**Exhibit 10.15**

 

**WEBSENSE, INC.**

 

**NOTICE OF GRANT OF STOCK OPTION**

 

Notice is hereby given ofthe following option grant (the “Option”) to purchase shares of the CommonStock of Websense, Inc. (the “Corporation”):

 

Optionee:  Vernon Gene Hodges

 

Grant Date:  January 9, 2006

 

VestingCommencement Date:  January 9,2006

 

Exercise Price:  $          pershare

 

Number of OptionShares:            shares

 

Expiration Date:

 

Type of Option:  Non-Statutory Stock Option

 

Exercise Schedule:  The Option shall become exercisable fortwenty-five percent (25%) of the Option Shares upon Optionee’s completion of                      year(s) of Service measured from the VestingCommencement Date and shall become exercisable for the balance of the OptionShares in a series of thirty-six (36) successive equal monthlyinstallments upon Optionee’s completion of each additional month of Serviceover the thirty-six (36) month period measured from the first anniversary ofthe Vesting Commencement Date.

 

Inthe event the Corporation terminates Optionee’s employment other than forCause, or Optionee resigns his employment for Good Reason, contingent uponOptionee providing the Corporation with a fully-effective waiver and release ofclaims in a form satisfactory to the Corporation, the vesting of theOption Shares that are not vested at the time of such termination orresignation shall be accelerated such that the Option Shares that would havevested if Optionee had remained continuously employed by the Corporation for aperiod of twelve (12) months following the date of such termination orresignation shall be vested.

 

Except as providedabove, in no event shall the Option become exercisable for any additionalOption Shares after Optionee’s cessation of Service.

 

Optionee understands andagrees that the Option is granted subject to and in accordance with and furtheragrees to be bound by the terms of the Option as set forth in the Stock OptionAgreement attached hereto as Exhibit A. Optionee herebyacknowledges the receipt of a copy of the official prospectus for the Option inthe form attached hereto as Exhibit B.

 

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Employment at Will.Nothing in this Notice or in the attached Stock Option Agreement shall conferupon Optionee any right to continue in Service for any period of specific durationor interfere with or otherwise restrict in any way the rights of theCorporation (or any Parent or Subsidiary employing or retaining Optionee) or ofOptionee, which rights are hereby expressly reserved by each, to terminateOptionee’s Service at any time for any reason, with or without cause.

 

Definitions.Except as otherwise specified herein, all capitalized terms in this Noticeshall have the meaning assigned to them in this Notice or in the attached StockOption Agreement.

 

 
| DATED:     | ** **              | ** ** | ** ** |
|------------|-------------------------|------------|------------|
| ** ** | ** **              |
| ** ** | ** **              |
|       | **WEBSENSE, INC.** |
|       |                    |
|       | By:                     |       |       |
|       |                    |
|       | Title:                  |       |       |
|       |                    |
|       |                    |
|       |                    |       |
|       | **OPTIONEE**            |       |
|       |                    |
|       | Address:                |       |       |
|       |                    |       |
|       |                    |       |
|            |                         |            |            |  |  |  |  |

 

 

**ATTACHMENTSExhibit A - Stock Option AgreementExhibit B – Option Summary and Prospectus**

 

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**EXHIBIT A**

 

**STOCK OPTION AGREEMENT**

 

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**EXHIBIT B**

 

**OPTION SUMMARY AND PROSPECTUS**

 

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**Non-Plan Inducement Grant**

 

**WEBSENSE, INC.**

 

**STOCK OPTION AGREEMENT**

 

**RECITALS**

 

A.                                   Optionee has not previously been an employeeor a non-employee member of the Corporation’s Board.

 

B.**                                    **Consistent with Nasdaq Marketplace Rule 4350(i)(1)(A)(iv),the Corporation has  made the promise ofa stock option to Optionee as an inducement material to Optionee’s enteringinto Service with the Corporation.

 

C.                                     Optioneeis to render valuable services to the Corporation (or a Parent or Subsidiary),and this Agreement is executed pursuant to, and is intended to carry out thepurposes of, the Corporation’s grant of an option to Optionee.

 

D.                                    Allcapitalized terms in this Agreement shall have the meaning assigned to them inthe attached Appendix.

 

**NOW,THEREFORE**, it is hereby agreed as follows:

 

1.                                       **Grant of Option**. The Corporationhereby grants to Optionee, as of the Grant Date, a Non-Statutory Option topurchase up to the number of Option Shares specified in the Grant Notice. TheOption Shares shall be purchasable from time to time during the option termspecified in Paragraph 2 at the Exercise Price.

 

2.                                       **Option Term**. This option shallexpire at the close of business on the Expiration Date, unless soonerterminated in accordance with Paragraph 5 or 6.

 

3.                                       **Limited Transferability**.

 

## (a)                                  This option shall be neithertransferable nor assignable by Optionee other than by will or the laws ofinheritance following Optionee’s death and may be exercised, duringOptionee’s lifetime, only by Optionee. However, Optionee may  designateone or more persons as the beneficiary or beneficiaries of this option, andthis option shall, in accordance with such designation, automatically betransferred to such beneficiary or beneficiaries upon the Optionee’s deathwhile holding this option. Such beneficiary or beneficiaries shall take thetransferred option subject to all the terms and conditions of this Agreement,including (without limitation) the limited time period during which this optionmay, pursuant to Paragraph 5, be exercised following Optionee’s death.

##  

## (b)                                 In addition, to the extent that suchaction is permitted by the Board and is consistent with applicable securitieslaws, this option may be assigned in whole or in part during Optionee’slifetime to one or more members of Optionee’s family or to a trust established

##  

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## for theexclusive benefit of one or more such family members or to Optionee’s formerspouse, to the extent such assignment is in connection with the Optionee’sestate plan or pursuant to a domestic relations order. The assigned portionshall be exercisable only by the person or persons who acquire a proprietaryinterest in the option pursuant to such assignment. The terms applicable to theassigned portion shall be the same as those in effect for this optionimmediately prior to such assignment.

##  

4.                                       **Dates of Exercise**. This optionshall become exercisable for the Option Shares in one or more installments asspecified in the Grant Notice. As the option becomes exercisable for suchinstallments, those installments shall accumulate, and the option shall remainexercisable for the accumulated installments until the Expiration Date orsooner termination of the option term under Paragraph 5 or 6.

 

5.                                       **Cessation of Service**. The optionterm specified in Paragraph 2 shall terminate (and this option shall cease tobe outstanding) prior to the Expiration Date should any of the followingprovisions become applicable:

 

## (a)                                  Should Optionee cease to remain inService for any reason (other than death, Permanent Disability or Misconduct)while holding this option, then Optionee shall have a period of three (3) months(commencing with the date of such cessation of Service) during which toexercise this option, but in no event shall this option be exercisable at anytime after the Expiration Date.

##  

## (b)                                 Should Optionee die while holdingthis option, then the personal representative of Optionee’s estate or theperson or persons to whom the option is transferred pursuant to Optionee’s willor the laws of inheritance shall have the right to exercise this option.However, if Optionee has designated one or more beneficiaries of this option,then those persons shall have the exclusive right to exercise this optionfollowing Optionee’s death. Any such right to exercise this option shall lapse,and this option shall cease to be outstanding, upon the earlier of (i) theexpiration of the twelve (12)-month period measured from the date of Optionee’sdeath or (ii) the Expiration Date.

##  

## (c)                                  Should Optionee cease Service byreason of Permanent Disability while holding this option, then Optionee shallhave a period of twelve (12) months (commencing with the date of such cessationof Service) during which to exercise this option. In no event shall this optionbe exercisable at any time after the Expiration Date.

##  

## (d)                                 During the limited period ofpost-Service exercisability, this option may not be exercised in theaggregate for more than the number of Option Shares for which the option isexercisable at the time of Optionee’s cessation of Service. Upon the expirationof such limited exercise period or (if earlier) upon the Expiration Date, thisoption shall terminate and cease to be outstanding for any exercisable OptionShares for which the option has not been exercised. However, this option shall,immediately upon Optionee’s cessation of Service for any reason, terminate andcease to be outstanding with respect to any Option Shares for which this optionis not otherwise at that time exercisable.

##  

2

 

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## (e)                                  Should Optionee’s Service beterminated for Misconduct or should Optionee otherwise engage in any Misconductwhile this option is outstanding, then this option shall terminate immediatelyand cease to remain outstanding.

##  

6.                                       **SpecialAcceleration of Option**. If (a) within theeighteen (18) months immediately following a Change in Control your employmentis terminated by the Corporation or any successor or assign without Cause oryou resign your employment for Good Reason or (ii) the Corporationterminates your employment without Cause during the pendency of a mergeragreement or tender offer which would result in a Change in Control, contingentupon you providing the Corporation with a fully-effective waiver and release ofclaims in a form satisfactory to the Corporation, this option, to theextent outstanding at the time of a Change in Control but not otherwise fullyexercisable, shall automatically accelerate so that this option shall,immediately prior to the Change in Control, become exercisable for all of theOption Shares at the time subject to this option and may be exercised forany or all of those Option Shares as fully vested shares of Common Stock. ThisAgreement shall not in any way affect the right of the Corporation to adjust,reclassify, reorganize or otherwise change its capital or business structure orto merge, consolidate, dissolve, liquidate or sell or transfer all or any part ofits business or assets.

 

7.                                       **Adjustmentin Option Shares**. Should any change be made to theCommon Stock by reason of any stock split, stock dividend, recapitalization,combination of shares, exchange of shares or other change affecting theoutstanding Common Stock as a class without the Corporation’s receipt ofconsideration, appropriate adjustments shall be made to (i) the totalnumber and/or class of securities subject to this option and (ii) theExercise Price in order to reflect such change and thereby preclude a dilutionor enlargement of benefits hereunder.

 

8.                                       **Stockholder Rights**. The holder ofthis option shall not have any stockholder rights with respect to the OptionShares until such person shall have exercised the option, paid the ExercisePrice and become a holder of record of the purchased shares.

 

9.                                       **Manner of Exercising Option**.

 

## (a)                                  In order to exercise this optionwith respect to all or any part of the Option Shares for which this optionis at the time exercisable, Optionee (or any other person or persons exercisingthe option) must take the following actions:

##  

### (i)                                     Execute and deliver to theCorporation a Notice of Exercise for the Option Shares for which the option isexercised.

###  

### (ii)                                  Pay the aggregate Exercise Price forthe purchased shares in one or more of the following forms:

###  

#### (A)                              cashor check made payable to the Corporation;

####  

3

 

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#### (B)                                sharesof Common Stock held by Optionee (or any other person or persons exercising theoption) for the requisite period necessary to avoid an additional charge to the Corporation’s earnings for financialreporting purposes over that recognizedat the date of grant****andvalued at Fair Market Value on the Exercise Date; or

####  

#### (C)                                ifpreviously authorized by the Board, in its sole discretion, through a specialsale and remittance procedure pursuant to which Optionee (or any other personor persons exercising the option) shall concurrently provide irrevocableinstructions (i) to a Corporation-designated brokerage firm to effect theimmediate sale of the purchased shares and remit to the Corporation, out of thesale proceeds available on the settlement date, sufficient funds to cover theaggregate Exercise Price payable for the purchased shares plus all applicableFederal, state and local income and employment taxes required to be withheld bythe Corporation by reason of such exercise and (ii) to the Corporation todeliver the certificates for the purchased shares directly to such brokeragefirm in order to complete the sale.

####  

Except to the extent the sale and remittance procedureis utilized in connection with the option exercise, payment of the ExercisePrice must accompany the Notice of Exercise delivered to the Corporation inconnection with the option exercise.

 

### (iii)                               Furnish to the Corporationappropriate documentation that the person or persons exercising the option (ifother than Optionee) have the right to exercise this option.

###  

### (iv)                              Make appropriate arrangements withthe Corporation (or Parent or Subsidiary employing or retaining Optionee) forthe satisfaction of all Federal, state and local income and employment taxwithholding requirements applicable to the option exercise.

###  

## (b)                                 As soon as practical after theExercise Date, the Corporation shall issue to or on behalf of Optionee (or anyother person or persons exercising this option) a certificate for the purchasedOption Shares, with the appropriate legends affixed thereto.

##  

## (c)                                  In no event may this option beexercised for any fractional shares.

##  

10.                                 **Compliancewith Laws and Regulation****s**.

 

## (a)                                  The exercise of this option and theissuance of the Option Shares upon such exercise shall be subject to complianceby the Corporation and Optionee with all applicable requirements of lawrelating thereto and with all applicable regulations of any stock exchange (orthe Nasdaq National Market, if applicable) on which the Common Stock may belisted for trading at the time of such exercise and issuance.

##  

4

 

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## (b)                                 The inability of the Corporation toobtain approval from any regulatory body having authority deemed by theCorporation to be necessary to the lawful issuance and sale of any Common Stockpursuant to this option shall relieve the Corporation of any liability withrespect to the non-issuance or sale of the Common Stock as to which suchapproval shall not have been obtained. The Corporation, however, shall use itsbest efforts to obtain all such approvals.

##  

11.                                 **Successors and Assigns**. Except tothe extent otherwise provided in Paragraphs 3 and 6, the provisions of thisAgreement shall inure to the benefit of, and be binding upon, the Corporationand its successors and assigns and Optionee, Optionee’s assigns, the legalrepresentatives, heirs and legatees of Optionee’s estate and any beneficiariesof this option designated by Optionee.

 

12.                                 **Notices**. Any notice required to begiven or delivered to the Corporation under the terms of this Agreement shallbe in writing and addressed to the Corporation at its principal corporateoffices. Any notice required to be given or delivered to Optionee shall be inwriting and addressed to Optionee at the address indicated below Optionee’ssignature line on the Grant Notice. All notices shall be deemed effective uponpersonal delivery or upon deposit in the U.S. mail, postage prepaid andproperly addressed to the party to be notified.

 

13.                                 **Construction**. All decisions of theBoard with respect to any question or issue arising under this Agreement shallbe conclusive and binding on all persons having an interest in this option.

 

14.                                 **Governing Law**. The interpretation,performance and enforcement of this Agreement shall be governed by the laws ofthe State of California without resort to that State’s conflict-of-laws rules.

 

5

 

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**EXHIBIT I**

 

**NOTICE OF EXERCISE**

 

I hereby notify Websense, Inc.(the “Corporation”) that I elect to purchase                            shares of the Corporation’s Common Stock (the “Purchased Shares”) at the optionexercise price of $                          pershare (the “Exercise Price”) pursuant to that certain option (the “Option”)granted to me on                                     ,              .

 

Concurrently with thedelivery of this Exercise Notice to the Corporation, I shall hereby pay to theCorporation the Exercise Price for the Purchased Shares in accordance with theprovisions of my agreement with the Corporation (or other documents) evidencingthe Option and shall deliver whatever additional documents may be requiredby such agreement as a condition for exercise. Alternatively, if previouslyauthorized by the Board, in its sole discretion, I may utilize the specialbroker-dealer sale and remittance procedure specified in my agreement to effectpayment of the Exercise Price.

 

                                            ,              

Date

 

 
|                                                                            |   |     |   |
|---------------------------------------------------------------------------------|--------|----------|--------|
|                                                                            |   | Optionee |
|                                                                            |   |     |
|                                                                            |   | Address: |   |   |
|                                                                            |   |     |
|                                                                            |   |     |   |
|                                                                            |   |     |   |
| Print name in  exact manner it is to  appear on the stock certificate:          |   |     |   |
|                                                                            |   |     |   |
| Address to which  certificate is to  be sent, if different from address  above: |   |     |   |
|                                                                            |   |     |   |
|                                                                            |   |     |   |
|                                                                            |   |     |   |
| Social Security  Number:                                                        |   |     |   |
|                                                                                 |        |          |        |  |

 

 

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**APPENDIX**

 

The following definitionsshall be in effect under the Agreement:

 

##### A.                                   **Agreement** shall mean this StockOption Agreement.

#####  

##### B.                                     **Board** shall mean the Corporation’sBoard of Directors.

#####  

##### C.                                     **Cause** for termination shall mean atermination of your employment by the Corporation based upon a good faithdetermination by the Board that one or more of the following has occurred: (a) yourcommission of a material act of fraud with respect to the Corporation, (b) yourintentional refusal or willful failure to carry out the reasonable instructionsof the Board, (c) your conviction of, or plea of nolo contendere to, atany time, a misdemeanor crime of moral turpitude or a felony (even if such hasoccurred prior to your employment with the Corporation), (d) your grossmisconduct in connection with the performance of your duties, or (e) yourmaterial breach of your obligations to the Corporation or any agreement betweenyou and the Corporation.

#####  

##### D.                                    **Change in Control** shall mean shallmean any of the following:

#####  

###### (i)                                     theacquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or14(d)(2) of the Exchange Act), other than by the Corporation or anyaffiliate thereof or any affiliate of a shareholder of the Corporationimmediately prior to such acquisition, of beneficial ownership (within themeaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or moreof the combined voting power or economic interests of the then outstandingvoting securities of the Corporation entitled to vote generally in the electionof directors;

######  

###### (ii)                                  achange in the composition of the Board occurring within a twenty-four monthperiod, as a result of which fewer than a majority of the directors of theBoard are Incumbent Directors;

######  

###### (iii)                               areorganization, merger, or consolidation, in each case, with respect to whichall or substantially all of the persons that were the respective beneficialowners of the voting securities of the Corporation immediately prior to suchreorganization, merger, or consolidation do not, following such reorganization,merger, or consolidation, beneficially own, directly or indirectly, more than50% of the combined voting power of the then outstanding voting securitiesentitled to vote generally in the election of directors of the Corporationresulting from such reorganization, merger, or consolidation; or

######  

###### (iv)                              thesale or other disposition of all or substantially all of the assets of theCorporation in one transaction or series of related transactions.

######  

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###### (v)                                 Notwithstandingthe foregoing, a Change in Control shall not be deemed to occur because amajority or more of the outstanding voting securities of the Corporation isacquired by (a) a trustee or other fiduciary holding securities under oneor more employee benefit plans maintained by the Corporation or any of itsaffiliates, or (b) any person that, immediately prior to such acquisition,is owned directly or indirectly by the stockholders of the Corporation inapproximately the same proportion as their ownership of stock in theCorporation immediately prior to such acquisition.

######  

##### E.                                      **Common Stock** shall mean shares ofthe Corporation’s common stock.

#####  

##### F.                                      **Code** shall mean the InternalRevenue Code of 1986, as amended.

#####  

##### G.                                     **Corporation** shall mean Websense, Inc.,a Delaware corporation, and any successor corporation to all or substantiallyall of the assets or voting stock of Websense, Inc. which shall byappropriate action assume the Option.

#####  

##### H.                                    **Employee** shall mean an individualwho is in the employ of the Corporation (or any Parent or Subsidiary), subjectto the control and direction of the employer entity as to both the work to beperformed and the manner and method of performance.

#####  

##### I.                                         **Exercise Date** shall mean the dateon which the option shall have been exercised in accordance with Paragraph 9 ofthe Agreement.

#####  

##### J.                                        **Exercise Price** shall mean theexercise price per Option Share as specified in the Grant Notice.

#####  

##### K.                                    **Expiration Date** shall mean the dateon which the option expires as specified in the Grant Notice.

#####  

##### L.                                      **Fair Market Value** per share ofCommon Stock on any relevant date shall be determined in accordance with thefollowing provisions:

#####  

###### (i)                                     Ifthe Common Stock is at the time traded on the Nasdaq National Market, then theFair Market Value shall be deemed equal to the closing selling price per shareof Common Stock on the date in question, as the price is reported by theNational Association of Securities Dealers on the Nasdaq National Market andpublished in The Wall Street Journal. If there is no closing sellingprice for the Common Stock on the date in question, then the Fair Market Valueshall be the closing selling price on the last preceding date for which suchquotation exists, or

######  

###### (ii)                                  Ifthe Common Stock is at the time listed on any Stock Exchange, then the FairMarket Value shall be deemed equal to the closing selling price per share ofCommon Stock on the date in question on the Stock Exchange determined by theBoard to be the primary market for the Common Stock, as such price isofficially quoted in the composite tape of transactions on such exchange andpublished in The Wall Street Journal. If there is no closing sellingprice for

######  

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###### the Common Stock on thedate in question, then the Fair Market Value shall be the closing selling priceon the last preceding date for which such quotation exists.

######  

##### M.                                 **Good Reason** shall mean yourresignation within ninety (90) days of the occurrence of any one or more of thefollowing events without your written consent, provided that you comply with areasonable Good Reason process providing the Corporation with an opportunity tocure the alleged Good Reason: (a) a material reduction in your base salaryand/or target bonus other than in connection with a Corporation-wide reductionin executive compensation, (b) a material reduction in your benefits,other than in connection with a Corporation-wide reduction in executivebenefits, (c) a material and significant reduction in your authority,title and/or duties without Sufficient Basis, (d) a requirement that yourelocate more than thirty-five (35) miles from your then-current officelocation. Notwithstanding the foregoing sentence, your receipt of less bonus orno bonus as a result of not meeting the relevant goals for a bonus is not aGood Reason.

#####  

##### N.                                    **Grant Date** shall mean the date ofgrant of the option as specified in the Grant Notice.

#####  

##### O.                                    **Grant Notice** shall mean the Noticeof Grant of Stock Option accompanying the Agreement, pursuant to which Optioneehas been informed of the basic terms of the option evidenced hereby.

#####  

##### P.                                      **Incumbent Directors** shall meanmembers of the Board who are (a) members of the Board as of the datehereof, or (b) elected, or nominated for election, to the Board with theaffirmative votes of at least a majority of the Incumbent Directors at the timeof such election or nomination.

#####  

##### Q.                                    **Misconduct** shall mean thecommission of any act of fraud, embezzlement or dishonesty by Optionee, anyunauthorized use or disclosure by Optionee of confidential information or tradesecrets of the Corporation (or any Parent or Subsidiary), or any otherintentional misconduct by Optionee adversely affecting the business or affairsof the Corporation (or any Parent or Subsidiary) in a material manner. Theforegoing definition shall not be deemed to be inclusive of all the acts oromissions which the Corporation (or any Parent or Subsidiary) may consideras grounds for the dismissal or discharge of Optionee or any other individualin the Service of the Corporation (or any Parent or Subsidiary).

#####  

##### R.                                     **Non-Statutory Option** shall mean anoption not intended to satisfy the requirements of Code Section 422.

#####  

##### S.                                      **Notice of Exercise** shall mean thenotice of exercise in the form attached hereto as Exhibit I.

#####  

##### T.                                     **Option Shares** shall mean the numberof shares of Common Stock subject to the option as specified in the GrantNotice.

#####  

##### U.                                    **Optionee** shall mean the person towhom the option is granted as specified in the Grant Notice.

#####  

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##### V.                                     **Parent** shall mean any corporation(other than the Corporation) in an unbroken chain of corporations ending withthe Corporation, provided each corporation in the unbroken chain (other thanthe Corporation) owns, at the time of the determination, stock possessing fiftypercent (50%) or more of the total combined voting power of all classes ofstock in one of the other corporations in such chain.

#####  

##### W.                                **Permanent Disability** shall mean theinability of Optionee to engage in any substantial gainful activity by reasonof any medically determinable physical or mental impairment which is expectedto result in death or has lasted or can be expected to last for a continuousperiod of twelve (12) months or more.

#####  

##### X.                                    **Service** shall mean the Optionee’sperformance of services for the Corporation (or any Parent or Subsidiary) inthe capacity of an Employee, a non-employee member of the board of directors ora consultant or independent advisor.

#####  

##### Y.                                     **Stock Exchange** shall mean theAmerican Stock Exchange or the New York Stock Exchange.

#####  

##### Z.                                     **Subsidiary** shall mean anycorporation (other than the Corporation) in an unbroken chain of corporationsbeginning with the Corporation, provided each corporation (other than the lastcorporation) in the unbroken chain owns, at the time of the determination,stock possessing fifty percent (50%) or more of the total combined voting powerof all classes of stock in one of the other corporations in such chain.

#####  

##### AA.                         **Sufficient Basis** shall mean areassignment or reduction in duties as a result of disciplinary action basedupon serious violation of Corporation policy or violation of an agreementbetween you and the Corporation.

#####  

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**NON-PLANINDUCEMENT GRANT**

 

 

**WEBSENSE, INC.**

 

 

NON-PLAN INDUCEMENT GRANT

 

SUMMARY AND PROSPECTUS

 

 

The date of thisProspectus is January 9, 2006

 

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**TABLE OF CONTENTS**

 
| ** **                                             | **Page**                                                                                                                                |
|--------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|
|                                                   |                                                                                                                                    |
| **QUESTIONS AND ANSWERS  ABOUT THE OPTION GRANTS**     | **1**                                                                                                                                   |
| ** **                                             | ** **                                                                                                                              |
| **GRANT OF OPTIONS**                                   | **1**                                                                                                                                   |
| ** **                                             | ** **                                                                                                                              |
| 1.                                                     | How are options  granted?                                                                                                               | 1 |
| 2.                                                     | How is the exercise  price determined?                                                                                                  | 1 |
| 3.                                                     | How is the fair market  value of the Common Stock determined?                                                                           | 1 |
| 4.                                                     | What type of option  have I been granted?                                                                                               | 1 |
| 5.                                                     | Can the Corporation  cancel my option and grant me a new option?                                                                        | 1 |
| 6.                                                     | Can I assign or  transfer my option?                                                                                                    | 2 |
| 7.                                                     | When do I acquire the  rights of a stockholder?                                                                                         | 2 |
|                                                   |                                                                                                                                    |   |
| **EXERCISE OF OPTIONS**                                | **2**                                                                                                                                   |
| ** **                                             | ** **                                                                                                                              | ** ** |
| 8.                                                     | When may I  exercise my option?                                                                                                    | 2 |
| 9.                                                     | When will my option  terminate?                                                                                                         | 2 |
| 10.                                                    | How do I exercise my  option?                                                                                                           | 2 |
| 11.                                                    | How do I pay the  exercise price?                                                                                                       | 2 |
| 12.                                                    | Can my tax withholding  obligations upon exercise of my option be satisfied from the shares of Common  Stock purchased under my option? | 3 |
|                                                   |                                                                                                                                    |   |
| **EARLY TERMINATION OF  OPTIONS**                      | **3**                                                                                                                                   |
| ** **                                             | ** **                                                                                                                              | ** ** |
| 13.                                                    | What happens to my  options if my service terminates?                                                                                   | 3 |
| 14.                                                    | What happens to my  options if I am discharged from service for Misconduct?                                                             | 3 |
| 15.                                                    | What happens to my  options if I die or become disabled?                                                                                | 4 |
| 16.                                                    | What happens to my  options if the Corporation is acquired or merged?                                                                   | 4 |
| 17.                                                    | What happens to my  options that are assumed upon a Corporate Transaction?                                                              | 4 |
| 18.                                                    | What  happens to my options if there is a change in control of the Corporation?                                                         | 5 |
|                                                   |                                                                                                                                    |   |
| **DISPOSITION OF SHARES**                              | **5**                                                                                                                                   |
| ** **                                             | ** **                                                                                                                              | ** ** |
| 19.                                                    | When can I sell my  shares acquired pursuant to the exercise of my option?                                                              | 5 |
|                                                   |                                                                                                                                    |   |
| **MISCELLANEOUS**                                      | **5**                                                                                                                                   |
| ** **                                             | ** **                                                                                                                              | ** ** |
| 20.                                                    | Is financing available?                                                                                                                 | 5 |
| 21.                                                    | Do I have the right to  remain employed until my options vest?                                                                          | 6 |
| 22.                                                    | Are there any  circumstances which would cause me to lose my rights with respect to an  option grant?                                   | 6 |
| 23.                                                    | Does the grant of an option  affect my eligibility to participate in stock plans or other compensatory  plans of the Corporation?       | 6 |
| 24.                                                    | What is a parent  corporation?                                                                                                          | 6 |
| 25.                                                    | What is a subsidiary  corporation?                                                                                                      | 6 |
| 26.                                                    | What shares of Common  Stock will be issued to me upon exercise of my option?                                                           | 6 |
| 27.                                                    | What happens if there  is a change in the Corporation’s capital structure?                                                         | 6 |
| 28.                                                    | Can my option be  amended or terminated?                                                                                                | 6 |
|                                                   |                                                                                                                                    |   |
| **RESTRICTIONS ON RESALE**                             | **7**                                                                                                                                   |
| ** **                                             | ** **                                                                                                                              | ** ** |
| 29.                                                    | What restrictions apply  if I am a Section 16 Insider?                                                                             | 7 |
| 30.                                                    | What restrictions apply  if I am an affiliate?                                                                                          | 8 |
|                                                   |                                                                                                                                    |   |
| **QUESTIONS AND ANSWERS  ON FEDERAL TAX CONSEQUENCES** | **8**                                                                                                                                   |
| ** **                                             | ** **                                                                                                                              | ** ** |
| T1.                                                    | Will the grant of a  non-statutory option result in federal income tax liability to me?                                                 | 8 |

 

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| T2.                          | Will the exercise of a  non-statutory option result in federal income tax liability to me?                                                                                                                                 | 8          |
|------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| T3.                          | Will I recognize  additional income when I sell shares acquired under a non-statutory option?                                                                                                                              | 8          |
| T4.                          | What are the  consequences of paying the exercise price of a non-statutory option in the form of  shares of Common Stock previously acquired upon the exercise of employee  options or through open-market purchases? | 9          |
| T5.                          | What are the federal  tax consequences to the Corporation?                                                                                                                                                                 | 9          |
|                         |                                                                                                                                                                                                                       |       |
| **FEDERAL TAX RATES**        | **9**                                                                                                                                                                                                                      |
| ** **                   | ** **                                                                                                                                                                                                                 | ** ** |
| T6.                          | What are the applicable  federal tax rates?                                                                                                                                                                                | 9          |
|                         |                                                                                                                                                                                                                       |       |
| **CORPORATION  INFORMATION** | **9**                                                                                                                                                                                                                      |

 

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**THIS DOCUMENT CONSTITUTES PART OF THEOFFICIAL PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THESECURITIES ACT OF 1933.**

 

Websense, Inc., aDelaware corporation (the “Corporation”), is offering shares of its commonstock (the “Common Stock”) to eligible individuals pursuant to specialinducement non-statutory stock option grants. The purpose of the grants is tooffer persons who have not previously been employees or directors of theCorporation, or following a bona fide period of non-employment (“New Hires”)the opportunity to acquire an ownership interest in the Corporation as aninducement material to such persons entering into employment with theCorporation. Unless the context indicates otherwise, all references to theCorporation in this Summary and Prospectus include Websense, Inc. and itsparent and subsidiary corporations, whether now existing or subsequentlyestablished.

 

# **QUESTIONS AND ANSWERS ABOUT THE OPTION GRANTS**

# ** **

This Summary andProspectus sets forth in question and answer format the principal terms of theoption grants which may be made from time to time to New Hires as aninducement material to such individuals entering into employment with theCorporation, including individuals who will commence providing services to theCorporation as executive officers of the Corporation or Board members subjectto the short-swing profit restrictions of Section 16(b) of the SecuritiesExchange Act of 1934 (the “1934 Act”). Such individuals will be referred to inthis document as “Section 16 Insiders.”

 

## **GRANT OF OPTIONS**

##  

### **1.****                                     ****How are options granted?**

###  

The Board has completediscretion to determine when and to whom options will be granted and the termsof each such grant. Your option grant will be evidenced by one or more optiondocuments (collectively, the “Option Agreement”) executed by the Corporationand you.

 

### **2.****                                     ****How is the exercise pricedetermined?**

###  

The exercise price ofyour option will be determined by the Board.

 

### **3.****                                     ****How is the fair market value ofthe Common Stock determined?**

###  

The fair market value pershare of Common Stock on any relevant date will be the closing selling priceper share on that date, as reported on the Nasdaq National Market and publishedin The Wall Street Journal. If the Common Stock is not traded on thatday, the fair market value will be the closing selling price per share on thelast preceding date for which such quotation exists.

 

### **4.****                                     ****What type of option have I beengranted?**

###  

You have been granted anon-statutory stock option that is ***not***intended to satisfy the requirements of Internal Revenue Code Section 422to be an “Incentive Stock Option.”  Forinformation about the tax consequences of your option transactions, see the “Questionsand Answers on Federal Tax Consequences” section below.

 

### **5.****                                     ****Can the Corporation cancel myoption and grant me a new option?**

###  

Yes. The Board has theauthority to cancel outstanding options and to issue new options in replacement,but your consent will be required in connection with your participation in anysuch cancellation/regrant program. The new options can cover the same or adifferent number of shares of Common Stock and will have an

 

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exercise price pershare not less than the fair market value of the Common Stock on the new grantdate. In addition, it is likely that the new options will have a vesting schedule basedon the new grant date, without any credit provided for the period the cancelledoptions were outstanding.

 

### **6.****                                     ****Can I assign or transfer myoption?**

###  

Generally, no. Youroption generally cannot be assigned or transferred, except by the provisions ofyour will or the laws of inheritance following your death or pursuant to anybeneficiary designation you have in effect for your option at the time of yourdeath. However, **to**the extent permitted by the Board,****your option will be assignable inwhole or in part during your lifetime to one or more members of yourimmediate family or to a trust established exclusively for one or more suchfamily members or to your former spouse. The assigned portion may only beexercised by the person or persons who acquire a proprietary interest in theoption pursuant to the assignment. No such assignment will be permitted,however, unless it is effected in connection with your estate plan or pursuantto a domestic relations order.

 

### **7.****                                     ****When do I acquire the rights of astockholder?**

###  

You will not have anystockholder rights with respect to the option shares. You will not acquirestockholder rights until you exercise the option, pay the exercise price andbecome a holder of record of the purchased shares.

 

**EXERCISE OF OPTIONS**

##  

### **8.****                                     ****When may I exercise myoption?**

###  

Your option will becomeexercisable for the option shares in a series of installments over theperiod that you remain in the Corporation’s service. The exercise schedule applicableto your option will be determined by the Board at the time of grant and will beset forth in the Option Agreement. You may exercise your option at anytime for the shares for which your option is exercisable, provided you do sobefore the option terminates.

 

### **9.****                                     ****When will my option terminate?**

###  

The actual expirationdate of your option will be set forth in the Option Agreement. Your option may,however, terminate prior to its designated expiration date in the event of yourtermination of service or upon the occurrence of certain other events. See the “EarlyTermination of Options” section below.

 

### **10.****                              ****How do I exercise my option?**

###  

To exercise your option,you must provide the Corporation with written notice of the exercise in whichyou indicate the number of shares to be purchased under your option. The noticemust be accompanied by payment of the exercise price for the purchased shares,together with appropriate proof that the person exercising the option (if otherthan yourself) has the right to effect such exercise. You will be required tosatisfy all applicable income and employment tax withholding requirements atthat time. For information about such tax withholding, see the “Questions andAnswers on Federal Tax Consequences” section below.

 

### **11.****                              ****How do I pay the exercise price?**

###  

The exercise price may bepaid in cash or check payable to the Corporation or in shares of Common Stock.Any shares delivered in payment of the exercise price will be valued at fairmarket value on the exercise date and must have been held for the requisiteperiod necessary to avoid a charge to the Corporation’s earnings for financialreporting purposes (generally a six (6)-month period).

 

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The Board may, in itssole discretion, elect to allow you to use a cashless exercise procedure toexercise your option. To use this procedure, you must provide irrevocableinstructions to a Corporation-designated brokerage firm to effect the immediatesale of the vested shares of Common Stock purchased under your option and topay over to the Corporation, out of the sale proceeds available on thesettlement date, sufficient funds to cover the aggregate exercise price payablefor the purchased shares plus all applicable withholding taxes. Concurrentlywith such instructions, you must also direct the Corporation to deliver thecertificates for the purchased shares to the brokerage firm in order to completethe sale.

 

### **12.****                              ****Can my tax withholdingobligations upon exercise of my option be satisfied from the shares of CommonStock purchased under my option?**

###  

The Board may, in itssole discretion, elect to allow you to have the Corporation withhold, from theshares of Common Stock purchased under your option, a portion of those shareswith a fair market value equal to a designated percentage (not to exceed onehundred percent (100%)) of the federal, state and local income and employmentwithholding taxes to which you may become subject in connection with theexercise of your option. In lieu of such direct withholding, the Board may allowyou to deliver previously acquired shares of Common Stock in satisfaction ofthe withholding tax liability. However, no shares of Common Stock will actuallybe withheld or accepted in satisfaction of such withholding tax liabilityexcept to the extent approved by the Board, and any such withheld or deliveredshares will be valued at fair market value on the date of the option exercise.

 

**EARLY TERMINATION OF OPTIONS**

##  

### **13.****                              ****What happens to my options if myservice terminates?**

###  

After your termination ofservice for any reason other than death, disability or Misconduct (as definedbelow in Question 14), you will have a limited period of time in which toexercise your outstanding options for any shares of Common Stock in which youare vested on the date your service terminates. The length of this period willbe set forth in your Option Agreement and will generally not be in excess ofthree (3) months. However, your option will in all events terminate on thespecified expiration date of the option term. To the extent your options arenot exercisable for one or more vested shares at the time of your terminationof service, your options will immediately terminate and cease to be outstandingwith respect to those unvested shares.

 

Unless your OptionAgreement specifically provides otherwise, you will be deemed to continue inservice for so long as you render services to the Corporation, whether as (i) anemployee, subject to the control and direction of the employer entity as toboth the work to be performed and the manner and method of performance, (ii) anon-employee Board member or (iii) a consultant or other independentadvisor.

 

The Board has thediscretion to extend the period during which you may exercise one or moreof your options following your termination of service and/or to permit suchoptions to be exercised not only with respect to the number of shares of CommonStock in which you are at the time vested but also with respect to one or moreadditional installments in which you would have vested had you continued inservice. You will be notified in writing in the event the Board decides toprovide you with any of those additional benefits.

 

### **14.****                              ****What happens to my options if Iam discharged from service for Misconduct?**

###  

Should you be dischargedfrom service for Misconduct or otherwise engage in Misconduct while youroptions are outstanding, then all of your outstanding options will immediatelyterminate. **Misconduct**includes (i) anyact of fraud, embezzlement or dishonesty, (ii) any unauthorized use ordisclosure of confidential information or trade secrets of the Corporation, or (iii) anyother intentional misconduct adversely affecting the business or affairs of theCorporation in a material manner. However, the foregoing list is not inclusiveof all the acts or omissions which may be considered as grounds fordismissal or discharge of any individual in the Corporation’s service.

 

3

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### **15.****                              ****What happens to my options if Idie or become disabled?**

###  

If you die while any ofyour options are outstanding, the personal representative of your estate or theperson or persons to whom the options are transferred by the provisions of yourwill or the laws of inheritance or pursuant to the beneficiary designation youhave in effect for those options may exercise each of those options forany or all vested shares of Common Stock for which the option was exercisableon the date your service with the Corporation terminated, less any shares you may havesubsequently purchased prior to your death. The right to exercise each suchoption will lapse upon the earlier of (i) the expiration of theoption term or (ii) the first anniversary of the date of your death.

 

If you terminate yourservice with the Corporation because you become permanently disabled, you willnormally have a period of twelve (12) months from such termination date duringwhich to exercise your options for any or all of the vested shares for whichthose options were exercisable at the time of such termination. In no event,however, may you exercise any option after the specified expiration of theoption term. For purposes of your option grant, you will be deemed to be **permanently disabled** if you are unable to perform anysubstantial gainful activity by reason of any medically-determinable physicalor mental impairment expected to result in death or to be of continuousduration of twelve (12) consecutive months or more.

 

### **16.****                              ****What happens to my options if theCorporation is acquired or merged?**

###  

In the event of aCorporate Transaction, your option will automatically vest on an acceleratedbasis so that your option will, immediately prior to the effective date of theCorporate Transaction, become exercisable for all the shares of Common Stock atthe time subject to that option and may be exercised for any or all ofthose shares as fully-vested shares. However, your option will **not** vest and become exercisable on such an acceleratedbasis, if and to the extent: (i) the option is assumed by the successorcorporation, (ii) such option is replaced with a cash incentive programwhich preserves the option spread existing on the unvested shares subject tothe option at the time of the Corporate Transaction and provides for subsequentpayout in accordance with the same vesting schedule applicable to thoseoption shares or (iii) the acceleration of the option is subject to otherlimitations imposed by the Board in the Option Agreement.

 

Your option will, to theextent not assumed by the successor corporation, terminate and cease to beoutstanding immediately following the completion of the Corporate Transaction.

 

A **CorporateTransaction** will be deemed to occur upon (i) a merger orconsolidation in which securities possessing more than fifty percent (50%) ofthe total combined voting power of the Corporation’s outstanding securities aretransferred to a person or persons different from the persons holding thosesecurities immediately prior to such transaction or (ii) a sale, transferor other disposition of all or substantially all the assets of the Corporationin liquidation or dissolution of the Corporation.

 

### **17.****                              ****What happens to my options thatare assumed upon a Corporate Transaction?**

###  

If your option is assumedby a successor corporation in a Corporation Transaction, then your option will,immediately after the Corporate Transaction, be appropriately adjusted to applyto the number and class of securities which would have been issued to youin consummation of the Corporate Transaction had your option been exercisedimmediately prior to the Corporate Transaction. Appropriate adjustments willalso be made to the exercise price payable per share under your assumed option,provided the aggregate exercise price for the option shares will remainthe same. To the extent the actual holders of the Corporation’s outstandingCommon Stock receive cash consideration for their Common Stock in consummationof the Corporate Transaction, the successor corporation may, in connection withthe assumption of your option, substitute one or more shares of its own commonstock with a fair market value equivalent to the cash consideration paid pershare of Common Stock in such Corporate Transaction.

 

The Board may structure one or more options so thatthose options will immediately vest and become exercisable for all the optionshares as fully vested shares upon an Involuntary Termination of the

 

4

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optionee’sservice within a designated period (not to exceed eighteen (18) months)following the effective date of a Corporate Transaction in which the optionsare assumed or are otherwise continued in effect. You should review your OptionAgreement to determine whether the options you hold will in fact accelerateupon such an Involuntary Termination.

 

An **Involuntary Termination**will be deemed to occur upon (i) theoptionee’s involuntary dismissal or discharge by the Corporation for reasonsother than Misconduct or (ii) such individual’s voluntary resignationfollowing (A) a change in his or her position with the Corporation whichmaterially reduces his or her duties and responsibilities or the level ofmanagement to which he or she reports, (B) a reduction in his or her levelof compensation (including base salary, fringe benefits and target bonus underany corporate performance-based bonus or incentive programs) by more thanfifteen percent (15%) or (C) a relocation of such individual’s place ofemployment by more than fifty (50) miles, provided and only if such change,reduction or relocation is effected by the Corporation without the optionee’sconsent.

 

### **18.****                              ****What happens to my options ifthere is a change in control of the Corporation?**

 

The Board may structure one or more options so thatthose options will immediately vest and become exercisable for all the optionshares as fully vested shares either upon the occurrence of a Change in Controlor upon an Involuntary Termination of the optionee’s service within adesignated period (not to exceed eighteen (18) months) following the effectivedate of that Change in Control. You should review your Option Agreement todetermine whether the options you hold will in fact accelerate upon a Change inControl or your subsequent Involuntary Termination.

 

A **Change in Control** will be deemed to occur in the event (i) anyperson directly or indirectly acquires securities possessing more than fiftypercent (50%) of the total combined voting power of the Corporation’soutstanding securities pursuant to a tender or exchange offer made directly tothe Corporation’s stockholders or (ii) there is a change in thecomposition of the Board over a period of thirty-six (36) consecutive months orless such that a majority of the Board ceases, by reason of one or morecontested elections for Board membership, to be comprised of individuals whoeither (A) have been Board members continuously since the beginning ofsuch period or (B) have been elected or nominated for election as Boardmembers during such period by at least a majority of the Board membersdescribed in clause (A) who were still in office at the time such electionor nomination was approved by the Board.

 

**DISPOSITION OF SHARES**

##  

### **19.****                              ****When can I sell my sharesacquired pursuant to the exercise of my option?**

###  

If you are a Section 16Insider, you will be subject to certain restrictions in connection with youroption grant. These restrictions are described in detail in the “Restrictionson Resale” section below.

 

**MISCELLANEOUS**

##  

### **20.****                              ****Is financing available?**

###  

Asa result of the Sarbanes-Oxley Act of 2002, the Company may no longerallow Section 16 Insiders to finance their acquisition of shares of CommonStock through the use of promissory notes. However, if you are not a Section 16Insider, the Board may assist you in the acquisition of shares ofCommon Stock by permitting you to pay the purchase price for the shares througha promissory note payable in one or more installments. The terms of any suchpromissory note, including the interest rate and terms of repayment, will beestablished in the sole discretion of the Board. Promissory notes will be madeon a full-recourse basis, and the maximum credit available to you may notexceed the purchase price payable for the acquired shares plus any withholdingtax liability incurred by you in connection with such acquisition. In addition,the Corporation will comply with all applicable requirements of Regulation U ofthe Board of Governors of the Federal Reserve System in connection with anyfinancing extended to you.

 

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### **21.****                              ****Do I have the right to remainemployed until my options vest?**

###  

No. Nothing in anyoption grant is intended to provide any person with the right to remain in theCorporation’s service for any specific period, and both you and the Corporationwill each have the right to terminate your service at any time and for anyreason, with or without cause.

 

### **22.****                              ****Are there any circumstances whichwould cause me to lose my rights with respect to an option grant?**

###  

Yes. The grant of optionsand the issuance of Common Stock under such options are subject to theCorporation’s procurement of all approvals and permits required by regulatoryauthorities having jurisdiction over the Corporation’s grant of options. It ispossible that the Corporation could be prevented from granting options or fromissuing shares of Common Stock in the event one or more required approvals orpermits were not obtained.

 

### **23.****                              ****Does the grant of an optionaffect my eligibility to participate in stock plans or other compensatory plansof the Corporation?**

###  

No. Option grants donot in any way affect, limit or restrict your eligibility to participate in anyother stock plan or other compensation or benefit plan or program maintained bythe Corporation.

 

### **24.****                              ****What is a parent corporation?**

###  

A corporation is a parentcorporation if such corporation owns, directly or indirectly, stock possessingfifty percent (50%) or more of the total combined voting power of theCorporation’s outstanding securities.

 

### **25.****                              ****What is a subsidiary corporation?**

###  

A corporation is asubsidiary corporation if the Corporation owns, directly or indirectly, stockpossessing fifty percent (50%) or more of the total combined voting power ofthe outstanding securities of that corporation.

 

### **26.****                              ****What shares of Common Stock willbe issued to me upon exercise of my option?**

 

The Common Stock will bemade available either from authorized but unissued shares of Common Stock orfrom shares of Common Stock reacquired by the Corporation, including sharesrepurchased on the open market.

 

### **27.****                              ****What happens if there is a changein the Corporation’s capital structure?**

 

In the event of aRecapitalization, appropriate adjustments will automatically be made to thenumber and/or class of securities and the exercise price per share ineffect under your outstanding options. The adjustments to your outstandingoptions will preclude the dilution or enlargement of your rights and benefitsavailable under those options.

 

A Recapitalization willinclude any stock dividend, stock split, recapitalization, combination ofshares, exchange of shares or other change affecting the outstanding CommonStock as a class without the Corporation’s receipt of consideration.

 

### **28.****                              ****Can my option be amended orterminated?**

 

Yes. However, noamendment or modification may, without your consent, adversely affect yourrights and obligations under your outstanding stock options.

 

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**RESTRICTIONS ON RESALE**

 

### **29.****                              ****What restrictions apply if I am aSection 16 Insider?**

###  

Section 16(b) ofthe 1934 Act requires the Corporation to recover any profit realized by anyofficer, director or beneficial owner of more than ten percent (10%) of theoutstanding Common Stock (a “Section 16 Insider”) from any purchase andsale, or sale and purchase, of such Common Stock made within a period of lessthan six (6) months.

 

The Securities andExchange Commission (the “SEC”) has issued a series of revised rules underSection 16(b) of the 1934 Act which govern the short-swing liabilitytreatment of certain transactions effected by a Section 16 Insider underequity incentive plans. The application of those rules to optiontransactions may be summarized as follows.

 

Option Grant.The receipt of an option grant will not be treated as an exempt “purchase” ofthe underlying option shares for short-swing liability purposes.

 

Option Exercise.The exercise of an option will be an exempt purchase so that it will not betreated as a “purchase” of the acquired shares for short-swing liabilitypurposes.

 

Delivery of Shares.The delivery of shares of Common Stock in payment of the exercise price will betreated as an exempt sale for short-swing liability purposes.

 

Stock Withholding.The withholding of a portion of the shares of Common Stock otherwise issuableto the Section 16 Insider by the Corporation in satisfaction of thewithholding taxes incurred in connection with the exercise of his or heroutstanding option will be treated as an exempt sale for short-swing liability purposesif such withholding is approved by the Board at the time of the option exerciseor at any earlier time. The delivery of shares of Common Stock out of the Section 16Insider’s existing investment portfolio in satisfaction of the applicable taxwithholding liability similarly will be treated as an exempt sale forshort-swing liability purposes if approved by the Board.

 

Sale of Shares.The sale of any shares acquired will be treated as a “sale” for short-swingliability purposes and will be matched with any non-exempt purchases of CommonStock (e.g. open-market purchases) made within six (6) months before orafter the date of such sale.

 

**Reporting Requirements**

 

Asa result of the Sarbanes-Oxley Act of 2002, each of the following transactionsinvolving the Section 16 Insider must be reported on a Form 4 filedby such individual ***no later than*** the close ofthe second business day following the date on which such transaction occurs:

 

•                                          Receipt ofoption grant

•                                          Exercise ofoption grant, whether or not the acquiredshares are sold immediately

•                                          Sale ofCommon Stock acquired upon option exercise

 

If the exercise price ispaid with shares of Common Stock, then the disposition of those shares shouldalso be reported on the same Form 4 for the option exercise.

 

When shares of CommonStock are withheld in satisfaction of applicable withholding taxes, the Section 16Insider should report the gross number of shares acquired upon the exercise ofthe option (including the withheld shares) on the Form 4 reporting the optionexercise and should also report the disposition of the withheld shares on thatsame Form 4 on which the option exercise is reported.

 

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### **30.****                              ****What restrictions apply if I aman affiliate?**

###  

In general, persons withpower to manage and direct the policies of the Corporation, their relatives andtrusts, estates, corporations or other entities controlled by any of thosepersons may be deemed to be affiliates of the Corporation. Affiliates ofthe Corporation are obligated to resell their shares of Common Stock incompliance with SEC Rule 144. This rule requires such sales to beeffected in “brokers’ transactions,” as defined in the rule, and a writtennotice of each sale must be filed with the SEC at the time of such sale. The rule alsolimits the number of shares which may be sold in any three (3)-monthperiod to the greater of (i) one percent (1%) of the outstanding shares ofCommon Stock or (ii) the average weekly reported volume of trading in suchshares on all securities exchanges during the four (4) calendar weekspreceding the filing of the required notice of proposed sale. However, therewill be no Rule 144 holding period requirements applicable to the sharesof Common Stock acquired pursuant to the exercise of your option.

 

**As an officer or director of theCorporation, you should consult with counsel before offering for sale anyshares of Common Stock acquired pursuant to the exercise of an option in orderto assure your compliance with Rule 144, Section 16 and all otherapplicable provisions of federal and state securities laws.**

 

**QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES**

# ** **

**CIRCULAR230 DISCLAIMER. THE FOLLOWING DISCLAIMER IS PROVIDED INACCORDANCE WITH THE INTERNAL REVENUE SERVICE’S CIRCULAR 230 (21 C.F.R. PART 10).THIS ADVICE IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED BY YOUFOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED ON YOU. THISADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF PARTICIPATION INTHE COMPANY’S EQUITY INCENTIVE PLANS. YOU SHOULD SEEK ADVICE BASED ON YOURPARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.**

 

The following is ageneral description of the United States federal income tax consequences ofcertain option transactions. **You shouldunderstand, however, that this tax information is not complete. For example, itdoes not address state or local tax laws or the application of laws if you aresubject to tax laws in other countries.**Furthermore, because taxlaws and regulations may change, and interpretations of these laws andregulations can change the way the laws and regulations apply to you, thisinformation may need to be updated after the delivery of this prospectus. **Therefore, you should consult with a tax advisor ifyou have questions relating to the tax consequences of participation in, andthe sale of shares received under the Plan.**

 

#### **T1.****                              Willthe grant of a non-statutory option result in federal income tax liability tome?**

####  

No.

 

#### **T2.****                              Willthe exercise of a non-statutory option result in federal income tax liabilityto me?**

####  

You will recognizeordinary income in the year in which your non-statutory option is exercised inan amount equal to the excess of (i) the fair market value of thepurchased shares on the exercise date over (ii) the exercise price paidfor those shares. This income will be reported by the Corporation on your W-2wage statement for the year of exercise (or on a Form 1099 if you are notan employee), and you will be required to satisfy the tax withholding requirementsapplicable to this income.

 

#### **T3.****                              WillI recognize additional income when I sell shares acquired under a non-statutoryoption?**

####  

Yes. You will recognize acapital gain to the extent the amount realized upon the sale of such sharesexceeds their fair market value at the time you recognized the ordinary incomewith respect to their acquisition. A capital loss will result to the extent theamount realized upon the sale is less than such fair market value. The gain orloss will be long-term if the shares are held for more than one (1) yearprior to the disposition.

 

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(Please seeQuestion T6 below for the tax rates applicable to capital gain.)  The holding period normally starts at thetime the non-statutory option is exercised.

 

#### **T4.****                              Whatare the consequences of paying the exercise price of a non-statutory option inthe form of shares of Common Stock previously acquired upon the exerciseof employee options or through open-market purchases?**

####  

You will not recognizeany taxable income to the extent the shares of Common Stock received upon theexercise of the non-statutory option equal in number the shares of Common Stockdelivered in payment of the exercise price. For Federal income tax purposes,these newly-acquired shares will have the same basis and capital gain holdingperiod as the delivered shares. To the extent the delivered shares wereacquired under an Incentive Option, the new shares received upon the exerciseof the non-statutory option will continue to be subject to taxation asIncentive Option shares.

 

The additional shares ofCommon Stock received upon the exercise of the non-statutory option will, ingeneral, have to be reported as ordinary income for the year of exercise in anamount equal to their fair market value on the exercise date. These additionalshares will have a tax basis equal to such fair market value and a capital gainholding period measured (in general) from the exercise date.

 

#### **T5.****                              Whatare the federal tax consequences to the Corporation?**

####  

The Corporation will beentitled to an income tax deduction equal to the amount of ordinary income yourecognize in connection with the exercise of the non-statutory option. Thededuction will, in general, be allowed for the taxable year of the Corporationin which you recognize such ordinary income.

 

**FEDERAL TAX RATES**

##  

#### **T6.****                              Whatare the applicable federal tax rates?**

####  

Currently, the maximummarginal federal income tax rate applicable to ordinary income and short-termcapital gain is 35% for 2005. Currently, the maximum marginal federal incometax rate for long-term capital gain is 15%. Even lower long-term capital gainrates may apply to taxpayers in the 15% and 10% marginal income taxbrackets.

 

Additionally, capitalgains and losses are subject to certain other provisions of the InternalRevenue Code of 1986, as amended (the “***Code***”) notapplicable to ordinary income. For example, capital gains and losses are nettedagainst other capital gains and losses, but only $3,000 of net capital losses may bededucted against ordinary income in any calendar year by any individualtaxpayer. **Consult your tax advisor for moreinformation regarding the rates and provisions that apply to you.**

 

**CORPORATION INFORMATION**

# ** **

Websense, Inc. is aDelaware corporation which maintains its principal executive offices at 10240Sorrento Valley Road, San Diego, CA 92121. The telephone number at the executive offices is (858) 320-8000.You may contact the Corporation at this address or telephone number forfurther information.

 

An important part ofyour participation in the Plan is understanding the Company, its products,operations, and financial condition. You can keep yourself informed about theCompany by reviewing proxy statements, reports to stockholders, and otherdocuments that we prepare for our stockholders and the general public. If youbecome one of our stockholders, you will be entitled to attend our stockholdermeetings and to vote in the election of directors and on other matters broughtbefore the stockholders.

 

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The United States federalsecurities laws require the Company to provide information about its businessand financial status in (a) Annual Reports, commonly filed on a Form 10-K;(b) Quarterly Reports, commonly filed on a Form 10-Q; and (c) CurrentReports relating to important corporate events occurring during the year,commonly filed on a Form 8-K. These reports are filed with the Securitiesand Exchange Commission (the “***SEC***”). The Company also prepares and files with the SECa proxy statement in connection with its Annual Meeting of Stockholders. Theproxy statement provides further information about the Company and itsofficers, directors, and major stockholders.

 

From time to time theCompany may also file other documents with the SEC as required by Sections13(a), 13(c), 14 and 15(d) of the 1934 Act. The following documents wefiled with the SEC are incorporated by reference into these materials, whichconstitute the prospectus for the Plan:

 

(a)                                  TheCompany’s latest annual report on Form 10-K filed pursuant to Sections 13(a) or15(d) of the 1934 Act, or either (1) our latest prospectus filedpursuant to Rule 424(b) under the Securities Act of 1933, as amended,that contains audited financial statements for our latest fiscal year for whichsuch statements have been filed, or (2) our effective registrationstatement on Form 10 or 20-F filed under the 1934 Act containing auditedfinancial statements for our latest fiscal year.

 

(b)                                 Allother reports filed pursuant to Sections 13(a) or 15(d) of the 1934Act since the end of the fiscal year covered by the annual report, theprospectus or the registration statement referred to in (a) above.

 

(c)                                  Thedescription of our common stock which is contained in a registration statementfiled under the 1934 Act, including any amendment or report filed for thepurpose of updating such description.

 

All reports and otherdocuments filed pursuant to Sections 13(a), 13(c), 14 and 15(d) of the1934 Act shall be deemed to be incorporated by reference herein and to be a part ofthis prospectus from the date of the filing of such reports and documents, ifsuch reports or other documents are filed (a) after the date of thisprospectus, and (b) prior to the filing of a post effective amendmentwhich indicates that all securities offered pursuant to the registrationstatement on Form S-8 we filed with the SEC registering the sharesreserved under the Plan have been sold or which deregisters all securities thenremaining unsold.

 

A copy of these documentsis always available without charge and upon written or oral request directed tothe Stock Plan Administrator at 10240 Sorrento Valley Road, San Diego, CA 92121or (858) 320-8000. If you are already one of our stockholders or a participantin any of our equity incentive plans, you should already receive either paperor electronic copies of our proxy statement, reports to stockholders, and otherstockholder communications. If you have not already received a copy of ourcurrent annual report, a copy should be delivered to you with these materials.Whether or not you have already received this information, copies of ourcurrent annual report or other stockholder communications are always availablewithout charge and upon written or oral request directed to the StockAdministrator. Alternatively, copies of the most recent reports containingaudited financial statements for our most recent fiscal year (which may bethe final prospectus by which shares of our common stock are sold to thegeneral public or the annual report to our stockholders) and our other SECfilings, are available through the Company’s filings with the SEC on thefollowing web site:

 

http://www.sec.gov/edgar/searchedgar/companysearch.html.

 

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