion of the capital stock of this corporation for shares of the surviving entity shall not be used in determining if the stockholders of this corporation own more than fifty percent (50%) of the voting power of the surviving entity (or its parent), but shall be used for determining the total outstanding voting power of such entity. (ii) In any of such events, if the consideration received by this corporation or its stockholders is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows: (A) Securities not subject to investment letter or other similar restrictions on free marketability covered by (B) below: (1) If traded on a securities exchange or through the National Market tier of Nasdaq, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty (30) day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by this corporation and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock. (B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by this corporation and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock. (iii) In the event the requirements of this subsection 2(c) are not complied with, this corporation shall forthwith either: (A) cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or 4

(B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 2(c)(iv) hereof. (iv) This corporation shall give each holder of record of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock written notice of such impending transaction not later than twenty (20) days prior to the stockholders' meeting called to approve such transaction, if any, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and this corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after this corporation has given the first notice provided for herein or sooner than ten (10) days after this corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of such Preferred Stock. 3. REDEMPTION. The Preferred Stock is not redeemable. 4. CONVERSION. The holders of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) RIGHT TO CONVERT. Subject to subsection 4(d), each share of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of this corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price for such series by the Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial Conversion Price per share for shares of Series A and Series A-1 Preferred Stock shall be $1.00. The initial Conversion Price per share for shares of Series B and Series B-1 Preferred Stock shall be $6.25. The initial Conversion Price per share for shares of Series BB and Series BB-1 Preferred Stock shall be $6.60. The initial Conversion Price for each such series has been adjusted as a result of the two-for-one stock split of this corporation's Common Stock effected on March 19, 1999. The Conversion Price for the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be subject to adjustment as set forth in subsection 4(d). (b) AUTOMATIC CONVERSION. Each share of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall automatically be 5

converted into shares of Common Stock at the Conversion Price at the time in effect for such series immediately upon the earlier of (i) the consummation of this corporation's sale of its Common Stock in a bona fide, firm commitment underwritten initial public offering pursuant to a registration statement on Form S-1 or Form SB-2 under the Securities Act of 1933, as amended (the "Act"), at a public offering price not less than (A) on a per share basis, the sum of $12.50 (appropriately adjusted for the two-for-one stock split of this corporation's Common Stock effected on March 19, 1999 and any other stock split, dividend, combination or recapitalization) (the "Series B Price") plus an amount equal to the product of 10% of the Series B Price multiplied by a fraction, the numerator of which shall be the number of days elapsed from the Purchase Date (as defined below) and the denominator of which shall be 365, and (B) $7,500,000 in the aggregate, or (ii) the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis). (c) MECHANICS OF CONVERSION. Before any holder of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock shall be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock, and shall give written notice, to this corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Act, the conversion may, at the option of any holder tendering Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock issuable upon such conversion of the Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock shall not be deemed to have converted such Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock until immediately prior to the closing of such sale of securities. (d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR CERTAIN DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be subject to adjustment from time to time as follows: 6

(i) (A) If this corporation shall issue, after the date of the filing of this Amended and Restated Certificate of Incorporation (the "Filing Date"), any Additional Stock (as defined below) without consideration or for a consideration per share less than the Conversion Price for the Series A Preferred Stock, the Series B Preferred Stock or the Series BB Preferred Stock in effect immediately prior to the issuance of such Additional Stock, immediately after the closing of such issuance, the Conversion Price for such series (specifically excepting the Series A-1, Series B-1 and Series BB-1 Preferred Stock) in effect immediately prior to the closing of each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance (including shares deemed issued pursuant to Section 4(d)(i)(E) on account of options, rights or convertible or exchangeable securities) plus the number of shares of Common Stock that the aggregate consideration received by this corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance (including shares deemed issued pursuant to Section 4(d)(i)(E) on account of options, rights or convertible or exchangeable securities) plus the number of shares of such Additional Stock. (B) No adjustment of the Conversion Price for the Series A Preferred Stock, Series B Preferred Stock or Series BB Preferred Stock shall be made in an amount less than one cent per share, provided that any adjustments that are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in subsections 4(d)(i)(E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment. (C) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by this corporation for any underwriting or otherwise in connection with the issuance and sale thereof. (D) In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors irrespective of any accounting treatment. (E) In the case of the issuance (whether before, on or after the applicable Filing Date) of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this subsection 4(d)(i) and subsection 4(d)(ii): 7

(1) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby. (2) The aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments) for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by this corporation for any such securities and related options or rights, plus the minimum additional consideration, if any, to be received by this corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)). (3) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to this corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof (unless such options or rights or convertible or exchangeable securities were merely deemed to be included in the numerator and denominator for purposes of determining the number of shares of Common Stock outstanding for purposes of subsection 4(d)(i)(A)), the Conversion Price of the Series A Preferred Stock, Series B Preferred Stock or Series BB Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. (4) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price of the Series A Preferred Stock, Series B Preferred Stock or Series BB Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities (unless such options or rights were merely deemed to be included in the numerator and denominator for purposes of determining the number of shares of Common Stock outstanding for purposes of subsection 4(d)(i)(A)), shall be recomputed to reflect the issuance of 8

only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. (5) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection 4(d)(i)(E)(3) or (4). (ii) "Additional Stock" shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E)) by this corporation after the Filing Date other than (A) Common Stock issued pursuant to a transaction described in subsection 4(d)(iii) hereof; (B) shares of Common Stock issuable or issued to employees, consultants, directors or vendors (if in transactions with primarily non-financing purposes) of this corporation directly or pursuant to a stock option plan, restricted stock plan or stock purchase agreement approved by the Board of Directors of this corporation; (C) shares of Common Stock issued or issuable (I) in a firm commitment underwritten public offering before or in connection with which all outstanding shares of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock are converted to Common Stock or (II) upon exercise of warrants or rights granted to underwriters in connection with such a public offering; (D) shares of Common Stock issued or issuable upon conversion of the Preferred Stock; (E) shares of Common Stock issued or issuable upon exercise of warrants issued to banks or equipment lessors; or (F) shares of Common Stock issued or issuable in connection with business combinations or corporate partnering transactions not primarily for equity financing purposes approved by the Board of Directors. (iii) In the event this corporation should at any time or from time to time after the Filing Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common 9

Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such split, subdivision, dividend or other distribution, if no record date is fixed), the Conversion Price of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time in the manner provided for deemed issuances in subsection 4(d)(i)(E). (iv) If the number of shares of Common Stock outstanding at any time after the Filing Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares. (e) OTHER DISTRIBUTIONS. In the event this corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by this corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection 4(d)(iii), then, in each such case for the purpose of this subsection 4(e), the holders of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of this corporation into which their shares of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of this corporation entitled to receive such distribution. (f) RECAPITALIZATIONS. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 4 or in Section 2), provision shall be made so that the holders of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock the number of shares of stock or other securities or property of the Company to which a holder of Common Stock deliverable upon conversion would have been entitled to receive on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. 10

(g) NO IMPAIRMENT. This corporation will not, by amendment of this Amended and Restated Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock against impairment. (h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS. (i) No fractional shares shall be issued upon the conversion of any share or shares of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock pursuant to this Section 4, this corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price for the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of a share of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock. (i) NOTICES OF RECORD DATE. In the event of any taking by this corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, this corporation shall mail to each holder of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock, at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. 11

(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock, in addition to such other remedies as shall be available to the holder of such Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this certificate. (k) NOTICES. Any notice required by the provisions of this Section 4 to be given to the holders of shares of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock shall be deemed given if delivered by confirmed facsimile or electronic transmission (with duplicate original sent by United States mail) or if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this corporation. (l) SPECIAL MANDATORY CONVERSION. (i) At any time following the Filing Date, if (A) any holder of shares of Series A Preferred Stock, Series B Preferred Stock or Series BB Preferred Stock is entitled to exercise the right of first offer (the "Right of First Offer") set forth in Section 2.4 of the Investors' Rights Agreement dated on or about April 13, 1998, by and between this corporation and certain Investors and Founders (as defined therein), as amended from time to time (the "Rights Agreement"), with respect to an equity financing of this corporation at a price per share which is less than the applicable Conversion Price of the Series BB Preferred Stock (the "Equity Financing"), (B) this corporation has complied with its notice obligations, or such obligations have been waived, under the Right of First Offer with respect to such Equity Financing and this corporation thereafter proceeds to consummate the Equity Financing, and (C) such holder (a "Non-Participating Holder") does not by exercise of such holder's Right of First Offer acquire his, her or its Pro Rata Share (as defined in Section 2.4 of the Rights Agreement) offered in such Equity Financing (a "Mandatory Offering"), then all of such Non-Participating Holder's shares of Series A Preferred Stock, Series B Preferred Stock and Series BB Preferred Stock shall automatically and without further action on the part of such holder be converted effective upon, subject to, and concurrently with, the closing of the Mandatory Offering (the "Mandatory Offering Date") into, in the case of Series A Preferred Stock, an equivalent number of shares of Series A-1 Preferred Stock, in the case of Series B Preferred Stock, an equivalent number of shares of Series B-1 Preferred Stock, and in the case of Series BB Preferred Stock, an equivalent number of shares of Series BB-1 Preferred Stock (a "Special Mandatory Conversion"); PROVIDED, HOWEVER, that no such conversion shall occur in 12

connection with a particular Equity Financing if, pursuant to the written request of this corporation, such holder agrees in writing to waive his, her or its Right of First Offer with respect to such Equity Financing. Upon conversion pursuant to this subsection 4(l)(i), the shares of Series A Preferred Stock, Series B Preferred Stock and Series BB Preferred Stock so converted shall be canceled and not subject to reissuance. (ii) The holder of any shares of Series A Preferred Stock, Series B Preferred Stock or Series BB Preferred Stock converted pursuant to this subsection 4(l) shall deliver to this corporation during regular business hours at the office of any transfer agent of this corporation for the Series A Preferred Stock, Series B Preferred Stock and Series BB Preferred Stock, or at such other place as may be designated by this corporation, the certificate or certificates for the shares so converted, duly endorsed or assigned in blank or to this corporation. As promptly as practicable thereafter, this corporation shall issue and deliver to such holder, at the place designated by such holder, a certificate or certificates for the number of full shares of the Series A-1 Preferred Stock, Series B-1 Preferred Stock or Series BB-1 Preferred Stock, as the case may be, to be issued and such holder shall be deemed to have become a stockholder of record of Series A-1 Preferred Stock, Series B-1 Preferred Stock or Series BB-1 Preferred Stock, as the case may be, on the Mandatory Offering Date unless the transfer books of this corporation are closed on that date, in which event he, she or it shall be deemed to have become a stockholder of record of Series A-1 Preferred Stock, Series B-1 Preferred Stock or Series BB-1 Preferred Stock, as the case may be, on the next succeeding date on which the transfer books are open. (iii) In the event that any shares of Series A-1 Preferred Stock, Series B-1 Preferred Stock or Series BB-1 Preferred Stock are issued, concurrently with such issuance, this corporation shall use its best efforts to take all such action as may be required, including amending its Certificate of Incorporation, (A) to cancel all authorized shares of Series A-1 Preferred Stock, Series B-1 Preferred Stock and Series BB-1 Preferred Stock that remain unissued after such issuance, (B) to create and reserve for issuance upon the Special Mandatory Conversion of any Series A Preferred Stock, Series B Preferred Stock or Series BB Preferred Stock a new series of Preferred Stock equal in number to the number of shares of Series A-1 Preferred Stock, Series B-1 Preferred Stock or Series BB-1 Preferred Stock so canceled and designated Series A-2 Preferred Stock, Series B-2 Preferred Stock and Series BB-2 Preferred Stock, respectively, with the designations, powers, preferences and rights and the qualifications, limitations and restrictions identical to those then applicable to the Series A-1 Preferred Stock, Series B-1 Preferred Stock and Series BB-1 Preferred Stock, respectively, except that the Conversion Price for such shares of Series A-2 Preferred Stock once initially issued shall be the Series A Conversion Price in effect immediately prior to such issuance, the Conversion Price for such shares of Series B-2 Preferred Stock once initially issued shall be the Series B Conversion Price in effect immediately prior to such issuance, and the Conversion Price for such shares of Series BB-2 Preferred Stock once initially issued shall be the Series BB Conversion Price in effect immediately prior to such issuance, and (C) to amend the provisions of this subsection 4(l) as appropriate to provide that any subsequent Special Mandatory Conversion will be into shares of Series A-2 Preferred Stock, Series B-2 Preferred Stock and Series BB-2 Preferred Stock rather than Series A-1 Preferred Stock, Series B-1 Preferred Stock and Series BB-1 Preferred Stock, as the case may be. This corporation shall take the same 13

actions with respect to the Series A-2 Preferred Stock, Series B-2 Preferred Stock and Series BB-2 Preferred Stock and each subsequently authorized series of Preferred Stock upon initial issuance of shares of the last such series to be authorized. The right to receive any dividend declared but unpaid at the time of conversion on any shares of Preferred Stock converted pursuant to the provisions of this subsection 4(l) shall accrue to the benefit of the new shares of Preferred Stock issued upon conversion thereof. 14

5. VOTING RIGHTS. (a) GENERAL VOTING RIGHTS. The holder of each share of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock shall have the right to one vote for each share of Common Stock into which such share could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). (b) VOTING FOR ELECTION OF DIRECTORS. As long as at least a majority of the shares of Series A Preferred Stock, Series B Preferred Stock and Series BB Preferred Stock originally issued, including any such shares subsequently converted to Series A-1 Preferred Stock, Series B-1 Preferred Stock or Series BB-1 Preferred Stock pursuant to subparagraph 4(l) hereof, remain outstanding, the holders of such shares of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis) shall be entitled to elect two (2) directors of this corporation at each annual election of directors. The holders of outstanding Common Stock shall be entitled to elect three (3) directors of this corporation at each annual election of directors. The holders of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series BB Preferred Stock, Series BB-1 Preferred Stock and Common Stock (voting together as a single class and not as separate series, and on an as-converted basis) shall be entitled to elect any remaining directors of this corporation. In the case of any vacancy (other than a vacancy caused by removal) in the office of a director occurring among the directors elected by the holders of a class or series of stock pursuant to this Section 5(b), the remaining directors so elected by that class or series may by affirmative vote of a majority thereof (or the remaining director so elected if there be but one, or if there are no such directors remaining, by the affirmative vote of the holders of a majority of the shares of that class or series), elect a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant. Any director who shall have been elected by the holders of a class or series of stock or by any directors so elected as provided in the immediately preceding sentence hereof may be removed during the aforesaid term of office, either with or without cause, by, and only by, the affirmative vote of the holders of a majority of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby created may be filled by the holders of that class or series of stock represented at the meeting or pursuant to unanimous written consent. 15

6. PROTECTIVE PROVISIONS. (a) Subject to the rights of series of Preferred Stock that may from time-to-time come into existence, so long as at least a majority of the shares of Series A Preferred Stock, Series B Preferred Stock and Series BB Preferred Stock originally issued, including any such shares subsequently converted to Series A-1 Preferred Stock, Series B-1 Preferred Stock or Series BB-1 Preferred Stock pursuant to subparagraph 4(l) hereof, remain outstanding, this corporation shall not take any of the following actions without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of the Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock, voting together as a single class and not as separate series and on an as-converted basis, except that no approval pursuant to this Section 6 shall be required to implement a conversion described in subsection 4(l) hereof: (i) redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or shares of Preferred Stock or Common Stock; provided, however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements under which this corporation has the option to repurchase such shares at cost upon the termination of such service as an employee, officer, director or consultant, as applicable; (ii) consummate any transaction specified in subsection 2(c)(i) hereof (collectively, a "Corporate Transaction"), unless the consideration received per share of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock in such Corporate Transaction is at least (i) $20.00, if such Corporate Transaction occurs on or prior to the first anniversary of the date on which any shares of Series BB Preferred Stock were first issued (the "Purchase Date"); (ii) $40.00, if such Corporate Transaction occurs after the first anniversary of the Purchase Date and on or prior to the second anniversary of the Purchase Date; (iii) $80.00, if such Corporate Transaction occurs after the second anniversary of the Purchase Date and on or prior to the third anniversary of the Purchase Date; (iv) $100.00, if such Corporate Transaction occurs after the third anniversary of the Purchase Date and on or prior to the fourth anniversary of the Purchase Date; and (v) $120.00, if such Corporate Transaction occurs on or at any time after the fourth anniversary of the Purchase Date. Each such per share price specified in the preceding sentence shall be appropriately adjusted for any stock dividends, combinations or splits. The consideration received per share of Series A, Series A-1, Series B, Series B-1, Series BB and Series BB-1 Preferred Stock in a Corporate Transaction shall include the consideration per share received directly by a holder of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock in such transaction and the consideration received by this corporation that would be distributed to such holder assuming such consideration is distributed to the holders of Preferred Stock and Common Stock in accordance with subsections 2(a) and 2(b) hereof. All consideration other than cash received in a Corporate Transaction shall be valued in accordance with subsection 2(c)(ii) hereof; 16

(iii) increase or decrease (other than by redemption or conversion or by operation of subsection 4(l) hereof) the authorized number of shares of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock; (iv) amend this corporation's certificate of incorporation or bylaws, as then in effect, in a manner that has a material adverse effect on the rights, preferences or privileges of the Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock; (v) authorize, create or issue any new class or series of capital stock or any other securities convertible into capital stock of this corporation having a preference over the Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock with respect to voting, dividends, conversion rights or rights upon liquidation; (vi) declare or pay any cash dividends on its Common Stock; or (vii) increase the authorized number of directors of this corporation above seven (7). (b) (i) Subject to the rights of series of Preferred Stock that may from time-to-time come into existence, so long as at least a majority of the shares of Series A Preferred Stock originally issued, including any such shares subsequently converted to Series A-1 Preferred Stock pursuant to subparagraph 4(l) hereof, remain outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of the Series A Preferred Stock and Series A-1 Preferred Stock, voting together as a single class and not as separate series and on an as-converted basis, (A) amend this corporation's Amended and Restated Certificate of Incorporation to alter or change the rights, preferences or privileges of the shares of such Series A Preferred Stock or Series A-1 Preferred Stock, if such Series A Preferred Stock or Series A-1 Preferred Stock would be adversely affected by such amendment in a manner different from other then outstanding series of this corporation's Preferred Stock (it being understood that, without limiting the foregoing, different series of Preferred Stock shall not be affected differently because of proportional differences in the amounts of their respective issue prices, liquidation preferences and redemption prices that arise out of differences in the original issue price for each such series) or (B) increase or decrease the aggregate number of authorized shares of such Series A Preferred Stock or Series A-1 Preferred Stock. Notwithstanding the foregoing, no approval pursuant to this Section 6 shall be required to implement a conversion described in subsection 4(l) hereof. (ii) Subject to the rights of series of Preferred Stock that may from time-to-time come into existence, so long as at least a majority of the shares of Series B Preferred Stock originally issued, including any such shares subsequently converted to Series B-1 Preferred Stock pursuant to subparagraph 4(l) hereof, remain outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of the Series B Preferred Stock and Series B-1 Preferred Stock, voting together as a single class and not as 17

separate series and on an as-converted basis, (A) amend this corporation's Amended and Restated Certificate of Incorporation to alter or change the rights, preferences or privileges of the shares of such Series B Preferred Stock or Series B-1 Preferred Stock, if such Series B Preferred Stock or Series B-1 Preferred Stock would be adversely affected by such amendment in a manner different from other then outstanding series of this corporation's Preferred Stock (it being understood that, without limiting the foregoing, different series of Preferred Stock shall not be affected differently because of proportional differences in the amounts of their respective issue prices, liquidation preferences and redemption prices that arise out of differences in the original issue price for each such series) or (B) increase or decrease the aggregate number of authorized shares of such Series B Preferred Stock or Series B-1 Preferred Stock. Notwithstanding the foregoing, no approval pursuant to this Section 6 shall be required to implement a conversion described in subsection 4(l) hereof. (iii) Subject to the rights of series of Preferred Stock that may from time-to-time come into existence, so long as at least a majority of the shares of Series BB Preferred Stock originally issued, including any such shares subsequently converted to Series BB-1 Preferred Stock pursuant to subparagraph 4(l) hereof, remain outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of the Series BB Preferred Stock and Series BB-1 Preferred Stock, voting together as a single class and not as separate series and on an as-converted basis, (A) amend this corporation's Amended and Restated Certificate of Incorporation to alter or change the rights, preferences or privileges of the shares of such Series BB Preferred Stock or Series BB-1 Preferred Stock, if such Series BB Preferred Stock or Series BB-1 Preferred Stock would be adversely affected by such amendment in a manner different from other then outstanding series of this corporation's Preferred Stock (it being understood that, without limiting the foregoing, different series of Preferred Stock shall not be affected differently because of proportional differences in the amounts of their respective issue prices, liquidation preferences and redemption prices that arise out of differences in the original issue price for each such series) or (B) increase or decrease the aggregate number of authorized shares of such Series BB Preferred Stock or Series BB-1 Preferred Stock. Notwithstanding the foregoing, no approval pursuant to this Section 6 shall be required to implement a conversion described in subsection 4(l) hereof. 7. STATUS OF CONVERTED STOCK. In the event any shares of Series A, Series A-1, Series B, Series B-1, Series BB or Series BB-1 Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so converted shall be canceled and shall not be issuable by this corporation. The Amended and Restated Certificate of Incorporation of this corporation shall be appropriately amended to effect the corresponding reduction in this corporation's authorized capital stock. (C) COMMON STOCK. The rights, preferences, privileges and restrictions granted to and imposed on the Common Stock are as set forth below in this Article IV(C). 1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common 18

Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of this corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. 2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding up of this corporation, the assets of this corporation shall be distributed as provided in Section 2 of Division (B) of this Article IV hereof. 3. REDEMPTION. The Common Stock is not redeemable. 4. VOTING RIGHTS. The holder of each share of Common Stock shall have the right to one vote, and shall be entitled to notice of any stockholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. ARTICLE V A director of this corporation shall, to the fullest extent permitted by the General Corporation Law as it now exists or as it may hereafter be amended, not be personally liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to this corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law is amended, after approval by the stockholders of this Article, to authorize corporation action further eliminating or limiting the personal liability of directors, then the liability of a director of this corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended. Any amendment, repeal or modification of this Article V, or the adoption of any provision of this Restated Certificate of Incorporation inconsistent with this Article V, by the stockholders of this corporation shall not apply to or adversely affect any right or protection of a director of this corporation existing at the time of such amendment, repeal, modification or adoption. ARTICLE VI To the fullest extent permitted by applicable law, this corporation is authorized to provide indemnification of (and advancement of expenses to) agents of this corporation (and any other persons to which Delaware law permits this corporation to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the Delaware General Corporation Law, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to this corporation, its stockholders and others. 19

ARTICLE VII This corporation reserves the right to adopt, amend, alter, supplement, rescind or repeal in any respect any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute or applicable law, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE VIII The Board of Directors may from time to time adopt, amend, alter, supplement, rescind or repeal any or all of the bylaws of this corporation without any action on the part of the stockholders; provided, however, that the stockholders may adopt, amend or repeal any bylaw adopted by the Board of Directors, and no amendment or supplement to the bylaws adopted by the Board of Directors shall vary or conflict with any amendment or supplement adopted by the stockholders. ARTICLE IX Subject to any Protective Provisions, the number of directors of this corporation shall be set from time to time by resolution of the Board of Directors or by the stockholders. ARTICLE X Elections of directors need not be by written ballot unless the bylaws of this corporation shall so provide. ARTICLE XI Meetings of stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of this corporation may be kept (subject to any statutory requirements) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of this corporation. * * * FOUR: The foregoing amendment and restatement was approved by the holders of the requisite number of shares of said corporation in accordance with Section 228 of the General Corporation Law. FIVE: That said amendment and restatement was duly adopted in accordance with the provisions of Section 242 and 245 of the General Corporation Law. 20

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed by the President and the Secretary of this corporation this _____ day of April, 1999. /s/ Keith J. Krach ---------------------------------------- Keith J. Krach President and Chief Executive Officer /s/ Edward P. Kinsey ---------------------------------------- Edward P. Kinsey Secretary 21

Exhibit 3.3 BYLAWS OF ARIBA, INC. ARTICLE I OFFICES Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the city of Menlo Park, State of California, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1997, shall be held at such date and time as shall be designated from time to time by the Board of

Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not fewer than ten (10) nor more than sixty (60) days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning at least ten percent (10%) in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. 2

Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not fewer than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of fifty percent (50%) of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express 3

provision of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Notwithstanding the above, if the certificate of incorporation permits cumulative voting in the election of directors, then each stockholder shall be entitled to as many votes in such election of directors as shall equal the number of votes which (except for such cumulative voting) such stockholder would otherwise be entitled to cast for the election of directors (with respect to the shares of capital stock having voting power held by such stockholder) multiplied by the number of directors to be elected by such stockholder, and such stockholder may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them. Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the 4

taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and new created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. 5

Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the board may be called by the president on two (2) days' notice to each director by mail or forty-eight (48) hours notice to each director either personally or by telegram; special meetings shall be called by the president or secretary in like 6

manner and on like notice on the written request of two (2) directors unless the board consists of only one director, in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Section 8. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. Section 10. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 7

COMMITTEES OF DIRECTORS Section 11. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. 8

Section 12. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. COMPENSATION OF DIRECTORS Section 13. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. REMOVAL OF DIRECTORS Section 14. Unless otherwise restricted by the certificate of incorporation or these bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the 9

time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the Board of Directors and shall be a president, a treasurer and a secretary. The Board of Directors may elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board of Directors may also choose one or more vice-presidents, assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide. Section 2. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a president, a treasurer, and a secretary and may choose vice presidents. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. 10

Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors. THE CHAIRMAN OF THE BOARD Section 6. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. He shall have and may exercise such powers as are, from time to time, assigned to him by the board and as may be provided by law. Section 7. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. He shall have and may exercise such powers as are, from time to time, assigned to him by the board and as may be provided by law. THE PRESIDENT AND VICE-PRESIDENTS Section 8. The president shall be the chief executive officer of the corporation; and in the absence of the Chairman and Vice Chairman of the Board he shall preside at all meetings of the stockholders and the Board of Directors; he shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. 11

Section 9. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. Section 10. In the absence of the president or in the event of his inability or refusal to act, the vice-president, if any, (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 11. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant 12

secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 12. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 13. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. Section 14. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 15. If required by the Board of Directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as 13

shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 16. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATE OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman or Vice Chairman of the Board of Directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, 14

participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or 15

certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholder or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 16

REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. 17

CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. SEAL Section 5. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION Section 6. The corporation shall, to the fullest extent authorized under the laws of the State of Delaware, as those laws may be amended and supplemented from time to time, indemnify any director made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of being a director of the corporation or a predecessor corporation or, at the corporation's request, a director or officer of another corporation, provided, however, that the corporation shall indemnify any such agent in connection with a proceeding initiated by such agent only if such proceeding was authorized by 18

the Board of Directors of the corporation. The indemnification provided for in this Section 6 shall: (i) not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, (ii) continue as to a person who has ceased to be a director, and (iii) inure to the benefit of the heirs, executors and administrators of such a person. The corporation's obligation to provide indemnification under this Section 6 shall be offset to the extent of any other source of indemnification or any otherwise applicable insurance coverage under a policy maintained by the corporation or any other person. Expenses incurred by a director of the corporation in defending a civil or criminal action, suit or proceeding by reason of the fact that he is or was a director of the corporation (or was serving at the corporation's request as a director or officer of another corporation) shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized by relevant sections of the General Corporation Law of Delaware. Notwithstanding the foregoing, the corporation shall not be required to advance such expenses to an agent who is a party to an action, suit or proceeding brought by the corporation and approved by a majority of the Board of Directors of the corporation which alleges willful misappropriation of corporate assets by such agent, disclosure of confidential information in violation of such agent's fiduciary or contractual obligations to the corporation or any other willful and deliberate breach in bad faith of such agent's duty to the corporation or its stockholders. 19

The foregoing provisions of this Section 6 shall be deemed to be a contract between the corporation and each director who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. The Board of Directors in its discretion shall have power on behalf of the corporation to indemnify any person, other than a director, made a party to any action, suit or proceeding by reason of the fact that he, his testator or intestate, is or was an officer or employee of the corporation. To assure indemnification under this Section 6 of all directors, officers and employees who are determined by the corporation or otherwise to be or to have been "fiduciaries" of any employee benefit plan of the corporation which may exist from time to time, Section 145 of the General Corporation Law of Delaware shall, for the purposes of this Section 6, be interpreted as follows: an "other enterprise" shall be deemed to include such an employee benefit plan, including without limitation, any plan of the corporation which is governed by the Act of Congress entitled "Employee Retirement Income Security Act of 1974," as amended from time to time; the corporation shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to such Act of Congress shall be deemed "fines." 20

ARTICLE VIII AMENDMENTS Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the certificate of incorporation at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the Board of Directors by the certificate or incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws. 21

CERTIFICATE OF SECRETARY OF ARIBA, INC. The undersigned, Edward Kinsey, hereby certifies that he is the duly elected and acting Secretary of Ariba, Inc., a Delaware corporation (the "Corporation"), and that the Bylaws attached hereto constitute the Bylaws of said Corporation as duly adopted by Action by Written Consent in Lieu of Organizational Meeting by the Board of Directors on September 17, 1996 and as amended by the Board of Directors at a meeting duly held on March 16, 1999. IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name this 30th day of March, 1999. /s/ Edward P. Kinsey --------------------------------------- Edward P. Kinsey, Secretary 22

Exhibit 4.1 ARIBA TECHNOLOGIES, INC. AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT APRIL 17, 1998

<TABLE> <CAPTION> TABLE OF CONTENTS Page ---- <S> <C> 1. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Request for Registration. . . . . . . . . . . . . . . . . . . . . 3 1.3 Company Registration. . . . . . . . . . . . . . . . . . . . . . . 4 1.4 Obligations of the Company. . . . . . . . . . . . . . . . . . . . 5 1.5 Furnish Information . . . . . . . . . . . . . . . . . . . . . . . 6 1.6 Expenses of Demand Registration . . . . . . . . . . . . . . . . . 6 1.7 Expenses of Company Registration. . . . . . . . . . . . . . . . . 6 1.8 Underwriting Requirements . . . . . . . . . . . . . . . . . . . . 6 1.9 Delay of Registration . . . . . . . . . . . . . . . . . . . . . . 7 1.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.11 Reports Under Securities Exchange Act of 1934 . . . . . . . . . . 9 1.12 Form S-3 Registration . . . . . . . . . . . . . . . . . . . . . .10 1.13 Assignment of Registration Rights . . . . . . . . . . . . . . . .11 1.14 Market Stand-Off Agreement Rights . . . . . . . . . . . . . . . .11 1.15 Termination of Registration Rights. . . . . . . . . . . . . . . .12 2. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . .12 2.1 Delivery of Financial Statements. . . . . . . . . . . . . . . . .12 2.2 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . .13 2.3 Termination of Information and Inspection Covenants . . . . . . .13 2.4 Right of First Offer. . . . . . . . . . . . . . . . . . . . . . .13 2.5 Proprietary Information and Inventions Agreements . . . . . . . .15 2.6 Board Representation. . . . . . . . . . . . . . . . . . . . . . .15 3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 3.1 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . .15 3.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .16 3.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . .16 3.4 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . .16 3.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 3.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 3.7 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . .16 3.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . .17 3.9 Aggregation of Stock. . . . . . . . . . . . . . . . . . . . . . .17 3.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . .17 3.11 Waiver of Right of First Offer. . . . . . . . . . . . . . . . . .17 3.12 Prior Agreement . . . . . . . . . . . . . . . . . . . . . . . . .17 </TABLE> Schedule A Schedule of Investors Schedule B Schedule of Founders

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of April 17, 1998, by and among Ariba Technologies, Inc., a Delaware corporation (the "Company"), the investors listed on Schedule A hereto, each of which is herein referred to as an "Investor", and the founders listed on Schedule B hereto, each of which is herein referred to as a "Founder". RECITALS WHEREAS, certain of the Investors and the Founders possess registration rights and certain of the Investors possess other investor rights granted pursuant to that certain Amended and Restated Investors' Rights Agreement (the "August Agreement"), dated August 15, 1997, among the Company and the persons listed on the Schedule of Investors attached thereto (the "Prior Investors"), as amended by that certain Amendment No. 1 of Amended and Restated Investors' Rights Agreement (the "Amendment") dated as of February 27, 1998 by and among the Company and the Amending Investors (as defined therein) (the August Agreement as amended by the Amendment is referred to herein as the "Prior Agreement"); WHEREAS, one of the Investors has been granted a warrant (the "Warrant") to purchase shares of the Company's Series B Preferred Stock pursuant to an equipment leasing transaction and pursuant to such Warrant the Company agreed to make such Investor a party to this Agreement; WHEREAS, one of the Investors (the "Series BB Investor") is a party to the Series BB Preferred Stock Purchase Agreement of even date herewith (the "Series BB Agreement") among the Company and such Investor, pursuant to which the Series BB Investor is purchasing shares of Series BB Preferred Stock of the Company; WHEREAS, in order to induce the Company to enter into the Series BB Agreement and to induce the Series BB Investor to invest funds in the Company pursuant to the Series BB Agreement, the Prior Investors and the Founders hereby agree to unconditionally waive their rights under the Prior Agreement, and the Investors, the Founders and the Company hereby agree that this Agreement shall govern the rights of the Investors and the Founders to cause the Company to register shares of Common Stock issued or issuable to such persons, and certain other matters as set forth herein; and WHEREAS, the Series BB Investors and the Company have agreed, pursuant to the Series BB Agreement, to enter into this Agreement; NOW, THEREFORE, in consideration of the promises, covenants, and conditions set forth herein, the parties hereto hereby agree as follows:

1. REGISTRATION RIGHTS. The Company covenants and agrees as follows: 1.1 DEFINITIONS. For purposes of this Section 1: (a) The term "Act" means the Securities Act of 1933, as amended. (b) The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (c) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.13 hereof. (d) The term "1934 Act" shall mean the Securities Exchange Act of 1934, as amended. (e) The term "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document. (f) The term "Registrable Securities" means (i) the Common Stock issuable or issued upon conversion of the Series A Preferred Stock and the Series B Preferred Stock, (ii) the shares of Common Stock issued to the Founders; provided, however, that such shares of Common Stock shall not be deemed Registrable Securities and the aforementioned individuals shall not be deemed Holders for the purposes of Section 1.2, 1.12 and 3.7 (except as provided therein), and (iii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of the shares referenced in (i) and (ii) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which his rights under this Section 1 are not assigned. (g) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding that are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities that are, Registrable Securities. (h) The term "Series A Preferred Stock" shall refer to and include the Series A-1 Preferred Stock. (i) The term "Series B Preferred Stock" shall refer to and include the Series B-1 Preferred Stock, the Series BB Preferred Stock, the Series BB-1 Preferred Stock and the Series B Preferred Stock issued upon exercise of the Warrant. 2

(j) The term "SEC" shall mean the Securities and Exchange Commission. 1.2 REQUEST FOR REGISTRATION. (a) If the Company shall receive at any time after the earlier of (i) September 27, 2000, or (ii) six (6) months after the effective date of the first registration statement for a public offering of securities of the Company (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145 transaction), a written request from the Holders of a majority of the Registrable Securities then outstanding that the Company file a registration statement under the Act covering the registration of at least fifty percent (50%) of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $7,500,000), then the Company shall: (i) within ten (10) days of the receipt thereof, give written notice of such request to all Holders; and (ii) effect as soon as practicable, and in any event within sixty (60) days of the receipt of such request, the registration under the Act of all Registrable Securities that the Holders request to be registered, subject to the limitations of subsection 1.2(b), within twenty (20) days of the mailing of such notice by the Company in accordance with Section 3.5. (b) If the Holders initiating the registration request hereunder ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable 3

Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. (c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period. (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2: (i) After the Company has effected two (2) registrations pursuant to this Section 1.2 and such registrations have been declared or ordered effective; (ii) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a registration subject to Section 1.3 hereof; provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or (iii) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.12 below. 1.3 COMPANY REGISTRATION. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.5, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. 4

1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or until the distribution contemplated in the Registration Statement has been completed. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed. (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. 5

1.5 FURNISH INFORMATION. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. (b) The Company shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.12 if, due to the operation of subsection 1.5(a), the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration as specified in subsection 1.2(a) or subsection 1.12(b)(2), whichever is applicable. 1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Section 1.2, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling Holders shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2. 1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 1.3 for each Holder (which right may be assigned as provided in Section 1.13), including (without limitation) all registration, filing, and qualification fees, printer's and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them, but excluding underwriting discounts and commissions relating to Registrable Securities. 1.8 UNDERWRITING REQUIREMENTS In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion 6

is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, that the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders) but in no event shall (i) the amount of securities of the selling Holders included in the offering be reduced below twenty-five percent (25%) of the total amount of securities included in such offering, unless such offering is the initial public offering of the Company's securities, in which case the selling stockholders may be excluded if the underwriters make the determination described above and no other stockholder's securities are included or (ii) notwithstanding (i) above, any shares being sold by a stockholder exercising a demand registration right similar to that granted in Section 1.2 be excluded from such offering. For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder that is a holder of Registrable Securities and that is a partnership or corporation, the partners, retired partners and stockholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. 1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.10 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder, and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the Act, the 1934 Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, 7

that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b) in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided that, in no event shall any indemnity under this subsection 1.10(b) exceed the gross proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. 8

(d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (f) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days 9

after the effective date of the first registration statement filed by the Company), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form. 1.12 FORM S-3 REGISTRATION. In case the Company shall receive from the Holders of a majority of the Registrable Securities then outstanding a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is not available for such offering by the Holders; (2) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $1,000,000; (3) if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than one hundred twenty (120) days after receipt of the request of the Holder or Holders under this Section 1.12; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period; or (4) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of a majority of the Holders. All expenses other than underwriting discounts and commissions incurred in connection with a registration requested pursuant to Section 1.12, including (without limitation) all registration, filing, qualification, printer's and accounting fees and the reasonable fees and 10

disbursements of one counsel for the selling Holder or Holders and counsel for the Company shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to this Section 1.12 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses). Registrations effected pursuant to this Section 1.12 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3, respectively. 1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities who, after such assignment or transfer, holds at least 92,197 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations and other recapitalizations), provided: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.14 below; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 1. 1.14 "MARKET STAND-OFF" AGREEMENT RIGHTS. Each Investor hereby agrees that, during the period of duration specified by the Company and an underwriter of Common Stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it immediately prior to the effective date of such registration statement, except Common Stock included in such registration; provided, however, that: (a) such agreement shall be applicable only to the first such registration statement of the Company that covers Common Stock (or other securities) to be sold on its behalf to the public in an underwritten offering; 11

(b) all officers and directors of the Company and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements; and (c) such market stand-off time period shall not exceed one hundred eighty (180) days. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Investor (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 1.15 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled to exercise any right provided for in this Section 1 after seven (7) years following the consummation of the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the initial firm commitment underwritten offering of its securities to the general public or, as to any Holder, such earlier time at which all Registrable Securities held by such Holder can be sold in any three (3) month period without registration in compliance with Rule 144 of the Act. 2. COVENANTS OF THE COMPANY. 2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to each Investor: (a) so long as such Investor holds at least 160,000 shares of Series A and/or Series B Preferred Stock (either in the form of Series A and/or Series B Preferred Stock or Common Stock issued upon conversion thereof, and as adjusted for subsequent stock splits, recombinations or reclassifications), as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholder's equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles ("gaap"), and audited and certified by independent public accountants of nationally recognized standing selected by the Company; (b) so long as such Investor holds at least 160,000 shares of Series A and/or Series B Preferred Stock (either in the form of Series A and/or Series B Preferred Stock or Common Stock issued upon conversion thereof, and as adjusted for subsequent stock splits, recombinations or reclassifications), as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, statement of cash flows for such fiscal quarter and an unaudited balance sheet and a statement of stockholder's equity as of the end of such fiscal quarter; 12

(c) so long as such Investor holds at least 160,000 shares of Series A and/or Series B Preferred Stock (either in the form of Series A and/or Series B Preferred Stock or Common Stock issued upon conversion thereof, and as adjusted for subsequent stock splits, recombinations or reclassifications), within thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows and balance sheet for and as of the end of such month, in reasonable detail; (d) so long as such Investor holds at least 160,000 shares of Series A and/or Series B Preferred Stock (either in the form of Series A and/or Series B Preferred Stock or Common Stock issued upon conversion thereof, and as adjusted for subsequent stock splits, recombinations or reclassifications), as soon as practicable, but in any event thirty (30) days prior to the end of each fiscal year, (i) a budget for the next fiscal year, and (ii) a business plan with respect to such next fiscal year; and (e) with respect to the financial statements called for in subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief Financial Officer or President of the Company certifying that such financials were prepared in accordance with gaap consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by gaap) and fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment. 2.2 INSPECTION. So long as such Investor holds at least 160,000 shares of Series A and/or Series B Preferred Stock (either in the form of Series A and/or Series B Preferred Stock or Common Stock issued upon conversion thereof, and as adjusted for subsequent stock splits, recombinations or reclassifications), the Company shall permit each Investor, at such Investor's expense, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Investor; provided, however, that the Company shall not be obligated pursuant to this Section 2.2 to provide access to any information that it reasonably considers to be a trade secret or similar confidential information. 2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. The covenants set forth in Section 2.1, Section 2.2, Section 2.4, Section 2.5 and Section 2.6 shall terminate as to the Investors and the Founders and be of no further force or effect when the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the firm commitment underwritten offering of its securities to the general public is consummated or when the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall first occur. 2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions specified in this paragraph 2.4, the Company hereby grants to each Investor a right of first offer with respect to future sales by the Company of its Shares (as hereinafter defined). An Investor shall be entitled to apportion the right of first offer hereby granted it among itself and its partners and affiliates in such proportions as it deems appropriate. 13

Each time the Company proposes to offer any shares of, or securities convertible into or exercisable for, any shares of any class of its capital stock ("Shares"), the Company shall first make an offering of such Shares to each Investor in accordance with the following provisions: (a) The Company shall deliver a notice by certified mail ("Notice") to the Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such Shares. (b) By written notification received by the Company, within twenty (20) calendar days after giving of the Notice, the Investor may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Shares that equals the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of the Series A and/or Series B Preferred Stock then held, by such Investor bears to the total number of shares of Common Stock of the Company then outstanding (assuming full conversion, exercise and exchange of all convertible, exercisable or exchangeable securities) (such Investor's "Pro Rata Share"). (c) If all Shares that Investors are entitled to obtain pursuant to subsection 2.4(b) are not elected to be obtained as provided in subsection 2.4(b) hereof, the Company may, during the ninety (90) day period following the expiration of the period provided in subsection 2.4(b) hereof, offer the remaining unsubscribed portion of such Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within sixty (60) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the Investors in accordance herewith. (d) The right of first offer in this paragraph 2.4 shall not be applicable (i) to the issuance or sale of shares of Common Stock (or options therefor) to employees or directors of or consultants to the Company for the primary purpose of soliciting or retaining their services, (ii) to or after consummation of a bona fide, firmly underwritten public offering of shares of Common Stock, registered under the Act pursuant to a registration statement on Form S-1 or SB-2, at an offering price equal to (A) on a per share basis, the sum of $12.50 (appropriately adjusted for any stock split, dividend, combination or other recapitalization) (the "Series B Purchase Price") plus an amount equal to the product of 10% of the Series B Purchase Price multiplied by a fraction, the numerator of which shall be the number of days elapsed from the date of this Agreement and the denominator of which shall be 365, and (B) $7,500,000 in the aggregate, (iii) the issuance of securities pursuant to the conversion, exercise or exchange of convertible, exercisable or exchangeable securities, (iv) the issuance of securities in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, or (v) the issuance of stock, warrants or other securities or rights to persons or entities with which the Company has 14

business relationships, provided such issuances are for other than primarily equity financing purposes. 2.5 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. The Company will cause each person with access to confidential information now or hereafter employed by it or any subsidiary to enter into a proprietary information and inventions agreement substantially in the form approved by the Board of Directors. 2.6 BOARD REPRESENTATION. (a) As long as Benchmark Capital Partners, L.P. or any affiliate thereof ("Benchmark") owns not less than fifty percent (50%) of the shares of Series A and Series B Preferred Stock it holds immediately after the Closing (as defined in the Series BB Agreement) (or an equivalent amount of Common Stock issued upon conversion thereof), it shall be entitled to designate one (1) of the two (2) representatives which the holders of the Series A and Series B Preferred Stock, voting separately as a single class and not as separate series, are entitled to elect to the Company's Board of Directors ("Board") pursuant to the Company's Amended and Restated Certificate of Incorporation ("Restated Certificate"). As long as Crosspoint Venture Partners 1996 or any affiliate thereof owns not less than fifty percent (50%) of the shares of Series A and Series B Preferred Stock they hold immediately after the Closing (or an equivalent amount of Common Stock issued upon conversion thereof), they shall be entitled to designate one (1) of the two (2) such representatives which the holders of the Series A and Series B Preferred Stock, voting separately as a single class and not as separate series, are entitled to elect to the Board pursuant to the Restated Certificate. Each Investor (including any successor and assign of the rights and obligations of such Investor under this Agreement) shall vote a sufficient number of shares of Series A and Series B Preferred Stock (or shares of Common Stock issued upon conversion thereof), to elect to the Board the representatives designated pursuant to this Section 2.6. (b) Each Founder agrees that he shall not vote to elect to the Board any of the three (3) representatives that holders of Common Stock, voting separately as a class, are entitled to elect to the Board pursuant to the Restated Certificate without obtaining the prior approval of the holders of a majority of the Series A and Series B Preferred Stock and Common Stock issued upon conversion thereof (calculated on an as converted basis), which approval shall not be unreasonably withheld. The foregoing shall not apply to the election to the Board of the Company's chief executive officer. 3. MISCELLANEOUS. 3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 15

3.2 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California; notwithstanding the foregoing, Section 2.6 shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware. 3.3 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. 3.4 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 3.5 NOTICES. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given (i) upon personal delivery to the party to be notified, (ii) upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties, or (iii) upon delivery by facsimile transmission to the party to be notified at the facsimile number indicated for such party on the signature page hereof, or at such other facsimile number as such party may designate by ten (10) days' advance written notice to the other parties. 3.6 EXPENSES. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; provided, however, (i) that in the event such amendment or waiver adversely affects the rights and/or obligations of the Founders under this Agreement in a different manner than the other Holders, such amendment or waiver shall also require the written consent of a majority of the Common Stock held by the Founders and (ii) that in the event such amendment or waiver adversely affects the rights and/or obligations of the holders of Series B Preferred Stock under this Agreement in a different manner than the other Holders, such amendment or waiver shall also require the written consent of the holders of a majority of the shares of Series B Preferred Stock (or shares of Common Stock issued upon conversion thereof) then outstanding (calculated on an as-converted basis). Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Company. 16

3.8 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 3.9 AGGREGATION OF STOCK. All shares of Registrable Securities held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. 3.10 ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto, if any) constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. 3.11 WAIVER OF RIGHT OF FIRST OFFER. The Prior Investors hereby unconditionally waive that certain right to notice and right of first offer set forth in Section 2.4 of the Prior Agreement, with respect to the sale and issuance of the Series BB Preferred Stock pursuant to the Series BB Agreement. 3.12 PRIOR AGREEMENT. The Prior Agreement is hereby superseded in its entirety and shall be of no further force or effect. 17

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ARIBA TECHNOLOGIES, INC. By: /s/ Keith J. Krach ----------------------------------------- Keith J. Krach President and Chief Executive Officer Address: 1314 Chesapeake Terrace Sunnyvale, California 94089 Telephone: (408) 543-3800 Facsimile: (408) 543-3900

INVESTORS: AMERINDO TECHNOLOGY GROWTH FUND II, INC. By: /s/ [ILLEGIBLE] ----------------------------------------- Print Name: --------------------------------- Title: Director -------------------------------------- Address: 43 Upper Grosvenor Street London W1X 9PG Telephone: ---------------------------------- Facsimile: ----------------------------------

BENCHMARK CAPITAL PARTNERS, L.P. By: Benchmark Capital Management Co., L.L.C. By: /s/ Robert C. Kugle ----------------------------------------- Member BENCHMARK FOUNDERS' FUND, L.P. By: Benchmark Capital Management Co., L.L.C. By: /s/ Robert C. Kugle ----------------------------------------- Member Address: 2480 Sand Hill Road, Suite 200 Menlo Park, California 94025 Telephone: (650) 854-8180 Facsimile: (650) 854-8183

/s/ Anthony Ciulla -------------------------------------------- Anthony Ciulla Address: 1080 Sunshine Circle Danville, California 94506 Telephone: (510) 736-8126 Facsimile: (510) 736-5109

CROSSPOINT VENTURE PARTNERS 1996 By: /s/ John B. Munford ----------------------------------------- Print Name: --------------------------------- Title: -------------------------------------- Address: One First Street Los Altos, California 94022 Telephone: ---------------------------------- Facsimile: (650) 948-6172

DMG TECHNOLOGY VENTURES, L.L.C. By: /s/ [ILLEGIBLE] ----------------------------------------- Print Name: --------------------------------- Title: -------------------------------------- Address: 1550 El Camino Real, Suite 100 Menlo Park, CA 94025 Telephone: (650) 614-5000 Facsimile: (650) 614-5030

ERIC A. ELDRED SEPARATE PROPERTY TRUST By: /s/ Philip R. Taylor ----------------------------------------- Philip R. Taylor, Trustee Address: 535 Cowper Street, Second Floor Palo Alto, California 94301 Telephone: (650) 614-9203 Facsimile: (650) 833-6903

G & H PARTNERS By: /s/ [ILLEGIBLE] ----------------------------------------- Partner Address: 155 Constitution Drive Menlo Park, California 94025 Telephone: (650) 321-2400 Facsimile: (650) 321-2800

/s/ Joaquin A. Garcia-Larrieu -------------------------------------------- Joaquin A. Garcia-Larrieu Address: 10380 Southwest 115th Street Miami, Florida 33176 Telephone: (305) 235-0267 Facsimile: ----------------------------------

INTEL CORPORATION By: /s/ [ILLEGIBLE] ----------------------------------------- Print Name: --------------------------------- Title: -------------------------------------- Address: 2200 Mission College Boulevard Mail Stop SC 4-210 Santa Clara, California 95052 Telephone: --------------------------------- Facsimile: ---------------------------------

THE KENNETH A. & ROBERTA E. ELDRED REVOCABLE TRUST DATED 1/19/90 By: /s/ Kenneth A. Eldred ----------------------------------------- Kenneth A. Eldred, Trustee Address: 1075 Westridge Drive Portola Valley, California 94028 Telephone: ---------------------------------- Facsimile: (415) 851-5279

/s/ Keith J. Krach -------------------------------------------- Keith J. Krach Address: 16520 South Kennedy Road Los Gatos, California 95032 Telephone: ---------------------------------- Facsimile: (408) 358-9395

LIGHTHOUSE CAPITAL PARTNERS II, L.P. By: Lighthouse Management Partners II, L.P., its g.p. By: Lighthouse Capital Partners, Inc., its g.p. By: /s/ [ILLEGIBLE] ----------------------------------------- Print Name: --------------------------------- Title: -------------------------------------- Address: 100 Drakes Landing Road, Suite 260 Greenbrae, California 94904-2131 Telephone: (415) 925-3370 Facsimile: (415) 925-3387

LITTON MASTER TRUST By: Amerindo Investment Advisors Inc. By: /s/ Alberto W. Vilar ----------------------------------------- Alberto W. Vilar Attorney-in-Fact for Litton Master Trust Address: One Embarcadero Center, Suite 2300 San Francisco, California 94111 Telephone: ---------------------------------- Facsimile: ----------------------------------

/s/ Emeric J. McDonald -------------------------------------------- Emeric J. McDonald Address: P.O. Box 4849 Mountain View, California 94040 Telephone: (650) 249-1535 Facsimile: (650) 834-3581

/s/ John McMahon -------------------------------------------- John McMahon Address: 1527 Grace Avenue San Jose, California 95125 Telephone: ---------------------------------- Facsimile: (408) 371-7469

PEOPLESOFT VENTURES, INC., a California corporation By: /s/ [ILLEGIBLE] ----------------------------------------- Print Name: --------------------------------- Title: -------------------------------------- Address: 4440 Rosewood Drive Pleasanton, California 94588 Telephone: ---------------------------------- Facsimile: (510) 467-7190

/s/ Donald Petersen -------------------------------------------- Donald Petersen Address: 255 East Brown Street, #460 Birmingham, Michigan 48009 Telephone: ---------------------------------- Facsimile: (313) 845-2300

THE PIDWELL FAMILY LIVING TRUST DATED 6/25/87 By: /s/ [ILLEGIBLE] ----------------------------------------- Trustee Address: 20628 Vickery Lane Saratoga, California 95070 Telephone: ---------------------------------- Facsimile: (408) 867-5049

PRAISE THE LORD FOUNDATION By: /s/ Kenneth A. Eldred ----------------------------------------- Kenneth A. Eldred Chief Financial Officer Address: 1075 Westridge Drive Portola Valley, California 94028 Telephone: (650) 851-4707 Facsimile: (650) 851-5279

/s/ A. Brooke Seawell -------------------------------------------- A. Brooke Seawell Address: 1245 San Mateo Drive Menlo Park, California 94025 Telephone: ---------------------------------- Facsimile: (650) 328-0388

TCV II, V.O.F. a Netherlands Antilles General Partnership By: Technology Crossover Management II, L.L.C., Its: Investment General Partner By: /s/ Robert C. Bensky ----------------------------------------- Robert C. Bensky, Chief Financial Officer Technology Crossover Ventures II, L.P. a Delaware Limited Partnership By: Technology Crossover Management II, L.L.C., Its: General Partner By: /s/ Robert C. Bensky ----------------------------------------- Robert C. Bensky, Chief Financial Officer TCV II (Q), L.P. a Delaware Limited Partnership By: Technology Crossover Management II, L.L.C., Its: General Partner By: /s/ Robert C. Bensky ----------------------------------------- Robert C. Bensky, Chief Financial Officer TCV II Strategic Partners, L.P. a Delaware Limited Partnership By: Technology Crossover Management II, L.L.C., Its: General Partner By: /s/ Robert C. Bensky ----------------------------------------- Robert C. Bensky, Chief Financial Officer Technology Crossover Ventures II, C.V. a Netherlands Antilles Limited Partnership By: Technology Crossover Management II, L.L.C., Its: Investment General Partner By: /s/ Robert C. Bensky ----------------------------------------- Robert C. Bensky, Chief Financial Officer Address: 56 Main Street, Suite 210 Millburn, New Jersey 07041 Telephone: ---------------------------------- Facsimile: (973) 467-5323

/s/ Hatim A. Tyabji -------------------------------------------- Hatim A. Tyabji Address: c/o VeriFone 4988 Great America Parkway Santa Clara, California 95054-1200 Telephone: (408) 919-5542 Facsimile: (408) 919-8899

VAN WAGONER CAPITAL MANAGEMENT By: /s/ Garrett Von Wagoner ----------------------------------------- Print Name: Garrett Von Wagoner --------------------------------- Title: President -------------------------------------- Address: 345 California Street, Suite 2450 San Francisco, California 94104 Telephone: (415) 835-5000 Facsimile: (415) 835-5050

VISA INTERNATIONAL SERVICE ASSOCIATION By: /s/ Todd Chaffee ----------------------------------------- Todd Chaffee Title: -------------------------------------- Address: 900 Metro Center Boulevard M/S M1-12th Floor Foster City, California 94404 Telephone: (650) 432-3152 Facsimile: (650) 432-3980

VISA U.S.A. INC. By: /s/ [Illegible] ----------------------------------------- Print Name: [Illegible] --------------------------------- Title: -------------------------------------- Address: 900 Metro Center Boulevard Foster City, California 94404 Telephone: (650) 432-2607 Facsimile: (650) 432-4125

/s/ Sarah L. Gordon Wild -------------------------------------------- Sarah L. Gordon Wild Address: 43 West 84th Street, #2 New York, New York 10024 Telephone: ---------------------------------- Facsimile: ----------------------------------

FOUNDERS: /s/ Rob DeSantis -------------------------------------------- Rob DeSantis Address: 105 Kennedy Court Los Gatos, California 95032 Telephone: (408) 356-2759 Facsimile: (408) 358-1242

/s/ Paul Hegarty -------------------------------------------- Paul Hegarty Address: 538 Sullivan Drive Mountain View, California 94041 Telephone: (650) 903-9327 Facsimile: ----------------------------------

/s/ Edward P. Kinsey -------------------------------------------- Edward P. Kinsey Address: 100 Dundee Lane San Carlos, California 94070 Telephone: (650) 591-6876 Facsimile: (650) 591-6380

/s/ Keith J. Krach -------------------------------------------- Keith J. Krach Address: 16520 South Kennedy Road Los Gatos, California 95032 Telephone: ---------------------------------- Facsimile: ----------------------------------

/s/ Robert Lent -------------------------------------------- Robert Lent Address: 2010 Broadway Burlingame, California 94010 Telephone: (650) 344-4412 Facsimile: (650) 340-7049

/s/ Boris Putanec -------------------------------------------- Boris Putanec Address: 1175 Laurel Street Menlo Park, California 94025 Telephone: ---------------------------------- Facsimile: (650) 325-8464

/s/ Paul Touw -------------------------------------------- Paul Touw Address: 220 Miramonte Avenue Palo Alto, California 94306 Telephone: (650) 321-4215 Facsimile: ----------------------------------

SCHEDULE A SCHEDULE OF INVESTORS NAME AND ADDRESS OF INVESTOR Amerindo Technology Growth Fund II, Inc. 43 Upper Grosvenor Street London W1X 9PG Benchmark Capital Partners, L.P. Benchmark Founders' Fund, L.P. 2480 Sand Hill Road, Suite 200 Menlo Park, California 94025 Anthony Ciulla 1080 Sunshine Circle Danville, California 94506 Crosspoint Venture Partners 1996 One First Street Los Altos, California 94022 DMG Technology Ventures, L.L.C. 1550 El Camino Real, Suite 100 Menlo Park, California 94025 Attention: Monica Komives Eric A. Eldred Separate Property Trust c/o Philip R. Taylor, Trustee 535 Cowper Street, Second Floor Palo Alto, California 94301 G & H Partners 155 Constitution Drive Menlo Park, California 94025 Joaquin A. Garcia-Larrieu 10380 Southwest 115th Street Miami, Florida 33176 Intel Corporation 2200 Mission College Boulevard, Mail Stop SC 4-210 Santa Clara, California 95052 S-1

NAME AND ADDRESS OF INVESTOR The Kenneth A. and Roberta E. Eldred Revocable Trust dated 1/19/90 c/o Kenneth A. Eldred, Trustee 1075 Westridge Drive Portola Valley, California 94028 Keith J. Krach 16520 South Kennedy Road Los Gatos, California 95032 Lighthouse Capital Partners 100 Drake's Landing Road, Suite 260 Greenbrae, California 94904-3121 Litton Master Trust c/o Amerindo Investment Advisors Inc. Attention: Alberto W. Vilar, Attorney-in-Fact One Embarcadero Center, Suite 2300 San Francisco, California 94111 Emeric J. McDonald P.O. Box 4849 Mountain View, California 94040 John McMahon 1527 Grace Avenue San Jose, California 95125 PeopleSoft Ventures, Inc. 4440 Rosewood Drive Pleasanton, California 94588 Donald Petersen 255 East Brown Street, #460 Birmingham, Michigan 48009 The Pidwell Family Living Trust dated 6/25/87 20628 Vickery Lane Saratoga, California 95070 Praise the Lord Foundation c/o Kenneth A. Eldred, CFO 1075 Westridge Drive Portola Valley, California 94028 S-2

NAME AND ADDRESS OF INVESTOR A. Brooke Seawell 1245 San Mateo Drive Menlo Park, California 94025 TCV II, V.O.F. Technology Crossover Ventures II, L.P. TCV II (Q), L.P. TCV II Strategic Partners, L.P. Technology Crossover Ventures II, C.V. 56 Main Street, Suite 210 Millburn, New Jersey 07041 Attention: Robert C. Bensky, CFO Hatim A. Tyabji c/o VeriFone 4988 Great America Parkway Santa Clara, California 95054-1200 Van Wagoner Capital Management 345 California Street, Suite 2450 San Francisco, California 94104 Visa International Service Association 900 Metro Center Boulevard M/S M1-12th Floor Foster City, California 94404 Attention: Todd Chaffee Visa U.S.A. Inc. 900 Metro Center Boulevard Foster City, California 94404 Attention: Beth Masegian, Vice President, Finance Sarah L. Gordon Wild 43 West 84th Street, #2 New York, New York 10024 S-3

SCHEDULE B SCHEDULE OF FOUNDERS Rob DeSantis 105 Kennedy Court Los Gatos, California 95032 Paul Hegarty 538 Sullivan Drive Mountain View, California 94041 Edward P. Kinsey 100 Dundee Lane San Carlos, California 94070 Keith J. Krach 16520 South Kennedy Road Los Gatos, California 95032 Robert Lent 2010 Broadway Burlingame, California 94010 Boris Putanec 1175 Laurel Street Menlo Park, California 94025 Paul Touw 220 Miramonte Avenue Palo Alto, California 94306 S-4

Exhibit 10.1 INDEMNIFICATION AGREEMENT THIS AGREEMENT (the "Agreement") is made and entered into as of ___________, 199_ by and between Ariba, Inc., a Delaware corporation ("the Company"), and _____________________ ("Indemnitee"). WITNESSETH THAT: WHEREAS, Indemnitee performs a valuable service for the Company; WHEREAS, the Board of Directors of the Company has adopted Bylaws (the "Bylaws") providing for the indemnification of the officers and directors of the Company to the maximum extent authorized by Section 145 of the Delaware General Corporation Law, as amended ("Law"); WHEREAS, the Bylaws and the Law, by their nonexclusive nature, permit contracts between the Company and the officers or directors of the Company with respect to indemnification of such officers or directors; WHEREAS, in accordance with the authorization as provided by the Law, the Company may purchase and maintain a policy or policies of directors' and officers' liability insurance ("D & O Insurance"), covering certain liabilities which may be incurred by its officers or directors in the performance of their obligations to the Company; and WHEREAS, in order to induce Indemnitee to continue to serve as an officer or director of the Company, the Company has determined and agreed to enter into this contract with Indemnitee; NOW, THEREFORE, in consideration of Indemnitee's service as an officer or director after the date hereof, the parties hereto agree as follows: 1. INDEMNITY OF INDEMNITEE. The Company hereby agrees to hold harmless and indemnify Indemnitee to the full extent authorized or permitted by the provisions of the Law, as such may be amended from time to time, and Article VII, Section 6 of the Bylaws, as such may be amended. In furtherance of the foregoing indemnification, and without limiting the generality thereof: (a) PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(a) if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the

Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. (b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided, however, that, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made. (c) INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. 2. ADDITIONAL INDEMNITY. In addition to, and without regard to any limitations on, the indemnification provided for in Section 1, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company's obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful under Delaware law. 3. CONTRIBUTION IN THE EVENT OF JOINT LIABILITY. (a) Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such 2

payment and Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. Company shall not enter into any settlement of any action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee. (b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), Company shall contribute to the amount of expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which the law may require to be considered. The relative fault of Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, and the degree to which their conduct is active or passive. (c) Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee. 4. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. 5. ADVANCEMENT OF EXPENSES. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee's Corporate Status within ten (10) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that 3

Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within thirty (30) days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). 6. PROCEDURES AND PRESUMPTIONS FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the law and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement: (a) To obtain indemnification (including, but not limited to, the advancement of Expenses and contribution by the Company) under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case by one of the following three methods, which shall be at the election of Indemnitee: (1) by a majority vote of the disinterested directors, even though less than a quorum, or (2) by independent legal counsel in a written opinion, or (3) by the stockholders. (c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors). Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 13 of this Agreement, and the 4

objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed. (d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence. (e) Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence. (f) If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 30 day period may be 5

extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(g) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board of Directors or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat. (g) Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board of Directors, or stockholder of the Company shall act reasonably and in good faith in making a determination under the Agreement of the Indemnitee's entitlement to indemnification. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence. 7. REMEDIES OF INDEMNITEE. (a) In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to 6

indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose Indemnitee's right to seek any such adjudication. (b) In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a DE NOVO trial, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination under Section 6(b). (c) If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent a prohibition of such indemnification under applicable law. (d) In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors' and officers' liability insurance policies maintained by the Company the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery. (e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. 8. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION. (a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the certificate of incorporation of the Company, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy 7

given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. 9. EXCEPTION TO RIGHT OF INDEMNIFICATION. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors of the Company or (b) such Proceeding is being brought by the Indemnitee to assert, interpret or enforce his rights under this Agreement. 10. DURATION OF AGREEMENT. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or any other Enterprise at the Company's request. 11. SECURITY. To the extent requested by the Indemnitee and approved by the Board of Directors of the Company, the Company may at any time and from time to time provide 8

security to the Indemnitee for the Company's obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee. 12. ENFORCEMENT. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company. (b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof. 13. DEFINITIONS. For purposes of this Agreement: (a) "Corporate Status" describes the status of a person who is or was a director, officer, employee or agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the express written request of the Company. (b) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (c) "Enterprise" shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary. (d) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding. (e) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in 9

representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. (f) "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director of the Company, by reason of any action taken by him or of any inaction on his part while acting as an officer or director of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other Enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement; and excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement. 14. SEVERABILITY. If any provision or provisions of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, illegal or otherwise unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. 15. MODIFICATION AND WAIVER. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 16. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company. 10

17. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: (a) If to Indemnitee, to the address set forth below Indemnitee signature hereto. (b) If to the Company, to: Ariba, Inc. 1585 Charleston Road Mountain View, CA 94043 Attention: Chief Financial Officer or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. 18. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. 19. HEADINGS. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. 20. GOVERNING LAW. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware without application of the conflict of laws principles thereof. 21. GENDER. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. 11

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. ARIBA, INC. By:____________________________________ Name:_____________________________ Title:____________________________ _______________________________________ Name: ________________________________ Address: _______________________________________ _______________________________________ _______________________________________ _______________________________________

Exhibit 10.2 ARIBA, INC. 1996 STOCK PLAN ADOPTED ON NOVEMBER 15, 1996 (AS AMENDED JULY 30, 1997) (AS AMENDED OCTOBER 5, 1998) (AS AMENDED MARCH 15, 1999)

TABLE OF CONTENTS <TABLE> <CAPTION> PAGE NO. -------- <S> <C> SECTION 1. ESTABLISHMENT AND PURPOSE. . . . . . . . . . . . . . . . . . . . . . . .1 SECTION 2. ADMINISTRATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 (a) Committees of the Board of Directors . . . . . . . . . . . . . . . . . . .1 (b) Authority of the Board of Directors. . . . . . . . . . . . . . . . . . . .1 SECTION 3. ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 (a) General Rule.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 (b) Ten-Percent Stockholders.. . . . . . . . . . . . . . . . . . . . . . . . .1 SECTION 4. STOCK SUBJECT TO PLAN. . . . . . . . . . . . . . . . . . . . . . . . . .2 (a) Basic Limitation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 (b) Additional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES. . . . . . . . . . . . . . . . .2 (a) Stock Purchase Agreement.. . . . . . . . . . . . . . . . . . . . . . . . .2 (b) Duration of Offers and Nontransferability of Rights. . . . . . . . . . . .2 (c) Purchase Price.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 (d) Withholding Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 (e) Restrictions on Transfer of Shares.. . . . . . . . . . . . . . . . . . . .3 (f) Accelerated Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . .3 SECTION 6. TERMS AND CONDITIONS OF OPTIONS. . . . . . . . . . . . . . . . . . . . .3 (a) Stock Option Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . .3 (b) Number of Shares.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 (c) Exercise Price.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 (d) Withholding Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 (e) Exercisability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 (f) Accelerated Exercisability . . . . . . . . . . . . . . . . . . . . . . . .4 (g) Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 (h) Nontransferability.. . . . . . . . . . . . . . . . . . . . . . . . . . . .5 (i) Termination of Service (Except by Death).. . . . . . . . . . . . . . . . .5 (j) Leaves of Absence. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 (k) Death of Optionee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 (l) No Rights as a Stockholder.. . . . . . . . . . . . . . . . . . . . . . . .6 (m) Modification, Extension and Assumption of Options. . . . . . . . . . . . .6 (n) Restrictions on Transfer of Shares and Minimum Vesting.. . . . . . . . . .6 (o) Accelerated Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . .6 i

SECTION 7. PAYMENT FOR SHARES.. . . . . . . . . . . . . . . . . . . . . . . . . . .6 (a) General Rule.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 (b) Surrender of Stock.. . . . . . . . . . . . . . . . . . . . . . . . . . . .6 (c) Services Rendered. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 (d) Promissory Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 (e) Exercise/Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 (f) Exercise/Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 SECTION 8. ADJUSTMENT OF SHARES.. . . . . . . . . . . . . . . . . . . . . . . . . .7 (a) General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 (b) Mergers and Consolidations.. . . . . . . . . . . . . . . . . . . . . . . .7 (c) Reservation of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . .8 SECTION 9. SECURITIES LAWS REQUIREMENTS.. . . . . . . . . . . . . . . . . . . . . .8 (a) General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 (b) Financial Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 SECTION 10. NO RETENTION RIGHTS.. . . . . . . . . . . . . . . . . . . . . . . . . .8 SECTION 11. DURATION AND AMENDMENTS.. . . . . . . . . . . . . . . . . . . . . . . .9 (a) Term of the Plan.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 (b) Right to Amend or Terminate the Plan.. . . . . . . . . . . . . . . . . . .9 (c) Effect of Amendment or Termination.. . . . . . . . . . . . . . . . . . . .9 SECTION 12. DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 </TABLE> ii

ARIBA, INC. 1996 STOCK PLAN SECTION 1. ESTABLISHMENT AND PURPOSE. The purpose of the Plan is to offer selected individuals an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, by purchasing Shares of the Company's Stock. The Plan provides both for the direct award or sale of Shares and for the grant of Options to purchase Shares. Options granted under the Plan may include Nonstatutory Options as well as ISOs intended to qualify under Section 422 of the Code. Capitalized terms are defined in Section 12. SECTION 2. ADMINISTRATION. (a) COMMITTEES OF THE BOARD OF DIRECTORS. The Plan may be administered by one or more Committees. Each Committee shall consist of one or more members of the Board of Directors who have been appointed by the Board of Directors. Each Committee shall have such authority and be responsible for such functions as the Board of Directors has assigned to it. If no Committee has been appointed, the entire Board of Directors shall administer the Plan. Any reference to the Board of Directors in the Plan shall be construed as a reference to the Committee (if any) to whom the Board of Directors has assigned a particular function. (b) AUTHORITY OF THE BOARD OF DIRECTORS. Subject to the provisions of the Plan, the Board of Directors shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. All decisions, interpretations and other actions of the Board of Directors shall be final and binding on all Purchasers, all Optionees and all persons deriving their rights from a Purchaser or Optionee. SECTION 3. ELIGIBILITY. (a) GENERAL RULE. Only Employees, Outside Directors and Consultants shall be eligible for the grant of Options or the direct award or sale of Shares. Only Employees shall be eligible for the grant of ISOs. (b) TEN-PERCENT STOCKHOLDERS. An individual who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall not be eligible for designation as an Optionee or Purchaser unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share on the date of grant, (ii) the Purchase Price (if any) is at least 100% of the Fair Market Value of a Share and (iii) in the case of an ISO, such ISO by its terms is not exercisable after the expiration of five years from the date of grant. For purposes of this Subsection (b), in determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied. 1

SECTION 4. STOCK SUBJECT TO PLAN. (a) BASIC LIMITATION. Shares offered under the Plan may be authorized but unissued Shares or treasury Shares. The aggregate number of Shares that may be issued under the Plan (upon exercise of Options or other rights to acquire Shares) shall not exceed 8,522,200(1) Shares, subject to adjustment pursuant to Section 8. The number of Shares that are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of Shares that then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. (b) ADDITIONAL SHARES. In the event that any outstanding Option or other right for any reason expires or is canceled or otherwise terminated, the Shares allocable to the unexercised portion of such Option or other right shall again be available for the purposes of the Plan. In the event that Shares issued under the Plan are reacquired by the Company pursuant to any forfeiture provision, right of repurchase or right of first refusal, such Shares shall again be available for the purposes of the Plan, except that the aggregate number of Shares which may be issued upon the exercise of ISOs shall in no event exceed 8,358,450(2) Shares (subject to adjustment pursuant to Section 8). SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES. (a) STOCK PURCHASE AGREEMENT. Each award or sale of Shares under the Plan (other than upon exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company. Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Purchase Agreement. The provisions of the various Stock Purchase Agreements entered into under the Plan need not be identical. (b) DURATION OF OFFERS AND NONTRANSFERABILITY OF RIGHTS. Any right to acquire Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within 30 days after the grant of such right was communicated to the Purchaser by the Company. Such right shall not be transferable and shall be exercisable only by the Purchaser to whom such right was granted. (c) PURCHASE PRICE. The Purchase Price of Shares to be offered under the Plan shall not be less than 85% of the Fair Market Value of such Shares, and a higher percentage may be required by Section 3(b). Subject to the preceding sentence, the Purchase Price shall be __________________________ (1) Reflects the 1,196,100-share increase by the Board of Directors and approved by the stockholders on July 30, 1997, and the 1,150,000-share increase authorized by the Board of Directors on October 5, 1998 and approved by the stockholders on November 5, 1998. Also reflects the 1,100,000-share increase authorized by the Board of Directors on March 15, 1999, subject to stockholder approval, and the 2-for-1 stock split effective March 19, 1999. (2) As of March 19, 1999. 2

determined by the Board of Directors at its sole discretion. The Purchase Price shall be payable in a form described in Section 7. (d) WITHHOLDING TAXES. As a condition to the purchase of Shares, the Purchaser shall make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such purchase. (e) RESTRICTIONS ON TRANSFER OF SHARES AND MINIMUM VESTING. Any Shares awarded or sold under the Plan shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine. Such restrictions shall be set forth in the applicable Stock Purchase Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. Any right to repurchase a Purchaser's Shares at the original Purchase Price (if any) upon termination of the Purchaser's Service shall lapse at least as rapidly as the following schedule: <TABLE> <CAPTION> Anniversary of Date Percentage of of Sale or Award Shares Vested ------------------- ------------- <S> <C> First 20% Second 40% Third 60% Fourth 80% Fifth 100% </TABLE> Any such repurchase right may be exercised only within 90 days after the termination of the Purchaser's Service for cash or for cancellation of indebtedness incurred in purchasing the Shares. (f) ACCELERATED VESTING. Unless the applicable Stock Purchase Agreement provides otherwise, any right to repurchase a Purchaser's Shares at the original Purchase Price (if any) upon termination of the Purchaser's Service shall lapse and all of such Shares shall become vested if (i) the Company is subject to a Change in Control and (ii) the repurchase right is not assigned to the entity that employs the Purchaser immediately after the Change in Control or to its parent or subsidiary. SECTION 6. TERMS AND CONDITIONS OF OPTIONS. (a) STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. (b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in 3

accordance with Section 8. The Stock Option Agreement shall also specify whether the Option is an ISO or a Nonstatutory Option. (c) EXERCISE PRICE. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the date of grant, and a higher percentage may be required by Section 3(b). The Exercise Price of a Nonstatutory Option shall not be less than 85% of the Fair Market Value of a Share on the date of grant, and a higher percentage may be required by Section 3(b). Subject to the preceding two sentences, the Exercise Price under any Option shall be determined by the Board of Directors at its sole discretion. The Exercise Price shall be payable in a form described in Section 7. (d) WITHHOLDING TAXES. As a condition to the exercise of an Option, the Optionee shall make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option. (e) EXERCISABILITY. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable. An Option shall become exercisable at least as rapidly as set forth in the following schedule: <TABLE> <CAPTION> Anniversary of Percentage of Shares Date of Option Grant Exercisable -------------------- -------------------- <S> <C> First 20% Second 40% Third 60% Fourth 80% Fifth 100% </TABLE> Subject to the preceding sentence, the exercisability provisions of any Stock Option Agreement shall be determined by the Board of Directors at its sole discretion. (f) ACCELERATED EXERCISABILITY. Unless the applicable Stock Option Agreement provides otherwise, all of an Optionee's Options shall become exercisable in full if (i) the Company is subject to a Change in Control, (ii) such Options do not remain outstanding, (iii) such Options are not assumed by the surviving corporation or its parent and (iv) the surviving corporation or its parent does not substitute options with substantially the same terms for such Options. (g) BASIC TERM. The Stock Option Agreement shall specify the term of the Option. The term shall not exceed 10 years from the date of grant, and a shorter term may be required by Section 3(b). Subject to the preceding sentence, the Board of Directors at its sole discretion shall determine when an Option is to expire. 4

(h) NONTRANSFERABILITY. No Option shall be transferable by the Optionee other than by beneficiary designation, will or the laws of descent and distribution. An Option may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee's guardian or legal representative. No Option or interest therein may be transferred, assigned, pledged or hypothecated by the Optionee during the Optionee's lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process. (i) TERMINATION OF SERVICE (EXCEPT BY DEATH). If an Optionee's Service terminates for any reason other than the Optionee's death, then the Optionee's Options shall expire on the earliest of the following occasions: (i) The expiration date determined pursuant to Subsection (g) above; (ii) The date three months after the termination of the Optionee's Service for any reason other than Disability; or (iii) The date six months after the termination of the Optionee's Service by reason of Disability. The Optionee may exercise all or part of the Optionee's Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionee's Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee's Service terminated (or vested as a result of the termination). The balance of such Options shall lapse when the Optionee's Service terminates. In the event that the Optionee dies after the termination of the Optionee's Service but before the expiration of the Optionee's Options, all or part of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionee's estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee's Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee's Service terminated (or vested as a result of the termination). (j) LEAVES OF ABSENCE. For purposes of Subsection (i) above, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing and if continued crediting of Service for this purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company). (k) DEATH OF OPTIONEE. If an Optionee dies while the Optionee is in Service, then the Optionee's Options shall expire on the earlier of the following dates: (i) The expiration date determined pursuant to Subsection (g) above; or (ii) The date 12 months after the Optionee's death. 5

All or part of the Optionee's Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators of the Optionee's estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee's death or became exercisable as a result of the death. The balance of such Options shall lapse when the Optionee dies. (l) NO RIGHTS AS A STOCKHOLDER. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by the Optionee's Option until such person becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant to the terms of such Option. (m) MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within the limitations of the Plan, the Board of Directors may modify, extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the Optionee's rights or increase the Optionee's obligations under such Option. (n) RESTRICTIONS ON TRANSFER OF SHARES AND MINIMUM VESTING. Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine. Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. Any right to repurchase an Optionee's Shares at the original Exercise Price upon termination of the Optionee's Service shall lapse at least as rapidly as the schedule set forth in Subsection (e) above. Any such repurchase right may be exercised only within 90 days after the termination of the Optionee's Service for cash or for cancellation of indebtedness incurred in purchasing the Shares. (o) ACCELERATED VESTING. Unless the applicable Stock Option Agreement provides otherwise, any right to repurchase an Optionee's Shares at the original Exercise Price upon termination of the Optionee's Service shall lapse and all of such Shares shall become vested if (i) the Company is subject to a Change in Control and (ii) the repurchase right is not assigned to the entity that employs the Optionee immediately after the Change in Control or to its parent or subsidiary. SECTION 7. PAYMENT FOR SHARES. (a) GENERAL RULE. The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash or cash equivalents at the time when such Shares are purchased, except as otherwise provided in this Section 7. (b) SURRENDER OF STOCK. To the extent that a Stock Option Agreement so provides, payment may be made all or in part with Shares owned by the Optionee or the Optionee's representative. Such Shares shall be surrendered to the Company in good form for transfer and 6

shall be valued at their Fair Market Value on the date when the Option is exercised. This Subsection (b) shall not apply to the extent that acceptance of Shares in payment of the Exercise Price would cause the Company to recognize compensation expense with respect to the Option for financial reporting purposes. (c) SERVICES RENDERED. At the discretion of the Board of Directors, Shares may be awarded under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary prior to the award. (d) PROMISSORY NOTE. To the extent that a Stock Option Agreement or Stock Purchase Agreement so provides, all or a portion of the Exercise Price or Purchase Price (as the case may be) of Shares issued under the Plan may be paid with a full-recourse promissory note. The par value of the Shares, if newly issued, shall be paid in cash or cash equivalents. The Shares shall be pledged as security for payment of the principal amount of the promissory note and interest thereon. The interest rate payable under the terms of the promissory note shall not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Board of Directors (at its sole discretion) shall specify the term, interest rate, amortization requirements (if any) and other provisions of such note. (e) EXERCISE/SALE. To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, payment may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. (f) EXERCISE/PLEDGE. To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, payment may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. SECTION 8. ADJUSTMENT OF SHARES. (a) GENERAL. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a combination or consolidation of the outstanding Stock into a lesser number of Shares, a recapitalization, a spin-off, a reclassification or a similar occurrence, the Board of Directors shall make appropriate adjustments in one or more of (i) the number of Shares available for future grants under Section 4, (ii) the number of Shares covered by each outstanding Option or (iii) the Exercise Price under each outstanding Option. (b) MERGERS AND CONSOLIDATIONS. In the event that the Company is a party to a merger or consolidation, outstanding Options shall be subject to the agreement of merger or consolidation. Such agreement, without the Optionees' consent, may provide for: 7

(i) The continuation of such outstanding Options by the Company (if the Company is the surviving corporation); (ii) The assumption of the Plan and such outstanding Options by the surviving corporation or its parent; (iii) The substitution by the surviving corporation or its parent of options with substantially the same terms for such outstanding Options; or (iv) The cancellation of such outstanding Options without payment of any consideration. (c) RESERVATION OF RIGHTS. Except as provided in this Section 8, an Optionee or Purchaser shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the number of shares of stock of any class. Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. SECTION 9. SECURITIES LAW REQUIREMENTS. (a) GENERAL. Shares shall not be issued under the Plan unless the issuance and delivery of such Shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company's securities may then be traded. (b) FINANCIAL REPORTS. The Company each year shall furnish to Optionees, Purchasers and stockholders who have received Stock under the Plan its balance sheet and income statement, unless such Optionees, Purchasers or stockholders are key Employees whose duties with the Company assure them access to equivalent information. Such balance sheet and income statement need not be audited. SECTION 10. NO RETENTION RIGHTS. Nothing in the Plan or in any right or Option granted under the Plan shall confer upon the Purchaser or Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Purchaser or Optionee) or of the Purchaser or Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause. 8

SECTION 11. DURATION AND AMENDMENTS. (a) TERM OF THE PLAN. The Plan became effective when adopted by the Board of Directors on November 15, 1996 and was approved by the Company's stockholders on January 15, 1997. On July 30, 1997 the Board of Directors adopted and the stockholders approved an increase in the number of shares issuable over the term of the Plan from 1,365,000 to 2,561,100 shares. On October 5, 1998 the Board of Directors adopted an increase in the number of shares issuable over the term of the Plan from 2,561,100 shares to 3,711,100 shares. The stockholders approved the 1,150,000-share increase on November 5, 1998. On March 15, 1999 the Board of Directors adopted and the stockholders approved an increase in the number of shares issuable over the term of the Plan from 3,711,100 shares to 4,261,100 shares. On March 19, 1999 the Company effected a 2-for-1 split of the Company's Common Stock. All share numbers reflected above are pre-split numbers. The Plan shall terminate automatically 10 years after its adoption by the Board of Directors and may be terminated on any earlier date pursuant to Subsection (b) below. (b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors may amend, suspend or terminate the Plan at any time and for any reason; provided, however, that any amendment of the Plan which increases the number of Shares available for issuance under the Plan (except as provided in Section 8), or which materially changes the class of persons who are eligible for the grant of ISOs, shall be subject to the approval of the Company's stockholders. Stockholder approval shall not be required for any other amendment of the Plan. (c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option previously granted under the Plan. SECTION 12. DEFINITIONS. (a) "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company, as constituted from time to time. (b) "CHANGE IN CONTROL" shall mean: (i) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity's securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; or (ii) The sale, transfer or other disposition of all or substantially all of the Company's assets. 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 9

the same proportions by the persons who held the Company's securities immediately before such transaction. (c) "CODE" shall mean the Internal Revenue Code of 1986, as amended. (d) "COMMITTEE" shall mean a committee of the Board of Directors, as described in Section 2(a). (e) "COMPANY" shall mean Ariba, Inc., a Delaware corporation. (f) "CONSULTANT" shall mean an individual who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors. (g) "DISABILITY" shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment. (h) "EMPLOYEE" shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary. (i) "EXERCISE PRICE" shall mean the amount for which one Share may be purchased upon exercise of an Option, as specified by the Board of Directors in the applicable Stock Option Agreement. (j) "FAIR MARKET VALUE" shall mean the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons. (k) "ISO" shall mean an employee incentive stock option described in Section 422(b) of the Code. (l) "NONSTATUTORY OPTION" shall mean a stock option not described in Sections 422(b) or 423(b) of the Code. (m) "OPTION" shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares. (n) "OPTIONEE" shall mean an individual who holds an Option. (o) "OUTSIDE DIRECTOR" shall mean a member of the Board of Directors who is not an Employee. (p) "PARENT" shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date. 10

(q) "PLAN" shall mean this Ariba, Inc. 1996 Stock Plan. (r) "PURCHASE PRICE" shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Board of Directors. (s) "PURCHASER" shall mean an individual to whom the Board of Directors has offered the right to acquire Shares under the Plan (other than upon exercise of an Option). (t) "SERVICE" shall mean service as an Employee, Outside Director or Consultant. (u) "SHARE" shall mean one share of Stock, as adjusted in accordance with Section 8 (if applicable). (v) "STOCK" shall mean the Common Stock of the Company, with a par value of $.002 per Share. (w) "STOCK OPTION AGREEMENT" shall mean the agreement between the Company and an Optionee which contains the terms, conditions and restrictions pertaining to the Optionee's Option. (x) "STOCK PURCHASE AGREEMENT" shall mean the agreement between the Company and a Purchaser who acquires Shares under the Plan which contains the terms, conditions and restrictions pertaining to the acquisition of such Shares. (y) "SUBSIDIARY" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. 11

Exhibit 10.6 INDUSTRIAL COMPLEX LEASE (California) Industrial Complex: Caribbean Corporate Center Landlord: MP Caribbean, Inc. Tenant: Ariba Technologies, Inc. Reference Date: August 11, 1997 INDEX TO LEASE <TABLE> <CAPTION> TITLE PAGE <S> <C> ARTICLE 1. DEFINITIONS AND CERTAIN BASIC PROVISIONS . . . . . . . . . . . . . . . 1 ARTICLE 2. GRANTING CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 3. DELIVERY OF DEMISED PREMISES . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 4. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 5. FINANCIAL REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE 6. TENANT'S RESPONSIBILITY FOR TAXES, OTHER REAL ESTATE CHARGES AND INSURANCE EXPENSES . . . . . . . . . . . . . . 4 ARTICLE 7. COMMON AREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 8. [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 9. USE AND CARE OF DEMISED PREMISES . . . . . . . . . . . . . . . . . . . 7 ARTICLE 10. MAINTENANCE AND REPAIR OF DEMISED PREMISES . . . . . . . . . . . . . . 7 ARTICLE 11. ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE 12. LANDLORD'S RIGHT OF ACCESS . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 13. SIGNS; STORE FRONTS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 14. UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 ARTICLE 15. INSURANCE COVERAGES . . . . . . . . . . . . . . . . . . . . . . . . . .10 ARTICLE 16. WAIVER OF LIABILITY; MUTUAL WAIVER OF SUBROGATION . . . . . . . . . . .11

ARTICLE 17. DAMAGES BY CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . .12 ARTICLE 18. EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 ARTICLE 19. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . .13 ARTICLE 20. SUBORDINATION; ATTORNMENT; ESTOPPELS . . . . . . . . . . . . . . . . .15 ARTICLE 21. TENANT'S INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . .15 ARTICLE 22. DEFAULT BY TENANT AND REMEDIES . . . . . . . . . . . . . . . . . . . .16 ARTICLE 23 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . .19 ARTICLE 24. HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 ARTICLE 25. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 ARTICLE 26. COMMISSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 ARTICLE 27. REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 ARTICLE 28. HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . .21 ARTICLE 29. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 </TABLE> EXHIBIT "A" DEMISED PREMISES EXHIBIT "B" CONSTRUCTION: TENANT ACCEPTANCE OF SPACE "AS IS" EXHIBIT "C" TENANT CONSTRUCTION RULES AND REGULATIONS EXHIBIT "D" RIGHT OF FIRST OPPORTUNITY 2

INDUSTRIAL COMPLEX LEASE (California) ARTICLE 1. DEFINITIONS AND CERTAIN BASIC PROVISIONS 1.1 The following list sets out certain defined terms and certain financial and other information pertaining to this lease: (a) "Landlord": MP Caribbean, Inc., a Delaware corporation, whose taxpayer identification number is 94-3226570. (b) Landlord's address: c/o GE Capital Investment Advisors, Inc., 444 Market Street, Suite 2100, San Francisco, California 94111, Attention: Asset Management and Legal Department (c) "Tenant": Ariba Technologies, Inc., a Delaware corporation, whose taxpayer identification number is 77-0439730. (d) Tenant's address: Prior to Commencement Date: 1870 Plymouth Street, Suite 103 Mountain View, CA 94043 Upon Commencement Date: 1314 Chesapeake Terrace Sunnyvale, CA 94089 (See also section 25.1) (e) Tenant's trade name: Ariba Technologies (f) Tenant's Guarantor: N/A (g) "Agent": South Bay Development Company, whose address is 511 Division Street, Campbell, California 95008, Attention: James D. Mair. (h) "Industrial Complex": Landlord's property in the City of Sunnyvale, Santa Clara County, California, which property is commonly known as: 1310-1327 Chesapeake Terrace, Caribbean Corporate Center, Sunnyvale, California. (i) "Demised Premises": that certain area in the Industrial Complex located at 1314 Chesapeake Terrace, Sunnyvale, California and being described or shown cross-hatched on the floor plan(s) attached hereto as EXHIBIT "A" which Landlord and Tenant acknowledge and agree to contain 32,576 square feet of rentable area. (j) "Commencement Date": the later of September 14, 1997, or that date upon which Landlord has completed all of the Landlord's Improvements as provided in Article IV of EXHIBIT "B" attached hereto. (k) "Lease Term": commencing on the Commencement Date and continuing for seven (7) years and no months after the Commencement Date; provided that if the Commencement Date is a date other than the first day of a calendar month, the lease term shall be extended by the number of days remaining in the calendar month in which the Commencement Date occurs. See EXHIBIT "D". (l) Minimum guaranteed rental: $57,008.00, subject to Section 4.1 below. (m) Prepaid rental: $57,008.00, being an estimate of the initial minimum guaranteed rental, for the first month of the lease term, such prepaid rental being due and payable upon execution of this lease. (n) Security deposit: $76,396.00, such security deposit being due and payable upon execution of this lease. (o) Permitted use: General office and software development, and for no other purpose whatsoever. (p) Tenant's maximum insurance deductible: $5,000.00. (q) "Tenant's Broker": Cushman & Wakefield of California, Inc. 1

(r) (i) "Tenant's Proportionate Share of Building Basic Costs": 44.89% (ii) "Tenant's Proportionate Share of Industrial Complex Basic Costs": 12.85% (iii) "Tenant's Proportionate Share of Parcel Basic Costs": 22.09%. ARTICLE 2. GRANTING CLAUSE 2.1 Landlord leases the Demised Premises to Tenant, and Tenant leases the Demised Premises from Landlord, upon the terms and conditions set forth in this lease. ARTICLE 3. DELIVERY OF DEMISED PREMISES 3.1 Except to the extent modified by Landlord's express assumption of construction obligations, if any, in EXHIBIT "B" attached to this lease, the Demised Premises is being leased "AS IS," with Tenant accepting all defects, if any; and Landlord makes no warranty of any kind, express or implied, with respect to the Demised Premises (without limitation, Landlord makes no warranty as the habitability, fitness or suitability of the Demised Premises for a particular purpose nor as to the absence of any toxic or otherwise hazardous substances). This Section 3.1 is subject to any contrary requirements under applicable law; however, in this regard Tenant acknowledges that it has been given the opportunity to inspect the Demised Premises and to have qualified experts inspect the Demised Premises prior to the execution of this lease. 3.2 Notwithstanding the foregoing, Landlord warrants for a period of ninety (90) days following the Commencement Date that the roof, mechanical, electrical and plumbing systems serving the Demised Premises shall be in proper working order. Landlord shall repair any defective or malfunctioning component of the foregoing building systems about which Landlord has received written notice from Tenant describing the failure or malfunction within ninety (90) days of the Commencement Date. 3.3 Notwithstanding anything to the contrary in this Lease, Tenant may, prior to the Commencement Date, enter the Demised Premises for the purpose of installing telephones, electronic communication or related equipment, fixtures, furniture and equipment, provided that Tenant shall be solely responsible for any of such equipment, fixtures, furniture or material and for any loss or damage thereto from any cause whatsoever, excluding only the gross negligence or willful misconduct of Landlord. Such early access to the Demised Premises and such installation shall be permitted only to the extent that Landlord determines that such early access and installation activities will not delay Landlord's completion of the Landlord Improvements. Landlord and Tenant shall cooperate in the scheduling of Tenant's early access to the Demised Premises and of Tenant's installation activities. The provisions of Articles 15, 16 and 21 below shall expressly apply in full during the period of any such early entry, and Tenant shall (i) provide certificates of insurance evidencing the existence and amounts of liability insurance carried by Tenant and its agents and contractors, reasonably satisfactory to Landlord, prior to such early entry, and (ii) comply with all applicable laws, regulations, permits and other approvals applicable to such early entry work in the Demised Premises. No rent shall be due for such early access period. ARTICLE 4. RENT 4.1 The minimum guaranteed rental shall be subject to periodic increases based upon the following schedule and which increases shall become effective automatically and without further notice as of the first day of the specified lease month: <TABLE> <CAPTION> Lease Months Monthly Rental ------------ -------------- <S> <C> Months 1 -12 $57,008.00 Months 13-24 $59,858.00 Months 25 -36 $62,851.00 Months 37 -48 $65,994.00 Months 49 -60 $69,294.00 Months 61 -72 $72,758.00 Months 73 -84 $76,396.00 </TABLE> 2

Notwithstanding anything to the contrary contained herein, Tenant shall be credited for the amount of minimum guaranteed rental for months one (1) and two (2) of the lease term in the total amount of $114,016.00. Tenant acknowledges that in no way shall this minimum guaranteed rental credit apply to any other period of the lease term or in any way relieve Tenant of its responsibility to pay all other charges due under this lease, including without limitation, Tenant's obligation to pay Tenant's pro rata share of real estate charges, insurance expenses and common area expenses. In the event Tenant is in default of any of its obligations set forth in this lease beyond any applicable notice and cure period at any time during the term of this lease, and Landlord elects to pursue its remedies under Section 22.2(c) below ("Landlord's Recovery Action"), in addition to any other fights or remedies Landlord may have as a result of such default in such Landlord's Recovery Action, the entire $114,016.00 amount of the minimum guaranteed rental credit hereinabove referenced shall be due and payable by Tenant to Landlord. 4.2 Rental shall accrue from the Commencement Date, and shall be payable to Landlord at Agent's address specified in Section 1.1(g) above or at such other address as Landlord shall so notify Tenant from time to time. 4.3 Tenant shall pay to Landlord minimum guaranteed rental in monthly installments in the amounts specified in Section 1.1(l) and Section 4.1 of this lease. The first such monthly installment shall be due and payable on or before the Commencement Date, and subsequent installments shall be due and payable on or before the first day of each succeeding calendar month during the lease term; provided that if the Commencement Date is a date other than the first day of a calendar month, there shall be due and payable on or before such date as minimum guaranteed rental for the balance of such calendar month a sum equal to that proportion of the rent specified for the first full calendar month as herein provided, which the number of days from the Commencement Date to the end of the calendar month during which the Commencement Date shall fall bears to the total number of days in such month. Tenant agrees to pay to Landlord, if assessed by the jurisdiction in which the Industrial Complex is located, any sales, excise or other tax imposed, assessed or levied in connection with Tenant's payment of rents. 4.4 It is understood that the minimum guaranteed rental is payable on or before the first day of each calendar month (in accordance with Section 4.2 above), without offset or deduction of any nature. In the event any rental is not received within five (5) days after its due date for any reason whatsoever, or if any rental payment is by check which is returned for insufficient funds, then in addition to the past due amount Tenant shall pay to Landlord one of the following (the choice to be at the sole option of Landlord unless one of the choices is improper under applicable law, in which event the other alternative will automatically be deemed to have been selected): (a) a late charge in an amount equal to six percent (6%) of the rental then due, in order to compensate Landlord for its administrative and other overhead expenses; or (b) interest on the rental then due at the maximum contractual rate which could legally be charged in the event of a loan of such rental to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously on any unpaid balance due to Landlord by Tenant during the period commencing with the rental due date and terminating with the date on which Tenant makes full payment of all amounts owing to Landlord at the time of said payment. Any such late charge or interest payment shall be payable as additional rental under this lease, shall not be considered a waiver by Landlord of any default by Tenant hereunder, and shall be payable immediately on demand. 4.5 If Tenant fails in two (2) consecutive months to make rental payments within five (5) days after it is due, Landlord, in order to reduce its administrative costs, may require, by giving written notice to Tenant (and in addition to any late charge or interest accruing pursuant to Section 4.4 above, as well as any other rights and remedies accruing pursuant to Article 22 or Article 23 below, or any other provision of this lease or at law), that minimum guaranteed rentals are to be paid quarterly in advance instead of monthly, and that all future rental payments are to be made on or before the due date by cash, cashier's check, or money order and that the delivery of Tenant's personal or corporate check will no longer constitute a payment of rental as provided in this lease. Any acceptance of a monthly rental payment or of a personal or corporate check thereafter by Landlord shall not be construed as a subsequent waiver of said rights. 4.6 Tenant shall pay when due any and all sales taxes levied, imposed or assessed by the United States of America, the State of California, or any political subdivision thereof or other taxing authority upon the minimum guaranteed rental, additional rent and all other sums payable hereunder. ARTICLE 5. FINANCIAL REPORTS 5.1 From time to time during the lease term, Tenant shall, within fifteen (15) days of Landlord's request therefor, furnish a true and accurate statement of its financial condition prepared in conformity with recognized accounting principles and in a form reasonably satisfactory to Landlord. 3

Landlord shall use reasonable efforts to maintain the confidentiality of such financial reports; provided, however, that Landlord may disclose such financial reports to individuals within its legal, real estate and accounting departments who have a reasonable need to know the information contained in such financial reports. Landlord and Tenant agree that Landlord may disclose Tenant's financial statements to potential purchasers of, or lenders on, the Industrial Complex only with Tenant's prior written consent, which consent shall not be unreasonably withheld or delayed. ARTICLE 6. TENANT'S RESPONSIBILITY FOR TAXES, OTHER REAL ESTATE CHARGES AND INSURANCE EXPENSES 6.1 Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in the Demised Premises which taxes shall be paid when due and before any delinquency. If any such taxes are levied against Landlord or Landlord's property and if Landlord elects to pay the same or if the assessed value of Landlord's property is increased by inclusion of personal property and trade fixtures placed by Tenant in the Demised Premises and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder. 6.2 Tenant shall also be liable for Tenant's Proportionate Share (as specified in Section 1.1(r) above and determined in accordance with Section 7.5 below) of all "real estate charges" (as defined below) and "insurance expenses" (as defined below) related to the Industrial Complex or Landlord's ownership of the Industrial Complex. Tenant's obligations under this Section 6.2 shall be prorated during any partial year (i.e., the first year and the last year of the lease term). Tenant's Proportionate Share shall be adjusted as reasonably determined by Landlord in the event that the total rentable area of the buildings in the Industrial Complex shall change after the date hereof. "Real estate charges" shall include ad valorem taxes, general and special assessments, parking surcharges, any tax or charge for governmental services (such as street maintenance or fire protection) which are attributable to the transfer or transaction directly or indirectly represented by this Lease, by any sublease or assignment hereunder or by other Leases in the Industrial Complex or by any document to which Tenant is a party creating or transferring (or reflecting the creation or transfer) or any interest or an estate in the Demised Premises and any tax or charge which replaces or is in addition to any of such above-described "real estate charges"; real estate charges shall also include any fees, expenses or costs (including attorney's fees, expert fees and the like) incurred by Landlord in protesting or contesting any assessments levied or the tax rate. "Real estate charges" shall not be deemed to include sales tax payable by Tenant pursuant to Section 4.6 above and any franchise, estate, inheritance or general income tax. "Insurance expenses" shall include all premiums and other expenses incurred by Landlord for liability insurance and fire and extended coverage property insurance (plus whatever endorsements or special coverages which Landlord, in Landlord's sole discretion, may consider appropriate) business interruption, and rent loss, earthquake and any other insurance policy which may be carried by Landlord insuring the Demised Premises, the Common Area, the Industrial Complex, or any improvements. 6.3 At Landlord's sole option, Landlord and Tenant shall attempt to obtain separate assessments for Tenant's obligations pursuant to Section 6.1 and, with respect to Section 6.2, for such of the "real estate charges" as are readily susceptible of separate assessment. To the extent of a separate assessment, Tenant agrees to pay such assessment before it becomes delinquent and to keep the Demised Premises free from any lien or attachment; moreover, as to all periods of time during the lease term, this covenant of Tenant shall survive the termination of the lease. With regard to the calendar year during which the lease term expires, Landlord at its option either may bill Tenant when the charges become payable or may charge the Tenant an estimate of Tenant's pro rata share of whichever charges have been being paid directly by Tenant (based upon information available for the current year plus, if current year information is not adequate in itself, information relating to the immediately preceding year). 6.4 At such time as Landlord has reason to believe that at some time within the immediately succeeding twelve (12) month period Tenant will owe Landlord any amounts pursuant to one or more of the preceding sections of this Article 6, Landlord may direct that Tenant prepay monthly a pro rata portion of the prospective future payment (i.e., the prospective future payment divided by the number of months before the prospective future payment will be due). Tenant agrees that any such prepayment directed by Landlord shall be due and payable monthly on the same day that minimum guaranteed rental is due. Any amounts paid by Tenant under this Section 6.4 shall be subject to reconciliation at the end of the tax year or calendar year, at Landlord's option, on the basis of the actual costs for such period, with Tenant to be credited with any overpayments made. 6.5 In the event that any payment due from Tenant to Landlord is not received within ten (10) days after its due date for any reason whatsoever, or if any such payment is by check which is returned for insufficient funds, then in addition to the amount then due, Tenant shall pay to Landlord interest on 4

the amount then due at the maximum contractual rate which could legally be charged in the event of a loan of such amount to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously on any unpaid balance until paid. ARTICLE 7. COMMON AREA 7.1 The term "Common Area" is defined for all purposes of this lease as that part of the Industrial Complex intended for the common use of all tenants, including among other facilities (as such may be applicable to the Industrial Complex), parking areas, private streets and alleys, landscaping, curbs, loading areas, sidewalks, recreation/picnic areas, malls and promenades (enclosed or otherwise), lighting facilities, drinking fountains, meeting rooms, public toilets, and the like, but excluding (i) space in buildings (now or hereafter existing) designated for rental for commercial purposes, as the same may exist from time to time; (ii) streets and alleys maintained by a public authority; (iii) areas within the Industrial Complex which may from time to time not be owned by Landlord (unless subject to a cross-access agreement benefiting the area which includes the Demised Premises); and (iv) areas leased to a single-purpose user where access is restricted. In addition, although the roof(s) of the building(s) in the Industrial Complex are not literally part of the Common Area, they will be deemed to be so included for purposes of (i) Landlord's ability to prescribe rules and regulations regarding same, and (ii) their inclusion for purposes of common area maintenance reimbursements. Landlord reserves the right to change from time to time the dimensions and location of the Common Area, as well as the dimensions, identities, locations and types of any buildings, signs or other improvements in the Industrial Complex; provided, however, that Landlord's actions pursuant to this sentence shall not unreasonably interfere with Tenant's access to or use of the Demised Premises. For example, and without limiting the generality of the immediately preceding sentence, Landlord may from time to time substitute for any parking area other areas reasonably accessible to the tenants of the Industrial Complex, which areas may be elevated, surface or underground. 7.2 Tenant, and its employees and customers, and when duly authorized pursuant to the provisions of this lease, its subtenants, licensees and concessionaires, shall have the nonexclusive right to use the Common Area (excluding roofs of buildings in the Industrial Complex) as constituted from time to time, such use to be in common with Landlord, other tenants in the Industrial Complex and other persons permitted by Landlord to use the same, including the nonexclusive right to use not more than 130 of the parking spaces in the Common Area as designated by Landlord from time to time, and subject to rights of governmental authorities, easements, other restrictions of record, and such reasonable rules and regulations governing use as Landlord may from time to time prescribe. For example, and without limiting the generality of Landlord's ability to establish rules and regulations governing all aspects of the Common Area, Tenant agrees as follows: (a) Landlord may from time to time designate specific areas within the Industrial Complex or in reasonable proximity thereto in which automobiles owned by Tenant, its employees, subtenants, licensees, and concessionaires shall be parked; and in this regard, Tenant shall furnish to Landlord upon request a complete list of license numbers of all automobiles operated by Tenant, its employees, its subtenants, its licensees or its concessionaires, or their employees; and Tenant agrees that if any automobile or other vehicle owned by Tenant or any of its employees, its subtenants, its licensees or its concessionaires, or their employees, shall at any time be parked in any part of the Industrial Complex other than the specified areas designated for employee parking, Tenant shall pay to Landlord as additional rent upon demand an amount equal to the daily rate or charge for such parking as established by Landlord from time to time for each day, or part thereof, that such automobile or other vehicle is so parked. (b) Tenant shall not solicit business within the Common Area nor take any action which would interfere with the rights of other persons to use the Common Area. (c) Landlord may temporarily close any part of the Common Area for such periods of time as may be necessary to make repairs or alterations or to prevent the public from obtaining prescriptive rights. (d) With regard to the roof(s) of the building(s) in the Industrial Complex, use of the roof(s) is reserved to Landlord, or with regard to any tenant demonstrating to Landlord's satisfaction a need to use same, to such tenant after receiving prior written consent from Landlord. 7.3 Landlord shall be responsible for the operation, management and maintenance of the Common Area, the manner of maintenance and the expenditures therefor to be in the sole discretion of Landlord, but to be generally in keeping with similar industrial centers within the same geographical area as the Industrial Complex. Landlord shall be the sole determinant of the type and amount of security services to be provided, if any. Landlord shall not be liable to Tenant, and Tenant hereby waives any 5

claim against Landlord for (i) any unauthorized or criminal entry of third parties into the Demised Premises or Industrial Complex, (ii) any damage to persons or property, except to the extent caused by the gross negligence or willful misconduct of Landlord, or (iii) any loss of property in and about the Demised Premises or Industrial Complex from any unauthorized or criminal acts of third parties, regardless of any action, inaction, failure, breakdown or insufficiency of security. 7.4 In addition to the rentals and other charges prescribed in this lease, Tenant shall pay to Landlord Tenant's Proportionate Share (as determined in Section 7.5 below) of the cost of operation and maintenance of the Common Area which may be incurred by Landlord in its discretion, including, among other costs, those for lighting, painting, cleaning, policing, inspecting, repairing, replacing, and, if there is an enclosed mall or promenade in the Industrial Complex, heating and cooling; Tenant's Proportionate Share of capital expenditures and expenses incurred by Landlord to increase the operating efficiency of the Industrial Complex or to cause the Common Area to comply with applicable Regulations (as such term is defined in Section 27.1), it being agreed that the cost of such capital expenditures and installation shall be amortized over the reasonable life of the capital expenditure, with the reasonable life and amortization schedule being determined in accordance with generally accepted accounting principles consistently applied; a reasonable portion of whatever management fee Landlord pays to the property manager for the Industrial Complex; a reasonable allowance for Landlord's overhead costs and the cost of any insurance for which Landlord is not reimbursed pursuant to Section 6.2 but specifically excluding all expenses paid or reimbursed pursuant to Article 6. In addition, although the roof(s) of the buildings(s) in the Industrial Complex are not literally part of the Common Area, Landlord and Tenant agree that roof maintenance, repair and replacement shall be included as a common area maintenance item to the extent not specifically allocated to Tenant under this lease nor to another tenant pursuant to its lease. With regard to capital expenditures other than the capital expenditures contemplated by the first sentence of this Section, (i) the original investment in capital improvements, i.e., upon the initial construction of the Industrial Complex, shall not be included, and (ii) improvements and replacements, to the extent capitalized on Landlord's records, shall be included only to the extent of a reasonable depreciation or amortization (including interest accruals commensurate with Landlord's interest costs). If this lease should commence on a date other than the first day of a calendar year or terminate on a date other than the last day of a calendar year, Tenant's reimbursement obligations under this Section 7.4 shall be prorated based upon Landlord's expenses for the entire calendar year. Tenant shall make such payment to Landlord on demand, at intervals not more frequent than monthly. Landlord may, at its option, make monthly or other periodic charges based upon the estimated annual cost of operation and maintenance of the Common Area, payable in advance but subject to adjustment after the end of the year on the basis of the actual cost for such year. Landlord has the right to establish as a reserve, such amounts as Landlord deems reasonable for the maintenance, repair and restoration of the roof and parking of the Industrial Complex. In the event that any payment due from Tenant to Landlord is not received within ten (10) days after its due date for any reason whatsoever, or if any such payment is by check which is returned for insufficient funds, then, in addition to the amount then due, Tenant shall pay to Landlord interest on the amount then due at the maximum contractual rate which could legally be charged in the event of a loan of such amount to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously on any unpaid balance until paid. Any delay or failure of Landlord in delivering any estimate or statement described in this Section 7.4 or in computing or billing Tenant's Proportionate Share of the foregoing costs shall not constitute a waiver of Landlord's right to require an increase in rent as provided herein or in any way impair the continuing obligations of Tenant under this Section. 7.5 "Basic Costs" shall mean the cost of (i) operation and maintenance of the common area for which Tenant is responsible to pay Tenant's Proportionate Share pursuant to Section 7.4; and (ii) real estate charges and insurance expenses for which Tenant is responsible to pay Tenant's Proportionate Share pursuant to Section 6.2. Basic Costs shall be comprised of "Building Basic Costs", "Industrial Complex Basic Costs", and "Parcel Basic Costs". "Building Basic Costs" shall consist of those Basic Costs which Landlord determines pertains exclusively to the building in which the Demised Premises are located (the "Building"). "Industrial Complex Basic Costs" shall consist of those Basic Costs which Landlord determines shall be shared among all buildings at the Industrial Complex. "Parcel Basic Costs" shall consist of those Basic Costs which Landlord determines shall be shared among the Building and the other free standing building contained on the same legal parcel as the Building (the "Parcel"). For purposes of determining Tenant's Proportionate Share of Basic Costs in accordance with this Article 7, (i) Tenant's Proportionate Share of Building Basic Costs shall equal a fraction, the numerator of which shall be the rentable area of the Demised Premises and the denominator of which shall be the rentable area of the Building; (ii) Tenant's Proportionate Share of Industrial Complex Basic Costs shall equal a fraction, the numerator or which shall be the rentable area of the Demised Premises and the denominator of which shall be the rentable area of all buildings (including the Building) at the Industrial Complex; and (iii) Tenant's Proportionate Share of Parcel Basic Costs shall equal a fraction the numerator of which shall be the rentable area of the Demised Premises and the denominator of which shall be the rentable area of the two buildings (including the Building) located on the Parcel. 6

ARTICLE 8. [INTENTIONALLY OMITTED] ARTICLE 9. USE AND CARE OF DEMISED PREMISES 9.1 The Demised Premises shall be used and occupied by Tenant solely for the permitted use specified in Section 1.1.(o) above and for no other purpose. Tenant, at its sole cost and expense, shall obtain and keep in effect during the term, all permits, licenses and other authorizations necessary to permit Tenant to use and occupy the Demised Premises for the permitted use. Without limiting the generality of the foregoing, Tenant shall not use or store any gasoline, flammable or so called "Red Label" materials in or about the Demised Premises. All equipment used within the Demised Premises shall be subject to approval by Landlord's insurance carriers and shall be Underwriters Laboratory or Factory Mutual approved for the uses intended, evidence of which shall be furnished to Landlord upon request. Tenant shall not operate any machinery or equipment in the Demised Premises which, in Landlord's sole discretion, shall cause any excessive noise, vibration or damage or disturbance to the other tenants in the Industrial Complex. 9.2 Tenant shall take good care of the Demised Premises and keep the same free from waste at all times. Tenant shall not overload the floors in the Demised Premises, nor deface or injure the Demised Premises. Tenant shall keep the Demised Premises and sidewalks, service-ways and loading areas adjacent to the Demised Premises neat, clean and free from dirt, rubbish, ice or snow at all times. Tenant shall store all trash and garbage within the Demised Premises or in a trash dumpster or similar container approved by Landlord as to type, location and screening; and Tenant shall arrange for the regular pick-up of such trash and garbage at Tenant's expense (unless Landlord finds its necessary to furnish such a service, in which event Tenant shall be charged an equitable portion of the total of the charges to all tenants using the service). Receiving and delivery of goods and merchandise and removal of garbage and trash shall be made only in the manner and areas prescribed by Landlord. Tenant shall not operate an incinerator or burn trash or garbage within the Industrial Complex. ARTICLE 10. MAINTENANCE AND REPAIR OF DEMISED PREMISES 10.1 Landlord shall keep the foundation, the exterior walls (except plate glass; windows, doors and other exterior openings; window and door frames, molding, closure devices, locks and hardware; special store fronts; lighting, heating, air conditioning, plumbing and other electrical, mechanical and electromotive installation, equipment and fixtures; signs, placards, decorations or other advertising media of any type; and interior painting or other treatment of exterior walls) and roof (subject to the second sentence in Section 7.4 above) of the Demised Premises in good repair. Landlord, however, shall not be required to make any repairs occasioned by the act or negligence of Tenant, its agents, contractors, employees, subtenants, invitees, customers, licensees and concessionaires (including, but not limited to, roof leaks resulting from Tenant's installation of air conditioning equipment or any other roof penetration or placement); and the provisions of the previous sentence are expressly recognized to be subject to the provisions of Article 17 and Article 18 of this lease. In the event that the Demised Premises should become in need of repairs required to be made by Landlord hereunder, Tenant shall give immediate written notice thereof to Landlord and Landlord shall have a reasonable time after receipt by Landlord of such written notice in which to make such repairs. Landlord shall not be liable to Tenant for any interruption of Tenant's business or inconvenience caused due to any work performed in the Demised Premises or in the Industrial Complex pursuant to Landlord's rights and obligations under the Lease, so long as the work is performed without gross negligence or willful misconduct. 10.2 Tenant shall keep the Demised Premises in good, clean and habitable condition and shall at its sole cost and expense keep the Demised Premises free of insects, rodents, vermin and other pests and make all needed repairs and replacements, including replacement of cracked or broken glass, except for repairs and replacements required to be made by Landlord under the provisions of Section 10.1, Article 17 and Article 18 and except to the extent any such repairs are necessitated by the gross negligence or willful misconduct of Landlord. Without limiting the coverage of the previous sentence, it is understood that Tenant's responsibilities therein include the repair and replacement in accordance with all applicable Regulations of all lighting, heating, air conditioning, plumbing and other electrical, mechanical and electromotive installation, equipment and fixtures and also include all utility repairs in ducts, conduits, pipes and wiring, and any sewer stoppage located in, under and above the Demised Premises, regardless of when or how the defect or other cause for repair or replacement occurred or became apparent; provided, however, that as to the maintenance and repair of the HVAC equipment in the Demised Premises, Landlord shall have the option of contracting directly with an HVAC servicing company for all such work and charging Tenant for all costs thereof. If any repairs required to be made by Tenant hereunder are not made within ten (10) days after written notice delivered to Tenant by 7

Landlord, Landlord may at its option make such repairs without liability to Tenant for any loss or damage which may result to its stock or business by reason of such repairs and Tenant shall pay to Landlord upon demand, as additional rental hereunder, the cost of such repairs plus interest at the maximum contractual rate which could legally be charged in the event of a loan of such payment to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously from the date of payment by Landlord until repayment by Tenant. At the expiration of this lease, Tenant shall surrender the Demised Premises in good condition, excepting reasonable wear and tear and losses required to be restored by Landlord in Section 10.1, Article 17 and Article 18 of this lease. 10.3 Tenant waives the right to make repairs at Landlord's expense under Section 1941 and 1942 of the California Civil Code and all other laws now or hereafter in effect. ARTICLE 11. ALTERATIONS 11.1 Tenant shall not make any alterations, additions or improvements to the Demised Premises (collectively, the "Alterations") without the prior written consent of Landlord, except for the installation of unattached, movable trade fixtures which may be installed without drilling, cuffing or otherwise defacing the Demised Premises. Tenant shall furnish complete plans and specifications to Landlord at the time it requests Landlord's consent to any Alterations if the desired Alterations (i) will affect the Industrial Complex's mechanical, electrical, plumbing, or life safety systems or services, or (ii) will affect any structural component of the Demised Premises or the Industrial Complex, or (iii) will require the filing of plans and specifications with any governmental or quasi-governmental agency or authority, or (iv) will cost in excess of Twenty-Five Thousand Dollars ($25,000.00). Subsequent to obtaining Landlord's consent and prior to commencement of the Alterations, Tenant shall deliver to Landlord any building permit required by applicable law and a copy of the executed construction contract(s). Tenant shall reimburse Landlord within ten (10) days after the rendition of a bill for all of Landlord's actual out-of-pocket costs incurred in connection with any Alterations, including, without limitation, all management, engineering, outside consulting, and construction fees incurred by or on behalf of Landlord for the review and approval of Tenant's plans and specifications and for the monitoring of construction of the Alterations. If Landlord consents to the making of any Alteration, such Alteration shall be made by Tenant at Tenant's sole cost and expense by a contractor approved in writing by Landlord. Tenant shall give Landlord not less than ten (10) days advance written notice of the commencement of Tenant's Alterations to enable Landlord to post and record notices of nonresponsibility. Tenant shall require its contractor to maintain insurance in such amounts and in such form as Landlord may require. Any construction, alteration, maintenance, repair, replacement, installation, removal or decoration undertaken by Tenant in connection with the Demised Premises shall be completed in accordance with plans and specifications which must be approved by Landlord, shall be carried out in a good, workmanlike and prompt manner and in accordance with the provisions of EXHIBIT "C" annexed hereto, shall comply with all applicable Regulations of the authorities having jurisdiction thereof, and shall be subject to supervision by Landlord or its employees, agents or contractors. Without limiting the generality of the immediately preceding sentence, any installation or replacement of Tenant's heating or air conditioning equipment must be effected strictly in accordance with Landlord's instructions, the Clean Air Act and all other applicable Regulations. Without Landlord's prior written consent, Tenant shall not use any portion of the Common Areas either within or without the Industrial Complex in connection with the making of any Alterations. If the Alterations which Tenant causes to be constructed result in Landlord being required to make any alterations and/or improvements to other portions of the Industrial Complex in order to comply with any applicable Regulations, then Tenant shall reimburse Landlord upon demand for all costs and expenses incurred by Landlord in making such alterations and/or improvements. Any Alterations made by Tenant shall become the property of Landlord upon installation and shall remain on and be surrendered with the Demised Premises upon the expiration or sooner termination of this lease, except Tenant shall upon demand by Landlord, at Tenant's sole cost and expense, forthwith and with all due diligence remove all or any portion of any Alterations made by Tenant which are designated by Landlord to be removed and repair and restore the Demised Premises in a good and workmanlike manner to their original condition, reasonable wear and tear excepted. Notwithstanding the foregoing, prior to commencing any Alterations, Tenant may request Landlord's waiver of the restoration obligation with respect to specified Alterations, which waiver may be granted or withheld by Landlord in its sole discretion. 11.2 All construction work done by Tenant within the Demised Premises shall be performed in a good and workmanlike manner with new materials of first-class quality, lien-free and in compliance with all governmental requirements and Regulations, and in such manner as to cause a minimum of interference with other construction in progress and with the transaction of business in the Industrial Complex. Tenant agrees to indemnify Landlord and hold Landlord harmless against any loss, liability or damage resulting from such work, and Tenant shall, if requested by Landlord, furnish a bond or other security satisfactory to Landlord against any such loss, liability or damage. 8

11.3 In the event Tenant uses a general contractor to perform construction work within the Demised Premises, Tenant shall, prior to the commencement of such work, require said general contractor to execute and deliver to Landlord a waiver and release of any and all claims against Landlord and liens against the Industrial Complex to which such contractor might at any time be entitled. The delivery of the waiver and release of lien within the time period set forth above shall be a condition precedent to Tenant's ability to enter on and begin its construction work at the Demised Premises and, if applicable, to any reimbursement from Landlord for its construction work. 11.4 Nothing contained in this lease shall be construed as constituting the consent or request of Landlord, express or implied, to or for the performance by any contractor, laborer, materialman or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Demised Premises or any part thereof. All materialmen, contractors, artisans, mechanics, laborers and any other persons now or hereafter furnishing any labor, services, materials, supplies or equipment to Tenant with respect to any portion of the Demised Premises are hereby charged with notice that they must look exclusively to Tenant to obtain payment for same. Tenant and any subtenants shall have no power to do any act or make any contract which may create or be the foundation of any lien, mortgage or other encumbrance upon the reversionary or other estate of Landlord, or any interest of Landlord in the Demised Premises. NOTICE IS HEREBY GIVEN THAT LANDLORD IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING THE DEMISED PREMISES OR ANY PART THEREOF, AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO THE DEMISED PREMISES. 11.5 In the event that Landlord elects to remodel all or any portion of the Industrial Complex, Tenant will cooperate with such remodeling, including Tenant's tolerating temporary inconveniences (and even the temporary removal of Tenant's signs in order to facilitate such remodeling, as it may relate to the exterior of the Demised Premises). ARTICLE 12. LANDLORD'S RIGHT OF ACCESS 12.1 Landlord and Landlord's agents and representatives shall have the right to enter the Demised Premises at any time in case of an emergency, and otherwise at all reasonable times upon reasonable advance oral or written notice for any purpose permitted pursuant to the terms of this lease, including, but not limited to, examining the Demised Premises; making such repairs or alterations therein as may be necessary or appropriate in Landlord's sole judgment for the safety and preservation thereof; erecting, installing, maintaining, repairing or replacing wires, cables, conduits, vents, ducts, risers, pipes, HVAC equipment or plumbing equipment running in, to, or through the Demised Premises; showing the Demised Premises to prospective purchasers or mortgagees and during the last year of this lease, prospective tenants; and posting notices of nonresponsibility. Except in the event of an emergency, Landlord's agents and representatives shall be accompanied by a representative of Tenant whenever they enter the Demised Premises. Tenant shall use reasonable efforts to accommodate Landlord's requests for accompanied entry of the Demised Premises. 12.2 If requested in writing by Landlord, Tenant shall give Landlord a key for all of the doors for the Demised Premises, excluding Tenant's vaults, safes and files. Landlord shall have the right to use any and all means to open the doors to the Demised Premises in an emergency in order to obtain entry thereto without liability to Tenant therefor. Any entry to the Demised Premises by Landlord by any of the foregoing means, or otherwise, shall not be construed or deemed to be a forcible or unlawful entry into or a detainer of the Demised Premises, or an eviction, partial eviction or constructive eviction of Tenant from the Demised Premises or any portion thereof, and shall not relieve Tenant of its obligations hereunder. ARTICLE 13. SIGNS; STORE FRONTS 13.1 Tenant shall not place or permit to be placed any signs upon (i) the roof of the Demised Premises, or (ii) the Common Areas or any exterior area of the Industrial Complex without Landlord's prior written approval which approval shall not be unreasonably withheld or delayed provided any proposed sign is placed only in those locations as may be designated by Landlord, and complies with the sign criteria promulgated by Landlord from time to time. Upon request of Landlord, Tenant shall immediately remove any sign, advertising material or lettering which Tenant has placed or permitted to be placed upon the exterior or interior surface of any door or window or at any point inside the Demised Premises, on the exterior of the Industrial Complex if required in connection with any cleaning, maintenance or repairs to the Industrial Complex or which, in Landlord's reasonable opinion, is of such 9

a nature as to not be in keeping with the standards of the Industrial Complex and if Tenant fails to do so, Landlord may without liability remove the same at Tenant's expense. Tenant shall comply with such regulations as may from time to time be promulgated by Landlord governing signs, advertising material or lettering of all tenants in the Industrial Complex. ARTICLE 14. UTILITIES 14.1 Tenant shall obtain all water, electricity, sewerage, gas, telephone and other utilities directly from the public utility company furnishing same. Any meters required in connection therewith shall be installed at Tenant's sole cost. Tenant shall pay all utility deposits and fees, and all monthly service charges for water, electricity, sewage, gas, telephone and any other utility services furnished to the Demised Premises during the term of this lease. In the event any such utilities are not separately metered on the Commencement Date, then until such time as such services are separately metered, Tenant shall pay Landlord Tenant's equitable share of the cost of such services, as determined by Landlord. If for any reason the use of any utility is measured on a meter(s) indicating the usage of Tenant and other tenants of the Industrial Complex, Tenant and such other tenants shall allocate the cost of such utility amongst themselves and shall each be responsible for the payment of its allocable share. Landlord shall furnish and install all piping, feeders, risers and other connections necessary to bring utilities to the perimeter walls of the Demised Premises. Anything to the contrary notwithstanding, Tenant shall remain obligated for the payment of Tenant's pro rata share of any heating costs and/or other utilities or services furnished to the Common Areas pursuant to Section 7.4. 14.2 Tenant shall have the right to use the existing heating, air conditioning and ventilation equipment in the Demised Premises, if any. All such equipment shall be maintained, repaired and replaced, as necessary, by Tenant in its sole expense and shall be surrendered by Tenant to Landlord at the end of the term of this lease together with the Demised Premises. Subject to Section 3.2, Landlord makes no representation or warranty as to the condition or capacity of such equipment. Landlord shall have no obligation whatsoever to provide the Demised Premises with any additional heat, air conditioning, ventilation or hot water. 14.3 Landlord shall not be liable for any interruption whatsoever, nor shall Tenant be entitled to an abatement or reduction of rent on account thereof, in utility services not furnished by Landlord, nor for interruptions in utility services furnished by Landlord which are due to fire, accident, strike, acts of God or other causes beyond the control of Landlord or which are necessary or useful in connection with making any alterations, repairs or improvements. Notwithstanding the foregoing, if such interruption or failure in utility services (i) is caused by Landlord or Landlord's authorized agent; (ii) can be repaired at the Industrial Complex; and (iii) continues for more than sixty (60) consecutive days, then Tenant shall be entitled to a proportionate abatement of all rental charges due hereunder, effective on the sixtieth day of such utility service failure. 14.4 Tenant shall not install any equipment which exceeds or overloads the capacity of the utility facilities serving the Demised Premises. ARTICLE 15. INSURANCE COVERAGES 15.1 Landlord shall procure and maintain throughout the term of this lease a policy or policies of insurance, at its sole cost and expense (but subject to Article 6 above), causing the Industrial Complex to be insured under standard fire and extended coverage insurance (excluding hurricane and storm insurance unless readily obtainable at commercially reasonable rates) and liability insurance (plus whatever endorsements or special coverages Landlord, in its sole discretion, may consider appropriate), to the extent necessary to comply with Landlord's obligations pursuant to other provisions of this lease. 15.2 Tenant shall procure and maintain throughout the term of this lease, at its sole cost and expense, the following insurance: (i) Comprehensive General Liability Insurance providing coverage for bodily injury (including death), property damage and products liability insurance (where such exposure exists). This policy shall contain a broad form contractual liability endorsement under which the insurer agrees to insure Tenant's obligations under Article 21 hereof. Such insurance shall have a combined single limit of not less than Two Million Dollars ($2,000,000) per occurrence, or such greater amount as Landlord may from time to time require; (ii) Fire and extended coverage insurance covering Tenant's personal property, fixtures, improvements, wall coverings, floor coverings, window coverings, alterations, furniture, 10

equipment, lighting, ceilings, heating, ventilation and air conditioning equipment, interior plumbing and plate glass against loss or damage by fire, flood, windstorms, hail, earthquakes, explosion, riot, damage from aircraft and vehicles, smoke damage, vandalism and malicious mischief and such other risks as are from time to time covered under "extended coverage" endorsements and special extended coverage endorsements commonly known as "all risks" endorsements, containing the waiver of subrogation required in Section 16.3 of this lease and in an amount equal to the greater of the full replacement value or the amount required by the holder of any mortgage from time to time placed upon the Industrial Complex or a portion of the Industrial Complex containing the Demised Premises; (iii) State Worker's Compensation Insurance in the statutorily mandated limits and Employers Liability Insurance with limits of not less than Five Hundred Thousand Dollars ($500,000), or such greater amount as Landlord may from time to time require; and (iv) Such other insurance as Landlord may reasonably require from time to time. It is expressly understood and agreed that the foregoing minimum limits of insurance coverage shall not limit the liability of Tenant for its acts or omissions as provided in this lease. All of the foregoing insurance policies (with the exception of Worker's Compensation Insurance to the extent not available under statutory law) shall name Landlord, any mortgagee, any managing agent for the Industrial Complex and such other parties as Landlord shall from time to time designate as an additional insured as their respective interests may appear, and shall provide that any loss shall be payable to Landlord and any other additional insured parties as their respective interests may appear. All insurance required hereunder shall be placed with companies which are rated A:VII or better by Best's Insurance Guide and licensed to do business in the State of California. All such policies shall be written as primary policies with deductibles not to exceed the amount specified in Section 1.1(p) above. Any other policies, including Landlord's policy, will serve as excess coverage. Tenant shall deliver duplicate original copies of all such policies and all endorsements thereto, prior to the Commencement Date, or, in the case of renewals thereto, fifteen (15) days prior to the expiration of the prior insurance policy, together with evidence that such policies are fully paid for, and that no cancellation, material change or non-renewal thereof shall be effective except upon thirty (30) days' prior written notice from the insurer to Landlord, as well as to Landlord's agent (at the address for the payment of rent set forth in Section 4.2 above). If Tenant should fail to comply with the foregoing requirement relating to insurance, Landlord may obtain such insurance and Tenant shall pay to Landlord on demand as additional rental hereunder the premium cost thereof plus interest at the maximum contractual rate (but in no event to exceed 1-1/2% per month) from the date of payment by Landlord until repaid by Tenant. ARTICLE 16. WAIVER OF LIABILITY; MUTUAL WAIVER OF SUBROGATION 16.1 Landlord and Landlord's agents and employees shall not be liable to Tenant, nor to Tenant's employees, agents or visitors, nor to any other person whomsoever, for any injury to person or damage to property caused by the Demised Premises or other portions of the Industrial Complex becoming out of repair or by defect or failure of any structural element of the Demised Premises or of any equipment, pipes or wiring, or broken glass, or by the backing up of drains, or by gas, water, steam, electricity, or oil leaking, escaping or flowing into the Demised Premises (except where due to Landlord's willful failure to make repairs required to be made by Landlord hereunder, after the expiration of a reasonable time after written notice to Landlord of the need for such repairs), nor shall Landlord be liable to Tenant, nor to Tenant's employees, agents or visitors, nor to any other person whomsoever, for any loss or damage that may be occasioned by or through the acts or omissions of other tenants of the Industrial Complex or of any other persons whomsoever, excepting only duly authorized employees and agents of Landlord. Landlord shall not be held responsible in any way on account of any construction, repair or reconstruction (including widening) of any private or public roadways, walkways or utility lines. 16.2 Landlord shall not be liable to Tenant or to Tenant's employees, agents, contractors, or to any other person whomsoever, for any injury to person or damage to property on or about the Demised Premises or the Common Area caused by the negligence or misconduct of Tenant, its employees, agents, subtenants, invitees, customers, licensees or concessionaires, or of any other person entering the Industrial Complex under express or implied invitation of Tenant (with the exception of customers in the Common Area), or arising out of the use of the Demised Premises by Tenant and the conduct of its business therein, or arising out of any breach or default by Tenant in the performance of its obligations under this lease; and Tenant hereby agrees to indemnify Landlord and hold Landlord harmless from any loss, expense or claims arising out of such damage or injury. Furthermore, Tenant agrees to indemnify Landlord and hold Landlord harmless from and against any and all liability, claims, demands, causes of action of any kind and nature arising or growing out of or in any way connected with Tenant's use, occupancy, management or control of the Demised Premises and Tenant's operations or activities in the Industrial Complex. 11

16.3 Landlord and Tenant each hereby release the other from any and all liability or responsibility to the other, or to any other party claiming through or under them by way of subrogation or otherwise, for any loss or damage to property caused by a casualty which is insurable under standard fire and extended coverage insurance; provided, however, that this mutual waiver shall be applicable only with respect to a loss or damage occurring during the time when property insurance policies, which are readily available in the marketplace, contain a clause or permit an endorsement to the effect that any such release shall not adversely affect or impair the policy or the right of the insured party to receive proceeds under the policy; provided, further, that this release shall not be applicable to the portion of any damage which is not reimbursed by the damaged party's insurer because of the "deductible" in the damaged party's insurance coverage. The release specified in this Section 16.3 is cumulative with any releases or exculpations which may be contained in other provisions of this lease. Landlord and Tenant agree that all policies of insurance obtained by them pursuant to the terms of this lease shall contain provisions or endorsements thereto waiving the insurer's rights of subrogation with respect to claims against the other, and, unless the policies permit waiver of subrogation without notice to the insurer, each shall notify its insurance companies of the existence of the waiver and indemnity provisions set forth in this lease. ARTICLE 17. DAMAGES BY CASUALTY 17.1 Tenant shall give immediate written notice to Landlord of any damage caused to the Demised Premises by fire or other casualty. 17.2 In the event that the Demised Premises shall be damaged or destroyed by fire or other casualty insurable under standard fire and extended coverage insurance and Landlord does not elect to terminate this lease as hereinafter provided, Landlord shall proceed with reasonable diligence and at its sole cost and expense to rebuild and repair the Demised Premises. In the event (a) the building in which the Demised Premises are located is destroyed or substantially damaged by a casualty not covered by Landlord's insurance, or (b) such building is destroyed or rendered untenantable to an extent in excess of fifty percent (50%) of the first floor area by a casualty covered by Landlord's insurance, or (c) the holder of a mortgage, deed of trust or other lien on such building at the time of the casualty elects, pursuant to such mortgage, deed of trust or other lien, to require the use of all or part of Landlord's insurance proceeds in satisfaction of all or part of the indebtedness secured by the mortgage, deed of trust or other lien, or (d) the Demised Premises shall be damaged to the extent of fifty percent (50%) or more of the cost of replacement, then Landlord may elect either to terminate this lease or to proceed to rebuild and repair the Demised Premises. Landlord shall give written notice to Tenant of such election within sixty (60) days after the occurrence of such casualty and, if it elects to rebuild and repair, shall proceed to do so with reasonable diligence and at its sole cost and expense. 17.3 Landlord's obligation to rebuild and repair under this Article 17 shall in any event be limited to restoring one of the following (as may be applicable): (a) if this lease does not include an attached exhibit describing Landlord's initial construction responsibility ("Landlord's Work"), restoring the Demised Premises to substantially the condition in which the same existed prior to such casualty, exclusive of any alterations, additions, improvements, fixtures and equipment installed by Tenant; or (b) restoring Landlord's Work, as described in the applicable exhibit attached to this lease (if such an exhibit is attached), to substantially the same condition in which the same existed prior to the casualty. Tenant agrees that promptly after completion of such work by Landlord, Tenant will proceed with reasonable diligence and at Tenant's sole cost and expense to restore, repair and replace all alterations, additions, improvements, fixtures, signs and equipment installed by Tenant, and, if an exhibit describing Tenant's Work is attached hereto, all items of Tenant's Work as described in such exhibit. 17.4 Notwithstanding anything to the contrary in this Article 17, if the casualty should occur during the last six (6) months of the term, and at least fifty percent (50%) of the Demised Premises has been damaged thereby, either party may, upon ten (10) days notice to the other party given within fifteen (15) days of the date of the casualty, terminate this lease. 17.5 Tenant agrees that during any period of reconstruction or repair of the Demised Premises, it will continue the operation of its business within the Demised Premises to the extent practicable. During the period from the occurrence of the casualty until Landlord's repairs are completed, the minimum guaranteed rental and additional rental charges shall be proportionately reduced hereunder. 17.6 Tenant hereby waives the provisions of California Civil Code Sections 1932(2) and 1933(4) and the provisions of any successor or other law of like import. 12

ARTICLE 18. EMINENT DOMAIN 18.1 If more than thirty percent (30%) of the floor area of the Demised Premises should be taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by private purchase in lieu thereof, this lease shall terminate and the rent shall be abated during the unexpired portion of this lease, effective on the date physical possession is taken by the condemning authority. 18.2 If less than thirty percent (30%) of the floor area of the Demised Premises should be taken as aforesaid, this lease shall not terminate; however, the minimum guaranteed rental payable hereunder during the unexpired portion of this lease shall be reduced in proportion to the area taken, effective on the date physical possession is taken by the condemning authority. Following such partial taking, Landlord shall make all necessary repairs or alterations to the remaining premises or, if an exhibit describing Landlord's Work is attached to this lease, all necessary repairs within the scope of Landlord's Work as described in such exhibit, as the case may be, required to make the remaining portions of the Demised Premises an architectural whole, but in no event shall Landlord be required to expend an amount greater than the award actually received by Landlord in connection with such taking. 18.3 If any part of the Common Area should be taken as aforesaid, this lease shall not terminate, nor shall the rent payable hereunder be reduced, except that either Landlord or Tenant may terminate this lease if the area of the Common Area remaining following such taking plus any additional parking area provided by Landlord in reasonable proximity to the Industrial Complex shall be less than seventy percent (70%) of the area of the Common Area immediately prior to the taking. Any election to terminate this lease in accordance with this provision shall be evidenced by written notice of termination delivered to the other party within thirty (30) days after the date physical possession is taken by the condemning authority. 18.4 All compensation awarded for any taking (or the proceeds of private sale in lieu thereof) of the Demised Premises or Common Area shall be the property of Landlord, and Tenant hereby assigns its interest in any such award to Landlord; provided, however, Landlord shall have no interest in any award made to Tenant for Tenant's moving and relocation expenses or for the loss of Tenant's fixtures and other tangible personal property if a separate award for such items is made to Tenant as long as such separate award does not reduce the amount of the award that would otherwise be awarded to Landlord. 18.5 The rights contained in this Article 18 shall be Tenant's sole and exclusive remedy in the event of a taking or condemnation. Each party waives the provisions of Sections 1265.130 and 1265.150 of the California Code of Civil Procedure and the provisions of any successor or other law of like import. 18.6 Notwithstanding anything to the contrary, Landlord may terminate this lease with no further liability to Tenant if (i) fifty percent (50%) or more of the gross leasable area of the Industrial Complex is taken or (ii) if following any taking, Landlord's mortgagee elects to require Landlord to apply all or a portion of such award to the outstanding indebtedness. ARTICLE 19. ASSIGNMENT AND SUBLETTING 19.1 Tenant shall not assign or in any manner transfer this lease or any estate or interest therein, or sublet the Demised Premises or any part thereof, or grant any license, concession or other right of occupancy of any portion of the Demised Premises without the prior written consent of Landlord. Landlord agrees that it will not withhold consent in a wholly unreasonable and arbitrary manner (as further explained in Section 29.4 of this lease); however, in determining whether or not to grant its consent, Landlord shall be entitled to take into consideration factors such as Landlord's desired tenant mix, the reputation and net worth of the proposed transferee, and the then current market conditions (including market rentals). In addition, Landlord shall also be entitled to charge Tenant a reasonable fee for processing Tenant's request. Consent by Landlord to one or more assignments or sublettings shall not operate as a waiver of Landlord's rights as to any subsequent assignments and sublettings. In all events, Landlord can refuse to consent to an assignment or sublease if there shall exist any uncured default of Tenant or a matter which will become a default with the passage of time. 19.2 If Tenant is a corporation, partnership or other entity and if at any time during the term of this lease the person or persons who own a majority of either the outstanding voting rights or the outstanding ownership interests of Tenant at the time of the execution of this lease cease to own a majority of such voting rights or ownership interests (except as a result of transfers by devise or descent), the loss of a majority of such voting rights or ownership interests shall be deemed an assignment of this lease by Tenant and, therefore, subject in all respects to the provisions of Section 13

19.1 above. The previous sentence shall not apply, however, if at the time of the execution of this lease, (i) Tenant is a corporation and the outstanding voting shares of capital stock of Tenant are listed on a recognized security exchange or over-the-counter market or (ii) Tenant is a privately held, corporation which subsequently elects to offer shares of stock in the corporation to the public through a "public offering". Further, any sale or transfer of all or substantially all of the stock or assets of Tenant shall not be deemed an assignment hereunder, provided that the successor entity expressly assumes the obligations of Tenant hereunder in an agreement whose form and content is satisfactory to Landlord in its sole discretion. 19.3 Notwithstanding anything to the contrary contained herein, and without prejudice to Landlord's right to require a written assumption from each assignee, any person or entity to whom this lease is assigned including, without limitation, assignees pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. paragraph 101, ET SEQ. (the 'Bankruptcy Code"), shall automatically be deemed, by acceptance of such assignment or sublease or by taking actual or constructive possession of the Demised Premises, to have assumed all obligations of Tenant arising under this lease effective as of the earlier of the date of such assignment or sublease or the date on which the assignee or sublessee obtains possession of the Demised Premises. In the event this lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord and shall remain the exclusive property of Landlord and not Constitute the property of Tenant or Tenant's estate within the meaning of the Bankruptcy Code. All such money or other consideration not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and shall be promptly paid or delivered to Landlord. 19.4 Notwithstanding any assignment or subletting, Tenant and any guarantor of Tenant's obligations under this lease shall at all times remain fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under this lease (even if future assignments and sublettings occur subsequent to the assignment or subletting by Tenant, and regardless of whether or not Tenant's approval has been obtained for such future assignments and sublettings). Moreover, in the event that the rental due and payable by a sublessee (or a combination of the rental payable under such sublease plus any bonus or other consideration therefor or incident thereto) exceeds the rental payable under this lease, or if with respect to a permitted assignment, permitted license or other transfer by Tenant permitted by Landlord, the consideration payable to Tenant by the assignee, licensee or other transferee exceeds the rental payable under this lease, then Tenant shall be bound and obligated to pay Landlord fifty percent (50%) of all such excess rental and other excess consideration within ten (10) days following receipt thereof by Tenant from such sublessee, assignee, licensee or other transferee, as the case may be. Finally, in the event of an assignment or subletting, it is understood and agreed that all rentals paid to Tenant by an assignee or sublessee (other than the fifty percent (50%) of excess rental or other consideration resulting from such assignment or sublease) shall be received by Tenant in trust for Landlord, to be forwarded immediately to Landlord without offset or reduction of any kind; and upon election by Landlord such rentals shall be paid directly to Landlord as specified in Section 4.2 of this lease (to be applied as a credit and offset to Tenant's rental obligation). 19.5 Tenant shall not mortgage, pledge or otherwise encumber its interest in this lease or in the Demised Premises; 19.6 In the event of the transfer and assignment by Landlord of its Interest in this lease and in the building containing the Demised Premises to a person expressly assuming Landlord's obligations under this lease, Landlord shall thereby be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of the Landlord for performance of such obligations. Any security given by Tenant to secure performance of Tenant's obligations hereunder may be assigned and transferred by Landlord to such successor in interest and Landlord shall thereby be discharged of any further obligation relating thereto. 19.7 Notwithstanding anything to the contrary contained herein, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this Lease, or in the case of a proposed subletting of less than the entire Demised Premises for substantially all of the remaining term of this lease, to recapture the portion of the Demised Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised by Landlord giving Tenant written notice ("Landlord's Recapture Notice") within twenty (20) days following Landlord's receipt of Tenant's written notice as required above. If this Lease shall be terminated with respect to the entire Demised Premises, the Term shall end on the date stated in Tenant's notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease for the expiration of the Term. If Landlord recaptures only a portion of the Demised Premises, the minimum guaranteed rental during the unexpired Term shall abate, proportionately, based on the minimum guaranteed rental due as of the date immediately prior to such recapture. Notwithstanding the foregoing, Tenant shall have the right to withdraw its request to assign or sublet within three (3) business days of delivery of Landlord's 14

Recapture Notice, in which event, this Lease shall continue unaffected and Landlord's Recapture Notice shall be null and void. 19.8 Tenant hereby waives any suretyship defenses it may now or hereafter have to an action brought by Landlord including those contained in Sections 2787 through 2856, Inclusive, 2899 and 3433 of the California Civil Code, as now or hereafter amended, or similar laws of like import. ARTICLE 20. SUBORDINATION; ATTORNMENT; ESTOPPELS 20.1 Tenant accepts this lease subject and subordinate to any mortgage, deed of trust or other lien presently existing upon the Industrial Complex or any portion of the Industrial Complex which includes the Demised Premises, and to any renewals, modifications and extensions thereof and this subordination shall be self operative and no further instrument of subordination is needed. Tenant agrees that any mortgagee shall have the right at any time to subordinate its mortgage, deed of trust or other lien to this lease; provided, however, notwithstanding that this lease may be (or is made to be) superior to a mortgage, deed of trust or other lien, the mortgagee shall not be liable for prepaid rentals, security deposits and claims accruing during or with respect to Landlord's ownership, any amendment or modification made to this lease without its prior written consent or any offsets or claims against Landlord; further provided that the provisions of a mortgage, deed of trust or other lien relative to the right of the mortgagee with respect to proceeds arising from an eminent domain taking (including a voluntary conveyance by Landlord) and provisions relative to proceeds arising from insurance payable by reason of damage to or destruction of the Demised Premises shall be prior and superior to any contrary provisions contained in this instrument with respect to the payment or usage thereof. Landlord shall have the right to require Tenant to subordinate this lease to any mortgage, deed of trust or other lien hereafter placed upon the Demised Premises or the Industrial Complex as a whole, and Tenant agrees upon demand to execute an instrument subordinating this lease as Landlord may request; provided, however, that Tenant's obligation to execute such a subordination (and attornment) instrument shall be conditioned on Tenant's receipt from the lender of a nondisturbance agreement in the form typically utilized by such lender. If the holder of any mortgage, indenture or deed of trust or similar instrument (each a "Mortgagee") succeeds to Landlord's interest in the Demised Premises, Tenant shall, upon request of any such Mortgagee, automatically become the tenant of and attorn to and recognize such Mortgagee as the landlord under this lease and will pay to it all rents and other amounts payable by Tenant under this lease, in accordance with the applicable terms of this lease. 20.2 Tenant may not exercise any remedies for default by Landlord hereunder unless and until Landlord and the holder(s) of any indebtedness secured by mortgage, deed of trust or other lien on the Demised Premises shall have received written notice of such default and a reasonable time (not less than 45 days) shall thereafter have elapsed without the default having been cured. 20.3 Tenant agrees that it will from time to time upon request by Landlord execute and deliver to Landlord a written statement addressed to Landlord (and to a party[ies] designated by Landlord), which statement shall identify Tenant and this lease, shall certify that this lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), shall confirm that Landlord is not in default as to any obligations of Landlord under this lease (or if Landlord is in default, specifying any default), shall confirm Tenant's agreements contained above in this Article 20, and shall contain such other information or confirmations as Landlord may reasonably require. Landlord is hereby irrevocably appointed and authorized as the agent and attorney-in-fact of Tenant to execute and deliver any such written statement on Tenant's behalf if Tenant fails to do so within seven (7) days after the delivery of a written request from Landlord to Tenant. ARTICLE 21. TENANT'S INDEMNIFICATION 21.1 Tenant shall indemnify, defend and hold harmless Landlord, Landlord's asset manager, Landlord's subasset manager, Landlord's partners, any subsidiary or affiliate of Landlord and the officers, directors, shareholders, partners, employees, managers, independent contractors, attorneys and agents of any of the foregoing (collectively, the "lndemnitees") from and against any and all claims, demands, causes of action, judgments, costs and expenses, and all losses and damages (including consequential and punitive damages) arising from Tenant's use of the Demised Premises or from the conduct of its business or from any activity, work, or other acts or things done, permitted or suffered by Tenant in or about the Demised Premises, and shall further indemnify, defend and hold harmless the Indemnitees from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this lease, or arising from any act, omission or negligence or willful or criminal misconduct of Tenant, or any officer, agent, employee, independent contractor, guest, or invitee thereof, and from all costs, attorneys' fees and disbursements, 15

and liabilities incurred in the defense of any such claim or any action or proceeding which may be brought against, out of or in any way related to this lease, except, in each Instance, to the extent caused by the gross negligence or willful misconduct of Landlord. Upon notice from Landlord, Tenant shall defend any such claim, demand, cause of action or suit at Tenant's expertise by counsel satisfactory to Landlord in its sole discretion. As a material part of the consideration to Landlord for this lease, Tenant hereby assumes all risk of damage to property or injury to persons in, upon or about the Demised Premises from any cause, except to the extent caused by the gross negligence or willful misconduct of Landlord, and Tenant hereby waives all claims with respect thereto against Landlord. Tenant shall give immediate notice to Landlord in case of casualty or accidents in the Demised Premises. The provisions of this Article 21 shall survive the expiration or sooner termination of this lease. 21.2 All personal property of Tenant, including goods, wares, merchandise, inventory, trade fixtures and other personal property of Tenant, shall be stored at the sole risk of Tenant. Landlord or its agents shall not be liable for any loss or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Industrial Complex or from the pipes, appliances or plumbing works therein or from the roof, street or subsurface or from any other places resulting from dampness or any other cause whatsoever, or from the act or negligence of any other tenant or any officer, agent, employee, contractor or guest of any such tenant, except personal injury caused by or due to the gross negligence or willful misconduct of Landlord. Landlord or its agents shall not be liable for interference with the electrical service, ventilation, or for any latent defect in the Demised Premises. 21.3 The parties hereto acknowledge that all or a part of the Demised Premises may be used for the storage and shipment of goods not owned by Tenant, and Landlord is not willing to enter into this lease unless Tenant indemnifies the Indemnitees to Landlord's satisfaction from any liability on the part of the Indemnitees to the owner(s) of such goods for damage to the same arising out of any acts or omissions of the Indemnitees. As a material inducement to Landlord to enter into this lease, Tenant agrees to defend, indemnify and hold the Indemnitees harmless from and against any and all losses, claims, liabilities, obligations and damages imposed upon or incurred or asserted against the Indemnitees by reason of damage to goods of persons storing such goods with Tenant, notwithstanding the fact that such losses, claims, liabilities, obligations or damages may have been caused by the acts or omissions of Landlord, except to the extent caused by the gross negligence or willful misconduct of Landlord. Tenant agrees that at all times during which it shall store goods not owned by it in the Demised Premises, it shall insure the indemnity described under this Section 21.3 in a manner reasonably satisfactory to Landlord. Landlord shall not be deemed a bailee, consignee, or warehouseman (or responsible for the standard of care incidental thereto) with respect to any goods stored or shipped to or from the Demised Premises for consignment or bailment and Tenant shall insert a clause to that effect in all warehouse receipts or consignment agreements for the storage or shipment of goods to or from the Demised Premises. ARTICLE 22. DEFAULT BY TENANT AND REMEDIES 22.1 The following events shall be deemed to be events of default by Tenant under this lease: (a) Tenant shall fail to pay any installment of rental or any other obligation under this lease involving the payment of money and such failure shall continue for a period of ten (10) days after such payment shall become due and payable after written notice thereof to Tenant; provided, however, that for each calendar year during which Landlord has already given Tenant one (1) written notice of the failure to pay an installment of rental, no further notice shall be required (i.e., the event of default will automatically occur on the tenth (10th) day after the day upon which the rental was due; and provided further that any such notice shall be in lieu of, and not in addition to, any notice required under Section 1161, ET SEQ., of the California Code of Civil Procedure). (b) Tenant shall fail to comply with any provision of this lease, other than as described in subsection (a) above, and either shall not cure such failure within fifteen (15) days after written notice thereof to Tenant, or shall cure that particular failure but shall again fail to comply with the same provision of this lease within three (3) months after Landlord's written notice; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under Section 1161 ET SEQ. of the California Code of Civil Procedure; provided further, however, that if the noticed failure cannot reasonably be cured within fifteen (15) days, Tenant shall not be deemed in default hereunder if Tenant commences to cure the default within such fifteen (15) day period, and thereafter diligently prosecutes such cure to completion. (c) Tenant or any guarantor of Tenant's obligations under this lease shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors. 16

(d) Tenant or any guarantor of Tenant's obligations under this lease shall file a petition under any section or chapter of the federal Bankruptcy Code, as amended, or under any similar law or statue of the United States or any state thereof; or Tenant or any guarantor of Tenant's obligations under this lease shall be adjudged bankrupt or insolvent in proceedings filed against Tenant or any guarantor of Tenant's obligations under this lease thereunder. (e) A receiver or Trustee shall be appointed for the Demised Premises or for all or substantially all of the assets of Tenant or any guarantor of Tenant's obligations under this lease. (f) Tenant shall desert or vacate or shall commence to desert or vacate the Demised Premises or any substantial portion of the Demised Premises or at any time prior to the last month of the lease term shall remove or attempt to remove, without the prior written consent of Landlord, all or a substantial amount of Tenant's goods, wares, equipment, fixtures, furniture, or other personal property. (g) Tenant shall do or permit to be done anything which creates a lien upon the Demised Premises or upon all or any part of the Industrial Complex. (h) Any transfer of a substantial portion of the assets of Tenant, or any incurrence of a material obligation by Tenant, unless such transfer or obligation is undertaken or incurred in the ordinary course of Tenant's business or in good faith for equivalent consideration, or with Landlord's consent. (i) The default of any guarantors of Tenant's obligations hereunder under any guaranty of this Lease, or the attempted repudiation or revocation of any such guaranty. 22.2 Upon the occurrence of any such event of default, Landlord shall have the option to pursue any one or more of the following remedies to the extent permitted by law: (a) Without any further notice or demand whatsoever, Tenant shall be obligated to reimburse Landlord for the damages suffered by Landlord as a result of the event of default, plus interest on such amount at the maximum contractual rate which could legally be charged in the event of a loan of such amount to Tenant (but in no event to exceed 1-1/2% per month); and Landlord may pursue a monetary recovery from Tenant. (b) Without any further notice or demand whatsoever, Landlord may take any one or more of the actions permissible at law to insure performance by Tenant of Tenant's covenants and obligations under this lease. In this regard, and without limiting the generality of the immediately preceding sentence, it is agreed that if Tenant fails to open for business as required in this lease or, having opened for business, deserts or vacates the Demised Premises, Landlord may enter upon and take possession of such premises in order to protect them from deterioration and continue to demand from Tenant the monthly rentals and other charges provided in this lease, without any obligation to relet; however, if Landlord does, at its sole discretion, elect to relet the Demised Premises, such action by Landlord shall not be deemed as an acceptance of Tenant's surrender of the Demised Premises unless Landlord expressly notifies Tenant of such acceptance in writing pursuant to this subsection (b), Tenant hereby acknowledging that Landlord shall otherwise be reletting as Tenant's agent and Tenant furthermore hereby agreeing to pay to Landlord on demand any deficiency that may arise between the monthly rentals and other charges provided in this lease and that actually collected by Landlord. In the event that Landlord shall elect to relet, then rentals received by Landlord from such reletting shall be applied: first, to the payment of any indebtedness (other than rent) due hereunder from Tenant to Landlord; second, to the payment of any cost of such reletting (including brokerage commissions); third, to the payment of the cost of any alterations and repairs to the Demised Premises; fourth, to the payment of rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. Should reletting, during any month to which such rent is applied, result in the actual payment of rentals at less than the rent payable during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making such alterations and repairs not covered by the rentals received from such reletting. Finally, it is agreed that in the event of any default described in subsection (g) of Section 22.1 of this lease, Landlord may pay or bond around such lien, whether or not contested by Tenant; and in such event Tenant agrees to reimburse Landlord on demand for all costs and expenses incurred in connection with any such action, with Tenant further agreeing that Landlord shall in no event be liable for any damages or claims resulting from such action. No action or inaction by Landlord including, without limitation, the re-entry or taking of possession of the Demised Premises by Landlord pursuant to this Section 22.2(b) shall be construed as an election to terminate this lease or as interference with Tenant's rights of possession, assignment or subletting unless a written notice of such election shall be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. 17

Notwithstanding any reletting without termination by Landlord, Landlord may, at any time after such reletting, elect to terminate this lease for any such default. (c) Landlord may terminate this lease by written notice to Tenant, in which event Tenant shall immediately surrender the Demised Premises to Landlord. In the event that Landlord shall elect to so terminate this lease, then Landlord may recover from Tenant: (i) The worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus (ii) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves reasonably could have been avoided; plus (iii) The worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves reasonably could be avoided; plus (iv) Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant's failure to perform its obligations under this lease or which in the ordinary course would be likely to result therefrom, plus (v) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. As used in subparagraphs (i) and (ii) above, the "worth at the time of award" is computed by allowing interest at the maximum rate permitted by law. As used in subparagraph (iii) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. Tenant hereby waives for Tenant and for all those claiming under Tenant all right now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenant's right of occupancy of the Demised Premises after any termination of this lease. (d) In addition to all other rights and remedies provided Landlord in this lease and by law, Landlord shall have the remedy described in California Civil Code Section 1951.4 (Landlord may continue the lease in effect after Tenant's breach and abandonment and recover rent as it becomes due if Tenant has the right to sublet or assign the lease, subject to reasonable limitations). 22.3 It is expressly agreed that in determining "the unpaid rent" as that term is used throughout subsections 22.2(c)(i) and 22.2(c)(ii) above, there shall be added to the minimum guaranteed rental (as specified in Sections 1.1(l) and 4.1 of this lease) a sum equal to the charges for maintenance of the Common Area (as specified in Section 7.4 of this lease), and the payments for taxes, charges and insurance (as specified in Article 6 of this lease). 22.4 It is further agreed that, in addition to payments required pursuant to subsections 22.2(b) and 22.2(c) above, Tenant shall compensate Landlord for all expenses incurred by Landlord in repossession (including, among other expenses, any increase in insurance premiums caused by the vacancy of the Demised Premises), all expenses incurred by Landlord in reletting (including, among other expenses, repairs, remodeling, replacements, advertisements and brokerage fees), all concessions granted to a new tenant upon reletting (including, among other concessions, renewal options), all losses incurred by Landlord as a direct or indirect result of Tenant's default (including, among other losses, any adverse reaction by Landlord's mortgagee or by other tenants or potential tenants of the Industrial Complex) and a reasonable allowance for Landlord's administrative efforts, salaries and overhead attributable directly or indirectly to Tenant's default and Landlord's pursuing the rights and remedies provided herein and under applicable law. 22.5 Landlord may restrain or enjoin any breach or threatened breach of any covenant, duty or obligation of Tenant herein contained without the necessity of proving the inadequacy of any legal remedy or irreparable harm. The remedies of Landlord hereunder shall be deemed cumulative and not exclusive of each other. 22.6 If on account of any breach or default by Tenant in its obligations hereunder, Landlord shall employ an attorney to present, enforce or defend any of Landlord's rights or remedies hereunder, Tenant agrees to pay any reasonable attorneys' fees incurred by Landlord in such connection. 18

22.7 Tenant acknowledges its obligation to deposit with Landlord the sum stated in Section 1.1(n) above, to be held by Landlord without interest as security for the performance by Tenant of Tenant's covenants and obligations under this lease. Tenant agrees that such deposit may be commingled with Landlord's other funds and that such security deposit is not an advance payment of rental or a measure of Landlord's damages in case of default by Tenant. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such funds to the extent necessary to make good any arrears of rentals and any other damage, injury, expense or liability caused to Landlord by such event of default, and Tenant shall pay to Landlord on demand the amount so applied in order to restore the security deposit to its original amount. If Tenant is not then in default hereunder, any remaining balance of such security deposit shall be returned by Landlord to Tenant within thirty (30) days of termination of this lease and Tenant's vacating of the Demised Premises (subject to the provisions of Section 19.6 above). 22.8 (a) In the event of any default described in subsection (d) of Section 22.1 of this lease, any assumption and assignment must conform with the requirements of the Bankruptcy Code and, in order to provide Landlord with the assurances contemplated by the Bankruptcy Code, Tenant must fulfill the following obligations, in addition to any other reasonable obligations that Landlord may require, before any assumption of this lease is effective: (i) all defaults under subsection (a) of Section 22.1 of this lease must be cured within ten (10) days after the date of assumption; (ii) all other defaults under Section 22.1 of this lease other than under subsection (d) of Section 22.1 must be cured within fifteen (15) days after the date of assumption; (iii) all actual monetary losses incurred by Landlord (including, but not limited to, reasonable attorneys' fees) must be paid to Landlord within ten (10) days after the date of assumption; and (iv) Landlord must receive within ten (10) days after the date of assumption a security deposit in the amount of six (6) months minimum guaranteed rent (using the minimum guaranteed rent in effect for the first full month immediately following the assumption) and an advance prepayment of minimum guaranteed rent in the amount of three (3) months minimum guaranteed rent (using the minimum guaranteed rent in effect for the first full month immediately following the assumption), both sums to be held by Landlord in accordance with Section 22.7 above and deemed to be rent under this lease for the purposes of the Bankruptcy Code as amended and from time to time in effect. (b) In the event this lease is assumed in accordance with the requirements of the Bankruptcy Code and this lease, and is subsequently assigned, then, in addition to any other reasonable obligations that Landlord may require and in order to provide Landlord with the assurances contemplated by the Bankruptcy Code, Landlord shall be provided with (i) a financial statement of the proposed assignee prepared in accordance with generally accepted accounting principles consistently applied, though on a cash basis, which reveals a net worth in an amount sufficient, in Landlord's reasonable judgment, to assure the future performance by the proposed assignee of Tenant's obligations under this lease; or (ii) a written guaranty by one or more guarantors with financial ability sufficient to assure the future performance of Tenant's obligations under this lease, such guaranty to be in form and content satisfactory to Landlord and to cover the performance of all of Tenant's obligations under this lease. ARTICLE 23. [INTENTIONALLY OMITTED] ARTICLE 24. HOLDING OVER 24.1 In the event Tenant remains in possession of the Demised Premises after the expiration of this lease and without the execution of a new lease or an amendment hereto, it shall be deemed to be occupying said premises as a tenant from month to month at a rental equal to the rental herein provided plus (i) fifty percent (50%) of such amount for the first ninety (90) days of the holdover period and (ii) one hundred percent (100%) of such amount thereafter, and otherwise subject to all the conditions, provisions and obligations of this lease insofar as the same are applicable to a month-to-month tenancy. Neither any provision hereof nor acceptance by Landlord of rent after such expiration or earlier termination shall be deemed a consent to a holdover hereunder or result in a renewal of this lease or an extension of the Term. Notwithstanding any provision to the contrary contained herein, (i) Landlord expressly reserves the right to require Tenant to surrender possession of the Demised Premises upon the expiration of the Term of this lease or upon the earlier termination hereof, the right to reenter the Demised Premises, and the right to assert any remedy at law or in equity to evict Tenant and collect damages in connection with any such holding over, and (ii) Tenant shall indemnify, defend and hold Landlord harmless from and against any and all claims, demands, actions, losses, damages, obligations, costs and expenses, including, without limitation, attorneys' fees incurred or suffered by Landlord by reason of Tenant's failure to surrender the Demised Premises on the expiration or earlier termination of this Lease in accordance with the provisions of this lease. 19

ARTICLE 25. NOTICES 25.1 Wherever any notice is required or permitted hereunder, such notice shall be in writing. Any notice or document required or permitted to be delivered hereunder shall be deemed to be delivered when actually received by the designated addressee or, if earlier and regardless of whether actually received or not, when deposited in the United States mail, postage prepaid, certified mail, return receipt requested, addressed to the parties hereto at the respective addresses set out in Section 1.1 above (or at Landlord's option, to Tenant at the Demised Premises), or at such other addresses as they have theretofore specified by written notice. Copies of all notices to Tenant shall concurrently be delivered to Thomas B. Jacob, Thoits, Love, Hershberger & McLean, 245 Lytton Avenue, Palo Alto, California 94301. 25.2 If and when included within the term "Landlord" as used in this instrument there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such notice specifying some individual at some specific address for the receipt of notices and payments to the Landlord; if and when included within the term "Tenant" as used in this instrument there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payment to Tenant. All parties included within the terms "Landlord" and "Tenant," respectively, shall be bound by notice and payments given in accordance with the provisions of this Article to the same effect as if each had received such notice or payment. In addition, Tenant agrees that actions by Landlord and notices to Tenant hereunder may be taken or given by Agent, Landlord's attorney, or any other property manager or agent. 25.3 A copy of any notice or document required or permitted to be delivered hereunder to Landlord shall simultaneously be delivered to Agent. ARTICLE 26. COMMISSIONS 26.1 Tenant and Landlord warrant that they have had no dealings with any broker or agent in connection with this lease, other than Agent and Tenant's Broker. Landlord shall be responsible for the payment of a commission to Agent pursuant to a separate agreement between Landlord and Agent. Landlord and Tenant covenant to pay, hold harmless and indemnify each other from and against any and all cost, expense or liability for any compensation, commissions or charges claimed by any other broker or agent utilized by the indemnitor with respect to this lease or the negotiation hereof. ARTICLE 27. REGULATIONS 27.1 Landlord and Tenant acknowledge that there are now in effect and may hereafter be enacted or go into effect federal, state, county and municipal laws, orders, rules, directives and regulations relating to or affecting the Demised Premises or the Industrial Complex, concerning the impact on the environment of construction, land use, maintenance and operation of structures, toxic or otherwise hazardous substances, and the conduct of business, including, without limitation, the Americans With Disabilities Act of 1990 and the Clean Air Act and regulations issued thereunder (all of the foregoing, as amended from time to time, being herein called the "Regulations"). Tenant will not cause or permit to be caused, any act or practice, by negligence, omission or otherwise, that would adversely affect the environment or do anything or permit anything to be done that would violate any of said Regulations. Moreover, Tenant shall have no claim against Landlord by reason of any changes Landlord may make in the Industrial Complex or the Demised Premises pursuant to said Regulations or any charges imposed upon Tenant, Tenant's customers or other invitees pursuant to same. 27.2 If, by reason of any Regulations, the payment to, or collection by, Landlord of any rental or other charge (collectively referred to hereinafter as "Lease Payments") payable by Tenant to Landlord pursuant to the provisions of this lease is in excess of the amount (the "Maximum Charge") permitted thereof by the Regulations, then Tenant, during the period (the "Freeze Period") when the Regulations shall be in force and effect shall not be required to pay, nor shall Landlord be permitted to collect, any sum in excess of the Maximum Charge. Upon the earlier of (i) the expiration of the Freeze Period, or (ii) the issuance of a final order or judgment of a court of competent jurisdiction declaring the Regulations to be invalid or not applicable to the provisions of this lease, Tenant, to the extent not then proscribed by law, and commencing with the first day of the month immediately following, shall pay to Landlord as additional rental, in equal monthly installments during the balance of the term of this lease, a sum equal to the cumulative difference between the Maximum Charges and the Lease Payments during the Freeze 20

Period. If any provisions of this Section, or the application thereof, shall to any extent be declared to be invalid and unenforceable, the same shall not be deemed to affect any of the other provisions of this section or of this lease, all of which shall be deemed valid and enforceable to the fullest extent permitted by law. 27.3 Tenant acknowledges that it will be wholly responsible for any accommodations or alterations which need to be made to the Demised Premises to accommodate disabled employees and customers of Tenant, including without limitation, the requirements under the Americans with Disabilities Act and any equivalent California law. Any alterations made to the Demised Premises in order to comply with either statute must be made solely at Tenant's expense and in compliance with all terms and requirements of this lease. Landlord agrees to make reasonable efforts to ensure that the Common Area is in compliance with the applicable disability access laws as of the date hereof. If a complaint is received by Landlord from either a private or government source regarding disability access to the Common Area of the Industrial Complex, Landlord reserves the right to mediate, contest, comply with or otherwise respond to such complaint as Landlord deems to be reasonably prudent under the circumstances. If Landlord decides to make alterations to the Common Area of the Industrial Complex in response to any such complaints or in response to legal requirements Landlord considers to be applicable to the Common Area of the Industrial Complex, the cost of such alterations shall be included in the Common Area maintenance charge under this lease. Landlord and Tenant agree that so long as the governmental entity or entities charged with enforcing such statutes have not expressly required Landlord to take specific action to effectuate compliance with such statutes, Landlord shall be conclusively deemed to be in compliance with such statutes. Tenant agrees to provide Landlord with written notice should Tenant become aware of a violation of such statutes with respect to the Common Area. In the event either Landlord or Tenant is required to take action to effectuate compliance with such statutes, Landlord or Tenant, as applicable, shall have a reasonable period of time to make the improvements and alterations necessary to effectuate such compliance, hich period of time shall be extended by any time necessary to cause, any necessary improvements and alterations to be made. ARTICLE 28. HAZARDOUS MATERIALS 28.1 During the term of this lease, Tenant shall comply with all Environmental Laws and Environmental Permits (each as defined in Section 28.7 hereof) applicable to the operation or use of the Demised Premises, will cause all other persons occupying or using the Demised Premises to comply with all such Environmental Laws and Environmental Permits, will immediately pay or cause to be paid all costs and expenses incurred by reason of such compliance, and will obtain and renew all Environmental Permits required for operation or use of the Demised Premises. 28.2 Tenant shall not generate, use, treat, store, handle, release or dispose of, or permit the generation, use, treatment, storage, handling, release or disposal of Hazardous Materials (as defined in Section 28.7 hereof) on the Demised Premises, or the Industrial Complex, or transport or permit the transportation of Hazardous Materials to or from the Demised Premises or the Industrial Complex except for limited quantities used or stored at the Demised Premises and required in connection with the routine operation and maintenance of the Demised Premises, and then only upon the written consent of Landlord and in compliance with all applicable Environmental Laws and Environmental Permits. 28.3 At any time and from time to time during the term of this lease, Landlord may perform, at Tenant's sole cost and expense, an environmental site assessment report concerning the Demised Premises, prepared by an environmental consulting firm chosen by Landlord, indicating the presence or absence of Hazardous Materials caused or permitted by Tenant and the potential cost of any compliance, removal or remedial action in connection with any such Hazardous Materials on the Demised Premises. Tenant shall grant and hereby grants to Landlord and its agents access to the Demised Premises and specifically grants Landlord an irrevocable non-exclusive license to undertake such an assessment; and the cost of such assessment shall be immediately due and payable on demand. 28.4 Tenant will immediately advise Landlord in writing of any of the following: (1) any pending or threatened Environmental Claim (as defined in section 28.7 hereof) against Tenant relating to the Demised Premises or the Industrial Complex; (2) any condition or occurrence on the Demised Premises or the Industrial Complex that (a) results in noncompliance by Tenant with any applicable Environmental Law, or (b) could reasonably be anticipated to form the basis of an Environmental Claim against Tenant or Landlord or the Demised Premises; (3) any condition or occurrence on the Demised Premises or any property adjoining the Demised Premises that could reasonably be anticipated to cause the Demised Premises to be subject to any restrictions on the ownership, occupancy, use or transferability of the Demised Premises under any Environmental Law; and (4) the actual or anticipated taking of any removal or remedial action by Tenant in response to the actual or alleged presence of any Hazardous Material on the Demised Premises or the Industrial Complex. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and Tenant's 21

response thereto. In addition, Tenant will provide Landlord with copies of all communications regarding the Demised Premises with any government or governmental agency relating to Environmental Laws, all such communications with any person relating to Environmental Claims, and such detailed reports of any such. Environmental Claim as may reasonably be requested by Landlord. 28.5 Tenant will not change or permit to be changed the present use of the Demised Premises unless Tenant shall have notified Landlord thereof in writing and Landlord shall have determined, in its sole and absolute discretion, that such change will not result in the presence of Hazardous Materials on the Demised Premises except for those described in Section 28.2 above. 28.6 (a) Tenant agrees to defend, indemnify and hold harmless the Indemnitees (as defined in Section 21.1) from and against all obligations (including removal and remedial actions), losses, claims, suits, judgments, liabilities, penalties, damages (including consequential and punitive damages), costs and expenses (including attorneys' and consultants' fees and expenses) of any kind or nature whatsoever that may at any time be incurred by, imposed on or asserted against such Indemnitees directly or indirectly based on, or arising or resulting from (a) the actual or alleged presence of Hazardous Materials on the Industrial Complex which is caused or permitted by Tenant and (b) any Environmental Claim relating in any way to Tenant's operation or use of the Demised Premises (the "Hazardous Materials Indemnified Matters"). The provisions of this Article 28 shall survive the expiration or sooner termination of this lease. (b) To the extent that the undertaking in the preceding paragraph may be unenforceable because it is violative of any law or public policy, Tenant will contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Hazardous Materials Indemnified Matters incurred by the Indemnitees. (c) All sums paid and costs incurred by Landlord with respect to any Hazardous Materials Indemnified Matter shall bear interest at the lesser of (i) eighteen (18%) percent per annum, or (ii) the maximum legal rate of interest allowed in the State of California, from the date so paid or incurred until reimbursed by Tenant, and all such sums and costs shall be immediately due and payable on demand. 28.7 (a) "Hazardous Materials" means (i) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and radon gas; (ii) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any applicable Environmental Law; and (iii) any other substance exposure which is regulated by any governmental authority; (b) "Environmental Law" means any federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety or Hazardous Materials, including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601 ET SEQ.; the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 ET SEQ.; the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 ET SEQ.; the Clean Water Act, 33 U.S.C. Sections 1251 ET SEQ.; the Toxic Substances Control Act, 15 U.S.C. Sections 2601 ET SEQ.; the Clean Air Act, 42 U.S.C. Sections 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Sections 300f ET SEQ.; the Atomic Energy Act, 42 U.S.C. Sections 2011 ET SEQ.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 ET SEQ.; the Occupational Safety and Health Act, 29 U.S.C. Sections 651 ET SEQ.; (c) "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations, proceedings, consent orders or consent agreements relating in any way to any Environmental Law or any Environmental Permit, including without limitation (i) any and all Environmental Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Environmental Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment; (d) "Environmental Permits" means all permits, approvals, identification numbers, licenses and other authorizations required under any applicable Environmental Law. 28.8 Landlord hereby represents to its actual knowledge without investigation that there are no Hazardous Materials in the Demised Premises in violation of any applicable Environmental Law. 22

ARTICLE 29. MISCELLANEOUS 29.1 Nothing in this lease shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant. 29.2 Tenant shall not for any mason withhold or reduce Tenant's required payments of rentals and other charges provided in this lease, it being agreed that the obligations of Landlord under this lease are independent of Tenant's obligations except as may be otherwise expressly provided. The immediately preceding sentence shall not be deemed to deny Tenant the ability of pursuing all rights granted it under this lease or at law; however, at the direction of Landlord, Tenant's claims in this regard shall be litigated in proceedings different from any litigation involving rental claims or other claims by Landlord against Tenant (i.e., each party may proceed to a separate judgment without consideration, counterclaim or offset as to the claims asserted by the other party). 29.3 The liability of Landlord, any agent of Landlord, or any of their respective officers, directors, shareholders, or employees to Tenant for or in respect of any default by Landlord under the terms of this lease or in respect of any other claim or cause of action shall be limited to the interest of Landlord in the Industrial Complex, and Tenant agrees to look solely to Landlord's interest in the Industrial Complex for the recovery and satisfaction of any judgment against Landlord, any agent of Landlord, or any of their respective officers, directors, shareholders, and employees. 29.4 In all circumstances under this lease where the prior consent of one party (the "consenting party"), whether it be Landlord or Tenant, is required before the other party (the "requesting party") is authorized to take any particular type of action, such consent shall not be withheld in a wholly unreasonable and arbitrary manner; however, the requesting party agrees that its exclusive remedy if it believes that consent has been withheld improperly (including, but not limited to, consent required from Landlord pursuant to Section 19.1) shall be to Institute litigation either for a declaratory judgment or for a mandatory injunction requiring that such consent be given (with the requesting party hereby waiving any claim for damages, attorneys' fees or any other remedy unless the consenting party refuses to comply with a court order or judgment requiring it to grant its consent). 29.5 Whenever a period of time is herein prescribed for action to be taken by either Landlord or Tenant, such party shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the reasonable control of such party; provided, however, that this provision shall NOT apply to Tenant's obligation to pay rent or any other sums due hereunder. 29.6 If any provision of this lease should be held to be Invalid or unenforceable, the validity and enforceability of the remaining provisions of this lease shall not be affected thereby. 29.7 [INTENTIONALLY OMITTED] 29.8 The laws of the State of California shall govern the interpretation, validity, performance and enforcement of this lease. Venue for any action under this lease shall be the county in which rentals are due pursuant to Section 4.2 and Section 1.1 of this lease. 29.9 The captions used herein are for convenience only and do not limit or amplify the provisions hereof. 29.10 Whenever herein the singular number is used, the same shall include the plural, and words of any gender shall include each other gender. 29.11 All covenants and obligations contained within this lease shall bind and inure to the benefit of Landlord, its successors and assigns, and shall be binding upon Tenant, its permitted successors and assigns. 29.12 This lease contains the entire agreement between the parties, and no rights are created in favor of either party other than as specified or expressly contemplated in this lease. No brochure, rendering, information or correspondence shall be deemed to be a part of this agreement unless specifically incorporated herein by reference. In addition, no agreement shall be effective to change, modify or terminate this lease in whole or in part unless such is in writing and duly signed by the party against whom enforcement of such change, modification or termination is sought. 23

29.13 LANDLORD AND TENANT HEREBY ACKNOWLEDGE THAT THEY ARE NOT RELYING UPON ANY BROCHURE, RENDERING, INFORMATION, REPRESENTATION OR PROMISE OF THE OTHER, OR OF THE AGENT, EXCEPT AS MAY BE EXPRESSLY SET FORTH IN THIS LEASE. 29.14 No waiver of any of the terms, covenants, provisions, conditions, rules and regulations imposed by this lease, and no waiver of any legal or equitable relief or remedy, shall be implied by the failure of Landlord to assert any rights, declare any forfeiture, or for any other reason. No waiver of any of the terms, provisions, covenants, conditions, rules and regulations shall be valid unless it shall be in writing signed by Landlord. No waiver by Landlord or forgiveness of performance by Landlord for one or more tenants shall constitute a Waiver or forgiveness of performance in respect to Tenant. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval under this Lease shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act of Tenant. No act or thing done by Landlord or Landlord's agents during the Term of this lease shall be deemed an acceptance of a surrender of the Demised Premises, unless in writing signed by Landlord. The delivery of the keys to any employee or agent of Landlord shall not operate as a termination of this lease or a surrender of the Demised Premises. The acceptance of any rent by Landlord following a breach of this lease by Tenant shall not constitute a waiver by Landlord of such breach or any other breach unless such waiver is expressly stated in a writing signed by Landlord. 29.15 Tenant shall deliver and surrender to Landlord possession of the Demised Premises (including all of Tenant's permanent work upon and to the Demised Premises, all replacements and all fixtures permanently attached to the Demised Premises) immediately upon the expiration of the Term or the termination of this lease in as good condition and repair as the same were on the delivery date (loss by any insured casualty and ordinary wear and tear only excepted), and deliver the keys at the office of Landlord or Landlord's agent; provided, however, that upon Landlord's request made at least thirty (30) days prior to the end of the Term, or the date Tenant is otherwise required to vacate the Demised Premises, Tenant shall remove all fixtures and equipment affixed to the Demised Premises by Tenant, and repair and restore the Demised Premises to their condition on the delivery date (loss by any insured casualty and ordinary wear and tear only excepted), at Tenant's sole expense. The removal shall be performed prior to the earlier of the end of the Term or the date Tenant is required to vacate the Demised Premises. 29.16 Tenant shall not record this lease. Without the prior written consent of Landlord, Tenant shall not record any memorandum of this lease, short form or other reference to this lease. 29.17 The submission of this lease for examination does not constitute a reservation of or option for the Demised Premises or any other space in the Industrial Complex, and shall not vest any right in Tenant. This lease shall become effective as a lease only upon its execution and delivery by the parties. 29.18 LANDLORD AND TENANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THE DEMISED PREMISES (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS LEASE OR ANY CLAIMS OR DEFENSES ASSERTING THAT THIS LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LANDLORD TO ENTER AND ACCEPT THIS LEASE. 24

29.19 This lease consists of twenty-nine Articles and Exhibits "A" through "D". With the exception of Article 7, in the event any provision of an exhibit shall be inconsistent with a provision in the body of the lease, the provision as set forth in the exhibit shall be deemed to control. EXECUTED as of the latest date accompanying a signature by Landlord or Tenant below. LANDLORD: MP CARIBBEAN, INC., a Delaware corporation By: GE CAPITAL INVESTMENT ADVISORS, INC., its agent By: /s/ [ILLEGIBLE] ------------------------------------- Name: [ILLEGIBLE] ------------------------------ Title: [ILLEGIBLE] ----------------------------- Date of Signature: 8-22-97 --------------------- TENANT: ARIBA TECHNOLOGIES, INC., a Delaware corporation By: /s/ Edward P. Kinsey ------------------------------------- Name: Edward P. Kinsey ------------------------------ Title: Vice President - Finance Chief Financial Officer ----------------------------- Date of Signature: 8-22-97 --------------------- 25

EXHIBIT "A" DEMISED PREMISES [FLOOR PLAN] 26

EXHIBIT "B" CONSTRUCTION: TENANT ACCEPTANCE OF SPACE "AS IS" ARTICLE I. GENERAL Tenant hereby accepts the Demised Premises "as is" and "ready for occupancy." Except as provided herein, Landlord shall have no obligation to make or pay for any improvements, renovations or alterations in or to the Demised Premises to prepare or make ready the Demised Premises for Tenant's occupancy as of the Commencement Date. Prior to any modification of the existing premises, Tenant shall adhere to the following as well as the provisions contained in Article 11 and EXHIBIT "C" of the lease. ARTICLE II. PRE-CONSTRUCTION OBLIGATIONS A. Plans, diagrams, schedules and other data relating to work to be performed by Tenant must be furnished by Tenant to Landlord complete, sufficient to obtain a building permit, and ready for Landlord's consideration and final approval within fifteen (15) days after execution of this lease (or at such other time as may be specified by this exhibit). Without limiting the generality of the immediately preceding sentence, Tenant's submissions must include a floor plan, a reflected ceiling plan, a plumbing plan, elevations of walls and a fixture plan. All drawings shall be at scale of either 1/8" or 1/4" Tenant shall reimburse Landlord for any loss or extra cost which may result to Landlord by reason of failure on the part of Tenant to submit any such plans, diagrams, schedules, specifications and/or other data within said period of time. B. Tenant shall secure Landlord's written approval of all designs, plans, specifications, materials, contractors and contracts for work to be performed by Tenant before beginning the work (including following whatever "work letter" instructions, if any, which Landlord may deliver to Tenant in connection with the work), and shall secure all necessary licenses and permits to be used in performing the work. Tenant's finished work shall be subject to Landlord's approval and acceptance. C. The insurance requirements under Article 15 of this lease and the indemnity requirements under Article 16 of this lease shall apply during the construction contemplated in this exhibit, and Tenant shall provide evidence of appropriate insurance coverage prior to beginning any of Tenant's work. Tenant shall provide Landlord with evidence of insurance covering both Tenant and Tenant's contractor against damage to their personal property, as well as against third-party liability and workers' compensation claims arising out of all construction and associated activities. All policies of insurance shall be subject to Landlord's prior approval and shall be endorsed showing Landlord as an additional named insured (or if permitted by Landlord, may provide a waiver of subrogation against Landlord). ARTICLE III. DESCRIPTION OF TENANT'S WORK A. Signs: Tenant shall pay for all signs and the installation thereof, including the electrical hook-up, subject to the provisions of Section 13.1 of this lease. B. Utilities: All meters or other measuring devices in connection with utility services shall be provided by Tenant. All service deposits shall be made by Tenant at Tenant's expense. C. All work undertaken by Tenant shall be at Tenant's expense and shall not damage the building or any part thereof. Any roof penetration shall be performed by Landlord's roofer or, at Landlord's option, by a bonded roofer approved in advance by Landlord. The work shall be begun only after Landlord has given consent, which consent shall in part be conditioned upon Tenant's plans, to include materials acceptable to Landlord, in order to prevent injury to the roof and to spread the weight of the equipment being installed. Tenant shall also be responsible for obtaining and paying for professional inspections of any structural work (including, without limitation, any roof work or concrete work). 1

D. All work undertaken by Tenant shall be awarded to Landlord's contractor unless, before any construction begins, Tenant chooses and receives Landlord's written approval for another contractor to complete Tenant's work. E. All work performed by or at the behest of Tenant shall be in compliance with all applicable Regulations. ARTICLE IV. DESCRIPTION OF LANDLORD'S WORK Landlord shall cause the roof, mechanical, electrical and plumbing systems serving the Demised Premises to be in proper working order as of the Commencement Date ("Landlord's Improvements"). INITIALED: LANDLORD: -------------------- TENANT: -------------------- 2

EXHIBIT "C" TENANT CONSTRUCTION RULES AND REGULATIONS 1. All demolition, removals and other categories of work that may inconvenience other tenants or disturb building operations must be scheduled and performed before or after normal working hours, and the property manager for the Industrial Complex (the "Property Manager") shall be provided with at least twenty-four (24) hours notice prior to proceeding with such work. 2. All structural and floor loading requirements shall be subject to the prior approval of the Industrial Complex's structural engineer. Approval shall be obtained by Tenant and any fees shall be at Tenant's sole expense. 3. All mechanical (HVAC, plumbing and sprinkler) and electrical requirements shall be subject to the prior approval of Landlord's mechanical and electrical engineers. When necessary, Property Manager will require engineering and shop drawings, which drawings must be approved by Property Manager before the work is started. Drawings shall be prepared by Tenant and all approvals shall be obtained by Tenant. 4. If the shutdown of risers and mains for electrical, HVAC, sprinkler and/or plumbing work is required, such work shall be supervised by a representative of Landlord at Tenant's sole expense at a time approved in advance by Property Manager. 5. Tenant's general contractor is responsible to do all of the following: (a) Properly supervise construction at the Demised Premises at all times. (b) Police the work at all times, continually keeping the affected space(s) safe and orderly. (c) Maintain the cleanliness and protection of all affected areas. (d) Avoid and prevent the disturbance of other tenants. 6. If Tenant's general contractor is negligent in any of its responsibilities, Tenant shall be charged for the corrective work done by Landlord's personnel. 7. No electrical cords are to be stretched across any walkways or public areas in any manner that would cause any safety hazard. 8. Radios may not be played if the sound can be heard in the Common Area or in other tenant suites. 9. Electrical rooms may not be used to store any materials, fixtures, etc. 10. All sprinkler shut downs, draining or filling shall be scheduled and coordinated with the Landlord's chief engineer or his delegate. 11. Bracing, soldering or welding shall be scheduled in advance with Property Manager. 12. Dust shall be kept at a minimum to avoid smoke detector activation. 13. If requested by Tenant, Property Manager shall provide space in the parking lot at a location to be determined by Landlord for a trash and debris bin during construction of the tenant improvements. 14. Damage to ANY pre-installed fixtures (E.G., water fountains, sinks, lights, commodes, signage, etc.) shall be repaired at Tenant's sole expense. 15. Tenant's general contractor shall coordinate the keying, schedule, Tenant's key requirements and cylinder installation with Landlord's designated locksmith. 16. Where appropriate, Tenant shall submit to Property Manager a final "as-built" set of drawings showing all items of work in full detail. "As-builts" shall be sepias or vellums. 1

17. Throughout the construction period and upon conclusion of the work, Tenant's general contractor shall cause the work areas and all other affected areas to be clear and free of debris. 2

EXHIBIT "D" RIGHT OF FIRST OPPORTUNITY Tenant shall have a one-time right of first opportunity ("Right of First Opportunity") to lease all, but not less than all, of the adjacent space in the Industrial Complex known as 1310 Chesapeake Terrace, Sunnyvale, California, containing approximately 40,000 square feet (the "First Opportunity Space"), at such time as the First Opportunity Space becomes "available for lease" (as defined below) during the lease term provided that Tenant is not then in default hereunder beyond any applicable notice and cure period. If the existing lease of the First Opportunity Space should expire or be terminated, the First Opportunity Space shall be deemed "available for lease" and, at such time, Landlord shall give written notice thereof to Tenant ("Landlord's Notice"). Upon receipt of Landlord's Notice, Tenant shall have the opportunity to inspect the First Opportunity Space and conduct reasonable non-invasive investigations therein for the purpose of determining whether Tenant wishes to lease the First Opportunity Space (the "Tenant Inspection"). If Tenant in response to Landlord's Notice elects to lease the First Opportunity Space, Tenant shall so notify Landlord in writing (the "Election Notice"). If Tenant does not deliver to Landlord the Election Notice within the later of (i) ten (10) days after Landlord's delivery of the Landlord's Notice or (ii) three (3) days after Landlord has provided Tenant with the opportunity to conduct the Tenant Inspection, Landlord shall be relieved of its obligation to make available for lease to Tenant the First Opportunity Space and the provisions of this paragraph shall be of no further force or effect. Without limiting the foregoing, upon the non-delivery of the Election Notice by Tenant, Landlord shall be entitled to grant options and rights free and clear of Tenant's Right of First Opportunity under this paragraph to other tenants or prospective tenants of the Industrial Complex. Upon Tenant's TIMELY delivery of the Election Notice with respect to the First Opportunity Space ("Tenant's Timely Notice Delivery Date"), Landlord and Tenant shall promptly enter into an amendment of this lease adding the First Opportunity Space to the Demised Premises on all the terms and conditions set forth in this lease as to the Demised Premises, except that (i) the term of the lease to Tenant of the First Opportunity Space shall commence (the "ROFO Commencement Date") upon the later of (a) the actual availability date of the First Opportunity Space or (b) Tenant's Timely Notice Delivery Date, and shall be coterminous with the remainder of the Demised Premises, (ii) Tenant shall take the First Opportunity Space in its then "AS-IS" condition (except that the First Opportunity Space shall be delivered to Tenant broom-clean and subject to the same warranty by Landlord as is set forth in Section 3.2 of this lease, with the ninety (90) day period to commence as of the ROFO Commencement Date; provided that in no event shall Landlord be required to expend in excess of $25,000.00 to repair any defective or malfunctioning component(s) of any of the building systems enumerated in said Section 3.2) and Landlord shall neither provide nor pay for any interior improvement work or services related to the First Opportunity Space, (iii) the minimum guaranteed rental per rentable square foot payable by Tenant for the First Opportunity Space shall be equal to the minimum guaranteed rental per rentable square foot then payable by Tenant under the lease for the original Demised Premises (with scheduled increases), which minimum guaranteed rental shall commence as of the ROFO Commencement Date, and (iv) Tenant's Proportionate Share shall be increased to reflect the addition of the First Opportunity Space to the Demised Premises. Notwithstanding anything to the contrary contained in this EXHIBIT "D", in the event that Landlord does not deliver a Landlord's Notice to Tenant on or before August 31, 2002, then Tenant shall have the right to terminate this lease upon thirty (30) days notice to Landlord ("Tenant's Termination Notice") provided that (i) the Right of First Opportunity has not previously been relinquished due to Tenant's default under this lease beyond any applicable notice and cure period, and (ii) Tenant's Termination Notice is delivered no later than September 30, 2002. In the event Tenant is entitled to and timely elects to exercise this early termination right, the lease shall terminate thirty (30) days following Landlord's receipt of Tenant's Termination Notice, subject to Tenant's obligations under Section 29.15 of the lease. If Tenant is entitled to exercise this early termination right, but does not timely do so, the lease shall continue in full force and effect through the scheduled expiration of the lease term, and Tenant's Right of First Opportunity under this EXHIBIT "D" shall be null and void and of no further force or effect.

Exhibit 10.7 TABLE OF CONTENTS <TABLE> <CAPTION> PARAGRAPH DESCRIPTION PAGE ------------------------------------------------------------------------------------- <S> <C> <C> BASIC LEASE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v 1. OCCUPANCY AND USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 2. TERMS AND POSSESSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 3. RENT; RENT ADJUSTMENTS; ADDITIONAL CHARGES FOR EXPENSES AND TAXES . . . . . . .2 (A) MONTHLY BASE RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 (B) ADJUSTMENTS IN BASE RENT . . . . . . . . . . . . . . . . . . . . . . . . .2 (C) ADDITIONAL CHARGES FOR EXPENSES AND TAXES . . . . . . . . . . . . . . . . .2 (1) DEFINITIONS OF ADDITIONAL CHARGES: . . . . . . . . . . . . . . . . . .2 (A) "TAX YEAR" . . . . . . . . . . . . . . . . . . . . . . . . . . .2 (B) "TENANT'S SHARE" . . . . . . . . . . . . . . . . . . . . . . . .2 (C) "REAL ESTATE TAXES" . . . . . . . . . . . . . . . . . . . . . . .2 (D) "EXPENSES" . . . . . . . . . . . . . . . . . . . . . . . . . . .3 (E) "EXPENSE YEAR" . . . . . . . . . . . . . . . . . . . . . . . . .4 (2) PAYMENT OF REAL ESTATE TAXES: . . . . . . . . . . . . . . . . . . . .4 (3) PAYMENT OF EXPENSES: . . . . . . . . . . . . . . . . . . . . . . . . .4 (4) OTHER: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 (5) AUDIT: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 (D) LATE CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 4. RESTRICTIONS ON USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 5. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 6. ADDITIONAL ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 7. REPAIR AND MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 8. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 9. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . .8 10. INSURANCE AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .9 11. WAIVER OF SUBROGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 12. SERVICES AND UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 13. TENANT'S CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 14. HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 15. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 16. RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 17. RE-ENTRY BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 18. INSOLVENCY OR BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . 12 19. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 20. DAMAGE BY FIRE, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 21. EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 22. SALE BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 23. RIGHT OF LANDLORD TO PERFORM . . . . . . . . . . . . . . . . . . . . . . . . 14 24. SURRENDER OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 i

32. SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 33. CORPORATE AUTHORITY; FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 14 34. PARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 35. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 36. TENANT'S REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 37. REAL ESTATE BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 38. LEASE EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 39. HAZARDOUS SUBSTANCE LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . 14 40. ARBITRATION OF DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 41. SIGNAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 42. OPTION TO RENEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 43. RENT DURING EXTENSION TERM . . . . . . . . . . . . . . . . . . . . . . . . . 16 44. RIGHT OF NOTICE PRIOR TO SALE . . . . . . . . . . . . . . . . . . . . . . . . 17 </TABLE> EXHIBIT "A" PREMISES EXHIBIT "B" WORKLETTER EXHIBIT "C" RULES AND REGULATIONS EXHIBIT "D" FORM OF TENANT ESTOPPEL CERTIFICATE EXHIBIT "E" DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS EXHIBIT "F" SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT EXHIBIT "G" ENVIRONMENTAL REPORTS ii

BASIC LEASE INFORMATION -------------------------------------------------------------------------------- LEASE DATE: JUNE 12, 1996 LANDLORD: CHARLESTON PLACE ASSOCIATES A CALIFORNIA LIMITED PARTNERSHIP MANAGING AGENT: THE MOZART DEVELOPMENT COMPANY LANDLORD'S AND MANAGING AGENT'S ADDRESS: C/O THE MOZART DEVELOPMENT COMPANY 1068 EAST MEADOW CIRCLE PALO ALTO, CA 94303 TENANT: U.S. ROBOTICS ACCESS CORP. TENANT'S ADDRESS: FOR NOTICE FOR BILLING C/O REAL ESTATE DEPARTMENT SAME AS FOR NOTICE 8100 N. MCCORMICK BLVD. SKOKIE, IL 60076 BUILDINGS: 1585 & 1565 CHARLESTON ROAD, MOUNTAIN VIEW, CALIFORNIA SUITE: ENTIRE BUILDINGS RENTABLE AREA OF THE PREMISES: 75,780 (1585) + 55,800 (1565) = 131,580 SQUARE FEET. RENTABLE AREA OF THE BUILDINGS: 131,580 SQUARE FEET PARKING SPACES: APPROXIMATELY 471 SPACES TENANT'S USE OF THE PREMISES: GENERAL OFFICE, ADMINISTRATION, RESEARCH AND DEVELOPMENT LEASE TERM: TEN (10) YEARS. EARLY OCCUPANCY DATE: OCTOBER 15, 1996 SCHEDULED COMMENCEMENT DATE: NOVEMBER 1, 1996. SCHEDULED EXPIRATION DATE: OCTOBER 31, 2006. TENANT ALLOWANCE: $460,530.00 - SEE EXHIBIT B TENANT'S PLAN DELIVERY DATE: SEE EXHIBIT B OUTSIDE DELIVERY DATE: JANUARY 31, 1997 <TABLE> <CAPTION> RENT: MONTHLY BASE RENT ANNUAL BASE RENT PSF/MONTH TOTAL TOTAL ---------- ----- ----- <S> <C> <C> <C> YEAR 1: $2.15 $282,897.00 $3,394,764.00 YEAR 2: $2.20 $289,476.00 $3,473,712.00 YEAR 3: $2.25 $296,055.00 $3,552,660.00 YEAR 4: $2.30 $302,634.00 $3,631,608.00 YEAR 5: $2.35 $309,213.00 $3,710,556.00 YEAR 6: $2.40 $315,792.00 $3,789,504.00 YEAR 7: $2.45 $322,371.00 $3,868,452.00 YEAR 8: $2.50 $328,950.00 $3,947,400.00 YEAR 9: $2.55 $335,529.00 $4,026,348.00 YEAR 10: $2.60 $342,108.00 $4,105,296.00 </TABLE> BASE RENT ADJUSTMENT: SEE ABOVE TENANT'S SHARE OF EXPENSES AND TAXES ("ADDITIONAL CHARGES"): 100.0% SECURITY DEPOSIT: NONE GUARANTOR OF LEASE: U.S. ROBOTICS CORPORATION BROKER: CB COMMERCIAL (DREW ARVAY/MIKE GRADO) BROKER'S FEE OR COMMISSION, IF ANY, PAID BY: LANDLORD The foregoing Basic Lease Information is hereby incorporated into and made a part of this Lease. Each reference in this Lease to any of the Basic Lease Information shall mean the respective information hereinabove set forth and shall be construed to incorporate all of the terms provided under the particular paragraph pertaining to such information. In the event of any conflict between any Basic Lease Information and the Lease, the latter shall control. iii

LANDLORD: CHARLESTON PLACE ASSOCIATES a California General Partnership By: CHARLESTON VENTURE I LIMITED PARTNERSHIP a California Limited Partnership Its: General Partner By: /s/ [ILLEGIBLE] ----------------------------------- Its: General Partner ----------------------------------- By: COMPETROL REAL ESTATE LIMITED a British Virgin Islands private company Its: General Partner By: /s/ [ILLEGIBLE] ----------------------------------- Its: Executive Vice President ----------------------------------- /s/ [ILLEGIBLE] ----------------------------------- Vice President ----------------------------------- TENANT: U.S. ROBOTICS ACCESS CORP. a Delaware Corporation By: /s/ [ILLEGIBLE] ----------------------------------- Its: Treasurer ----------------------------------- iv

LEASE AGREEMENT THIS LEASE AGREEMENT is made and entered into as of June 12, 1996, by and between CHARLESTON PLACE ASSOCIATES a California general partnership, (herein called "Landlord"), and U.S. ROBOTICS ACCESS CORP., a Delaware corporation, (herein called "Tenant"). Upon and subject to the terms, covenants and conditions hereinafter set forth, Landlord hereby leases to Tenant and Tenant hereby hires from Landlord those premises (the "Premises") comprising the area substantially as outlined in red on the attached EXHIBIT "A", in the buildings (hereinafter referred to as the "Building") specified in the Basic Lease Information attached hereto. The number of square feet designated as Rentable Area of the Premises on the Basic Lease Information may include portions of the Building Common Area attributed to the Premises and not located within the area outlined on EXHIBIT A. The Building, together with the associated land and improvements is referred to as "Project." The term "Common Area" shall mean all areas and facilities within the Project that are not designated by Landlord for the exclusive use of Tenant or any other tenant or other occupant of the Project, including the parking areas, access and perimeter roads, pedestrian sidewalks, landscaped areas, trash enclosures, recreation areas and the like. 1. OCCUPANCY AND USE. Tenant may use and occupy the Premises for the purpose specified in the Basic Lease Information and for no other use or purpose without the prior written consent of Landlord. Landlord shall have the right to grant or withhold consent to a proposed change of use in its sole discretion. Notwithstanding the above, Tenant understands and agrees that a Declaration of Covenants, Conditions and Restrictions ("CC&R's")encumbers the Land and Project and that Tenant's Occupancy and Use of the Premises may be restricted by such encumbrance. If necessary, Tenant shall execute such documents as are reasonably necessary to cause this Lease to become subordinate to such CC&R's (see the attached EXHIBIT E). 2. TERMS AND POSSESSION. (a) The term of this Lease (the "Term") shall be for the period specified in the Basic Lease Information (or until sooner terminated as herein provided). If Landlord, for any reason whatsoever, cannot deliver possession of the Premises to Tenant on the date specified in the Basic Lease Information for the commencement of the Term, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom. In that event, however, the Term of the Lease shall not commence until such commencement date as is determined pursuant to EXHIBIT B. In such event, the scheduled commencement date and scheduled expiration date shall be adjusted accordingly. Payment of Rent and Additional Charges by Tenant due to delay in delivery of the Premises caused by Tenant shall also be governed by EXHIBIT B hereof. Notwithstanding the provisions above and of EXHIBIT B, if the delivery of the Premises is delayed beyond Outside Delivery Date, as set forth in the Basic Lease Information, Tenant shall have the right to terminate this Lease by notifying Landlord in writing of its intent to do so no later than five (5) business days after the Outside Delivery Date. The Outside Delivery Date shall be extended one day for each day of delay caused by (i) Tenant as more particularly set forth in EXHIBIT B hereof and (ii) acts of God, acts of the Government, a shortage of material or labor or other causes beyond the reasonable control of Landlord. The dates upon which the Term shall actually commence and terminate pursuant to this Paragraph 2(a) are herein called the "Commencement Date" and the "Expiration Date," respectively. (b) Completion of the improvements to the Premises and Building shall be governed by the terms and conditions of the separate work letter ("Work Letter"), attached hereto as EXHIBIT "B". (c) The Premises shall be deemed "delivered" and the Term shall commence as defined in EXHIBIT B. (d) Tenant shall, no later than ninety (90) days after the date of issuance by the appropriate governmental agency of a Certificate of Occupancy or its equivalent concerning the Improvements, occupy at least a portion of the Premises. Time is of essence. This subparagraph 2(d) shall not be construed as an obligation of Tenant to continuously occupy the Premises. 3. RENT; RENT ADJUSTMENTS; ADDITIONAL CHARGES FOR EXPENSES AND TAXES. (a) MONTHLY BASE RENT. Commencing on the Commencement Date, except to the extent otherwise provided for in Paragraph 2(c), Tenant shall pay to Landlord throughout the Term the annual rental specified in the Basic Lease Information ("Rent"), which sum shall be payable by Tenant in equal monthly installments on, or, at Tenant's election, before, the first day of each month, in advance, with the first month's rent due upon execution of this Lease Agreement, in lawful money of the United States (without any prior demand therefor and without deduction or offset whatsoever, except as expressly provided for in Paragraphs 20 & 21) to Landlord or its managing agent at the address specified in the Basic Lease Information or to such other firm or to such other place as Landlord or its Managing Agent may from time to time designate in writing. Tenant shall pay to Landlord all charges and other amounts whatsoever as provided in this Lease ("Additional Charges") at the place where the Rent is payable and Landlord shall have the same remedies for a default in the payment of 1

Additional Charges as for a default in the payment of Rent. If the Commencement Date should occur on a day other than the first day of a calendar month, or the Expiration Date should occur on a day other than the last day of a calendar month, then the Rent and Additional Charges for such fractional month shall be prorated on a daily basis. (b) ADJUSTMENTS IN BASE RENT. The monthly base rent under Paragraph 3(a) shall be adjusted as provided in the Basic Lease Information. (c) ADDITIONAL CHARGES FOR EXPENSES AND TAXES. (1) DEFINITIONS OF ADDITIONAL CHARGES: For purposes of this Paragraph 3(c), the following terms shall have the meanings hereinafter set forth: (A) "TAX YEAR" shall mean each twelve (12) consecutive month period commencing January 1st of the calendar year during which the Commencement Date of this Lease occurs, provided that if the taxing authority levies taxes on other than a Calendar year, Landlord, upon notice to Tenant, may change the Tax Year from time to time to any other twelve (12) consecutive month period and, in the event of any such change, Tenant's Share of Real Estate Taxes (as hereinafter defined) shall be equitably adjusted for the Tax Years involved in any such change. (B) "TENANT'S SHARE" shall mean the percentage figure so specified in the Basic Lease Information. (C) "REAL ESTATE TAXES" shall mean all taxes, assessments and charges levied upon or with respect to the Project or any personal property of Landlord used in the operation of thereof, or Landlord's interest in the Project or such personal property. Real Estate Taxes shall include, without limitation, all general real property taxes and general and special assessments, charges, fees or assessments for transit, housing, police, fire or other governmental services or purported benefits to the Building (provided, however, that any refunds of Real Estate Taxes paid by Tenant (as part of Tenant's Share of Real Estate Taxes) shall be credited against Tenant's further obligation to pay Real Estate Taxes during the Term), service payments in lieu of taxes, and any tax, fee or excise on the act of entering into this Lease, or any other lease of space in the Building, or on the use or occupancy of the Building or any part thereof, or on the rent payable under any lease or in connection with the business of renting space in the Building, that are now or hereafter levied or assessed against Landlord by the United States of America, the State of California, or any political subdivision, public corporation, district or any other political or public entity, and shall also include any other tax, fee or other excise, however described, that may be levied or assessed as a substitute for, or as an addition to, in whole or in part, any other Real Estate Taxes, whether or not now customary or in the contemplation of the parties on the date of this Lease. Real Estate Taxes shall not include franchise, transfer, inheritance or capital stock taxes or income taxes measured by the net income of Landlord from all sources unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord as a substitute for, or as an addition to, in whole or in part, any other tax that would otherwise constitute a Real Estate Tax. Additionally, Real Estate Taxes shall not include any assessments or like charges to pay for any remediation o contamination from any Hazardous Substance (defined in Paragraph 39 hereof) existing as of the Commencement Date unless introduced in, on, under or about the Premises by Tenant or Tenant's employees, agents, contractors or invitees. Real Estate Taxes shall also include reasonable legal fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Real Estate Taxes; provided that such fees, costs and disbursements do not exceed the actual savings in Real Estate Taxes obtained by Tenant over the Term of the Lease. In the event that Tenant desires to contest on its own behalf the assessed value of the property as determined by the applicable taxing authority (e.g. the County of Santa Clara), Landlord shall not unreasonably withhold its approval. If any assessments are levied on the Project, Tenant shall have no obligation to pay more than that amount of annual installments of principal and interest that would become due during the Lease Term had Landlord elected to pay the assessment in installment payments, even if Landlord pays the assessment in full. (D) "EXPENSES" shall mean the total costs and reasonable expenses paid or incurred by Landlord in connection with the management, operation, maintenance and repair of the Building, including, without limitation (i) the cost of air conditioning, electricity, steam, heating, mechanical, ventilating, elevator systems and all other utilities and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of repairs and general maintenance and cleaning; (iii) the cost of fire, extended coverage, boiler, sprinkler, public liability, property damage, rent, earthquake (if available at commercially reasonable rates) and other insurance; (iv) fees, charges and other costs, including management fees, consulting fees, legal fees (which are allowed elsewhere in the Lease) and accounting fees, fees of all independent contractors engaged by Landlord directly related to the operation of the Building or reasonably charged by Landlord if Landlord performs management services in connection with the Building, (though the management fee shall not exceed the cap noted in the following paragraph); (v) the cost of any capital improvements made to the Building after the Commencement Date (a) as a labor saving device or to effect other economies in the operation or maintenance of the Building (from which a reasonable person would anticipate that savings 2

would actually result), (b) to repair or replace capital items which are no longer capable of providing the services required of them, or (c) that are made to the Building after the date of this Lease and are required under any governmental law or regulation that was not required to be completed in respect of the Building prior to the date the Lease was executed. The cost of the foregoing capital improvements and any other capital improvements in excess of $2,500 per month ($30,000 per year), the cost of which is the responsibility of Tenant pursuant to this Lease, shall be amortized over the useful life of the capital item in question as determined in accordance with generally accepted accounting principles ("GAAP"), together with interest on the unamortized balance at the rate paid by Landlord on funds borrowed for the purpose of constructing such capital improvements; however, in the event that Landlord is not able to borrow said funds on a nonrecourse basis, then the rate shall be 10% per annum; and (vi) any other reasonable expenses of any other kind whatsoever reasonably incurred in managing, operating, maintaining and repairing the Building, including, but not limited to, costs incurred pursuant to any CC&R's and/or ground lease identified in EXHIBIT E. Any "deductible" amounts relating to capital improvements required to be paid by Tenant hereunder in connection with any casualty policy carried by Landlord shall be amortized over the useful life of the restoration work in accordance with GAAP. Notwithstanding anything to the contrary herein contained, Expenses shall not include, and in no event shall Tenant have any obligation to pay for pursuant to this Paragraph 3 or Paragraph 7(b), (aa) the initial construction cost of the Project or real property on which the Building is located; (bb) the cost of providing tenant improvements to any other tenant; (cc) debt service (including, but without limitation, interest, principal and any impound payments) required to be made on any mortgage or deed of trust recorded with respect to the Building and/or the real property on which the Building is located other than debt service and financing charges imposed pursuant to Paragraph 3(c)(1)(D)(v) above; (dd) the cost of special services, goods or materials provided to any tenant; (ee) depreciation; (ff) the portion of a management fee paid to Landlord or affiliate in excess of two percent (2%) of Rent and Additional Charges (excluding the management fee); (gg) costs occasioned by Landlord's fraud or willful misconduct under applicable laws; (hh) costs for which Landlord has a right of and has received reimbursement from others; (ii) costs to correct any construction or design defects in the original construction of the Premises, the Building or the Project; (jj) costs arising from a disproportionate use of any utility or service supplied by Landlord to any other occupant of the Building to the extent that Landlord has the ability to charge such other tenant for said costs under the terms of a lease comparable to terms governing said costs in this Lease; (kk) repairs, replacement and upgrades to the structural elements of the Building; (ll) environmental pollution remediation related costs for which Landlord has indemnified Tenant pursuant to Paragraph 39; (mm) advertising or promotional costs; and (nn) leasing commissions. All costs and expenses shall be determined in accordance with generally accepted accounting principles which shall be consistently applied (with accruals appropriate to Landlord's business). Expeses shall not include specific costs incurred for the account of, separately billed to and paid by specific tenants. (E) "EXPENSE YEAR" shall mean each twelve (12) consecutive month period commencing January 1 of the calendar year during which the Commencement Date of the Lease occurs, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenant's Share of Expenses shall be equitably adjusted for the Expense Years involved in any such change. (2) PAYMENT OF REAL ESTATE TAXES: With reasonable promptness after Landlord has received the tax bills for any Tax Year, Landlord shall furnish Tenant with a statement (herein called "Landlord's Tax Statement") setting forth the amount of Real Estate Taxes for such Tax Year, and Tenant's Share thereof. Unless otherwise required in Paragraph 3(c)4 below, Tenant shall pay to Landlord actual Real Estate Taxes no later than twenty (20) days prior to the due date of such Real Estate Tax installment. (3) PAYMENT OF EXPENSES: Commencing on the Commencement Date, unless otherwise provided for in Paragraph 3(a), Tenant shall pay to Landlord as Additional Charges one-twelfth (1/12th) of Tenant's Share of the Expenses for each Expense Year on or before the first day of each month of such Expense Year, in advance, in an amount reasonably estimated by Landlord and billed by Landlord to Tenant, and Landlord shall have the right initially to determine monthly estimates and to revise such estimates from time to time. With reasonable promptness after the expiration of each Expense Year, Landlord shall furnish Tenant with a statement (herein called "Landlord's Expense Statement"), setting forth in reasonable detail the Expenses for such Expense Year and Tenant's Share thereof. If the actual Expenses for such Expense Year exceed the estimated Expenses paid by Tenant for such Expense Year, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual Expenses within thirty (30) days after the receipt of Landlord's Expense Statement, and if the total amount paid by Tenant for any such Expense Year shall exceed the actual Expenses for such Expense Year, such excess shall be credited against the next installment of the estimated Expenses due from Tenant to Landlord hereunder or if the Term has ended it shall be returned to Tenant within thirty (30) days. Any utility rebates for the Project which Landlord receives for payments made by Tenant (as part of Tenant's Share of Expenses) shall be forwarded to Tenant so long as such rebate is received within one year following the Expiration Date or sooner termination of the Lease. If it has been determined that Tenant has overpaid Expenses during the last year of the Lease Term (including rebates of utilities applicable to Tenant), then Landlord shall reimburse Tenant for such overage on or before the thirtieth (30th) day following the Expiration Date. 3

(4) OTHER: To the extent any item of Real Estate Taxes or Expenses is payable by Landlord in advance of the period to which it is applicable (e.g. insurance and tax escrows required by Landlord's Lender), or to the extent that prepayment is customary for the service or matter, Landlord may (i) include such items in Landlord's estimate for periods prior to the date such item is to be paid by Landlord and (ii) to the extent Landlord has not collected the full amount of such item prior to the date such item is to be paid by Landlord, Landlord may include the balance of such full amount in a revised monthly estimate for Additional Charges. If the Commencement Date or Expiration Date shall occur on a date other than the first day of a Tax Year and/or Expense Year, Tenant's share of Real Estate Taxes and Expenses, for the Tax Year and/or Expense Year in which the Commencement Date occurs shall be prorated. (5) AUDIT: Within ninety (90) days after receipt of any Expense Statement or Tax Statement from Landlord, Tenant shall have the right to examine Landlord's books and records relating to such Expense Statements and Tax Statements, or cause an independent audit thereof to be conducted by an accounting firm to be selected by Tenant and subject to the reasonable approval of Landlord. If the audit conclusively proves that Tenant has overpaid either Expenses or Real Estate Taxes, then Landlord shall promptly reimburse Tenant for such overage, and if such overage exceeds five percent (5%) of the actual amount of Expenses or Real Estate Taxes paid by Landlord for the Tax or Expense Year covered by such audit, then Landlord shall bear the cost of such audit, up to a maximum cost of $5,000. If Tenant fails to object to any such Expense Statement or Tax Statement or request an independent audit thereof within such ninety (90) day period, such Expense Statement and/or Tax Statement shall be final and shall not be subject to any audit, challenge or adjustment. (d) LATE CHARGES. Tenant recognizes that late payment of any Rent or Additional Charges will result in administrative expenses to Landlord, the extent of which additional expense is extremely difficult and economically impractical to ascertain. Tenant therefore agrees that if any Rent or Additional Charges remain unpaid ten (10) days after such amount is due, the amount of such unpaid Rent or Additional Charges shall be increased by a late charge to be paid to Landlord by Tenant in an amount equal to four percent (4%) of the amount of the delinquent Rent or Additional Charges. Tenant shall be excused once each twelve (12) month period of the Term from the application of a late fee to any Rent or Additional Charge which became delinquent without a prior written invoice or other notice of Landlord; provided, however, the late fee shall nevertheless be payable if Tenant does not cure the delinquency within ten (10) days after written notice from Landlord. In addition, any outstanding Rent, Additional Charges, late charges and other outstanding amounts shall accrue interest at an annualized rate of the greater of, 10% or The Federal Reserve Discount Rate plus 5%, until paid to Landlord. Tenant agrees that such amount is a reasonable estimate of the loss and expense to be suffered by Landlord as a result of such late payment by Tenant and may be charged by Landlord to defray such loss and expense. The provisions of this Paragraph 3(d) in no way relieve Tenant of the obligation to pay Rent or Additional Charges on or before the date on which they are due, nor do the terms of this Paragraph 3(d) in any way affect Landlord's remedies pursuant to Paragraph 19 in the event any Rent or Additional Charges are unpaid after the date due. 4. RESTRICTIONS ON USE. Tenant shall not do or permit anything to be done in or about the Premises which will obstruct or interfere with the rights of other tenants or occupants of the Building or the Project or injure or annoy them, nor use or allow the Premises to be used for any unlawful purpose, nor shall Tenant cause or maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer the commission of any waste in, on or about the Premises. 5. COMPLIANCE WITH LAWS. Tenant shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated. Tenant shall not do or permit anything to be done in or about the Premises or bring or keep anything therein which will in any way increase the rate of any insurance upon the Project or any of its contents (unless Tenant agrees to pay for such increase) or cause a cancellation of such insurance or otherwise affect such insurance in any manner, and Tenant shall at its sole cost and expense promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force and with the requirements of any board of fire underwriters or other similar body now or hereafter constituted relating to or affecting the condition, use or occupancy of the Premises, to the extent required because of (i) Tenant's unique use of the Premises, (ii) alterations or improvements made by or for Tenant, or (iii) Tenant's negligence or willful misconduct. In the event of a conflict between the provisions this Paragraph 5 and Paragraph 3 of the Lease, Paragraph 3 shall control. The judgment of any court of competent jurisdiction or the admission of Tenant in an action against Tenant, whether Landlord be a party thereto or not, that Tenant has so violated any such law, statute, ordinance, rule, regulation or requirement, shall be conclusive of such violation as between Landlord and Tenant. 6. ADDITIONAL ALTERATIONS. Tenant shall not make or suffer to be made any additional alterations, additions or improvements ("Alterations") in, on or to the Premises or any part thereof without the prior written consent of Landlord. Failure of Landlord to give its disapproval within fifteen (15) calendar days after receipt of Tenant's written request for approval shall constitute approval by Landlord, unless Landlord shall 4

make a reasonable request for additional information. Tenant's written request shall include the following information, (a) 1/8' scale plans and engineering drawings noting the improvements, (b) specifications and finish schedule, (c) contractor information, (d) other information that Landlord may reasonably require. In the event Landlord disapproves of an alteration, addition or improvement which requires Landlord's consent hereunder, such disapproval shall be in writing and shall state Landlord's reasons therefor with reasonable specificity. Landlord shall not unreasonably withhold it approval to such request. Any alterations in, on or to the Premises, except for Tenant's movable furniture and equipment, shall be the property of Tenant during the Term and shall become Landlord's property at the end of the Term without compensation to Tenant. Landlord shall not unreasonably withhold its consent to Alterations that (i) do not materially and adversely affect the structure of the Building or its electrical, plumbing, HVAC, security or other systems, (ii) are not visible from the exterior of the Premises, and (iii) are consistent with Tenant's permitted use hereunder and (iv) are of the same general character as the tenant improvements existing when the Premises were delivered to Tenant. In the event Landlord consents to the making of any Alterations by Tenant, the same shall be made by Tenant, at Tenant's sole cost and expense, in accordance with plans and specifications reasonably approved by Landlord, and any contractor or person selected by Tenant to make the same must first be reasonably approved in writing by Landlord or, at Landlord's option, the Alterations shall be made by Landlord (substantially in accordance with the terms of the Work Letter attached hereto to the extent applicable to such alterations) for Tenant's account and Tenant shall reimburse Landlord for the cost thereof (including a reasonable charge for Landlord's overhead) within twenty (20) days after receipt of a statement from Landlord therefor. Upon the expiration or sooner termination of the Term, Tenant shall upon demand by Landlord, at Landlord's election either (i) at Tenant's sole cost and expense, forthwith and with all due diligence remove any Alterations made by or for the account of Tenant, designated by Landlord to be removed (provided, however, that upon the written request of Tenant prior to installation of such Alterations, Landlord shall advise Tenant at that time whether or not such Alterations must be removed upon the expiration or sooner termination of this Lease), and restore the Premises to its original condition as of the Commencement Date, subject to normal wear and tear and the rights and obligations of Tenant concerning casualty damage pursuant to Paragraph 20 or (ii) pay Landlord the reasonable estimated cost thereof. 7. REPAIR AND MAINTENANCE. (a) Landlord shall be responsible for the following repair and maintenance obligations: (i) maintenance and repair of the exterior, roof and structural portions of the Building, (ii) repairs and maintenance of the Building systems for electrical, mechanical, HVAC or plumbing and all controls appurtenant thereto, and (iii) parking areas, courtyards, sidewalks, entry ways, lawns, landscaping and other similar facilities of the Project. In the event that Tenant desires to directly manage the maintenance of the mechanical and HVAC systems or the plumbing and all controls appurtenant thereto (though Tenant shall have the option to be responsible for these items, so long as Tenant complies with Landlord's reasonable requests concerning the management thereof), then Landlord agrees to not unreasonably withhold its approval so long as Tenant adequately maintains such equipment, as reasonably determined by Landlord. Tenant shall have the authority to communicate directly with Landlord's roof maintenance company. In emergency situations, Tenant shall have the authority to contact directly any venders approved by Landlord and order repairs. In the event that Landlord fails to pursue its duties as noted above within thirty (30) days of written request from Tenant, excepting structural changes, then Tenant shall have the right to contact any venders approved by Landlord and directly contract for said repairs and maintenance provided that Tenant agrees to pay for the cost of said repairs and maintenance. Tenant shall have the right to request that Landlord reimburse Tenant for said costs pursuant to the provisions of Paragraph 3. In the event of disagreement between Landlord and Tenant over the matter, Tenant shall have the right to utilize the arbitration provisions of Paragraph 40. In the event that arbitration is pursued and it is determined that Landlord shall reimburse Tenant for such costs, then Tenant shall have the right to offset such costs against payments of Expenses due under the Lease. (b) Tenant shall maintain and repair the interior portion of the Premises and any additional tenant improvements, alterations or additions installed by or on behalf of Tenant within the Premises, however, excluding any portions thereof which are structural in nature or which are the obligation of Landlord under Paragraph 7(a) Tenant shall be responsible for the expense of installation, operation, and maintenance of its telephone and other communications cabling from the point of entry into the Building to the Premises and throughout the Premises; though Landlord shall have the right to perform such work on behalf of Tenant in Common Areas. Tenant hereby waives and releases its right to make repairs at Landlord's expense under Sections 1941 and 1942 of the California Civil Code or under any similar law, statute or ordinance now or hereafter in effect. In addition, Tenant hereby waives and releases its right to terminate this Lease under Section 1932(1) of the California Civil Code or under any similar law, statute or ordinance now or hereafter in effect. If Tenant fails after thirty (30) days' written notice by Landlord to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by Landlord at the expense of Tenant and the expenses thereof incurred by Landlord shall be reimbursed immediately as Additional Rent within thirty (30) days after submission of a bill or statement therefor. 5

(c) The purpose of Paragraph 7(a) and 7(b) is to define the obligations of Landlord and Tenant to perform various repair and maintenance functions; the allocation of the costs therefor are covered under this Paragraph 7(c) and Paragraph 3. Tenant shall bear the full cost of repairs or maintenance interior or exterior, structural or otherwise, to preserve the Premises and the Building in good working order and condition, arising out of (i) the performance or existence of any alteration or modification to the Premises made by Tenant; (ii) the installation, use or operation of Tenant's property or fixtures; (iii) the moving of Tenant's property or fixtures in or out of the Building or in and about the Premises; or (iv) except to the extent any claims arising from any of the foregoing are reimbursed by insurance carried by Landlord, are covered by the waiver of subrogation in Paragraph 11 or are otherwise provided for in Paragraph 20, the acts, omissions or negligence of Tenant, or any of its servants, employees, contractors, agents, visitors, or licensees, or the particular use or particular occupancy or manner of use or occupancy of the Premises by Tenant or any such person. (d) Except to the extent any claims arising from any of the foregoing are reimbursed by insurance carried by Landlord, are covered by the waiver of subrogation in Paragraph 11 or are otherwise provided for in Paragraph 20, there shall be no abatement of Rent with respect to, and except for Landlord's active negligence or willful misconduct, Landlord shall not be liable for any injury to or interference with Tenant's business arising from, any repairs, maintenance, alteration or improvement in or to any portion of the Building, including the Premises, or in or to the fixtures, appurtenances and equipment therein. (e) When feasible, Landlord will give Tenant reasonable prior notice of its intent to construct capital improvements in excess of $30,000 per year and Tenant shall have the right to contest such capital improvements so long as Tenant agrees to indemnify and defend Landlord from costs and other liabilities arising out of not immediately pursuing such capital improvements. 8. LIENS. Tenant shall keep the Premises free from any liens arising out of any work performed, material furnished or obligations incurred by Tenant. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith shall be considered Additional Charges and shall be payable to it by Tenant on demand with interest at the maximum rate permitted by law. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper, for the protection of Landlord, the Premises, the Building and any other party having an interest therein, from mechanics' and materialmen's liens, and Tenant shall give notice to Landlord at least five (5) business days' prior notice of commencement of any construction on the Premises. 9. ASSIGNMENT AND SUBLETTING. (a) Tenant shall not directly or indirectly, voluntarily or by operation of law, sell, assign, encumber, pledge or otherwise transfer or hypothecate all or any part of the Premises or Tenant's leasehold estate hereunder (collectively, "Assignment"), or permit the Premises to be occupied by anyone other than Tenant or sublet the Premises (collectively, "Sublease") or any portion thereof without Landlord's prior written consent in each instance, which consent shall not be unreasonably withheld by Landlord. Without otherwise limiting the criteria upon which Landlord may withhold its consent to any proposed Sublease or Assignment, if Landlord withholds its consent where either (i) the creditworthiness of the proposed Sublessee or Assignee is not reasonably acceptable to Landlord or, (ii) the proposed Sublessee's or Assignee's use of the Premises is not in compliance with the allowed Tenant's Use of the Premises as described in the Basic Lease Information, such withholding of consent shall be presumptively reasonable. If Landlord consents to the Sublease or Assignment, Tenant may thereafter enter into a valid Sublease or Assignment upon the terms and condition set forth in this Paragraph 9. (b) If Tenant desires at any time to enter into an Assignment of this Lease or a Sublease of the Premises or any portion thereof, it shall first give written notice to Landlord of its desire to do so, which notice shall contain (i) the name of the proposed assignee, subtenant or occupant; (ii) the name of the proposed assignee's, subtenant, or occupant's business to be carried on in the Premises; (iii) the terms and provisions of the proposed Assignment or Sublease; and (iv) such financial information as Landlord may request concerning the proposed assignee, subtenant or occupant. (c) At any time within fifteen (15) days after Landlord's receipt of the notice specified in Paragraph 9(b), Landlord may by written notice to Tenant elect to (i) sublease itself the portion of the Premises specified in Tenant's notice (so long as Tenant requests a sublease of more than 80% of the Premises); (ii) take an Assignment of Tenant's leasehold estate specified in Tenant's notice hereunder (so long as Tenant requests an assignment of more than 80% of the Premises); (iii) terminate this Lease as to the portion of the Premises that is specified in Tenant's notice (so long as the portion of the Premises involved constitutes more than 80% of the 6

Premises), with a proportionate abatement in Rent and Additional Charges; (iv) consent to the Sublease or Assignment; or (v) disapprove the Sublease or Assignment. Notwithstanding anything in this Paragraph 9(c) to the contrary, Landlord shall not have the rights set forth in (i), (ii) and (iii) of this Paragraph 9(c) unless (A) Tenant, in its notice to Landlord, states that it desires to sublease or assign the Lease with respect to all of the Premises for substantially all of the unexpired term of the Lease (meaning that less than one year remains on the initial Term after the end of the applicable sublease or assignment term), (B) the sublease or assignment is not to an "affiliate" (hereinafter defined) or made in connection with a "Permitted Transfer" (hereinafter defined), and (C) Landlord relieves and releases Tenant from any obligations under the Lease accruing after the effective date of such assignment or sublease. In the event Landlord elects to Sublease or take an Assignment from Tenant as described in clauses (i) and (ii) above, the rent payable by Landlord shall be the lower of that set forth in Tenant's notice or the Rent payable by Tenant under this Lease at the time of the Assignment or Sublease (or a proportionate amount thereof representing the portion of the Premises subject to the Assignment or Sublease if less than the entire Premises is subject to the Assignment or Sublease). In the event Landlord elects any of the options set forth in clauses (i), (ii), or (iii) above, with respect to a portion of the Premises, Tenant shall at all times provide reasonable and appropriate access to such portion of the Premises and use of any common facilities, and Landlord shall have the right to use such portion of the Premises for any legal purpose in its sole discretion and the right to further assign or sublease the portion of the Premises subject to Landlord's election without the consent of Tenant. If Landlord consents to the Sublease or Assignment within said fifteen (15) day period, Tenant may thereafer within one hundred twenty (120) days after Landlord's consent, but not later than the expiration of said one hundred twenty (120) days, enter into such Assignment or Sublease of the Premises or portion thereof upon the terms and conditions set forth in the notice furnished by Tenant to Landlord pursuant to Paragraph 9(b). Additionally, Tenant shall be allowed to retain sublease profits in the event Landlord consents to a sublease. Failure by Landlord to either consent or refuse such consent to a proposed assignment, encumbrance or sublease within the fifteen (15) day time period specified above shall be deemed to be Landlord's consent thereto. In the event that Landlord disapproves of a proposed assignment, encumbrance or sublease which requires Landlord's consent hereunder, such disapproval shall be in writing and state Landlord's reasons therefor with reasonable specificity. (d) Except as otherwise provided to the contrary in Paragraph 9(c) clause (A), (B) and (C) hereof in connection with Landlord's recapture rights, no consent by Landlord to any Assignment or Sublease by Tenant shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after the Assignment or Sublease. The consent by Landlord to any Assignment or Sublease shall not relieve Tenant from the obligation to obtain Landlord's express written consent to any other Assignment or Sublease. Any Assignment or Sublease that is not in compliance with this Paragraph 9 shall be void and, at the option of Landlord, shall constitute a material default by Tenant under this Lease. The acceptance of Rent or Additional Charges by Landlord from a proposed assignee or sublessee shall not constitute the consent to such Assignment or Sublease by Landlord. (e) The following shall be deemed a voluntary assignment of Tenant's interest in this Lease: (i) any dissolution, merger, consolidation, or other reorganization of Tenant; and (ii) if the capital stock of Tenant is not publicly traded, the sale or transfer to one person or entity stock possessing more than fifty percent (50%) of the total combined voting power of all classes of Tenant's stock issued, outstanding and entitled to vote for the election of directors. Notwithstanding anything to the contrary contained in this Paragraph 9, Tenant may enter into any of the following transfers (a "Permitted Transfer") without Landlord's prior written consent: (1) Tenant may assign its interest in the Lease to a corporation which results from a merger, consolidation or other reorganization, so long as the surviving corporation has a net worth immediately following such transaction that is equal to or greater than the net worth of Tenant as of the date immediately prior to such transaction; and (2) Tenant may assign this Lease to a corporation which purchases or otherwise acquires all or substantially all of the assets of Tenant, so long as such acquiring corporation has a net worth immediately following such transaction that is equal to or greater than the net worth of Tenant as of the date immediately prior to such transaction. (f) Each assignee, sublessee or other transferee, other than Landlord, shall assume, as provided in this Paragraph 9(f), all obligations of Tenant under this Lease and shall be and remain liable jointly and severally with Tenant for the payment of Rent and Additional Charges, and for the performance of all the terms, covenants, conditions and agreements herein contained on Tenant's part to be performed for the Term; provided, however, that the assignee, sublessee, mortgagee, pledgee or other transferee shall be liable to Landlord for rent only in the amount set forth in the Assignment or Sublease and shall only be required to perform those obligations under the Lease to the extent that they relate to the portion of the Premises subleased or interest in the Lease assigned. No Assignment shall be binding on Landlord unless the assignee or Tenant shall deliver to Landlord a counterpart of the Assignment and an instrument in recordable form that contains a covenant of assumption by the assignee satisfactory in substance and form to Landlord, consistent with the requirements of this Paragraph 9(f), but the failure or refusal of the assignee to execute such instrument of assumption shall not release or discharge the assignee from its liability as set forth above. (g) Landlord will approve within ten (10) days of receipt of written notice the assignment of Tenant's interest in the lease or sublease of the Premises by Tenant to an affiliate provided that (i) the affiliate delivers to the Landlord concurrent with such assignment a written notice of the assignment and an assumption agreement whereby the affiliate assumes and agrees to perform, observe and abide by the terms, conditions, obligations, and provisions of this lease, and (ii) the entity remains an affiliate. No subletting or assignment by Tenant made pursuant to this Paragraph shall relieve Tenant of Tenant's obligations under this Lease. As used 7

herein, the term "affiliate" shall mean and collectively refer to a corporation or other entity which controls, is controlled by or is under common control with Tenant, by means of an ownership of more than fifty percent (50%) of the outstanding voting shares of stock. 10. INSURANCE AND INDEMNIFICATION. (a) Landlord shall indemnify and hold Tenant harmless from and against any and all claims or liability for any injury or damage to any person or property including any reasonable attorney's fees (but excluding any consequential damages or loss of business) occurring in, on, or about the Project to the extent such injury or damage is caused by the negligence or willful misconduct of Landlord, its agents, servants, contractors, employees (collectively, including Landlord, "Landlord Parties"). (b) Landlord shall not be liable to Tenant, and Tenant hereby waives all claims against Landlord Parties for any injury or damage to any person or property in or about the Premises by or from any cause whatsoever (other than the negligence or willful misconduct of Landlord Parties, including Landlord's negligence or willful misconduct as related to construction or property management), and without limiting the generality of the foregoing, whether caused by water leakage of any character from the roof, walls, basement, or other portion of the Premises or the Building, or caused by gas, fire, oil, electricity, or any cause whatsoever, in, on, or about the Premises, the Building or any part thereof (other than that caused by the negligence or willful misconduct of Landlord Parties). Tenant acknowledges that any casualty insurance carried by Landlord will not cover loss of income to Tenant or damage to the alterations in the Premises installed by Tenant or Tenant's personal property located within the Premises. Tenant shall be required to maintain the insurance described in Subparagraph 10(d) below during the Term. (c) Except to the extent caused by the negligence or willful misconduct of Landlord Parties, Tenant shall indemnify and hold Landlord harmless from and defend Landlord against any and all claims or liability for any injury or damage to any person or property whatsoever: (i) occurring in or on the Premises; or (ii) occurring in, on, or about any other portion of the Project to the extent such injury or damage shall be caused by the negligence or willful misconduct by Tenant, its agents, servants, employees, or invitees (collectively, including Tenant, "Tenant Parties"). Tenant further agrees to indemnify and hold Landlord harmless from, and defend Landlord against, any and all claims, losses, or liabilities (including damage to Landlord's property) arising from (x) any breach of this Lease by Tenant and/or (y) the conduct of any work or business of Tenant Parties in or about the Project, including, but not limited to any release, discharge, storage or use of any hazardous substance, hazardous waste, toxic substance, oil, explosives, asbestos, or similar material. In the event of a discrepancy between the terms of this paragraph and the terms of Paragraph 39 of the Lease concerning Hazardous Substance liability, the latter shall control. (d) Tenant shall procure at its cost and expense and keep in effect during the Term the following insurance: (i) commercial general liability insurance including contractual liability with a minimum combined single limit of liability of Three Million Dollars ($3,000,000). Such insurance shall name Landlord as an additional insured, shall specifically include the liability assumed hereunder by Tenant, and shall provide that it is primary insurance, and not excess over or contributory with any other valid, existing, and applicable insurance in force for or on behalf of Landlord, and shall provide that Landlord shall receive thirty (30) days' written notice from the insurer prior to any cancellation or change of coverage; (iii) "all risk" property insurance (including, without limitation, boiler and machinery (if applicable); sprinkler damage, vandalism and malicious mischief) on all leasehold improvements installed in the Premises by Tenant at its expense (if any), and on all Tenant's personal property. Tenant shall be allowed to have reasonable deductibles under its insurance coverage. Such insurance shall be an amount equal to full replacement cost of the aggregate of the foregoing and shall provide coverage comparable to the coverage in the standard ISO All Risk form, when such form is supplemented with the coverages required above; (iv) worker's compensation insurance; and (v) such other insurance as may be required by the law. Tenant shall deliver certificates thereof to Landlord on or before the Commencement Date, and thereafter at least thirty (30) days before the expiration dates of expiring policies; and, in the event Tenant shall fail to procure such insurance, or to deliver certificates, Landlord may, at its option, procure same for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Charges within five (5) days after delivery to Tenant of bills therefor. (e) The provisions of this paragraph 10 shall survive the expiration or termination of this Lease with respect to any claims or liability occurring prior to such expiration or termination. (f) Landlord shall maintain insurance on the Project against fire and risks covered by "all risk" (excluding earthquake and flood, though Landlord, at its option, may include this coverage) on a 100% of "replacement cost" basis (though reasonable deductibles may be included under such coverage - excepting earthquake coverage, such deductibles shall not exceed 10% or replacement cost). Landlord's insurance shall also cover the improvements installed by Landlord prior to the commencement of the Term, shall have a building ordinance provision, and shall provide for rental interruption insurance covering a period of twelve (12) full 8

months. In no event shall Landlord be deemed a co-insurer under such policy. Landlord shall also maintain contractual liability coverage (or with contractual liability endorsement) on an occurrence basis in amounts not less than Three Million Dollars ($3,000,000) per occurrence with respect to bodily injury or death and property damage. Notwithstanding the foregoing obligations of Landlord to carry insurance, Landlord may modify the foregoing coverages if and to the extent it is commercially reasonable to do so. 11. WAIVER OF SUBROGATION. Notwithstanding anything to the contrary in this Lease, to the extent that this waiver does not invalidate or impair their respective insurance policies, the parties hereto release each other and their respective agents, employees, successors, assignees and subtenants from all liability for injury to any person or damage to any property that is caused by or results from a risk (i) which is actually insured against, to the extent of receipt of payment under such policy (unless the failure to receive payment under any such policy results from a failure of the insured party to comply with or observe the terms and conditions of the insurance policy covering such liability, in which event, such release shall not be so limited), (ii) which is required to be insured against under this Lease, or (iii) which would normally be covered by the standard form of "all risk-extended coverage" casualty insurance, without regard to the negligence or willful misconduct of the entity so released. Landlord and Tenant shall each obtain from their respective insurers under all policies of fire, theft, and other property insurance maintained by either of them at any time during the Term insuring or covering the Project or any portion thereof of its contents therein, a waiver of all rights of subrogation which the insurer of one party might otherwise, if at all, have against the other party, and Landlord and Tenant shall each indemnify the other against any loss or expense, including reasonable attorneys' fees, resulting from the failure to obtain such waiver. 12. SERVICES AND UTILITIES. (a) Landlord shall provide the maintenance and repairs described in paragraph 7(a), except for damage occasioned by the act of Tenant, which damage shall be repaired by Landlord at Tenant's expense. (b) Subject to the provisions elsewhere herein contained and to the rules and regulations of the Building, Tenant shall be responsible for arranging for, and direct payment of the cost of, garbage pickup, janitorial, water, electricity, gas, telephone and any and all other utilities and services; and, Landlord shall cooperate with Tenant's efforts to arrange such services. Tenant agrees at all times to cooperate fully with Landlord and to abide by all the reasonable regulations and requirements which Landlord may prescribe for the proper functioning and protection of the heating, ventilating and air conditioning system. (c) Tenant will not without the written consent of Landlord, which consent shall not be unreasonably withheld or delayed, use any apparatus or device in the Premises which, when used, puts an excessive load on the Building or its structure or systems. (d) Landlord shall not be in default hereunder or be liable for any damages directly or indirectly resulting from, nor shall the rental herein reserved be abated by reason of (i) the installation, use or interruption of use of any equipment in connection with the foregoing utilities and services; (ii) failure to furnish or delay in furnishing any services to be provided by Landlord when such failure or delay is caused by Acts of God or the elements, labor disturbances of any character, any other accidents or other conditions beyond the reasonable control of Landlord, or by the making of repairs or improvements to the Premises or to the Building; or (iii) the limitation, curtailment, rationing or restriction on use of water or electricity, gas or any other form of energy or any other service or utility whatsoever serving the Premises or the Building. Furthermore, Landlord shall be entitled to cooperate voluntarily in a reasonable manner with the efforts of national, state or local governmental agencies or utilities suppliers in reducing energy or other resources consumption. 13. TENANT'S CERTIFICATES. Tenant, at any time and from time to time, within twenty (20) days from receipt of written notice from Landlord, will execute, acknowledge and deliver to Landlord and, at Landlord's request, to any prospective tenant, purchaser, ground or underlying lessor or mortgagee of any part of the Building or the land upon which the Building is located or any other party acquiring an interest in Landlord, a certificate of Tenant substantially in the form attached as EXHIBIT "D" and also containing any other information that may reasonably be required by any of such persons. It is intended that any such certificate of Tenant delivered pursuant to this Paragraph 13 may be relied upon by Landlord and any prospective tenant, purchaser, ground or underlying lessor or mortgagee of any part of the Building or the land upon which the Building is located, or such other party. If requested by Tenant, Landlord shall provide Tenant with a similar certificate. 14. HOLDING OVER. Any holding over after the expiration of the Term with the consent of Landlord shall be construed to be a tenancy from month to month at one hundred twenty-five percent (125%) of the Rent herein specified together with an amount estimated by Landlord for the monthly Rent and Additional Charges payable under this Lease, and shall otherwise be on the terms and conditions herein specified so far as applicable. Any holding over without Landlord's consent shall constitute a default by Tenant and entitle Landlord to re-enter the Premises as provided in Paragraph 19. 15. SUBORDINATION. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, this Lease shall be subject and subordinate at all times to: (i) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Building or the land upon which the Building is situated or both; and (ii) the lien of any mortgage or deed of trust which may now exist or hereafter be executed in any amount for which the Building, land, ground leases or underlying 9

leases, or Landlord's interest or estate in any of said items, is specified as security. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated any such ground leases or underlying leases or any such liens to this Lease. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest to Landlord at the option of such successor in interest. Notwithstanding anything to the contrary contained herein, this Lease shall not be subject or subordinate to any ground or underlying lease or to any lien, mortgage, deed of trust or other security interest affecting the Premises, unless the ground lessor, lender or other holder of the interest to which this lease would be subordinated executes a reasonable recognition and non-disturbance agreement which provides that Tenant shall be entitled to continue in possession of the Premises on the terms and conditions of this Lease if and for so long as Tenant fully performs all of its obligations hereunder. Tenant covenants and agrees to execute and deliver upon demand by Landlord and in the form requested by Landlord and reasonably acceptable to Tenant (Tenant has approved the form of the subordination, non-disturbance and attornment agreement attached as EXHIBIT F), any additional documents evidencing the priority or subordination of this Lease with respect to any such ground leases or underlying leases or the lien of any such mortgage or deed of trust. Tenant shall execute, deliver and record any such documents within twenty (20) days after Landlord's written request. 16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the rules and regulations attached to this Lease as EXHIBIT "C" and all reasonable modifications thereof and additions thereto from time to time put into effect by Landlord. Landlord shall not be responsible for the nonperformance by any other Tenant or occupant of the Building or the Project of any said rules and regulations. In the event of an express and direct conflict between the terms, covenants, agreements and conditions of this Lease and those set forth in the rules and regulations, as modified and amended from time to time by Landlord, this Lease shall control. 17. RE-ENTRY BY LANDLORD. Landlord reserves and shall at all reasonable times, upon reasonable prior notice (except in the case of an emergency), and subject to Tenant's reasonable security precautions and the right of Tenant to accompany Landlord at all times, have the right to re-enter the Premises to inspect the same, to supply janitor service and any other service to be provided by Landlord to Tenant hereunder (unless Tenant is supplying such service), to show the Premises to prospective purchasers, mortgagees or tenants (as to prospective tenants, only during the last twelve (12) months of the Lease Term), to post notices of nonresponsibility or as otherwise required or allowed by this Lease or by law, and to alter, improve or repair the Premises and any portion of the Building and may for that purpose erect, use, and maintain scaffolding, pipes, conduits, and other necessary structures in and through the Premises where reasonably required by the character of the work to be performed. Landlord shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance or other damage arising from Landlord's entry and acts pursuant to this Paragraph and Tenant shall not be entitled to an abatement or reduction of rent or Additional Charges if Landlord exercises any rights reserved in this paragraph. Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby, except for Landlord's negligence or willful misconduct. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to un-lock all of the doors in, upon and about the Premises, excluding Tenant's vaults and safes, or special security areas (designated in advance), and Landlord shall have the right to use any and all means which Landlord may deem necessary or proper to open said doors in an emergency, in order to obtain entry to any portion of the Premises, and any entry to the Premises, or portion thereof obtained by Landlord by any of said means, or otherwise, shall not under any emergency circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction, actual or constructive, of Tenant from the Premises or any portions thereof. Landlord shall use best efforts during re-entry to not unreasonably interfere with Tenant's use of the Premises or its business conducted therein. 18. INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take possession of all or substantially all of the assets of Tenant, or an assignment of Tenant for the benefit of creditors, or any action taken or suffered by Tenant under any insolvency, bankruptcy, reorganization or other debtor relief proceedings, whether now existing or hereafter amended or enacted, shall at Landlord's option constitute a breach of this Lease by Tenant unless a petition in bankruptcy, or receiver attachment, or other remedy pursued by a third party is discharged within sixty (60) days. Upon the happening of any such event or at any time thereafter, this Lease shall terminate five (5) days after written notice of termination from Landlord to Tenant. In no event shall this Lease be assigned or assignable by operation of law or by voluntary or involuntary bankruptcy proceedings or otherwise and in no event shall this Lease or any rights or privileges hereunder be an asset of Tenant under any bankruptcy, insolvency, reorganization or other debtor relief proceedings. 19. DEFAULT. (a) The failure to perform or honor any covenant, condition or representation made under this Lease shall constitute a "default" hereunder by Tenant upon expiration of the appropriate grace period hereinafter provided. Tenant shall have a period of three (3) days from the date of written notice from Landlord within which to cure any default in the payment of Rent or Additional Charges. Tenant shall have a period of thirty (30) days from the date of written notice from Landlord within which to cure any other default under this Lease; provided, however, that with respect to any default other than the payment of Rent or Additional Charges that cannot reasonably be cured within thirty (30) days, the default shall not be deemed to be uncured if Tenant commences to cure within thirty (30) days from Landlord's notice and continues to prosecute diligently the curing 10

thereof. Upon an uncured default of this Lease by Tenant, Landlord shall have the following rights and remedies in addition to any other rights or remedies available to Landlord at law or in equity: (i) The rights and remedies provided by California Civil Code, Section 1951.2, including but not limited to, recovery of the worth at the time of award of the amount by which the unpaid Rent and Additional Charges for the balance of the Term after the time of award exceeds the amount of rental loss for the same period that the Tenant proves could be reasonably avoided, as computed pursuant to subsection (b) of said Section 1951.2; (ii) The rights and remedies provided by California Civil Code, Section 1951.4, that allows Landlord to continue this Lease in effect and to enforce all of its rights and remedies under this Lease, including the right to recover Rent and Additional Charges as they become due, for so long as Landlord does not terminate Tenant's right to possession; provided, however, if Landlord elects to exercise its remedies described in this Paragraph 19(a)(ii) and Landlord does not terminate this Lease, and if Tenant requests Landlord's consent to an assignment of this Lease or a sublease of the Premises at such time as Tenant is in default, Landlord shall not unreasonably withhold its consent to such assignment or sublease. Acts of maintenance or preservation, efforts to relet the Premises or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of Tenant's rights to possession; (iii) The right to terminate this Lease by giving notice to Tenant in accordance with applicable law; (iv) If Landlord elects to terminate this Lease, the right and power to enter the Premises and remove therefrom all persons and property and, to store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant, and to sell such property and apply such proceeds therefrom pursuant to applicable California law. (b) Landlord shall have a period of thirty (30) days from the date of written notice from Tenant within which to cure any default under this Lease; provided, however, that with respect to any default that cannot reasonably be cured within thirty (30) days, the default shall not be deemed to be uncured if Landlord commences to cure within thirty (30) days from Tenant's notice and continues to prosecute diligently the curing thereof. Tenant agrees to give any Mortgagee and/or Trust Deed Holders ("Mortgagee"), by Registered Mail, a copy of any Notice of Default served upon the Landlord, provided that prior to such notice Tenant has been notified in writing, (by way of Notice of Assignment of Rents and Leases, or otherwise) of the address of such Mortgagee. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the Mortgagee shall have an additional thirty (30) days (provided that Tenant notifies Mortgagee concurrently with Tenant's notice to Landlord at the beginning of Landlord's thirty (30) day period; otherwise Mortgagee shall have sixty days from the date on which it is noticed) within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary to cure such default shall be granted if within such applicable period Mortgagee has commenced and is diligently pursuing the remedies necessary to cure such default, in which event the Lease shall not be terminated while such remedies are being so diligently pursued. 20. DAMAGE BY FIRE, ETC. If the Premises or the Building are damaged by fire or other casualty, Landlord shall forthwith repair the same, provided that such repairs can be made within one hundred eighty (180) days after the date of such damage under the laws and regulations of the federal, state and local governmental authorities having jurisdiction thereof. In such event, this Lease shall remain in full force and effect except that Tenant shall be entitled to a proportionate reduction of Rent and Additional Charges while such repairs to be made hereunder by Landlord are being made. Such reduction of rent, if any, shall be based upon the greater of (i) the proportion that the area of the Premises rendered untenantable by such damage bears to the total area of the Premises; or (ii) the extent to which such damage and the making of such repairs by Landlord shall interfere with the business carried on by Tenant in the Premises, where clause (ii) is limited to the extent of rental abatement insurance allowed by Landlord's casualty insurance policy. Within twenty (20) days after the date of such damage, Landlord shall notify Tenant whether or not in Landlord's reasonable opinion such repairs can be made within one hundred eighty (180) days after the date of such damage and Landlord's determination thereof shall be binding on Tenant. If such repairs cannot be made within one hundred eighty (180) days from the date of such damage, Landlord shall have the option within thirty (30) days after the date of such damage either to: (i) notify Tenant of Landlord's intention to repair such damage and diligently prosecute such repairs, in which event this Lease shall continue in full force and effect and the Rent and Additional Charges shall be reduced as provided herein; or (ii) notify Tenant of Landlord's election to terminate this Lease as of a date specified in such notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after notice is given. In the event that such notice to terminate is given by Landlord, this Lease shall terminate on the date specified in such notice. In the event that Landlord notifies Tenant that restoration or repair of the Premises will take more than one hundred and eighty (180) days, Tenant shall have a right to terminate the Lease within fifteen (15) days following receipt of Landlord's notice, by providing Landlord with written notice of its election to do so - in such event (and also in the event Landlord terminates the lease pursuant to the immediately preceding sentence), Tenant shall have no liability for payment of the deductible under Landlord's insurance relating to such damage. In the event this Lease is no terminated by Tenant, as provided for in the immediately preceding sentence, or by Landlord as provided above, Landlord shall proceed diligently to restore the Premises to a condition at least comparable to that existing immediately prior to such damage, and Tenant shall have the additional right to terminate this Lease if 11

Landlord has not completed such restoration within one hundred and eighty (180) days after the date of such damage by providing written notice to Landlord of its election to do so within five (5) days of the passing of the one hundred and eighty (180) period. Except in the cases of termination by Landlord or Tenant, the payment of any cost for repairs in excess of the applicable insurance proceeds shall be governed by Paragraph 3 of the Lease. In case of termination by either Tenant or Landlord, the Rent and Additional Charges shall be reduced by a proportionate amount based upon the extent to which such damage interfered with the business carried on by Tenant in the Premises, and Tenant shall pay such reduced Rent and Additional Charges up to the date of termination. Landlord agrees to refund to Tenant any Rent and Additional Charges previously paid for any period of time subsequent to such date of termination. The repairs to be made hereunder by Landlord shall not include, and Landlord shall not be required to repair, any damage by fire or other cause to the property of Tenant or any repairs or replacements of any paneling, decorations, railings, floor coverings or any alterations, additions, fixtures or improvements installed on the Premises by or at the expense of Tenant (excluding the initial Tenant Improvements constructed by Landlord). Tenant hereby waives the provisions of Section 1932.2, and Section 1933.4, of the Civil Code of California. Notwithstanding anything contained herein to the contrary, if a Major Casualty occurs with respect to any portion of the Building, and the net cost to restore, rebuild or replace the Building and Premises not covered by insurance proceeds is in excess of $1,000,000, then Landlord shall not be obligated to undertake such restoration, rebuilding or replacement unless (a) Landlord elects to do so in writing or (b) Tenant agrees to directly fund (regardless of the provisions of Paragraph 3) such shortfall. For the purpose of this Lease, a "Major Casualty" shall mean an earhquake related casualty that renders unusable twenty percent (20%) or more of the Net Rentable Area of the Building or which materially adversely affects the use of such Building. 21. EMINENT DOMAIN. If any part over 15 % of the Premises shall be taken or appropriated under the power of eminent domain or conveyed in lieu thereof, Tenant shall have the right to terminate this Lease at its option. If any part of the Building shall be taken or appropriated under power of eminent domain or conveyed in lieu thereof and such taking is so extensive that it renders the remaining portion of the Building unsuitable for the use being made of the Building on the date immediately preceding such taking, Landlord may terminate this Lease at its option. In either of such events, Landlord shall receive (and Tenant shall assign to Landlord upon demand from Landlord) any income, rent, award or any interest therein which may be paid in connection with the exercise of such power of eminent domain, and Tenant shall have no claim against Landlord for any part of sum paid by virtue of such proceedings, whether or not attributable to the value of the unexpired term of this Lease except that Tenant shall be entitled to petition the condemning authority for the following: (i) the then unamortized cost of any Alterations of tenant improvements paid for by Tenant from its own funds (as opposed to any allowance provided by Landlord); (ii) the value of Tenant's trade fixtures; (iii) Tenant's relocation costs; (vi) Tenant's goodwill, loss of business and business interruption; and (v) one-half of the amount which is the lesser of (a) the bonus value of this lease, or (b) the amount of the award in excess of the sum of amounts payable to Landlord's ground lessor (if any) and any holder of a mortgage or other third party lien encumbering Landlord's groundlease estate or fee simple ownership in the Property. If a part of the Premises shall be so taken or appropriated or conveyed and neither party hereto shall elect to terminate this Lease and the Premises have been damaged as a consequence of such partial taking or appropriation or conveyance, Landlord shall restore the Premises continuing under this Lease at Landlord's cost and expense; provided, however, that Landlord shall not be required to repair or restore any injury or damage to the property of Tenant or to make any repairs or restoration of any Alterations installed on the Premises by or at the expense of Tenant. Thereafter, the Rent and Additional Charges to be paid under this Lease for the remainder of the Term shall be proportionately reduced, such that thereafter the amounts to be paid by Tenant shall be in the ratio that they are of the portion of the Premises not so taken bears to the total area of the Premises prior to such taking. Notwithstanding anything to the contrary contained in this Paragraph 21, if the temporary use or occupancy of any part of the Premises shall be taken or appropriated under power of eminent domain during the Term, this Lease shall be and remain unaffected by such taking or appropriation and Tenant shall continue to pay in full all Rent and Additional Charges payable hereunder by Tenant during the Term; in the event of any such temporary appropriation or taking, Tenant shall be entitled to receive that portion of any award which represents compensation for the use of or occupancy of the Premises during the Term, and Landlord shall be entitled to receive that portion of any award which represents the cost of restoration of the Premises and the use and occupancy of the Premises after the end of the Term. If such temporary taking is for a period longer than two hundred and seventy (270) days and unreasonably interferes with Tenant's use of the Premises or the Project Common Areas, then Tenant shall have the right to terminate the Lease. 22. SALE BY LANDLORD. If Landlord sells or otherwise conveys its interest in the Premises, Landlord shall be relieved of its obligations under the Lease from and after the date of sale or conveyance (including the obligations of Landlord under Section 39), only when Landlord transfers any security deposit of Tenant to its successor and the successor assumes in writing the obligations to be performed by Landlord on and after the effective date of the transfer (including the obligations of Landlord under Section 39), whereupon Tenant shall attorn to such successor. 23. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any abatement of Rent or Additional Charges. If Tenant shall default in the payment of any sum of money, other than Rent or Additional Charges, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder, and such failure shall continue for ten (10) days after notice 12

by Landlord (or such longer period as noted in Paragraph ___, Landlord may, but shall not be obligated so ________ without waiving or releasing Tenant from any obligation of Tenant, make any such payment or perform any such act on Tenant's part to be made or performed as provided in this Lease. All sums so paid by Landlord and all necessary incidental costs together with interest thereon at the maximum rate permitted by law, from the date of such payment by Landlord shall be payable as Additional Charges to Landlord on demand. 24. SURRENDER OF PREMISES. (a) At the end of the Term or any renewal thereof or other sooner termination of this Lease, Tenant will peaceably deliver to Landlord possession of the Premises, together with all improvements or additions upon or belonging to Landlord, by whomsoever made, in the same condition as received, or first installed, subject to the terms of Paragraphs 39 & 21, subject to normal wear and tear and the rights and obligations of Tenant concerning casualty damage pursuant to Paragraph 20, damage by fire, earthquake, Act of God, or the elements alone excepted. Tenant may, upon the termination of this Lease, remove all movable furniture and equipment belonging to Tenant, at Tenant's sole cost, provided that Tenant repairs any damage caused by such removal. Property not so removed shall be deemed abandoned by Tenant, and title to the same shall thereupon pass to Landlord. Upon request by Landlord, and unless otherwise agreed to in writing by Landlord, Tenant shall remove, at Tenant's sole cost, any or all Alterations to the Premises installed by or at the expense of Tenant and all movable furniture and equipment belonging to Tenant which may be left by Tenant and repair any damage resulting from such removal. (b) The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or may, at the option of Landlord, operate as an assignment to it of any or all such subleases or subtenancies. 25. WAIVER. If either Landlord or Tenant waives the performance of any term, covenant or condition contained in this Lease, such waiver shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein. Furthermore, the acceptance of Rent or Additional Charges by Landlord shall not constitute a waiver of any preceeding breach by Tenant of any term, covenant or condition of this Lease, regardless of Landlord's knowledge of such preceding breach at the time Landlord accepted such Rent or Additional Charges. Failure by Landlord to enforce any of the terms, covenants or conditions of this Lease for any length of time shall not be deemed to waive or to decrease the right of Landlord to insist thereafter upon strict performance by Tenant. Waiver by Landlord of any term, covenant or condition contained in this Lease may only be made by a written document signed by Landlord. 26. NOTICES. Except as otherwise expressly provided in this Lease, any bills, statements, notices, demands, requests or other communications given or required to be given under this Lease shall be effective only if rendered or given in writing, sent by certified mail, return receipt requested, reputable overnight carrier, or delivered personally, (i) to Tenant (A) at Tenant's address set forth in the Basic Lease Information, if sent prior to Tenant's taking possession of the Premises, or (B) at the Premises, with a copy sent simultaneously to Tenant at the address set forth in the Basic Lease Information, if sent subsequent to Tenant's taking possession of the Premises, or (C) at any place where Tenant may be found if sent subsequent to Tenant's vacating, deserting, abandoning or surrendering the Premises; or (ii) to Landlord at Landlord's address set forth in the Basic Lease Information; or (iii) to such other address as either Landlord or Tenant may designate as its new address (or such purpose by notice given to the other in accordance with the provisions of this Paragraph 27. Any such bill, statement, notice, demand, request or other communication shall be deemed to have been rendered or given on the date the return receipt indicates delivery of or refusal of delivery if sent by certified mail, the day upon which recipient accepts and signs for delivery from a reputable overnight carrier, or on the date a reputable overnight carrier indicates refusal of delivery, or upon the date personal delivery is made. If Tenant is notified in writing of the identity and address of Landlord's mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor notice of any default by Landlord under the terms of this Lease in writing sent by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given the opportunity to cure such default (as defined in Paragraph 19 (b)) prior to Tenant exercising any remedy available to it. 27. TAXES PAYABLE BY TENANT. At least ten (10) days prior to delinquency Tenant shall pay all taxes levied or assessed upon Tenant's equipment, furniture, fixtures and other personal property located in or about the Premises. If the assessed value of Landlord's property is increased by the inclusion therein of a value placed upon Tenant's equipment, furniture, fixtures or other personal property, Tenant shall pay to Landlord, upon written demand, the taxes so levied against Landlord, or the proportion thereof resulting from said increase in assessment. 28. ABANDONMENT. Tenant shall not abandon the Premises and cease performing its financial and maintenance obligations under this Lease at any time during the Term, and if Tenant shall abandon and cease performing its financial and maintenance obligations under this Lease, or surrender the Premises or be dispossessed by process of law, or otherwise, any personal property belonging to Tenant and left on the Premises shall, at the option of Landlord, be deemed to be abandoned and title thereto shall thereupon pass to Landlord. Notwithstanding anything to the contrary contained herein, Tenant shall not be allowed to vacate the Premises if such would result in a termination of Landlord's insurance. Upon Tenant's request, Landlord will ask its insurer if such vacation of the Premises would result in termination of its current insurance policy. For purposes of this Paragraph 28, the Tenant shall not be deemed to have abandoned the Premises solely because the Tenant is not occupying the Premises. 29. SUCCESSORS AND ASSIGNS. Subject to the provisions of Paragraph 9, the terms, covenants and conditions contained herein shall be binding upon and inure to the benefit of the parties hereto and their respective legal and personal representatives, successors and assigns. 30. ATTORNEY'S FEES. If Tenant or Landlord brings any action for any relief against the other, declaratory or otherwise, arising out of this Lease, including any suit by Landlord for the recovery of Rent or Additional Charges or possession of the Premises, the losing party shall pay to the prevailing party a reasonable sum for attorney's fees, which shall be deemed to have accrued on the commencement of such action and shall be paid whether or not the action is prosecuted to judgment. 31. LIGHT AND AIR. Tenant covenants and agrees that no diminution of light, air or view by any structure which may hereafter be erected (whether or not by Landlord) shall entitle Tenant to any reduction of rent under this Lease, result in any liability of Landlord to Tenant, or in any other way affect this Lease or Tenant's obligations hereunder. 32. SECURITY DEPOSIT. [Intentionally Omitted] 13

by Landlord which are not controlled by Landlord's lender and any rights of indemnity owed to Landlord by any insurance company. 37. REAL ESTATE BROKERS. Each party represents that it has not had dealings with any real estate broker, finder or other person with respect to this Lease in any manner, except for any broker named in the Basic Lease Information, whose fees or commission, if earned, shall be paid as provided in the Basic Lease Information. Each party shall hold harmless the other party from all damages resulting from any claims that may be asserted against the other party by any other broker, finder or other person with whom the other party has or purportedly has dealt. 38. LEASE EFFECTIVE DATE. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 39. HAZARDOUS SUBSTANCE LIABILITY. Tenant has received from Landlord a copy of the reports noted in EXHIBIT G (the "Environmental Reports"). Except as noted in the Environmental Reports, Landlord represents and warrants that to the best of its knowledge, the Premises and Project are presently free of asbestos, toxic waste, underground storage tanks and other Hazardous Substances in amounts exceeding legally established maximum thresholds. Additionally, except as noted in the Environmental Reports, Landlord represents that it has received no written notice of any violation or claimed violation with respect to the presence of toxic or Hazardous Substances on, in or under the Project or of any pending or contemplated investigation or other action relating thereto. (a) DEFINITION OF HAZARDOUS SUBSTANCES. For the purpose of this Lease, "Hazardous Substances" shall be defined, collectively, as oil, flammable explosives, asbestos, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are "hazardous substances," "hazardous wastes," "hazardous materials" or "toxic substances" under applicable environmental laws, ordinance or regulation. (b) TENANT INDEMNITY. Tenant releases Landlord from any liability for, waives all claims against Landlord and shall indemnify, defend and hold harmless Landlord, its employees, partners, agents, subsidiaries and affiliate organizations against any and all claims, suits, loss, costs (including costs of investigation, clean up, monitoring, restoration and reasonably attorney fees), damage or liability, whether foreseeable or unforeseeable, by reason of property damage (including diminution in the value of the property of Landlord), personal injury or death directly arising from or related to Hazardous Substances released, manufactured, discharged, disposed, used or stored on, in, or under the Property or Premises during the initial Term and any extensions of this Lease, by Tenant or its employees, invitees, agents or contractors, except for Hazardous Substance (i) (A) originating on property which is not leased, owned or otherwise used or controlled by Tenant and (B) which migrates through the air, groundwater or otherwise to the Premises, or (ii) which was present on the Premises immediately prior to Tenant's first occupancy of the Premises and was not caused by Tenant, its employees, invitees, subtenants, agents, assignees, licensees or servants. The provisions of this Tenant Indemnity regarding Hazardous Substances shall survive the termination of the Lease. (c) LANDLORD INDEMNITY. Landlord releases Tenant from any liability for, waives all claims against Tenant and shall indemnify, defend and hold harmless Tenant, its officers, employees, and agents to the extent of Landlord's interest in the Project, against any and all actions by any governmental agency for clean up of Hazardous Substances on or under the Property, including costs of legal proceedings, investigation, clean up, monitoring, and restoration, including reasonable attorney fees, if, and to the extent, the Hazardous Substances occur on the Property or Premises under the following circumstances: (i) the Hazardous Substance was released or disposed of on property which is not leased, owned or otherwise used or controlled by Tenant and such Hazardous Substance migrated through the air or groundwater to the Project; (ii) Hazardous Substances were released or disposed of on, in, or about the Premises immediately prior to Tenant's first occupancy unless caused by Tenant, its employees, invitees, subtenants, agents, assigns, licensees or servants, or; (iii) the contamination of the Property was caused by the release, disposal, use or storage of Hazardous Substances in, on or about the Premises by Landlord, its employees, agents, licensees or servants. The provisions of this Landlord Indemnity regarding Hazardous Substances shall survive the termination of the Lease. Additionally, Landlord shall be responsible for the cost to contain or remove friable asbestos within the Buildings if so required by applicable laws. Tenant has informed Landlord, that except for very immaterial amounts of toxic materials incidental to its office use (e.g. copier toner), Tenant will not use and Hazardous Substances in material amounts within the Building and shall comply with any applicable laws to the extent that it does. 40. ARBITRATION OF DISPUTES. ANY CONTROVERSY OR CLAIM ARISING OUT OF THIS LEASE OR A BREACH OF THIS LEASE SOLELY BETWEEN LANDLORD AND TENANT RELATING TO A MONETARY DEFAULT IN AN AMOUNT OF LESS THAN TWENTY-FIVE THOUSAND DOLLARS ($25,000), BUT NOT INCLUDING A DEFAULT WITH RESPECT TO THE TIMELY PAYMENT OF RENT AND ADDITIONAL CHARGES, SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. NOTICE: BY INITIALLY IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF 15

DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. CONSENT TO NEUTRAL ARBITRATION BY: [ILLEGIBLE](LANDLORD): [ILLEGIBLE] (TENANT). 41. SIGNAGE. Tenant shall be allowed its name on the Building monument signage located around the perimeter of the Project. Tenant shall be responsible for the costs related to such signage. Such sign shall be subject to approval from Landlord and applicable governing entities, including but not limited to, cities, C,C&R's, ground lessor, etc. 42. OPTION TO RENEW. Upon condition that (i) no event of default is continuing under this Lease at the time of exercise or at the commencement of the option term, and (ii) Tenant or its affiliate continues to physically occupy the Premises, then Tenant shall have the right to extend the Term for two (2) period(s) of seven (7) years ("Extension Term(s)") following the initial Expiration Date, by giving written notice ("Exercise Notice") to Landlord at least eighteen (18) months prior to the Expiration of the Term. 43. RENT DURING EXTENSION TERM. The Monthly Base Rent during the seven (7) year Extension Terms shall be the greater of the Monthly Base Rent paid during the first full month of the previous Term (e.g. $282,897.00 would be the minimum Monthly Base Rent during the first extension) or the Fair Market Rental Value for the Premises as of the commencement of the option term, as determined below: (a) Within thirty (30) days after receipt of Tenant's Exercise Notice, Landlord shall notify Tenant of Landlord's estimate of the Fair Market Rental Value for the Premises, as determined below, for determining Monthly Base Rent during the ensuing Extension Term; provided, however, if Tenant's Exercise Notice is given more than eighteen (18) months before the Expiration Date, Landlord's estimate of Fair Market Rental Value may, but need not be given more than eighteen (18) months before the Expiration Date. Within fifteen (15) days after receipt of such notice from Landlord, Tenant shall notify Landlord in writing that it (i) agrees with such rental rate or (ii) disagrees with such rental rate. No response shall constitute agreement. In the event that Tenant disagrees with Landlord's estimate of Fair Market Rental Value for the Premises, then the parties shall meet and endeavor to agree within fifteen (15) days after Landlord receives Tenant's notice described in the immediately preceding sentence. If the parties cannot agree upon the Fair Market Rental Value within said fifteen (15) day period, then the parties shall submit the matter to binding appraisal in accordance with the following procedure except that in any event neither party shall be obligated to start such procedure sooner than eighteen (18) months before the expiration of the Lease Term. Within fifteen (15) days of the conclusion of the period during which the two parties fail to agree (but not sooner than eighteen (18) months before the expiration of the Lease Term), the parties shall either (i) jointly appoint an appraiser for this purpose or (ii) failing this joint action, each separately designate a disinterested appraiser. No person shall be appointed or designated an appraiser unless such person has at least five (5) years experience in appraising major commercial property in Santa Clara County and is a member of a recognized society of real estate appraisers. If within thirty (30) days after the appointment, the two appraisers reach agreement on the Fair Market Rental Value for the Premises, that value shall be binding and conclusive upon the parties. If the two appraisers thus appointed cannot reach agreement on the Fair Market Rental Value for the Premises within thirty (30) days after their appointment, then the appraisers thus appointed shall appoint a third disinterested appraiser having like qualifications within five (5) days. If within thirty (30) days after the appointment of the third appraiser a majority of the appraisers agree on the Fair Market Rental Value of the Premises, that value shall be binding and conclusive upon the parties. If within thirty (30) days after the appointment of the third appraiser a majority of the appraisers cannot reach agreement on the Fair Market Rental Value for the Premises, then the three appraisers shall each simultaneously submit their independent appraisal to the parties, the appraisal farthest from the median of the three appraisals shall be disregarded, and the mean average of the remaining two appraisals shall be deemed to be the Fair Market Rental Value for the Premises and shall be binding and conclusive upon the parties. Each party shall pay the fees and expenses of the appraiser appointed by it and shall share equally the fees and expenses of the third appraiser. If the two appraisers appointed by the parties cannot agree on the appointment of the third appraiser, they or either of them shall give notice of such failure to agree to the parties and if the parties fail to agree upon the selection of such third appraiser within ten (10) days after the appraisers appointed by the parties give such notice, then either of the parties, upon notice to the other party, may request such appointment by the American Arbitration Association or, on it failure, refusal or inability to act, may apply for such appointment to the presiding judge of the Superior Court of Santa Clara County, California. (b) Wherever used throughout this Paragraph (Rent during Extension Term) the term "Fair Market Rental Value" shall mean the fair market rental value of the Premises, using as a guide the rate of monthly base rent which would be charged during the Extension Term (including periodic increases during the Extension Term, if any) in the Shoreline Business Park area of Mountain View area for comparable steel/frame, single tenant, Class A office space in comparable quality, as of the time that the Extension Term 16

commences, with appropriate adjustments regarding taxes, insurance and operating expenses as necessary to insure comparability to this Lease, as the case may be, and also taking into consideration amount and type of parking, location, leasehold improvements, proposed term of lease, amount of space leased, extent of service provided or to be provided, and any other relevant terms or conditions (including consideration of whether or not the monthly base rent is fixed). (c) In the event of a failure, refusal or inability of any appraiser to act, his successor shall be appointed by the party who originally appointed him, but in the case of the third appraiser, his successor shall be appointed in the same manner as provided for appointment of the third appraiser. (d) The appraisers shall render their appraisals in writing with counterpart copies to Landlord and Tenant. The appraisers shall have no power to modify the provisions of this Lease. (e) To the extent that binding appraisal has not been completed prior to the expiration of any preceding period for which Monthly Base Rent has been determined, Tenant shall pay Monthly Base Rent at the rate estimated by Landlord, with an adjustment to be made once Fair Market Rental Value is ultimately determined by binding appraisal. In no event shall any such adjustment result in a decrease of the Monthly Base Rent for the Premises below the average Monthly Base Rent during the immediately preceding term. (f) From and after the commencement of each Extension Term, all of the other terms, covenants and conditions of the Lease shall also apply; provided, however, that Tenant shall have no further rights to extend the Term. 44. RIGHT OF NOTICE PRIOR TO SALE. Prior to selling the property, Landlord will give Tenant written notice of its intent to do so. If within ten (10) days of receipt of said written notice, Tenant shall make a good faith offer to Landlord for the purchase of the Property, then Landlord shall refrain from closing on the sale of the Property to another party during the thirty (30) day period immediately following the date of Landlord's notice to Tenant noted in the first sentence of this Paragraph 44 ("Notice of Sale Period"). Landlord shall be under no obligation to accept an offer from Tenant for any reason and may sell the property to any party it elects following such Notice of Sale Period. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first above written. LANDLORD: CHARLESTON PLACE ASSOCIATES a California General Partnership By: CHARLESTON VENTURE I LIMITED PARTNERSHIP a California Limited Partnership Its: General Partner By: /s/ [ILLEGIBLE] ----------------------------------- Its: General Partner ----------------------------------- By: COMPETROL REAL ESTATE LIMITED a British Virgin Islands private company Its: General Partner By: /s/ [ILLEGIBLE] ----------------------------------- Its: Executive Vice President ----------------------------------- /s/ [ILLEGIBLE] ----------------------------------- Vice President ----------------------------------- TENANT: U.S. ROBOTICS ACCESS CORP. a Delaware Corporation By: /s/ C. David Hall ----------------------------------- Its: Treasurer ----------------------------------- 17

EXHIBIT "A" -------------------------------------------------------------------------------- PREMISES [MAP] EXHIBITS - PAGE 1 OF 15

EXHIBIT "B" -------------------------------------------------------------------------------- WORK LETTER 1. LANDLORD'S WORK: Landlord shall furnish and install the Base Building provided for in Paragraph 2 at Landlord's expense, the delivery of which shall be subject to the Building Availability Conditions noted below. 2. BUILDING AVAILABILITY CONDITIONS: Landlord shall notify Tenant in writing (the "Building Availability Notice") no less than ten (10) days prior to the date on which Landlord anticipates that the Building will meet the following conditions: (i) the Premises will be vacated by the previous tenant; (ii) all furniture, fixtures, equipment and other personal property of such tenant will have been removed (excepting those which Tenant is purchasing from the previous tenant); and (iii) that the building will be delivered in a clean condition, with all carpets shampooed, walls patched and painted where necessary, all ceiling tiles and light fixtures in good repair and generally fully janitorized condition (such conditions (i) through (iii) referred to as the "Building Availability Conditions"). When these conditions have been met (and Tenant shall have been given an opportunity, upon no less than three (3) days notice, to walk-through the Premises to verify that the Building Availability Conditions have been met and/or to create a punch list of those items still needing to be met), then Tenant shall accept the Premises and Building in an "as-is" condition. Additionally, Landlord has provided to Tenant a letter from ACCO dated July 25, 1995 which details the primary specifications of the HVAC equipment in the Buildings and a letter from Frank Electric dated June 10, 1996 which details the primary specifications of electrical power provided to the Buildings. 3. COMMENCEMENT DATE: Fifteen (15) days after the date that Tenant so accepts the Premises pursuant to the preceding sentence shall be deemed the Commencement Date. However, in no event shall Tenant be obligated to accept the Premises prior to the Early Occupancy Date noted in the Basic Lease Information and have the Term commence prior to the Commencement Date noted in the Basic Lease Information. By occupying the Premises, Tenant shall be deemed to have accepted the same as suitable for the purpose herein intended and to have acknowledged that the same comply fully with Landlord's obligations, except for any "punch list" type items which Tenant and Landlord have agreed that Landlord will repair. Notwithstanding the foregoing, acceptance of the space by Tenant shall not relieve Landlord of its obligation to complete outstanding punch-list items which are Landlord's responsibility. Within five (5) days after written request of Landlord and in the event that the Building Availability Conditions have been met, Tenant agrees to execute for Landlord a letter confirming the Commencement Date and certifying that Tenant has accepted delivery of the Premises. 4. TENANT'S WORK: Tenant shall bear the cost of Tenant Improvements and any modifications requested by Tenant to the Buildings after the Building Availability Conditions have been met shall be at Tenant's expense. Additionally, Cable TV connections, telephone equipment and wiring and office equipment wiring, shall be installed by Tenant. The cost of space planning and preparing the working drawings (including the drawings noted below) for Tenant Improvements or any changes to the original instruction and/or plans and specifications shall be paid by Tenant. Tenant's architect and/or engineers shall prepare complete architectural, mechanical, electrical, plumbing, and other plans and specifications for any changes to the Premises. Tenant shall use its own unionized general contractor for the construction of its tenant improvements and shall contract directly with such contractor. Such contractor shall be subject to Landlord's approval, which will not be unreasonably withheld. 5. SHELL AND TENANT IMPROVEMENT PLANS: Landlord shall provide Tenant with its most recent architectural drawings for the Buildings. However, Landlord shall not be responsible for any subsequent changes to, omissions from, or errors in such drawings. Tenant shall be responsible for preparing the necessary plans and specifications for any changes to the interiors of the Buildings desired by Tenant. All such plans and specifications shall be performed by Tenant's architect and engineers and shall be subject to approval by Landlord, which approval shall not be unreasonably withheld or delayed. It is agreed that the suitability of the improvements for the uses specified in the Lease shall be a reasonable condition to withhold approval. 5. EXECUTION OF TENANT'S WORK: Tenant shall engage reputable, unionized general contractors who will complete the work in a good and workmanlike manner and in accordance with relevant laws and codes. 6. PAYMENTS TO LANDLORD: Tenant shall pay to Landlord all amounts payable by Tenant, if any, within twenty (20) days after billing by Landlord. Bills may be rendered during the progress of the work so as to enable Landlord to pay its general contractor, architect or engineers without advancing Landlord's funds for Tenant Improvements though such progress billings shall only be based on the extent to which the work is completed. 7. TENANT ALLOWANCE: Landlord shall provide Tenant an allowance as set for in the Basic Lease Information ("Tenant Allowance") for the cost of the following items in respect of the Tenant Improvements: Architectural and engineering fees, space planning, building permits or other governmental fees, cost of labor materials and other charges included in the construction contract for construction of Tenant Improvements. Tenant shall be allowed to request monthly draws against such allowance. Such requests shall include the following items: (a) copy of contract (each contract need be submitted only once), (b) invoice reflecting no more than the portion of the cost which has been completed, less a 10% holdback/retention, (c) conditional lien releases from the general EXHIBITS - PAGE 2 OF 15

contractor and subcontractors. Landlord shall hold back the last 10% of the Tenant Allowance until Tenant has delivered the following items to Landlord: (a) final punch list signed off by both Tenant and Landlord and/or their architects, (b) written certification from Tenant's architect and contractor that the work is complete and meets all applicable building codes, and (c) a final conditional lien release (IE. the final amount due to all of Tenant's contractor) reflecting an amount of no more than the amount to be paid by Landlord. Tenant shall cooperate with the schedule of Landlord' s construction lender and Landlord shall use reasonable efforts to insure that such amounts are paid promptly. EXHIBITS - PAGE 3 OF 15

EXHIBIT "C" -------------------------------------------------------------------------------- RULES AND REGULATIONS 1. Sidewalks, halls, passages, exits, entrances, elevators, escalators and stairways shall not be obstructed by Tenant or used by Tenant for any purpose other than for ingress to and egress from the Premises. The halls, passages, exits, entrances, elevators and stairways are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and interests of the Building and its tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom Tenant normally deals in the ordinary course of Tenant's business unless such persons are engaged in illegal activities. Tenant, and Tenant's employees or invitees, shall not go upon the roof of the Building, except as authorized by Landlord and except as necessary for Tenant to perform its obligations under the Lease. 2. No sign, placard, picture, name, advertisement or notice visible from the exterior of the Premises shall be inscribed, painted, affixed, installed or otherwise displayed by Tenant either on the Premises or any part of the Building without the prior written consent of Landlord, and Landlord shall have the right to remove any such sign, placard, picture, name, advertisement or notice without notice to and at the expense of Tenant. If Landlord shall have given such consent to Tenant at any time, whether before or after the execution of the Lease, such consent shall not in any way operate as a waiver or release of any of the provisions hereof or of the Lease, and shall be deemed to relate only to the particular sign, placard, picture, name, advertisement or notice so consented to by Landlord and shall not be construed as dispensing with the necessity of obtaining the specific written consent of Landlord with respect to any other such sign, placard, picture, name, advertisement or notice. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved by Landlord. 3. The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of tenants only and Landlord reserves the right to exclude any other names therefrom. 4. No curtains, draperies, blinds, shutters, shades, screens or other coverings, awnings, hangings or decorations shall be attached to, hung or placed in, or used in connection with, any window, door or patio on the Premises without the prior written consent of Landlord. In any event with the prior written consent of Landlord, all such items shall be installed inboard of Landlord's window coverings and shall not in any way be visible from the exterior of the Building. No articles shall be placed or kept on the window sills so as to be visible from the exterior of the Building. No articles shall be placed against glass partitions or doors which might appear unsightly from outside the Building. 5. During the continuance of any invasion, mob, riot, public excitement or other extreme and emergency circumstance rendering such action advisable in Landlord's reasonable opinion, Landlord reserves the right to prevent access to the Building by closing the doors, or otherwise, for the safety of tenants and protection of the Building and property in the Building. 6. [Intentionally Omitted] 7. [Intentionally Omitted] 8. Tenant shall see that the doors of the Premises are closed and securely locked and must observe strict care and caution that all water faucets or water apparatus are entirely shut off before Tenant or its employees leave such Premises, and that all utilities shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness the Tenant shall make good all injuries sustained by other tenants or occupants of the Building or Landlord. On multiple-tenancy floors, all tenants shall keep the door or doors to the Building corridors closed at all times except for ingress and egress. 9. As more specifically provided in the Lease, Tenant shall not waste electricity, water or air conditioning and agrees to cooperate fully with Landlord to assure the most effective operation of the Building's heating and air conditioning, and shall refrain from attempting to adjust any controls other than room thermostats installed for Tenant's use. 10. Tenant shall keep and cause to be kept closed all window coverings when necessary because of the sun's position. 11. Tenant shall not alter any lock or access device or install a new or additional lock or access device or any bolt on any door of the Premises without the prior written consent of Landlord. If Landlord shall give its consent, Tenant shall in each case furnish Landlord with a key for any such lock. 12. Tenant shall not make or have made additional copies of any keys or access devices provided by Landlord. Tenant, upon the termination of the tenancy, shall deliver to Landlord all the keys or access devices for the Building, offices, rooms and toilet rooms which shall have been furnished to Tenant or which Tenant shall have EXHIBITS - PAGE 4 OF 15

had made. In the event of the loss of any keys or access devices so furnished by Landlord, Tenant shall pay Landlord therefor. 13. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein, and the expense of any breakage, stoppage or damage resulting from the violation of this rule by Tenant or Tenant's employees or invitees shall be borne by Tenant. 14. Tenant shall not use or keep in the Premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material other than limited quantities necessary for the operation or maintenance of office or office equipment. Tenant shall not use any method of heating or air conditioning other than supplied by Landlord. 15. Tenant shall not use, keep or permit to be used or kept in the Premises any foul or noxious gas or substance or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought or kept in or about the Premises or the Building. 16. [Intentionally omitted] 17. Except with the prior written consent of Landlord, Tenant shall not sell, or permit the sale, at retail, of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise in or on the Premises, nor shall Tenant carry on, or permit or allow any employee or other person to carry on, the business of stenography, typewriting or any similar business in or from the Premises for the service or accommodation of occupants of any other portion of the Building, nor shall the Premises be used for the storage of merchandise or for manufacturing of any kind, or the business of a public barber shop or beauty parlor, nor shall the Premises be used for any improper, immoral or objectionable purpose, or any business or activity other than that specifically provided for in Tenant's Lease. 18. If Tenant requires telegraphic, telephonic, burglar alarm or similar services, it shall first obtain and comply with Landlord's reasonable instructions in their installation. 19. Landlord will direct electricians as to where and how telephone, telegraph and electrical wires are to be introduced or installed. No boring or cutting for wires will be allowed without the prior written consent of Landlord. The location of burglar alarms, telephones, call boxes and other office equipment affixed to the Premises shall be subject to the written approval of Landlord, which shall not be unreasonably withheld. 20. Tenant shall not install any radio or television antenna, loudspeaker or any other device on the exterior walls or the roof of the Building without first obtaining Landlord's approval, which shall not be unreasonably withheld, and approvals from applicable regulatory bodies (e.g. the City of Mountain View). Tenant shall not interfere with radio or television broadcasting or reception from or in the Building or elsewhere. 21. Tenant shall not lay linoleum, tile, carpet or any other floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved in writing by Landlord. The expense of repairing any damage resulting from a violation of this rule by Tenant or Tenant's contractors, employees or invitees or the removal of any floor covering shall be borne by Tenant. Tenant shall use chair pads if needed to avoid excess wear and tear to the floor coverings. 22. No furniture, freight, equipment, materials, supplies, packages, merchandise or other property will be carried up or down the elevators without appropriate protection of the elevators finishes. Landlord shall have the right to prescribe the weight, size, and position of all safes, furniture or other heavy equipment brought into the Building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on wood strips of such thickness as determined by Landlord to be necessary to properly distribute the weight thereof. Landlord will not be responsible for loss of or damage to any such safe, equipment or property from any cause, and all damage done to the Building by moving or maintaining any such safe, equipment or other property shall be repaired at the expense of Tenant. Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building shall be placed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building must be acceptable to Landlord. 23. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Tenant shall not mark, use double-sided adhesive tape on, or drive nails, screw or drill into, the partitions, woodwork or plaster or in any way deface the Premises or any part thereof. Tenant may hang pictures on walls in the Premises. Any damage to the walls caused by Molly bolts, or like hanging materials, will be repaired by Tenant. EXHIBITS - PAGE 5 OF 15

24. [Intentionally Omitted] 25. There shall not be used in any space, or in the public areas of the Building, either by Tenant or others, any hand trucks except those equipped with rubber tires and side guards or such other material-handling equipment as Landlord may approve. No other vehicles of any kind shall be brought by Tenant into or kept in or about the Premises. 26. Tenant shall store all trash and garbage within the interior of the Premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the jurisdiction in which the Premises is located, without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate. 27. Canvassing, soliciting, distribution of handbills or any other written material and peddling in the Building are prohibited, and Tenant shall cooperate to prevent the same. Tenant shall not make room-to-room solicitation of business from other tenants in the Building. 28. Landlord shall have the right, exercisable without notice and without liability to Tenant, to change the name and address of the Building. In such event, Landlord shall reimburse Tenant for the reasonable costs incurred by Tenant in reprinting stationery and other office materials and providing notice of such change of name or address. 29. Landlord reserves the right to exclude or expel from the Building any person who, in Landlord's judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the rules or regulations of the Building. 30. Without the prior written consent of Landlord, Tenant shall not use the name of the Building in connection with or in promoting or advertising the business of Tenant except as Tenant's address. Tenant may use Project's name on its stationery and business cards. 31. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency. 32. Tenant assumes any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed, unless caused by the gross negligence or willful misconduct of Landlord, its agents, servants, or employees ("Landlord Parties"). 33. [Intentionally Omitted] 34. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all tenants of the Building. 35. Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Building and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations hereinafter stated and any additional rules and regulations which are adopted. No new Rule or Regulation shall be designed to discriminate solely against Tenant. 36. Tenant shall be responsible for the observance of all of the foregoing Rules and Regulations by Tenant's employees, agents, clients, customers, invitees and guests. 37. Unless otherwise defined, terms used in these Rules and Regulations shall have the same meaning as in the Lease. EXHIBITS - PAGE 6 OF 15

EXHIBIT "D" -------------------------------------------------------------------------------- FORM OF TENANT ESTOPPEL CERTIFICATE FORM OF TENANT ESTOPPEL CERTIFICATE TO: ________________, OR ASSIGNEE ("LENDOR"), AND/OR WHOM ELSE IT MAY CONCERN: THIS IS TO CERTIFY THAT: 1. The undersigned is the lessee ("Tenant") under that certain lease dated __________,19__, ("Lease"), by and between _________________ as lessor ("Landlord") and _____________________ as Tenant, covering those certain premises commonly known and designated as __________________ ("Premises"). 2. The Lease has not been modified, changed, altered, assigned, supplemented or amended in any respect (except as indicated below; if none, state "none"). The Lease is not in default and is valid and in full force and effect on the date hereof. The Lease is the only Lease or agreement between the Tenant and the Landlord affecting or relating to the Premises. _____________________. 3 The Tenant is not entitled to, and has made no agreement(s) with the Landlord or its agents or employees concerning free rent, partial rent, rebate of rent payments, credit or offset or deduction in rent, or, except as set forth in the Lease, any other type of rental concession, including, without limitation, lease support payments or lease buy-outs (except as indicated below; if none, state "none"). _________________________________ ______________________________________________________. 4. The Tenant has accepted and now occupies the ________________________. The Lease term began _______,19__. The termination date of the present term of the Lease, excluding unexercised renewals, is __________________. 5. The Tenant has paid rent for the Premises for the period up to and including _______________________,. The fixed minimum rent and any additional rent (including the Tenant's share of tax increases and cost of living increases) payable by the Tenant presently is $ _________ per month. No such rent has been paid more than two (2) months in advance of its due date, except as indicated below or except as required under the Lease (if none, state "none"). The Tenant's security deposit is $ ____________. ____________________________________. 6. No event has occurred and no condition exists which, with the giving notice or the lapse of time or both, will constitute a default under the Lease. The Tenant has no existing defenses or offsets against the enforcement of this Lease by the Landlord. 7. The Tenant has received or will receive payment or credit for tenant improvement work in the total amount of $ ________________ (or if other than cash, describe below; if none, state "none"). All conditions under this Lease to be performed by the Landlord as of the date hereof have been satisfied. All required contributions by the Landlord to the Tenant on account of the Tenant's tenant improvements have been received by the Tenant. _______________________________________________________________ _______________________________________. 8. The Lease contains, and the Tenant has, no outstanding options or rights of first refusal to purchase the Premises or any part thereof or all or any part of the real property of which the Premises are a part. 9. No actions, whether voluntary or otherwise, are pending against the Tenant or any general partner of the Tenant under the bankruptcy laws of the United States or any state thereof. 10. The Tenant has not sublet the Premises to any sublessee and has not assigned any of its rights under the Lease, except as indicated below (if none, state "none"). No one except the Tenant and its employees occupies the Premises. ________________________________________. 11. The address for notices to be sent to the Tenant is as set forth in the Lease. 12. To the best of Tenant's knowledge, the use, maintenance or operation of the Premises by Tenant complies with, and will at all times comply with, all applicable federal, state, county or local statutes, laws, rules and regulations of any governmental authorities relating to environmental, health or safety matters (being hereinafter collectively referred to as the Environmental Laws). EXHIBITS - PAGE 7 OF 15

13. The Premises have not been used by Tenant and the Tenant does not plan to use the Premises for any activities which, directly or indirectly, involve the use, generation, treatment, storage, transportation or disposal of any petroleum product or any toxic or hazardous chemical, material, substance, pollutant or waste. 14. Tenant has not received any notices, written or oral, of violation of any Environmental Law or of any allegation which, if true, would contradict anything contained herein and there are not writs, injunctions, decrees, orders or judgements outstanding, no lawsuits, claims, proceedings or investigations pending or threatened, relating to the use, maintenance or operation of the Premises by Tenant, nor is Tenant aware of a basis for any such proceeding. 15. (INCLUDE THIS PARAGRAPH FOR LOAN TRANSACTIONS.) The Tenant has been advised that all the interest of the Landlord in and to the Lease is being duly assigned to Lendor, and that pursuant to the terms thereof, all rent payments under the Lease shall continue to be paid to the Landlord in accordance with the terms of the Lease unless and until the Tenant is notified otherwise in writing by Lendor or its successors or assigns. Tenant has been advised further: (a) Under the provisions of this assignment, the Lease cannot be terminated (either directly or by the exercise of any option which could lead to termination) or modified in any of its terms, or consent be given to the release of any party having liability thereon, without the prior written consent of Lendor or it successors or assigns, and without such consent, no rent may be collected or accepted more than two (2) months in advance. Except as otherwise may be required under the Lease. (b) The interest of the Landlord in the Lease has been assigned to Lendor for the purposes specified in the assignment. Lendor, or its successors or assigns, assumes no duty, liability or obligation whatsoever under the Lease or any extension or renewal thereof. (c) Any notices sent to Lendor or its affiliates should be sent by registered mail and addressed as follows: ________________________. 16. Tenant agrees to give any Mortgagee and/or Trust Deed Holders ("Mortgagee"), by registered mail, a copy of any notice of default served upon the Landlord, provided that prior to such notice Tenant has been notified in writing (by way of Notice of Assignment of Rents and Leases, or otherwise), of the address of such Mortgagee. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the Mortgagee shall have an additional sixty (60) days within which to cure such default of it such default cannot be cured within that time, then such additional time as may be necessary to cure such default shall be granted if within such sixty (60) days Mortgagee has commenced and is diligently pursuing the remedies necessary to cure such default, in which event the Lease shall not be terminated while such remedies are being so diligently pursued. 17. This certification is made knowing that Lendor relies upon the truth of this certification in disbursing certain funds to or on behalf of Landlord. 18. The undersigned is authorized to execute this Tenant Estoppel Certificate on behalf of the Tenant. DATED THIS _____________ DAY OF ___________,19__. --------------------------------------------- (Tenant) By: ---------------------------------------- Its: ----------------------------------- Date: ----------------------------------- THE UNDERSIGNED HEREBY CERTIFIES THAT THE CERTIFICATIONS SET FORTH ABOVE ARE TRUE AS OF THE DATE HEREOF. --------------------------------------------- (Owner/Landlord) By: ---------------------------------------- Its: ----------------------------------- Date: ----------------------------------- EXHIBITS - PAGE 8 OF 15

EXHIBIT "E" -------------------------------------------------------------------------------- DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS ("CC&R'S") CHARLESTON PLACE See CC&R's dated July 16, 1991 and entitled "DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR CHARLESTON PLACE" a copy of which has been provided separately to Tenant and which were recorded in the records of Santa Clara County, Document #10989807. EXHIBITS - PAGE 9 OF 15

EXHIBIT "F" -------------------------------------------------------------------------------- SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT FORM OR SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT PROVIDED BY CHEMICAL BANK, BASE FORM DATED SEPTEMBER 14, 1993 AND AS FURTHER AMENDED BY MUTUAL AGREEMENT BETWEEN JASON PETERS, REPRESENTING U.S. ROBOTICS, AND MIRIAM KULNIS, REPRESENTING CHEMICAL BANK. EXHIBITS - PAGE 10 OF 15

EXHIBIT "G" -------------------------------------------------------------------------------- ENVIRONMENTAL REPORTS 1. Report to Sun Microsystems from Wahler Associates regarding N. Bayshore Area Environment Risk Assessment dated 12/9/86. 2. Report to Adobe Systems from SRM Applied Environmental Research on Toxic Contamination in the Immediate Vicinity of Subject Property, dated February 25, 1987. 3. Canonie Environmental, Report on Existing Ground Water Assessment dated March 19, 1987. 4. Wahler Associates, Environmental Assessment: Potential Health Affects of Exposure to Chemicals in Ground Water and Soil Vapor dated March, 1987. 5. Levine Fricke, Computer Modeling of Recommended Alternative for the North Bayshore Area, dated July 29, 1987. 6. Short Form of License Agreement between Spectra-Physics, Inc., and Teledyne Semiconductor and Charleston Associates dated February 4, 1988. 7. Agreement between Spectra-Physics, Inc. and Teledyne Semiconductor and Charleston Associates, dated February 4, 1988. 8. Report to Sun Microsystems from Wahler Associates regarding N. Bayshore Area Environment Risk Assessment dated 12/9/86. 9. Report to Adobe Systems from SRM Applied Environmental Research on Toxic Contamination in the Immediate Vicinity of Subject Property, dated February 25, 1987. 10. Canonie Environmental, Report on Existing Ground Water Assessment dated March 19, 1987. l1. Wahler Associates, Environmental Assessment: Potential Health Affects of Exposure to Chemicals in Ground Water and Soil Vapor dated March, 1987. 12. Levine Fricke, Computer Modeling of Recommended Alternative for the North Bayshore Area, dated July 29, 1987. 13. Short Form of License Agreement between Spectra-Physics, Inc., and Teledyne Semiconductor and Charleston Associates dated February 4, 1988. 14. Agreement between Spectra-Physics, Inc. and Teledyne Semiconductor and Charleston Associates, dated February 4, 1988. 15. Earth Metrics Incorporated, Soils and Groundwater Contamination Investigation for the Proposed Nine Acre Site in Mountain View, California, dated April 7, 1988. 16. Earth Metrics Incorporated, Soils and Groundwater Contamination Investigation for the Proposed Nine Acre Site in Mountain View, California, dated April 25, 1988. 17. Earth Metrics Incorporated, Draft Work Plan for Underground Tank Removal and Clean-Up of Minor Oil and Grease Surface Spills in the Southeast Quadrant, of Charleston/Huff, in Mountain View, California, dated September, 1988. 18. Agreement between Spectra-Physics, Inc., and Teledyne Semiconductor and Charleston Road Venture I and Charleston Road Venture II, dated September 14, 1988. 19. Short Form of License Agreement between Spectra-Physics, Inc., and Teledyne Semiconductor and Charleston Road Venture I, Charleston Road Venture II and Mozart-Travis Venture I dated September 14, 1988. 20. Earth Metrics Incorporated, Summary of Closure and Remediation of Southeast Quadrant of Charleston/Huff in Mo