of the Internal Revenue Code of 1986, as amended (the “Code”), if such Section is applicable. Ifthe commencement of such severance payments must be delayed, then the deferred installments shallbe paid in a lump sum on the earliest practicable date permitted by Section 409A(a)(2) of the Code.          (d) **Health Insurance.**If Subsection (a) above applies, and if the Employeeelects to continue health insurance coverage under the Consolidated Omnibus BudgetReconciliation Act (“COBRA”) for the Employee and, if applicable, the Employee’s dependentsfollowing the termination of the Employee’s employment, then the Company shall pay theemployer portion of the monthly premium under COBRA for the Employee and, if applicable,such dependents until the earliest of (i) the close of the Continuation Period, (ii) theexpiration of the Employee’s continuation coverage under COBRA or (iii) the date when the Employeereceives substantially equivalent health insurance coverage in connection with new employmentor self-employment.          (e) **Definition of “Cause.”**For purposes of this Agreement, “Cause” shallmean:          (i) An unauthorized use or disclosure by the Employee of the Company’sconfidential information or trade secrets, which use or disclosure causes materialharm to the Company;          (ii) A material breach by the Employee of any agreement between the Employeeand the Company;          (iii) A material failure by the Employee to comply with the Company’s writtenpolicies or rules;          (iv) The Employee’s conviction of, or plea of “guilty” or “no contest” to, afelony under the laws of the United States or any State thereof;          (v) The commission of any act of fraud, embezzlement or dishonesty by theEmployee;          (vi) The Employee’s gross negligence or intentional misconduct;          (vii) A continuing failure by the Employee to perform assigned duties afterreceiving written notification of such failure from the Company; or          (viii) A failure by the Employee to cooperate in good faith with agovernmental or internal investigation of the Company or its directors, officers oremployees, if the Company has requested the Employee’s cooperation.          (f) **Definition of “Change in Control.”**For purposes of this Agreement,“Change in Control” shall mean:
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          (i) The consummation of a merger or consolidation of the Company with or intoanother entity or any other corporate reorganization, if persons who were notstockholders of the Company immediately prior to such merger, consolidation or otherreorganization own immediately after such merger, consolidation or otherreorganization 50% or more of the voting power of the outstanding securities of eachof (A) the continuing or surviving entity and (B) any direct or indirect parentcorporation of such continuing or surviving entity;          (ii) The sale, transfer or other disposition of all or substantially all of theCompany’s assets;          (iii) A change in the composition of the Company’s Board of Directors (the“Board”), as a result of which fewer than 50% of the incumbent directors aredirectors who either:          (A) Had been directors of the Company on thedate 24 months prior to the date of such change in thecompositionof the Board (the “Original Directors”); or          (B) Were appointed to the Board, or nominatedfor election to the Board, with the affirmative votes of atleast amajority of the aggregate of (I) the Original Directors whowere inoffice at the time of their appointment or nomination and (II)thedirectors whose appointment or nomination waspreviouslyapproved in a manner consistent with this Subparagraph (B); or          (iv) Any transaction as a result of which any person is the “beneficial owner”(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended),directly or indirectly, of securities of the Company representing at least 50% ofthe total voting power represented by the Company’s then outstanding votingsecurities. For purposes of this Paragraph (iv), the term “person” shall have thesame meaning as when used in Sections 13(d) and 14(d) of such Act but shall exclude(A) a trustee or other fiduciary holding securities under an employee benefit planof the Company or of a Parent or Subsidiary and (B) a corporation owned directly orindirectly by the stockholders of the Company in substantially the same proportionsas their ownership of the common stock of the Company.A transaction shall not constitute a Change in Control if its sole purpose is to change the stateof the Company’s incorporation or to create a holding company that will be owned in substantiallythe same proportions by the persons who held the Company’s securities immediately before suchtransaction.          (g) **Definition of “Good Reason.”**For purposes of this Agreement, “Good Reason” shall mean (i)a change in the Employee’s position with the Company that materially reduces the Employee’s levelof responsibility, (ii) a reduction in the Employee’s annual rate of
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base salary or (iii) a relocation of the Employee’s place of employment by more than 35 miles, butonly if such change, reduction or relocation is effected by the Company without the Employee’sconsent.          (h) **Definition of “Permanent Disability.”**For purposes of this Agreement, “PermanentDisability” shall mean the Employee’s inability to perform the essential functions of theEmployee’s position, with or without reasonable accommodation, for a period of at least 120consecutive days because of a physical or mental impairment.          **2. PARACHUTE PAYMENTS.**          (a) **Scope of Limitation.**This Section 2 shall apply only if an independentaccounting firm selected by the Employee from among the largest four accounting firms in theUnited States (the “Accounting Firm”) determines that the after-tax value of all Payments (asdefined below) to the Employee, taking into account the effect of all federal, state and localincome taxes, employment taxes and excise taxes applicable to the Employee (including theexcise tax under Section 4999 of the Code), will be greater after the application of thisSection 2than it was before the application of this Section 2. If this Section 2 applies, it shallsupersedeany contrary provision of this Agreement.          (b) **Basic Rule.**In the event that the Accounting Firm determines that anypayment or transfer by the Company to or for the benefit of the Employee (a “Payment”) wouldbe nondeductible by the Company for federal income tax purposes because of the provisionsconcerning “excess parachute payments” in Section 280G of the Code, then the aggregatepresent value of all Payments shall be reduced (but not below zero) to the Reduced Amount. Forpurposes of this Section 2, the “Reduced Amount” shall be the amount, expressed as a presentvalue, which maximizes the aggregate present value of the Payments without causing anyPayment to be nondeductible by the Company because of Section 280G of the Code.          (c) **Reduction of Payments.**If the Accounting Firm determines that anyPayment would be nondeductible by the Company because of Section 280G of the Code, thenthe Company shall promptly give the Employee notice to that effect and a copy of the detailedcalculation thereof and of the Reduced Amount, and the Employee may then elect, in theEmployee’s sole discretion, which and how much of the Payments shall be eliminated or reduced(as long as after such election the aggregate present value of the Payments equals the ReducedAmount) and shall advise the Company in writing of the Employee’s election within 10 businessdays of receipt of notice. If no such election is made by the Employee within such 10-dayperiod, then the Company may elect which and how much of the Payments shall be eliminated orreduced (as long as after such election the aggregate present value of the Payments equals theReduced Amount) and shall notify the Employee promptly of such election. For purposes of thisSection 2, a present value shall be determined in accordance with Section 280G(d)(4) of theCode. All determinations made by the Accounting Firm under this Section 2 shall be bindingupon the Company and the Employee and shall be made within 10 business days of the datewhen a Payment becomes payable or transferable. As promptly as practicable following suchdetermination and the elections hereunder, the Company shall pay or transfer to or for thebenefitof the Employee such amounts as are then due to the Employee and shall promptly pay or
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transfer to or for the benefit of the Employee in the future such amounts as become due to theEmployee.          (d) **Overpayments and Underpayments.**As a result of uncertainty in theapplication of Section 280G of the Code at the time of an initial determination by theAccountingFirm hereunder, it is possible that Payments will have been made by the Company that shouldnot have been made (an “Overpayment”) or that additional Payments that will not have beenmade by the Company could have been made (an “Underpayment”), consistent in each case withthe calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, basedupon the assertion of a deficiency by the Internal Revenue Service against the Company or theEmployee that the Accounting Firm believes has a high probability of success, determines thatan Overpayment has been made, such Overpayment shall be treated for all purposes as a loan tothe Employee that the Employee shall repay to the Company, together with interest at theapplicable federal rate provided in Section 7872(f)(2) of the Code; provided, however, that noamount shall be payable by the Employee to the Company if and to the extent that such paymentwould not reduce the amount that is subject to taxation under Section 4999 of the Code. Intheevent that the Accounting Firm determines that an Underpayment has occurred, suchUnderpayment shall promptly be paid or transferred by the Company to or for the benefit of theEmployee, together with interest at the applicable federal rate provided in Section 7872(f)(2)ofthe Code.          (e) **Related Corporations.**For purposes of this Section 2, the term“Company” shall include affiliated corporations to the extent determined by the AccountingFirmin accordance with Section 280G(d)(5) of the Code.          (f) **Fees of Accounting Firm and Required Data.**The Company shall payall fees, expenses and other costs associated with retaining the Accounting Firm for thepurposesdescribed in this Section 2. The Company shall provide to the Accounting Firm all data in theCompany’s possession or under its control that the Accounting Firm reasonably requires for thepurposes described in this Section 2.          **3. EMPLOYMENT AT WILL.**          The Employee’s employment with the Company shall be “at will,” meaning that either theEmployee or the Company shall be entitled to terminate the Employee’s employment at any time andfor any reason, with or without Cause. Any contrary representations that may have been made to theEmployee shall be superseded by this Agreement. This Agreement shall constitute the full andcomplete agreement between the Employee and the Company on the “at will” nature of the Employee’semployment, which may only be changed in an express written agreement signed by the Employee and aduly authorized officer of the Company.          **4. SUCCESSORS.**          (a) **Company’s Successors.**This Agreement shall be binding upon any successor (whether director indirect and whether by purchase, lease, merger, consolidation, reorganization, liquidation orotherwise) to all or substantially all of the Company’s business
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and/or assets. For all purposes under this Agreement, the term “Company” shall include anysuccessor to the Company’s business and/or assets that becomes bound by this Agreement.          (b) **Employee’s Successors.**This Agreement and all rights of the Employee hereunder shallinure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives,executors, administrators, successors, heirs, distributees, devisees and legatees. This Agreementand all rights and obligations of the Employee hereunder are personal to the Employee and may notbe transferred or assigned by the Employee at any time; provided that Employee may assign theEmployee’s rights hereunder pursuant to any property settlement resulting from the dissolution ofthe Employee’s marriage on the condition that such rights shall be conditioned upon Employee’sperformance of the Employee’s obligations hereunder as if no such assignment had occurred.          **5. ARBITRATION.**          (a) **Scope of Arbitration Requirement.**The parties hereby waive theirrights to a trial before a judge or jury and agree to arbitrate before a neutral arbitratorany and allclaims or disputes arising out of this Agreement or the Release and any and all claims arisingfrom or relating to the Employee’s employment with the Company, including (but not limited to)claims against any current or former employee, director or agent of the Company, claims ofwrongful termination, retaliation, discrimination, harassment, breach of contract, breach ofthecovenant of good faith and fair dealing, defamation, invasion of privacy,fraud,misrepresentation, constructive discharge or failure to provide a leave of absence, claimsregarding commissions, stock options or bonuses, infliction of emotional distress or unfairbusiness practices, or any tort or tort-like causes of action.          (b) **Exceptions.**The foregoing notwithstanding, the only claims that may beresolved in any appropriate forum (including courts of law) are (i) claims concerning workers’compensation benefits and (ii) claims concerning unemployment insurance.          (c) **Procedure.**The arbitrator’s decision shall be written and shall include thefindings of fact and law that support the decision. The arbitrator’s decision shall be finalandbinding on both parties, except to the extent applicable law allows for judicial review ofarbitration awards. The arbitrator may award any remedies that would otherwise be available tothe parties if they were to bring the dispute in court. The arbitration shall be conductedin accordance with the National Rules for the Resolution of Employment Disputes of the AmericanArbitration Association; provided, however, that the arbitrator shall allow the discoveryauthorized by the California Arbitration Act or the discovery that the arbitrator deemsnecessaryfor the parties to vindicate their respective claims or defenses. The arbitration shall takeplace inSanta Clara County or, at the Employee’s option, the County in which the Employee primarilyworked with the Company at the time when the arbitrable dispute or claim first arose.          (d) **Costs.**The parties shall share the costs of arbitration equally, except thatthe Company shall bear the cost of the arbitrator’s fee and any other type of expense or costthatthe Employee would not be required to bear if the Employee were to bring the dispute or claimincourt. Both the Company and the Employee shall be responsible for their own attorneys’ fees,
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and the arbitrator may not award attorneys’ fees unless a statute or contract at issue specificallyauthorizes such an award.          **6. MISCELLANEOUS PROVISIONS.**          (a) **Notice.**Notices and all other communications contemplated by thisAgreement shall be in writing and shall be deemed to have been duly given when personallydelivered or when mailed by U.S. registered or certified mail, return receipt requested andpostage prepaid. In the case of the Employee, mailed notices shall be addressed to theEmployeeat the home address that the Employee most recently communicated to the Company in writing.In the case of the Company, mailed notices shall be addressed to its corporate headquarters,andall notices shall be directed to the attention of its Secretary.          (b) **Entire Agreement.**This Agreement supersedes and replaces any prioragreements, representations or understandings, whether written, oral or implied, between theEmployee and the Company with respect to the subject matter hereof.          (c) **Modifications and Waivers.**No provision of this Agreement shall bemodified, waived or discharged unless the modification, waiver or discharge is agreed to inwriting and signed by the Employee and by an authorized officer of the Company (other than theEmployee). No waiver by either party of any breach of, or of compliance with, any condition orprovision of this Agreement by the other party shall be considered a waiver of any othercondition or provision or of the same condition or provision at another time.          (d) **Withholding Taxes.**All payments made under this Agreement shall besubject to reduction to reflect taxes or other charges required to be withheld by law.          (e) **Choice of Law and Severability.**This Agreement shall be interpreted inaccordance with the laws of the State of California (except their provisions governing thechoice of law). If any provision of this Agreement becomes or is deemed invalid, illegal orunenforceable in any jurisdiction by reason of the scope, extent or duration of its coverage,then such provision shall be deemed amended to the extent necessary to conform to applicable law soas to be valid and enforceable or, if such provision cannot be so amended without materiallyaltering the intention of the parties, then such provision shall be stricken and the remainderof this Agreement shall continue in full force and effect. Should there ever occur any conflictbetween any provision contained in this Agreement and any present or future statute, law,ordinance or regulation, then the latter shall prevail, but the provision of this Agreementaffectedthereby shall be curtailed and limited only to the extent necessary to bring it intocompliancewith applicable law. All the other terms and provisions of this Agreement shall continue infullforce and effect without impairment or limitation.          (f) **Counterparts.**This Agreement may be executed in two counterparts,each of which shall be deemed an original, but both of which together shall constitute one andthe same instrument.
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          **IN WITNESS WHEREOF**, each of the parties has executed this Agreement, in the case of theCompany by its duly authorized officer, as of the day and year first above written.             Selectica, Inc.