8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934

Date of report (Date of earliest event reported): February 25, 2005

VITRIA TECHNOLOGY, INC.

(Exact name of registrant as specified in charter)

Delaware
(State or other jurisdiction
of incorporation) 000-27207
(Commission File Number) 77-0386311
(I.R.S. Employer Identification No.)

945 Stewart Drive
Sunnyvale, CA 94085
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (408) 212-2700

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
	ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 10.36
EXHIBIT 10.37
EXHIBIT 10.38

ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

Executive Bonuses

     On March 3, 2005, the Compensation Committee of the Board of Directors of Vitria Technology, Inc. awarded the following bonuses to Vitria’s executive officers for the year ended December 31, 2004.

Name and Title	Bonus
M. Dale Skeen	$	125,000
Chief Executive Officer and Chief Technology Officer
Michael D. Perry	$	46,875
Senior Vice President and Chief Financial Officer
John N. Ounjian	$	50,000
Executive Vice President, HealthCare & Insurance
Aaron C. Timm	$	36,000
Vice President, General Counsel and Secretary

Executive Bonus Targets

     On March 3, 2005, the Compensation Committee set the following bonus targets for Vitria’s executive officers for the year ending December 31, 2005.

Name and Title	2005 Bonus Target
M. Dale Skeen		$	225,000
Chief Executive Officer and Chief Technology Officer
John Ounjian		$	175,000
Executive Vice President, HealthCare & Insurance

Executive Equity Compensation

     On March 3, 2005, the Compensation Committee granted Dr. Skeen a stock option for 500,000 shares of Common Stock. The stock option vests in equal monthly installments over four years with such vesting commencing on March 3, 2005. The exercise price of the option is $3.42 which was the fair market value of Vitria’s Common Stock on the date of grant.

     On March 3, 2005, the Compensation Committee granted Mr. Ounjian a restricted common stock award for 100,000 shares of Common Stock. The shares subject to the restricted stock award vest as to twenty five percent of such shares on the one year anniversary of the date of grant and the remaining shares vest in equal monthly installments thereafter over the next three years. The fair market value of Vitria’s Common Stock on the date of the restricted stock award was $3.42.

Amendment to Stock Option Grants issued to John L. Walecka

     On March 3, 2005, the Compensation Committee approved an amendment of the stock option grants made by Vitria on August 30, 1999 with 20,000 shares vested with an exercise price of $10.00 per share, November 5, 2001 with 17,450 shares vested with an exercise price of $12.04 per share, July 25, 2003 with 11,805 shares vested with an exercise price of $4.65 per share and November 4, 2004 with 1,250 shares vested with an exercise price of $3.50 per share to John L. Walecka, a former director of Vitria. Mr. Walecka resigned as a member of the Board of Directors on January 13, 2005. The amendment extended the post termination exercise period for each of the stock option grants from ninety days to one year.

Offer Letter with Jim Davis

     On February 25, 2005, Vitria entered into an offer letter with Jim Davis, pursuant to which Mr. Davis will become Vitria’s Executive Vice President of Operations. The Offer Letter is attached hereto as Exhibit 10.38.

     Pursuant to the Offer Letter, Mr. Davis will be paid an annual salary of $300,000 and will have a target bonus of $150,000. Mr. Davis is guaranteed fifty percent of the pro-rated target bonus for 2005. Mr. Davis will be reimbursed for relocation expenses of up to $30,000. If Mr. Davis resigns without good reason or is terminated without cause within the first twelve months of his employment he is obligated to repay the full $30,000. Mr. Davis will also receive a stock option grant for 250,000 shares of Common Stock with vesting terms as determined by the Board of Directors or the Compensation Committee.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

     (c) Exhibits

Exhibit
Number	Description
10.33(1)	Form of Stock Option Agreement.
10.36	Form of Restricted Stock Award Agreement.
10.37	Form of Restricted Stock Award Grant Notice.
10.38	Offer letter, by and between Jim Davis and Vitria, dated February 25, 2005.

(1) Filed as Exhibit 10.33 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 9, 2004 and incorporated herein by reference.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	VITRIA TECHNOLOGY, INC.
Dated: March 8, 2005	By:	/s/ Michael D. Perry
		Michael D. Perry
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description
10.33(1)	Form of Stock Option Agreement.
10.36	Form of Restricted Stock Award Agreement.
10.37	Form of Restricted Stock Award Grant Notice.
10.38	Offer letter, by and between Jim Davis and Vitria, dated February 25, 2005.

(1) Filed as Exhibit 10.33 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 9, 2004 and incorporated herein by reference.

EX-10.36

Exhibit 10.36

VITRIA TECHNOLOGY, INC.
1999 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

     Pursuant to the Restricted Stock Award Grant Notice (“Grant Notice”) and this Restricted Stock Award Agreement (collectively, the “Award”) and in consideration of the Purchase Price (as defined below), Vitria Technology, Inc. (the “Company”) has awarded you a restricted stock award under its 1999 Equity Incentive Plan (the “Plan”) for the number of shares of the Company’s Common Stock subject to the Award as indicated in the Grant Notice. Defined terms not explicitly defined in this Restricted Stock Award Agreement but defined in the Plan shall have the same definitions as in the Plan.

     The details of your Award are as follows:

     1. CONSIDERATION. The purchase price of Common Stock acquired pursuant to the Award shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board, according to a deferred payment or other similar arrangement with you; (iii) at the discretion of the Board, by services rendered or to be rendered to the Company; or (iv) in any other form of legal consideration that may be acceptable to the Board in its discretion (the “Purchase Price”); provided, however, that payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment and must be made in a form of consideration legal under Delaware General Corporation Law.

     2. VESTING. Subject to the limitations contained herein, your Award will vest as provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

     3. NUMBER OF SHARES. The number of shares subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.

     4. TRANSFER RESTRICTIONS. The shares issued under your Award are not transferable until vested and while non-vested shall not be sold, assigned, hypothecated, pledged or otherwise transferred by you. The Company shall not be required: (a) to transfer on its books any shares issued under your Award that are sold, assigned, hypothecated, pledged, or otherwise transferred in violation of any of the provisions set forth in this Agreement, or (b) to treat as owner of such shares issued under your Award or to accord the right to vote as such owner or to pay dividends to any purported transferee of such shares issued under your Award.

     5. RIGHT OF REACQUISITION.

          (a) The Company shall have the right to reacquire all or any part of the shares (the “Reacquisition Right”) you received pursuant to your Award that have not as yet vested in accordance with the Vesting Schedule on the Grant Notice (“Unvested Shares”) on the following terms and conditions:

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               (i) The Company shall simultaneously with termination of your Continuous Service automatically reacquire all of the Unvested Shares for the consideration that you paid or for no consideration if the shares were granted to you, unless the Company agrees to waive its Reacquisition Right as to some or all of the Unvested Shares. Any such waiver shall be exercised by the Company by written notice to you or your representative (with a copy to the Escrow Holder as defined below) within ninety (90) days after the termination of your Continuous Service, and the Escrow Holder may then release to you the number of Unvested Shares not being reacquired by the Company. If the Company does not waive its Reacquisition Right as to all of the Unvested Shares, then upon such termination of your Continuous Service, the Escrow Holder shall transfer to the Company the number of shares the Company is reacquiring.

               (ii) The shares issued under your Award shall be held in escrow pursuant to the terms of the Joint Escrow Instructions attached to the Grant Notice as Attachment IV. You agree to execute three (3) Assignment Separate From Certificate forms (with date and number of shares blank) substantially in the form attached to the Grant Notice as Attachment III and deliver the same, along with the certificate or certificates evidencing the shares, for use by the escrow agent pursuant to the terms of the Joint Escrow Instructions.

               (iii) Subject to the provisions of your Award, you shall, during the term of your Award, exercise all rights and privileges of a shareholder of the Company with respect to the shares deposited in escrow. You shall be deemed to be the holder of the shares for purposes of receiving any dividends which may be paid with respect to such shares and for purposes of exercising any voting rights relating to such shares, even if some or all of such shares have not yet vested and been released from the Company’s Reacquisition Right.

               (iv) If, from time to time, there is any stock dividend, stock split or other change in the character or amount of any of the outstanding stock of the corporation, the stock of which is subject to the provisions of your Award, then in such event any and all new, substituted or additional securities to which you are entitled by reason of your ownership of the shares acquired under your Award shall be immediately subject to the Reacquisition Right with the same force and effect as the shares subject to this Reacquisition Right immediately before such event.

     6. RESTRICTIVE LEGENDS. All certificates representing the Common Stock shall have endorsed thereon legends in substantially the following forms (in addition to any other legend which may be required by other agreements between the parties hereto):

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.”

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     7. AWARD NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or on the part of the Company or an Affiliate to continue your employment. In addition, nothing in your Award shall obligate the Company or an Affiliate, their respective shareholders, boards of directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

     8. WITHHOLDING OBLIGATIONS.

          (a) At the time your Award is made, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your Award.

          (b) Unless the tax withholding obligations of the Company and/or any Affiliate are satisfied, the Company shall have no obligation to issue a certificate for such shares or release such shares from any escrow provided for herein.

     9. TAX CONSEQUENCES. The acquisition and vesting of the shares may have adverse tax consequences to you. You may mitigate or exacerbate such tax consequences by filing an election under Section 83(b) of the Internal Revenue Code, as amended (the “Code”). Such election must be filed within thirty (30) days after the date of your Award. YOU ACKNOWLEDGE THAT IT IS YOUR OWN RESPONSIBILITY, AND NOT THE COMPANY’S, TO DETERMINE WHETHER A SECTION 83(b) ELECTION IS APPROPRIATE FOR YOUR SITUATION. If YOU DECIDE TO FILE A SECTION 83(b) ELECTION, IT IS YOUR RESPONSIBILITY AND NOT THE COMPANY’S TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN IF YOU REQUEST THE COMPANY TO MAKE THE FILING ON YOUR BEHALF.

     10. NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

     11. MISCELLANEOUS.

          (a) The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. Your rights and obligations under your Award may only be assigned with the prior written consent of the Company.

          (b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.

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          (c) You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.

     12. GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.

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ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Award Grant Notice and Restricted Stock Award Agreement (the “Award”), _________ hereby sells, assigns and transfers unto Vitria Technology, Inc., a Delaware corporation (“Assignee”) _____________________ (____________) shares of the common stock of the Assignee, standing in the undersigned’s name on the books of said corporation represented by Certificate No. ______ herewith and do hereby irrevocably constitute and appoint ____________ as attorney-in-fact to transfer the said stock on the books of the within named Company with full power of substitution in the premises. This Assignment may be used only in accordance with and subject to the terms and conditions of the Award, in connection with the reacquisition of shares of Common Stock of the Assignee issued to the undersigned pursuant to the Award, and only to the extent that such shares remain subject to the Assignee’s Reacquisition Right under the Award.

Dated: ___________________________________

Signature: _____________________________________

_________________________, Recipient

[INSTRUCTION: Please do not fill in any blanks other than the signature line. The purpose of this Assignment is to enable the Company to exercise its Reacquisition Right set forth in the Award without requiring additional signatures on your part.]

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JOINT ESCROW INSTRUCTIONS

[Date]

Corporate Secretary
Vitria Technology, Inc.
945 Stewart Street
Sunnyvale, CA 94086

Dear Sir/Madam:

     As Escrow Agent for both Vitria Technology, Inc., a Delaware corporation (the “Company”), and the undersigned recipient of stock of the Company (“Recipient”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Award Grant Notice (the “Grant Notice”), dated ___to which a copy of these Joint Escrow Instructions is attached as Attachment IV, and pursuant to the terms of that certain Restricted Stock Award Agreement (“Agreement”), which is Attachment I to the Grant Notice, in accordance with the following instructions:

     1. In the event the Company or an assignee shall elect to exercise the Repurchase Option set forth in the Agreement, the Company or its assignee will give to Recipient and you a written notice specifying the number of shares of stock to be purchased and the time and place for a closing thereunder. Recipient and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.

     2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the same, together with the certificate evidencing the shares of stock to be transferred, to the Company against the simultaneous delivery to you of the purchase price (which may include suitable acknowledgment of cancellation of indebtedness) for the number of shares of stock being purchased pursuant to the exercise of the Repurchase Option.

     3. Recipient irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as specified in the Agreement. Recipient does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such securities and other property all documents necessary or appropriate to make such securities negotiable and complete any transaction herein contemplated, including but not limited to any appropriate filing with state or government officials or bank officials.

     4. This escrow shall terminate upon the exercise in full or expiration of the Repurchase Option, whichever occurs first.

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     5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Recipient, you shall deliver all of the same to Recipient and shall be discharged of all further obligations hereunder; provided, however, that if at the time of termination of this escrow you are advised by the Company that any property subject to this escrow is the subject of a pledge or other security agreement, you shall deliver all such property to the pledgeholder or other person designated by the Company.

     6. Except as otherwise provided in these Joint Escrow Instructions, your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

     7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Recipient while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

     8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

     9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver these Joint Escrow Instructions or documents or papers deposited or called for hereunder.

     10. You shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.

     11. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be Secretary of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Secretary of the Company shall automatically become the successor Escrow Agent unless the Company shall appoint another officer or assistant officer of the Company as successor Escrow Agent, and Recipient hereby confirms the appointment of such successor as his attorney-in-fact and agent to the full extent of your appointment.

     12. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

     13. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are

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authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

     14. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, and if not during normal business hours of the recipient, then on the next business day, (c) five (5) calendar days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the other parties hereto at such party’s address set forth below, or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto.

Company:	Vitria Technology, Inc.
	945 Stewart Street
	Sunnyvale, CA 94086
Recipient: Escrow Agent:	Attn: General Counsel / Chief Financial Officer Vitria Technology, Inc.
	945 Stewart Street
	Sunnyvale, CA 94086
	Attn: Corporate Secretary

     15. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Grant Notice.

     16. You shall be entitled to employ such legal counsel and other experts (including, without limitation, the firm of Cooley Godward LLP) as you may deem necessary properly to advise you in connection with your obligations hereunder. You may rely upon the advice of such counsel, and you may pay such counsel reasonable compensation therefor. The Company shall be responsible for all fees generated by such legal counsel in connection with your obligations hereunder.

     17. This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. It is understood and agreed that references to “you” and “your” herein refer to the original Escrow Agent and to any and all successor Escrow Agents. It is understood and agreed that the Company may at any time or from time to time assign its rights under the Grant Notice and these Joint Escrow Instructions in whole or in part.

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     18. These Joint Escrow Instructions shall be governed by and interpreted and determined in accordance with the laws of the State of California, as such laws are applied by California courts to contracts made and to be performed entirely in California by residents of that state.

Very truly yours,


VITRIA TECHNOLOGY, INC.
 

By:  

Title:  

Name:  

RECIPIENT

Name:  

ESCROW AGENT:

_______________________________________

Name: _________________________________

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EX-10.37

Exhibit 10.37

VITRIA TECHNOLOGY, INC.
1999 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD GRANT NOTICE

VITRIA TECHNOLOGY, INC. (the “Company”), pursuant to its 1999 Equity Incentive Plan (the “Plan”), hereby awards to Participant the number of shares of the Company’s Common Stock set forth below (“Award”). This Award is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Award Agreement, the Plan, the form of Assignment Separate from Certificate and the form of Joint Escrow Instructions, all of which are attached hereto and incorporated herein in their entirety.

Participant:
Date of Grant:
Vesting Commencement Date:
Number of Shares Subject to Award:
Consideration:	[in consideration for services]

Vesting Schedule:	[1/4th of the shares vest one year after the Vesting Commencement Date.
	1/48th of the shares vest monthly thereafter over the next three years.]

Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Award Grant Notice, the Restricted Stock Award Agreement and the Plan. Participant further acknowledges that as of the Date of Grant, this Restricted Stock Award Grant Notice, the Restricted Stock Award Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) Awards previously granted and delivered to Participant under the Plan, and (ii) the following agreements only:

OTHER AGREEMENTS:

VITRIA TECHNOLOGY, INC.	PARTICIPANT:
By: _______________________________________	____________________________________________
Signature	Signature
Name: _____________________________________	Name: ______________________________________
Title: ______________________________________	Date: _______________________________________
Date: ______________________________________

ATTACHMENTS: Restricted Stock Award Agreement, 1999 Equity Incentive Plan, form of Assignment Separate from Certificate and form of Joint Escrow Instructions.

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ATTACHMENT I
RESTRICTED STOCK AWARD AGREEMENT

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ATTACHMENT II
1999 EQUITY INCENTIVE PLAN

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ATTACHMENT III
FORM OF ASSIGNMENT SEPARATE FROM CERTIFICATE

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ATTACHMENT IV

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FORM OF JOINT ESCROW INSTRUCTIONS

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EX-10.38

Exhibit 10.38

February 25, 2005

Jim Davis
[address]
[address]

Dear Jim:

Vitria Technology, Inc. is pleased to offer you a position as Executive Vice President, Operations. You will report to me and have responsibilities for Professional Services, Marketing, Human Resources, Legal, and Sales Operations. Your annual base salary will be $300,000.00 with an MBO target bonus of $150,000.00. Your annual 2005 MBO target bonus amount will be a prorated amount and is guaranteed at 50%. You will be reimbursed for actual relocation expenses not to exceed $30,000.00. You agree that your relocation package will be repaid to Vitria in full, if you resign without good reason or are terminated for cause within the first 12 months of your employment with Vitria. This offer is subject to a satisfactory result, determined in the Company’s sole discretion, from the Company’s background investigation to which you have consented.

Vitria Technology, Inc. will grant to you under its Equity Incentive Plan an option to purchase 250,000 shares of Common Stock. Upon approval of the Board or the appropriate sub-committee of the Board, you will be notified in writing regarding the terms and conditions of the grant.

As a Vitria employee, you will be expected to abide by Vitria’s policies and procedures, and sign and comply with the Proprietary Information and Inventions Agreement. Your employment at Vitria Technology is at will. This means that either you or Vitria Technology, Inc may terminate your employment at any time for any reason, with or without cause or advance notice.

All new employees must pass an employment verification procedure before they are permitted to work. This procedure has been established by Vitria Technology and requires every individual to provide satisfactory evidence of his/her identity and legal authority to work in the United States within twenty-four (24) hours of his/her start date.

This letter and the Proprietary Information and Inventions Agreement constitute the entire and final agreement between you and Vitria regarding your employment and supersede any other agreements, representations or promises. You understand that this agreement cannot be changed or amended except in writing signed by you and by an authorized company representative.

Your expected start date will be March 7, 2005. We are looking forward to having you come join the team. Please sign below to indicate your acceptance of this offer and return a signed copy to Allen Chin, VP of Human Resources, by fax at 408-212-2729 as soon as possible, but no later than 7 days from the date of this offer.

Sincerely yours,

/s/ Dale Skeen
Dale Skeen
Chief Executive Officer

Acceptance /s/ Jim Davis

Date February 25, 2005