Exhibit 10.6

SEVERANCE AGREEMENT

 

	THIS AGREEMENT is entered into as of ______  ______,200_, by and between [____________________] (the "Employee") and **ACTIONPOINT,INC**., a Delaware corporation (the "Company").

	**1.	Term of Agreement.**
	This Agreement shall remain in effect from the datehereof until the earlier of:

(a)	The date when the Employee's employment with theCompany terminates for any reason not described in Section 6; or

(b) 	the date when the Company has met all of itsobligations under this Agreement following a termination of the Employee'semployment with the Company for a reason described in Section 6.
**2.	Definition of Cause.**
For all purposes under this Agreement, "Cause" shallmean:

	(a)	The unauthorized use or disclosure of theconfidential information or trade secrets of the Company;

	(b)	Conviction of, or a plea of "guilty" or "nocontest" to, a felony under the laws of the United States or any statethereof;

	(c)	An act of embezzlement, fraud or theft withrespect to the property of the Company;

	(d)	Gross misconduct, gross negligence or otherconduct that is cause for termination under any written Company policy that wasin effect before the Change in Control;

	(e)	Repeated abuse of alcohol or drugs on the job orin a manner affecting job performance; or

	(f)	Failure to perform assigned duties.

The foregoing, however, shall not be deemed an exclusive listof all acts or omissions that the Company may consider as grounds for thedischarge of the Employee without Cause.  In the case of conduct described inSubsection (e) above, such conduct shall constitute "Cause" only if such conductrecurs after the Employee has received written notice that the Company considerssuch conduct to be "Cause" under this Agreement.  In the case of conductdescribed in Subsection (f) above, such conduct shall constitute "Cause" only ifsuch conduct recurs after the Employee has received written notice that theCompany considers such conduct to be "Cause" under this Agreement and had anopportunity to cure such conduct during a period of not less than 30 days.

 
**	3.	Definition of Change in Control.**
	For all purposes under this Agreement, "Change inControl" shall mean the occurrence of any of the following events after the dateof this Agreement.

(a)	The consummation of a merger or consolidation of theCompany with or into another entity or any other corporate reorganization, ifmore than 50% of the combined voting power of the continuing or survivingentity's  securities  outstanding immediately after such merger, consolidationor other reorganization is owned by persons who were not stockholders of theCompany immediately prior to such merger, consolidation or otherreorganization;

(b)	The sale, transfer, exchange or other disposition ofall or substantially all of the Company's assets;

(c)	A change in the composition of the Company's Board ofDirectors (the "Board"), as a result of which 50% or fewer of the incumbentdirectors are directors who either (i) had been directors of the Company on thedate 24 months prior to the date of the event that may constitute a Change inControl (the original "directors") or (ii) were elected, or nominated forelection, to the Board with the affirmative votes of at least a majority of theaggregate of the original directors who were still in office at the time of theelection or nomination and the directors whose election or nomination waspreviously so approved; or

(d)	Any transaction as a result of which any person is the"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Actof 1934, as amended), directly or indirectly, of securities of the Companyrepresenting at least 50% of the total voting power represented by the Company'sthen outstanding voting securities.  For purposes of this Paragraph (e), theterm "person" shall have the same meaning as when used in sections 13(d) and14(d) of such Act but shall exclude (i) a trustee or other fiduciary holdingsecurities under an employee benefit plan of the Company or of a parent orsubsidiary of the Company and (ii) a corporation owned directly or indirectly bythe stockholders of the Company in substantially the same proportions as theirownership of the common stock of the Company.

A transaction shall not constitute a Change in Control if itssole purpose is to change the state of the Company's incorporation or to createa holding company that will be owned in substantially the same proportions bythe persons who held the Company's securities immediately before suchtransaction.

 

 
**	4.	Definition of Continuation Period**
	For all purposes under this Agreement, "ContinuationPeriod" shall mean the period commencing on the date when the termination of theEmployee's employment under Section 6 is effective and ending on the earlierof:

(a)	The date [___] months after the date when theemployment termination was effective; or

(b)	The date of the Employee's death.
**5.	Definition of Good Reason**
For all purposes under this Agreement, "Good Reason" shallmean that the Employee:

	(a)	Has incurred a material reduction in his/herauthority or responsibility as an employee of the Company, with the result thathis/her position is no longer comparable to the position that he/she occupiedbefore the Change in Control;

	(b)	Has incurred a reduction in excess of 10% inhis/her base salary as an employee of the Company;

	(c)	Has been notified by the Company after the Changein Control that his/her principal place of work as an employee of the Companywill be relocated, which will cause his/her one-way commuting distance toincrease by more than 40 miles; or

	(d)	Is employed by a successor of the Company that hasfailed to comply with Section 10(a).
**6.	Eligibility for Severance Pay and Benefits**
 

		(a)  	**Change in Control and EmploymentTermination**.  The Employee shall be entitled to receive the severance paydescribed in Section 7 and the benefits described in Section 8 from the Companyif, and only if, one of the following events occurs:
**(i)	Within the first six-month period after theoccurrence of a Change in Control, the Employee voluntarily resigns his/heremployment for Good Reason; or

(ii)	Within the first 12-month period after the occurrenceof a Change in Control, the Company terminates the Employee's employment for anyreason other than Cause.

The determination of whether the Employee's employment hasterminated shall be made without regard to whether the Employee continues toprovide services to the Company as a member of the Board or otherwise in thecapacity of an independent contractor.  A transfer of the Employee's employmentfrom the Company to a successor of the Company shall not be considered atermination of employment, if such successor complies with the requirements ofSection 10(a).

 

		(b)	**Other Requirements**.  The Employee shallbe entitled to receive the severance pay described in Section 7 and the benefitsdescribed in Section 8 from the Company only if the Employee (i) continueshis/her employment for such reasonable period (not to exceed 90 days) as theCompany may request in order to ensure an orderly transition to his/hersuccessor, (ii) has executed a general release (in a form prescribed by theCompany) of all known and unknown claims that he/she may then have against theCompany or persons affiliated with the Company and (iii) has agreed not toprosecute any legal action or other proceeding based upon any of suchclaims.
**	7.	Amount of Severance Pay.**
		Within five business days after the termination ofthe Employee's employment under Section 6, the Company shall pay the Employee alump sum equal to [___]% of the Employee's base compensation1 at thegreater of (a) the annual rate in effect on the date when the termination of theEmployee's employment with the Company is effective or (b) the annual rate ineffect on the date of the Change in Control.

	**8.	Bonus and Group Insurance**.
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		(a)	**Bonus**.  In the event of anemployment termination described in Section 6, the Company shall pay theEmployee a bonus for the year in which such termination occurs.  Such bonusshall not be less than the bonus that would have been payable absent suchtermination, calculated on the basis of the most recent interim resultsavailable and prorated to reflect the portion of such year during which theEmployee was employed by the Company.

		(b)	**Group Insurance**.  During theContinuation Period, the Employee (and, where applicable, the Employee'sdependents) shall be entitled to continue participation in the group insuranceplans maintained by the Company, including life, disability and health insuranceprograms, as if the Employee were still an employee of the Company.  Whereapplicable, the Employee's salary for purposes of such plans shall be determinedat the greater of (i) the annual rate in effect on the date when the terminationof the Employee's employment with the Company is effective or (ii) the annualrate in effect on the date of the Change in Control.  To the extent that theCompany finds it impossible to cover the Employee under its group insuranceduring the Continuation Period, the Company shall provide the Employee withindividual policies which offer at least the same level of coverage and whichimpose not more than the same costs on the Employee.  The foregoingnotwithstanding, in the event that the Employee becomes eligible for comparablegroup insurance coverage in connection with new employment, the coverageprovided by the Company under this Subsection (c) shall terminate immediately.Any group health continuation coverage that the Company is required to offerunder the Consolidated Omnibus Budget Reconciliation Act of 1986 shall commencewhen coverage under this Subsection (c) terminates.
**	9.	Limitation on Payments.**
	(a)	**Application of Limitation**.  This Section 9shall apply only if the Employee, on an after-tax basis, would receive morevalue under this Agreement after the application of this Section 9 than beforethe application of this Section 9.  For this purpose, "after-tax basis" shallmean a calculation taking into account all federal and state income and excisetaxes imposed on the Employee, including (without limitation) the excise taxdescribed in section 4999 of the Internal Revenue Code of 1986, as amended (the"Code").  If this Section 9 is applicable, it shall supersede any conflictingprovision of this Agreement.
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	(b)	**Basic Rule**.  The Company shall not makeany payment or property transfer to, or for the benefit of, the Employee (underthis Agreement or otherwise) that would subject the Employee to the excise taxdescribed in section 4999 of the Code.  All calculations required by thisSection 9 shall be performed by the independent auditors retained by the Companymost recently prior to the Change in Control (the "Auditors"), based oninformation supplied by the Company and the Employee, and shall be binding onthe Company and the Employee.  All fees and expenses of the Auditors shall bepaid by the Company.
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	(c)	**Reductions**.  If the amount of theaggregate payments or property transfers to the Employee must be reduced underthis Section 9, then the Employee shall direct in which order the payments ortransfers are to be reduced, but no change in the timing of any payment ortransfer shall be made without the Company's consent.  As a result ofuncertainty in the application of Section 4999 of the Code at the time of aninitial determination by the Auditors hereunder, it is possible that a paymentwill have been made by the Company that should not have been made (an"Overpayment") or that an additional payment that will not have been made by theCompany should have been made (an "Underpayment").  In the event that theAuditors, based upon the assertion of a deficiency by the Internal RevenueService against the Employee that the Auditors believe has a high probability ofsuccess, determine that an Overpayment has been made, such Overpayment shall betreated for all purposes as a loan to the Employee that the Employee shall repayto the Company, together with interest at the applicable federal rate specifiedin section 7872(f)(2) of the Code; provided, however, that no amount shall bepayable by the Employee to the Company if and to the extent that such paymentwould not reduce the amount that is subject to an excise tax under section 4999of the Code.  In the event that the Auditors determine that an Underpayment hasoccurred, such Underpayment shall promptly be paid or transferred by the Companyto, or for the benefit of, the Employee, together with interest at theapplicable federal rate specified in section 7872(f)(2) of the Code.
**	10.	Successors.**
		(a)	**Company's Successors**.  The Companyshall require any successor (whether direct or indirect and whether by purchase,lease, merger, consolidation, liquidation or otherwise) to all or substantiallyall of the Company's business or, assets or all or substantially all of thecapital stock or assets of a subsidiary or other business unit in which theEmployee is employed to assume this Agreement  and to agree expressly in writingto perform this Agreement in the same manner and to the same extent as theCompany would be required to perform it in the absence of a succession.  For allpurposes under this Agreement, the term "Company" shall include any successor toa business or assets of the Company which executes and delivers the assumptionagreement described in this Subsection (a) or which becomes bound by thisAgreement by operation of law.
**		(b)	Employee's**Successors**.  ThisAgreement and all rights of the Employee hereunder shall inure to the benefitof, and be enforceable by, the Employee's personal or legal representatives,executors, administrators, successors, heirs, distributees, devisees andlegatees.
**	11.	Miscellaneous Provisions.**
		(a)	**Notice**.	  Notices and all othercommunications contemplated by this Agreement shall be in writing and shall bedeemed to have been duly given when personally delivered or when mailed by U.S.registered or certified mail, return receipt requested and postage prepaid.  Inthe case of the Employee, mailed notices shall be addressed to the Employee atthe home address which the Employee most recently communicated to the Company inwriting.  In the case of the Company, mailed notices shall be addressed to itscorporate headquarters, and all notices shall be directed to the attention ofits Secretary.

		(b)	**Waiver.**No provision of this Agreementshall be modified, waived or discharged unless the modification, waiver ordischarge is agreed to in writing and signed by the Employee and by anauthorized officer of the Company (other than the Employee).  No waiver byeither party of any breach of, or of compliance with, any condition or provisionof this Agreement by the other party shall be considered a waiver  of any othercondition or provision or of the same condition or provision at anothertime.

		(c)	**Whole Agreement; Amendments**.	Noagreements, representa-tions or understandings (whether oral or written andwhether express or implied) which are not expressly set forth in this Agreementhave been made or entered into by either party with respect to the subjectmatter hereof.  This Agreement may be amended only in writing, by an instrumentexecuted by both parties.

		(d)	**No Setoff; Withholding Taxes**.  Thereshall be no right of setoff or counterclaim, with respect to any claim, debt orobligation, against payments to the Employee under this Agreement.  All paymentsmade under this Agreement shall be subject to reduction to reflect taxesrequired to be withheld by law.
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		(e)	**Choice of Law**.  The validity,interpretation, construction and performance of this Agreement shall be governedby the laws of the State of California, except their choice-of-lawprovisions.

		(f)	**Severability**.	The invalidity orunenforceability of any provision or provisions of this Agreement shall notaffect the validity or enforceability of any other provision hereof, which shallremain in full force and effect.

		(g)	**Arbitration**.	Except as otherwiseprovided in Section 9, any controversy or claim arising out of or relating tothis Agreement, or the breach thereof, shall be settled by arbitration in SanJose, California, in accordance with the Commercial Arbitration Rules of theAmerican Arbitration Association.  Discovery shall be permitted to the sameextent as in a proceeding under the Federal Rules of Civil Procedure, including(without limitation) such discovery as is specifically authorized by section1283.05 of the California Code of Civil Procedure, without need of prior leaveof the arbitrator under section 1283.05(e) of such Code.  Judgment on the awardrendered by the arbitrator may be entered in any court having jurisdictionthereof.  All fees and expenses of the arbitrator and such Association shall bepaid as determined by the arbitrator.

		(h)	**No Assignment**.  The rights of anyperson to payments or benefits under this Agreement shall not be made subject tooption or assignment, either by voluntary or involuntary assignment or byoperation of law, including (without limitation) bankruptcy, garnishment,attachment or other creditor's process, and any action in violation of thisSubsection (h) shall be void.
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	IN WITNESS WHEREOF, each of the parties has executedthe Agreement, in the case of the Company by its duly authorized officer, as ofthe day and year first above written.

 

	___________________________________

 

	ACTIONPOINT, INC.

	By  ________________________________

 

	Title  _______________________________

 

 

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