(c) **Stock Option**. As soon as reasonably practicable on or after the date of this Agreement,the Company shall grant the Employee additional options to purchase 600,000 sharesof the Company’s Common Stock (the “Options”). The Options shall be granted under theCompany’s 1999 Equity Incentive Plan, as amended (the “Plan”). The exercise price per share of theOptions shall be equal to the closing price per share of the Company’s Common Stock on the date ofgrant. The term of the Options shall be 10 years, subject to earlier expiration in the event ofthe termination of the Employee’s Employment. The Options shall become exercisable for one-quarterof the total number of shares when the Employee completes 12 months of continuous service followingthe date of this Agreement and for 1/48th of the total number of shares when hecompletes each month of continuous service thereafter. In addition, the Options shall immediatelybecome exercisable for one-half of the remaining unexercisable shares if the Company is subject toa Change in Control within 12 months after the date of this Agreement. (Certain terms are definedin Section 12.) The Options shall immediately become exercisable for all of the shares if theCompany is subject to a Change in Control more than 12 months after the date of this Agreement.All shares purchased by exercising the Options shall be fully vested. The grant of the Optionsshall be subject to the other terms and conditions set forth in the Plan and the Company’s standardform of Stock Option Agreement.          (d) **Restricted Stock Units**. As soon as reasonably practicable on or after the date of thisAgreement, the Company shall grant the Employee 400,000 units representing shares of the Company’sCommon Stock (the “Units”). The Units shall be granted under the Plan. The Units shall vest basedon the attainment of strategic objectives by the Company. Such objectives shall be established bythe Compensation Committee of the Board, and its determinations with respect to the vesting of theUnits shall be final and binding. In addition, one-half of the remaining unvested Units shallimmediately vest if the Company is subject to a Change in Control within 12 months after the dateof this Agreement. All of the Units shall immediately vest if the Company is subject to a Changein Control more than 12 months after the date of this Agreement. The grant of the Units shall besubject to the other terms and conditions set forth in the Plan and the Company’s form of StockUnit Agreement.          3. **Vacation and Employee Benefits.**During his Employment, the Employee shall be eligible forpaid vacations in accordance with the Company’s vacation policy, as it may be amended from time totime. During his Employment, the Employee shall also be eligible to participate in the employeebenefit plans maintained by the Company, subject in each case to the generally applicable terms andconditions of the plan in question and to the determinations of any person or committeeadministering such plan.          4. **Business Expenses.**During his Employment, the Employee shall be authorized to incurnecessary and reasonable travel, entertainment and other business expenses in connection with hisduties hereunder. The Company shall reimburse the Employee for such expenses upon presentation ofan itemized account and appropriate supporting documentation, all in accordance with the Company’sgenerally applicable policies. The Company shall also pay, or reimburse the Employee for, hismembership fees for Vistage International, Inc.          5. **Term of Employment.**
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          (a) **Termination of Employment**. The Company may terminate the Employee’s Employment at anytime and for any reason (or no reason), and with or withoutCause, by giving the Employee notice in writing. The Employee may terminate his Employment bygiving the Company 30 days’ advance notice in writing. The Employee’s Employment shall terminateautomatically in the event of his death. The termination of the Employee’s Employment shall notlimit or otherwise affect his obligations under Section 7.          (b) **Employment at Will**. The Employee’s Employment with the Company shall be “at will,”meaning that either the Employee or the Company shall be entitled to terminate the Employee’sEmployment at any time and for any reason, with or without Cause. Any contrary representationsthat may have been made to the Employee shall be superseded by this Agreement. This Agreementshall constitute the full and complete agreement between the Employee and the Company on the “atwill” nature of the Employee’s Employment, which may only be changed in an express writtenagreement signed by the Employee and a duly authorized officer of the Company.          (c) **Rights upon Termination**. Except as expressly provided in Section 6, upon the terminationof the Employee’s Employment, the Employee shall only be entitled to the compensation, benefits andexpense reimbursements that the Employee has earned under this Agreement before the effective dateof the termination. The payments under this Agreement shall fully discharge all responsibilitiesof the Company to the Employee.          6. **Termination Benefits.**          (a) **Preconditions**. Any other provision of this Agreement notwithstanding, this Section 6shall not apply unless the following requirements are satisfied:          (i) The Employee has executed a general release of all claims that he may thenhave against the Company or persons affiliated with the Company. The release shallbe in a form mutually agreed upon by the Company and the Employee within 30 daysafter his Employment termination date. The Employee shall execute the releasewithin the period set forth in the form.          (ii) The Employee has returned all property of the Company in the Employee’spossession.          (iii) If requested by the Board, the Employee has resigned as a member of theBoard and as a member of the Boards of Directors of all subsidiaries of the Company,to the extent applicable.          (b) **Involuntary Termination**. If, during the term of this Agreement, the Employee is subjectto an Involuntary Termination, then the Company shall pay the Employee a severance benefit equal tohis annual Base Salary at the rate in effect at the time of the termination of Employment (the“Severance Benefit”). One-half of the Severance Benefit shall be paid in a lump sum within 10business days after the termination of Employment, and the balance of the Severance Benefit shallbe paid in equal monthly installments during the 12-month period following the termination of hisEmployment.
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          The amount of the Severance Benefit shall be reduced by the amount of any severance pay or payin lieu of notice that the Employee receives from the Company under a federal or state statute(including, without limitation, the Worker Adjustment and Retraining Notification Act).          If the Company determines that the Employee is a “specified employee” under Section409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulationsthereunder when his Employment terminates, then (i) payments of the Severance Benefit, to theextent not exempt from Section 409A of the Code, shall commence on the earliest practicable datethat occurs more than six months after the Employment termination date and (ii) the payments thatotherwise would have been made during the first six months following the Employment terminationdate shall be made in a lump sum on the first day of the seventh month after the Employmenttermination date.          (c) **Health Insurance**. If Subsection (b) above applies, and if the Employee elects to continuehealth insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) forhimself and, if applicable, his dependents following the termination of his Employment, then theCompany shall pay the employer portion of the monthly premium under COBRA for the Employee and, ifapplicable, such dependents until the earliest of (i) the close of the 12-month period followingthe termination of his Employment, (ii) the expiration of the Employee’s continuation coverageunder COBRA or (iii) the date when the Employee receives substantially equivalent health insurancecoverage in connection with new employment or self-employment. If continuation coverage underCOBRA becomes unavailable for reasons beyond the Employee’s control during the 12-month periodfollowing the termination of his Employment, then the Company shall at that time pay the Employee alump sum equal to the monthly amount that the Company paid most recently under this Subsection (c)multiplied by the number of remaining months in such 12-month period.          (d) ***Pro Rata*****Bonus**. If Subsection (b) above applies, then the Company shall also pay theEmployee the product of (i) the Employee’s target bonus under Section 2(b) for the fiscal year inwhich his Employment terminates multiplied by (ii) a fraction, the numerator of which is the numberof days for which the Employee was employed by the Company during such fiscal year and thedenominator of which is 365.          7. **Non-Solicitation and Non-Disclosure.**          (a) **Non-Solicitation**. During the period commencing on the date of this Agreement andcontinuing until the first anniversary of the date when the Employee’s Employment terminated forany reason, the Employee shall not directly or indirectly, personally or through others, solicit orattempt to solicit (on the Employee’s own behalf or on behalf of any other person or entity) either(i) the employment of any employee or consultant of the Company or any of the Company’s affiliatesor (ii) the business of any customer of the Company or any of the Company’s affiliates.          (b) **Non-Disclosure**. The Employee shall enter into a Proprietary Information and InventionsAgreement with the Company, in the Company’s standard form (the “PIIA”), which is incorporatedherein by this reference.
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          8. **Successors.**          (a) **Company’s Successors**. This Agreement shall be binding upon any successor (whether director indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to allor substantially all of the Company’s business and/or assets. For all purposes under thisAgreement except Section 7(a), the term “Company” shall include any successor to the Company’sbusiness and/or assets which 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.          9. **Arbitration**. Any controversy or claim arising out of this Agreement and any and all claimsrelating to the Employee’s Employment with the Company shall be settled by final and bindingarbitration. The arbitration shall take place in Santa Clara County, California, or, at theEmployee’s option, the County in which the Employee primarily worked when the arbitrable dispute orclaim first arose. The arbitration shall be administered by the American Arbitration Associationunder its National Rules for the Resolution of Employment Disputes. Any award or finding shall beconfidential. The Employee and the Company agree to provide one another with reasonable access todocuments and witnesses in connection with the resolution of the dispute. The Employee and theCompany shall share the costs of arbitration equally, except that the Company shall bear the costof the arbitrator’s fee and any other type of expense or cost that the Employee would not berequired to bear if the Employee were to bring the dispute or claim in court. Each party shall beresponsible for its own attorneys’ fees; provided, however, that the arbitrator shall award to theprevailing party in any such dispute its attorneys’ fees and costs, in addition to all otherappropriate relief. This Section 9 shall not apply to claims for workers’ compensation benefits orunemployment insurance benefits. Injunctive relief and other provisional remedies shall beavailable in accordance with Section 1281.8 of the California Code of Civil Procedure.          10. **Golden Parachute Excise Tax**. In the event that any payment or benefit received by theEmployee pursuant to this Agreement (a “Payment”) would constitute a “parachute payment” within themeaning of Section 280G of Code and, but for this sentence, would be subject to the excise taximposed by Section 4999 of the Code (the “Excise Tax”), then the Employee shall have the option ofhaving such Payment be equal to a reduced amount. Such reduced amount shall be calculated aseither (i) the largest portion of the Payment that would result in no portion of the Payment beingsubject to the Excise Tax or (ii) the largest portion, up to and including the total, of thePayment, whichever amount, after taking into account all applicable federal, state and localemployment taxes, income taxes and the Excise Tax (all computed at the highest applicable marginalrate), results in the Employee’s receipt, on an after-tax basis, of the greater amount of thePayment, notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.If a reduction in payments or benefits constituting“parachute payments” is necessary so that the Payment equals the reduced amount, the reductionshall occur in the following order: a reduction of cash payments; cancellation of acceleratedvesting of stock awards, if applicable; and reduction of employee benefits. The Employee’s
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election to take a reduced amount, if any, shall be irrevocable and shall be made prior to the timesuch payment would otherwise be due.          If the Company reasonably determines that this Section 10 may apply, it shall engage anindependent accounting firm to perform the foregoing calculations. The Company shall bear allexpenses with respect to the determinations by such accounting firm required to be made hereunder.The accounting firm engaged to make the determinations hereunder shall provide its calculations,together with detailed supporting documentation, to the Employee and the Company, at least fivedays in advance of the date on which the Employee’s right to a Payment is triggered (if requestedat that time by the Employee or the Company) or at such other time as requested. Any good-faithdeterminations of the accounting firm made hereunder shall be final, binding and conclusive uponthe Employee and the Company.          11. **Miscellaneous Provisions.**          (a) **Notice**. Notices and all other communications contemplated by this Agreement shall be inwriting and shall be deemed to have been duly given when personally delivered, when delivered byFedEx with delivery charges prepaid, or when mailed by U.S. registered or certified mail, returnreceipt requested and postage prepaid. In the case of the Employee, mailed notices shall beaddressed to him at the home address that he 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) **Modifications and Waivers**. No provision of this Agreement shall be modified, waived ordischarged unless the modification, waiver or discharge is agreed to in writing and signed by theEmployee and by an authorized officer of the Company (other than the Employee). No waiver byeither party of any breach of, or of compliance with, any condition or provision of this Agreementby the other party shall be considered a waiver of any other condition or provision or of the samecondition or provision at another time.          (c) **Whole Agreement**. No other agreements, representations or understandings (whether oral orwritten and whether express or implied) that are not expressly set forth in this Agreement havebeen made or entered into by either party with respect to the subject matter hereof. ThisAgreement, the Stock Option Agreement described in Section 2(c), the Stock Unit Agreement describedin Section 2(d) and the PIIA contain the entire understanding of the parties with respect to thesubject matter hereof.          (d) **Taxes**. All payments made under this Agreement shall be subject to reduction to reflecttaxes or other charges required to be withheld by law. The Company shall not have a duty to designits compensation policies in a manner that minimizes the Employee’s tax liabilities, and theEmployee shall not make any claim against the Company or the Board related to tax liabilitiesarising from the Employee’s compensation.          (e) **Choice of Law and Severability**. This Agreement shall be interpreted in accordance withthe laws of the State of California (except their provisions governing the choice of law). If anyprovision of this Agreement becomes or is deemed invalid, illegal or
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unenforceable in any applicable jurisdiction by reason of the scope, extent or duration of its coverage, then suchprovision shall be deemed amended to the minimum 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 remainder ofthis Agreement shall continue in full force and effect. If any provision of this Agreement isrendered illegal by any present or future statute, law, ordinance or regulation (collectively the“Law”), then such provision shall be curtailed or limited only to the minimum extent necessary tobring such provision into compliance with the Law. All the other terms and provisions of thisAgreement shall continue in full force and effect without impairment or limitation.          (f) **No Assignment**. This Agreement and all rights and obligations of the Employee hereunderare personal to the Employee and may not be transferred or assigned by the Employee at any time.The Company may assign its rights under this Agreement to any entity that assumes the Company’sobligations hereunder in connection with any sale or transfer of all or a substantial portion ofthe Company’s assets to such entity.          (g) **Counterparts**. This Agreement may be executed in two or more counterparts, each of whichshall be deemed an original, but all of which together shall constitute one and the sameinstrument.          **12. Definitions.**          (a) **Cause**. For all purposes under this Agreement, “Cause” shall mean:          (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 Employee’s gross negligence or willful misconduct;          (vi) A continuing failure by the Employee to perform assigned duties afterreceiving written notification of such failure from the Board; or          (vii) A failure by the Employee to cooperate in good faith with a governmentalor internal investigation of the Company or its directors, officers or employees, ifthe Company has requested the Employee’s cooperation.
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          (b) **Change in Control**. For all purposes under this Agreement, “Change in Control” shall mean:          (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 Board, as a result of which fewer than50% of the incumbent directors are directors who either:          (A) Had been directors of the Company on the date 24 monthsprior to the date of such change in the composition of the Board(the “Original Directors”); or          (B) Were appointed to the Board, or nominated for election tothe Board, with the affirmative votes of at least a majority of theaggregate of (I) the Original Directors who were in office at thetime of their appointment or nomination and (II) the directors whoseappointment or nomination was previously approved in a mannerconsistent 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 of the Company and (B) a corporationowned directly or indirectly by the stockholders of the Company in substantially thesame proportions as 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.
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          (c) **Involuntary Termination**. For all purposes under this Agreement, “Involuntary Termination”shall mean a termination of the Employee’s service that occurs by reason of (i) his involuntarydismissal or discharge by the Company for reasons other than Cause or (ii) his voluntaryresignation following (A) a change in his position with the Company that materially reduces hislevel of responsibility, (B) a reduction in his level of Base Salary, (C) a relocation of his placeof employment by more than 35 miles or (D) the failure of any successor to the Company to assumethe Company’s obligations under this Agreement, provided and only if such change, reduction orrelocation is effected by the Company without the Employee’s consent.          **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.