Anthony J. Kadillak - Page 4

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                                     Background                                       
               The parties submitted this case fully stipulated pursuant to           
          Rule 122.  The parties’ stipulations of facts, with attached                
          exhibits, are incorporated herein by this reference.  At the time           
          the petition was filed, petitioner resided in San Francisco,                
          California.                                                                 
          A.   Ariba Technologies, Inc., Incentive Stock Options                      
               From April 24, 1997, through April 4, 2001, petitioner was             
          employed as a sales assistant with Ariba Technologies, Inc.                 
          (Ariba) at an annual salary of $38,000.                                     
               1. Grants and Exercise of Stock Options                                
               In addition to his salary, on July 21, 1997, Ariba issued to           
          petitioner option No. 34 under its 1996 Stock Option Agreement              
          (agreement) and 1996 Stock Option Plan (plan).  Option No. 34,              
          which qualified as an incentive stock option (ISO), granted                 
          petitioner the option to acquire 2,000 shares of Ariba common               
          stock.2                                                                     
               On March 2, 1998, Ariba issued option No. 117 to petitioner            
          under its agreement and plan.  Option No. 117, which qualified as           
          an ISO, granted petitioner the option to acquire 2,000 shares of            

               2 The stock granted under option No. 34 will not be                    
          discussed in this Opinion.  When the ISOs granted under option              
          No. 34 were exercised, both the stock’s purchase price and FMV              
          were 20 cents per share.  As a result, no AMTI gain or loss was             
          generated upon the exercise of these shares or their subsequent             
          sale.                                                                       





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