Exhibit 10.2

 

[TIER 1 ELIGIBLE OFFICER]

 

WEBSENSE, INC.

 

PARTICIPATION AGREEMENT

 

(OFFICER CHANGE IN CONTROL SEVERANCE BENEFIT PLAN)

 

Name of Eligible Officer:

 

You have been selected to participate in the Websense, Inc. Officer Change in
Control Severance Benefit Plan (the “Plan”).  Capitalized terms not explicitly
defined in this Participation Agreement (the “Agreement”) but defined in the
Plan shall have the same definitions as in the Plan.

 

Pursuant to the terms of the Plan, a copy of which is attached as Exhibit A to
this Agreement, you may become entitled to receive severance benefits in the
event of a Covered Termination as provided in this Agreement.

 

In accordance with Section 2 of the Plan, you have been designated as an
Eligible Officer.

 

Section 1.              SEVERANCE BENEFITS FOR COVERED TERMINATIONS DURING THE
COVERAGE PERIOD.

 

Subject to the exceptions set forth in Section 2(c) of the Plan, if during the
Coverage Period you are terminated in a Covered Termination, and meet all the
other requirements set forth in Sections 2(b) and 5 of the Plan, including,
without limitation, executing the applicable required Release within the
applicable time period set forth therein and provided that such Release becomes
effective in accordance with its terms, you will receive the following severance
benefits:

 

(a)           Cash Severance Benefit.  You will be entitled to receive a single
lump sum cash payment equal to: (i) twenty-four (24) months of Base Salary, plus
(ii) your Additional Severance Amount (together the “Cash Severance Benefit”)
payable as provided in Section 6 of the Plan.

 

(b)           Accelerated Vesting of Stock Awards.

 

(1)           Effective as of the date of your Covered Termination, (i) the
vesting and exercisability of all outstanding stock options to purchase the
Company’s common stock that are held by you on such date shall be accelerated in
full, (ii) any reacquisition or repurchase rights held by the Company in respect
of common stock issued pursuant to any other stock award granted to you by the
Company shall lapse in full, and (iii) the vesting of any other stock awards
granted to you by the Company, and any issuance of shares triggered by the
vesting of such stock awards, shall be accelerated in full.  Notwithstanding the
foregoing, this Section 1(b) shall not apply to stock awards issued under or
held in any Qualified Plan.

 

(2)           If your stock awards accelerate vesting in accordance with this
Section 1(b), such stock awards will remain exercisable, if applicable, until
the earlier of (A) one

 

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(1) year following the effective date of Covered Termination, or (B) the
original maximum term of the stock award. In order to give effect to the intent
of the foregoing provision, notwithstanding anything to the contrary set forth
in your stock award agreements or the applicable equity incentive plan under
which such stock award was granted that provides that any then unvested portion
of your award will immediately expire upon your termination of service, no
unvested portion of your stock award shall terminate any earlier than two
(2) months following any Covered Termination that occurs prior to a Change in
Control.   Notwithstanding anything to the contrary set forth herein, your stock
awards shall remain subject to earlier termination in connection with a
“Corporate Transaction” as provided in the Company’s Amended and Restated 2000
Stock Incentive Plan, or substantially equivalent provisions of any successor or
other equity incentive plan adopted by the Company which govern your stock
awards, as applicable.

 

(c)           Payment of Continued Group Health Plan Benefits.  If you timely
elect continued group health plan continuation coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall pay the
full amount of your COBRA premiums, or shall provide coverage under any
self-funded plan, on behalf of you for your continued coverage under the
Company’s group health plans, including coverage for your eligible dependents,
for eighteen (18) months following your Covered Termination; provided, however,
that no such premium payments shall be made, and no coverage shall be provided
without cost to you under any self-funded group health plan, following the
expiration of your continued coverage under COBRA or the date that you become
eligible to elect coverage under a group health plan of a subsequent employer. 
You will be required to notify the Company immediately if you become eligible to
be covered by a group health plan of a subsequent employer.  Upon the conclusion
of such period of insurance premium payments made by the Company, or the
provision of coverage under a self-funded group health plan, you will be
responsible for the entire payment of premiums (or payment for the cost of
coverage) required under COBRA for the duration of your eligible COBRA coverage
period.  For purposes of this Section 1(c), (i) references to COBRA shall be
deemed to refer also to analogous provisions of state law and (ii) any
applicable insurance premiums that are paid by the Company shall not include any
amounts payable by you under an Internal Revenue Code Section 125 health care
reimbursement plan, which amounts, if any, are your sole responsibility.

 

Section 2.              CASH SEVERANCE BENEFIT FOR COVERED TERMINATIONS OUTSIDE
THE COVERAGE PERIOD.

 

Subject to the exceptions set forth in Section 2(c) of the Plan, if you meet all
the requirements set forth in Sections 2(b) and 5 of the Plan, including,
without limitation, executing the applicable required Release within forty-five
(45) days following your termination, and provided that such Release becomes
effective in accordance with its terms, you will receive the severance benefits
set forth in this Section 2.  If your employment terminates due to a Covered
Termination that does not occur during the Coverage Period, you will be entitled
to receive a single lump sum cash payment equal to six (6) months of your Base
Salary.   Such payment shall be made to you within ten (10) days of the
effective date of the Release.   In the event that within the two month period
following your Covered Termination there is a Change in Control, such that your
Covered Termination occurred during the Coverage Period, then you will be
entitled to

 

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receive benefits under Section 1 of this Agreement, which will be offset by any
payments that you may have previously received under this Section 2.

 

Section 3.              4999 GROSS-UP PAYMENTS.   [INCLUDE THIS SECTION FOR U.S.
RESIDENTS ONLY]

 

(a)           Subject to the limitations of Section 3(b) below, if any payment,
distribution or benefit you would receive from the Company or otherwise, but
determined without regard to any additional payment required under this
Section 3, pursuant to a Change in Control (each a “Payment” and collectively
the “Payments”), would (i) constitute a “parachute payment” within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
and (ii) be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties payable with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then you shall be entitled to receive from the
Company (or have the Company pay on your behalf) an additional payment (the
“Gross-Up Payment”) in an amount that shall fund your payment of any Excise Tax
on the Payments as well as all income and employment taxes imposed on the
Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment and any
interest or penalties imposed with respect to income and employment taxes
imposed on the Gross-Up Payment.

 

(b)           The Company shall make no Gross-Up Payment if the Payments do not
exceed 110% of the Safe Harbor Amount, as defined below, and instead the
Payments due and made under the Plan shall be reduced so that the Payments, in
the aggregate, equal the Safe Harbor Amount. Safe Harbor Amount” means 2.99
times your “base amount,” within the meaning of Section 280G(b)(3) of the Code,
so that no amount of the Payments is subject to the Excise Tax.  The reduction
of the Payments due and made hereunder, if applicable, shall be made by first
reducing the severance benefits provided under Section 1(a), 1(c), and 1(b) of
this Agreement, in that order, unless an alternative method of reduction is
elected by you prior to a Change in Control, and subject to approval by the
Company.  “In the event that acceleration of vesting of stock award compensation
is to be reduced, such acceleration of vesting shall be cancelled in the reverse
order of the date of grant of your stock awards unless you elect in writing a
different order for cancellation.  Notwithstanding anything to the contrary set
forth herein, you may not elect the order in which the reduction in your
payments or benefits will occur if such election would cause any such amounts to
constitute “nonqualified deferred compensation” within the meaning of
Section 409A of the Code such that you would incur the additional 20% tax under
Section 409A of the Code.

 

(c)           The accounting firm engaged by the Company for general audit
purposes as of the day prior to the effective date of the Change in Control
shall perform the foregoing calculations.  If the accounting firm so engaged by
the Company is serving as accountant or auditor for the individual, entity or
group effecting the Change in Control, the Company shall appoint a nationally
recognized accounting firm to make the determinations required hereunder.  The
Company shall bear all expenses with respect to the determinations by such
accounting firm required to be made hereunder.

 

(d)           The accounting firm engaged to make the determinations hereunder
shall provide its calculations, together with detailed supporting documentation,
to the Company and

 

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you within fifteen (15) calendar days after the date on which your right to a
Payment is triggered (if requested at that time by you or the Company) or such
other time as requested by you or the Company.  If the accounting firm
determines that no Excise Tax is payable with respect to a Payment, it shall
furnish you and the Company with an opinion reasonably acceptable to you that no
Excise Tax will be imposed with respect to such Payment.  Any good faith
determinations of the accounting firm made hereunder shall be final, binding and
conclusive upon you and the Company.

 

Section 4.              DEFINITIONS.

 

(a)           “Additional Severance Amount” shall mean the greatest of the
following amounts: (A) the average of your last three annual bonuses paid prior
to your Covered Termination; (B) your last annual bonus paid prior to your
Covered Termination; (C) the average of your last three annual bonuses paid
prior to the effective date of the Change in Control; (D) your last annual bonus
paid prior to the effective date of the Change in Control, and (E) your last
target bonus in effect prior to your Covered Termination.  For such purposes,
your “annual bonus” means the aggregate bonus paid or payable with respect to
the applicable fiscal year of the Company, or any portion of such fiscal year.

 

(b)           “Base Salary” shall mean your base pay (excluding incentive pay,
premium pay, commissions, overtime, bonuses and other forms of variable
compensation), at the rate in effect during the last regularly scheduled payroll
period immediately preceding the date of your Covered Termination, and prior to
any reduction in your base salary that would permit you to voluntarily terminate
employment for Good Reason (as defined below).

 

(c)           “Good Reason” shall mean any one of the following events occurs
without your consent on or after the commencement of your employment, provided
that you have first provided written notice to the Company (or the surviving
corporation, as applicable) within 90 days of the first such occurrence of such
condition specifying the event(s) constituting Good Reason and specifying that
you intend to terminate your employment not earlier than 30 days after providing
such notice, and the Company (or surviving corporation) has not cured such
event(s) within 30 days (or such longer period as may be specified by you in
such notice) after your written notice is received by such member of the Board
(or by the surviving corporation) (the “Cure Period”), and you resign within
thirty (30) days following the end of the Cure Period:  (i) a material breach by
the Company of any provision of the Plan or this Agreement or any other material
agreement between you and the Company concerning the terms and conditions of
your employment; (ii) any material reduction in your duties[, authority and/or
responsibilities][include bracketed terms only for CEO, President, CFO and
General Counsel]; (iii) a material reduction by the Company in your annual base
salary; provided, however, that Good Reason shall not be deemed to have occurred
in the event of a reduction in your annual base salary that is pursuant to a
salary reduction program affecting substantially all of the employees of the
Company and that does not adversely affect you to a greater extent than other
similarly situated employees; (iv) a relocation of your business office to a
location that requires a one-way increase in your driving distance of more than
thirty-five (35) miles, except for required travel by you on the Company’s
business to an extent substantially consistent with your business travel
obligations prior to the effective date of the Change in Control.

 

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Notwithstanding anything to the contrary set forth herein, any definition of
“Good Reason” contained in any individually negotiated written agreement between
you and the Company shall apply in lieu of the foregoing provision if such other
definition would trigger your right to resign and receive benefits under the
Plan (“Alternate Good Reason Definition”).  In the event that the Company’s
Compensation Committee and Company’s counsel determine that any Alternate Good
Reason Definition applicable to you does not meet the requirements for payments
made upon conditions that constitute a “substantial risk of forfeiture” as
defined in Treas. Reg. 1.409A-1(d), any Cash Severance Benefit payment will be
subject to the distribution requirements of Section 409A(a)(2)(A) of the Code,
including, without limitation, the requirement of Section 409A(a)(2)(B)(i) of
the Code that such payment be delayed until 6 months after your separation from
service if you are a “specified employee” within the meaning of the aforesaid
section of the Code at the time of such separation from service.

 

(d)           “Qualified Plan” means a plan sponsored by the Company or an
affiliate that is intended to be qualified under Section 401(a) of the Internal
Revenue Code.

 

Section 5.              OTHER AGREEMENTS.

 

By signing this Agreement, you agree that any severance benefits that may become
payable under the Plan shall be offset by any severance benefits that may become
payable under any individual written agreement between you and the Company
(“Other Agreement”), if applicable.   Notwithstanding anything to the contrary
set forth herein, to the extent that any Other Agreement provides you with a
more favorable severance benefit, you will receive the greater benefit provided
under such individual agreement in lieu of the lesser benefit provided under the
Plan and this Agreement, as well as, without duplication of benefits, any
benefits provided under this Agreement not included in such Other Agreement,
including, without limitation, a Gross-Up Payment calculated with respect to the
more favorable cash severance benefit as if those payments were made under this
Agreement.  With respect to Covered Terminations that occur prior to January 1,
2009, any severance amounts otherwise payable under this Plan that are offset by
severance benefits payable under any Other Agreement shall be paid at the time
provided in such other Agreement.  Notwithstanding anything to the contrary set
forth in any Other Agreement, any severance amounts payable under this Plan that
are offset by amounts payable under any Other Agreement pursuant to this
Section shall be paid at the time set forth in Section 6 of the Plan with
respect to Covered Terminations that occur on or after January 1, 2009.

 

If you elect not to sign this Agreement, the terms of any Other Agreement will
solely control the provision of your severance benefits, and you will not be an
Eligible Officer that may receive additional severance benefits under the Plan.

 

Section 6.              AMENDMENT.

 

The foregoing severance benefits are subject to such change as the Company,
pursuant to Section 8(b) of the Plan, may determine in its sole and absolute
discretion.  Any such change in severance benefits shall be set forth in a
revised version of this Agreement.

 

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Section 7.              REDUCTIONS.

 

The severance benefits set forth in this Participation Agreement are subject to
certain reductions under Section 3 of the Plan.

 

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To participate in the Plan, please sign and date this Agreement in the space
provided below and return it to Susan Brown, Vice President, Human Resources no
later than [                  ], 2008.

 

The extra copy is for your file.  On behalf of Websense Inc., I am pleased to
welcome you as an Eligible Officer under the Plan.

 

 

Sincerely,

 

 

 

 

 

 

 

 

 

 

 

Gene Hodges

 

 

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

Participant’s Signature

 

Date

 

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EXHIBIT A

 

WEBSENSE, INC. OFFICER CHANGE IN CONTROL SEVERANCE BENEFIT PLAN

 

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