Ariba (ARBA)

Option Grants

Exercisability. Options become exercisable at such time or times and during such period as the Committee may determine at the time of grant. The vesting schedule may be tied to length of service or the attainment of performance goals. If an optionee holds an option when his or her service terminates, it will not remain exercisable beyond the designated post-service exercise period, which generally is three months from the termination date. Under no circumstances, however, may an option be exercised after its term expires, which generally is 10 years after the date of grant. The Compensation Committee may extend the post-service exercise period or accelerate vesting.

Exercise Price. The option exercise price per share may not be less than 100% of the fair market value per share of our Common Stock on the grant date. Without stockholder approval, the exercise price of outstanding options may not be reduced and outstanding out-of-the-money options may not be exchanged for cash or other awards. However, the exercise price of outstanding options may be adjusted up or down without stockholder approval in connection with a corporate transaction involving the Company (such as a stock dividend, stock split, extraordinary cash dividend, reorganization, merger or spin-off).

The exercise price may be paid in cash. Options may also be exercised through a same-day sale program pursuant to which a brokerage firm effects the immediate sale of shares purchased under the option and pays over to the Company, out of the sale proceeds on the settlement date, sufficient funds to cover the exercise price for the purchased shares plus all applicable withholding taxes. The Compensation Committee may also make available other forms of payment to the extent permitted by applicable law.

Incentive Stock Options. Incentive stock options may only be granted to individuals who are employees of the Company or its parent or subsidiary corporations. For any employee, the aggregate fair market value (determined as of the grant date) of the Common Stock for which incentive stock options may become exercisable for the first time during any calendar year cannot exceed $100,000.