**Exhibit 10.2**

 

**WEBSENSE, INC.**

 

**NOTICE OF GRANT OF STOCK OPTION**

 

Notice is herebygiven of the following option grant (the “Option”) to purchase shares of theCommon Stock of Websense, Inc. (the “Corporation”):

 
| Optionee:                   | Vernon Gene Hodges                                                                         |
|-----------------------------|--------------------------------------------------------------------------------------------|
|                        |                                                                                       |
| Grant Date:                 | April 13, 2006                                                                        |
|                        |                                                                                       |
| Vesting Commencement  Date: | January 9, 2006                                                                       |
|                        |                                                                                       |
| Exercise Price:             | $ 32.24 per share                                                                     |
|                        |                                                                                       |
| Number of Option Shares:    |               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 ofService measured from the Vesting Commencement Date and shall becomeexercisable for the balance of the Option Shares in a series of thirty-six(36) successive equal monthly installments upon Optionee’s completion of eachadditional month of Service over the thirty-six (36) month period measured fromthe first anniversary of the 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 provided above,in no event shall the Option become exercisable for any additional OptionShares after Optionee’s cessation of Service.

 

Optioneeunderstands and agrees that the Option is granted subject to and in accordancewith the terms of the Websense, Inc. 2000 Stock Incentive Plan (the “Plan”).Optionee further agrees to be bound by the terms of the Plan and the terms ofthe Option as set forth in the Stock Option Agreement attached hereto as Exhibit A.Optionee hereby acknowledges the receipt of a copy of the official prospectusfor the Plan in the form attached hereto as Exhibit B. A copyof the Plan is available upon request made to the Corporate Secretary at theCorporation’s principal offices.

 

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Employment at Will.Nothing in this Notice or in the attached Stock Option Agreement or in the Planshall confer upon Optionee any right to continue in Service for any period ofspecific duration or interfere with or otherwise restrict in any way the rightsof the Corporation (or any Parent or Subsidiary employing or retainingOptionee) or of Optionee, which rights are hereby expressly reserved by each,to terminate Optionee’s Service at any time for any reason, with or withoutcause.

 

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: | April 13,  2006    |   |   |
|--------|-------------------------|--------|--------|
|   |                    |
|   | **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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**WEBSENSE, INC.**

 

**STOCK OPTION AGREEMENT**

 

**RECITALS**

 

A.                                   On January 9, 2006 on the date Optioneecommenced employment as the chief executive officer of the Corporation,Optionee was awarded non-plan inducement options consistent with NasdaqMarketplace Rule 4350(i)(1)(A)(iv) (the ***“Original Options”***).

 

B.                                     TheCorporation subsequently requested that Optionee agree to the cancellation ofthe Original Options and the immediate re-grant of an equal number (aftergiving affect to the two for one stock split effected through a stock dividendon March 17, 2006 (the ***“Stock Split”***))of options under the 2000 Stock Equity Plan (the ***“Plan”***)with the same exercise price (adjusted for the Stock Split), vesting schedule,vesting commencement date and expiration date as the Original Options.

 

C.                                     Thepurpose of the cancellation and re-grant is to bring the options under theterms and conditions, including the annual grant limitations under the Plan, tobetter align the Optionee’s compensation with the stockholder approved limitationsand to qualify the options to the extent possible, as performance-basedcompensation under 162(m) of the Internal Revenue Code of 1986, as amended.

 

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.****                                      Grantof Option**. The Corporation hereby grants to Optionee under the Plan, asof the Grant Date, a Non-Statutory Option to purchase up to the number ofOption Shares specified in the Grant Notice. The Option Shares shall bepurchasable from time to time during the option term specified in Paragraph 2at the Exercise Price.

 

**2.****                                      OptionTerm**. This option shall expire at the close of business on theExpiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.

 

**3.****                                      LimitedTransferability.**

 

**(a)****                                 **Thisoption shall be neither transferable nor assignable by Optionee other than bywill or the laws of inheritance following Optionee’s death and may beexercised, during Optionee’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

 

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optionsubject to all the terms and conditions of this Agreement, including (withoutlimitation) the limited time period during which this option may, pursuant toParagraph 5, be exercised following Optionee’s death.

 

**(b)****                                 **Inaddition, to the extent that such action is permitted by the Board and isconsistent with applicable securities laws, this option may be assigned inwhole or in part during Optionee’s lifetime to one or more members ofOptionee’s family or to a trust established for the exclusive benefit of one ormore such family members or to Optionee’s former spouse, to the extent suchassignment is in connection with the Optionee’s estate plan or pursuant to adomestic relations order. The assigned portion shall be exercisable only by theperson or persons who acquire a proprietary interest in the option pursuant tosuch assignment. The terms applicable to the assigned portion shall be the sameas those in effect for this option immediately prior to such assignment.

 

**4.****                                      Datesof Exercise**. This option shall become exercisable for the Option Sharesin one or more installments as specified in the Grant Notice. As the optionbecomes exercisable for such installments, those installments shall accumulate,and the option shall remain exercisable for the accumulated installments untilthe Expiration Date or sooner termination of the option term under Paragraph 5or 6.

 

**5.****                                      Cessationof Service**. The option term specified in Paragraph 2 shall terminate(and this option shall cease to be outstanding) prior to the Expiration Dateshould any of the following provisions become applicable:

 

**(a)****                                 **ShouldOptionee cease to remain in Service for any reason (other than death, PermanentDisability or Misconduct) while holding this option, then Optionee shall have aperiod of three (3) months (commencing with the date of such cessation ofService) during which to exercise this option, but in no event shall thisoption be exercisable at any time after the Expiration Date.

 

**(b)****                                 **ShouldOptionee die while holding this option, then the personal representative ofOptionee’s estate or the person or persons to whom the option is transferredpursuant to Optionee’s will or the laws of inheritance shall have the right toexercise this option. However, if Optionee has designated one or morebeneficiaries of this option, then those persons shall have the exclusive rightto exercise this option following Optionee’s death. Any such right to exercisethis option shall lapse, and this option shall cease to be outstanding, uponthe earlier of (i) the expiration of the twelve (12)-month periodmeasured from the date of Optionee’s death or (ii) the Expiration Date.

 

**(c)****                                 **ShouldOptionee cease Service by reason of Permanent Disability while holding thisoption, then Optionee shall have a period of twelve (12) months (commencingwith the date of such cessation of Service) during which to exercise thisoption. In no event shall this option be exercisable at any time after theExpiration Date.

 

**(d)****                                 **Duringthe limited period of post-Service exercisability, this option may not beexercised in the aggregate for more than the number of Option Shares for whichthe

 

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optionis exercisable at the time of Optionee’s cessation of Service. Upon theexpiration of such limited exercise period or (if earlier) upon the ExpirationDate, this option shall terminate and cease to be outstanding for anyexercisable Option Shares for which the option has not been exercised. However,this option shall, immediately upon Optionee’s cessation of Service for anyreason, terminate and cease to be outstanding with respect to any Option Sharesfor which this option is not otherwise at that time exercisable.

 

**(e)****                                 **ShouldOptionee’s Service be terminated for Misconduct or should Optionee otherwiseengage in any Misconduct while this option is outstanding, then this optionshall terminate immediately and cease to remain outstanding.

 

**6.****                                      **SpecialAcceleration of Option****.

 

**(a)****                                 **If(i) within eighteen (18) months immediately following a Change in ControlOptionee’s Service is terminated by the Corporation without Cause or Optioneeresigns his employment for Good Reason or (ii) the Corporation terminatesOptionee’s Services without Cause during the pendency of a merger agreement ortender offer which would result in a Change in Control, contingent uponOptionee 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 such termination without Cause or resignationfor Good Reason, as applicable, but not otherwise fully exercisable, shallautomatically accelerate so that this option shall become immediatelyexercisable for all the Option Shares at such time subject to the Option and may beexercised for any or all of those Option Shares as fully vested shares.

 

**(b)****                                 **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 tothe Common Stock by reason of any stock split, stock dividend,recapitalization, combination of shares, exchange of shares or other changeaffecting the outstanding Common Stock as a class without the Corporation’sreceipt of consideration, appropriate adjustments shall be made to (i) thetotal number 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.****                                      StockholderRights**. The holder of this option shall not have any stockholder rightswith respect to the Option Shares until such person shall have exercised theoption, paid the Exercise Price and become a holder of record of the purchasedshares.

 

**9.****                                      Mannerof Exercising Option**.

 

**(a)****                                 **Inorder to exercise this option with respect to all or any part of theOption Shares for which this option is at the time exercisable, Optionee (orany other person or persons exercising the option) must take the followingactions:

 

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**(i)****                                   **Executeand deliver to the Corporation a Notice of Exercise for the Option Shares forwhich the option is exercised.

 

**(ii)****                               **Paythe aggregate Exercise Price for the purchased shares in one or more of thefollowing forms:

 

**(1)****                                **cashor check made payable to the Corporation;

 

**(2)****                                **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

 

**(3)****                                **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)****                           **Furnishto the Corporation appropriate documentation that the person or personsexercising the option (if other than Optionee) have the right to exercise thisoption.

 

**(iv)****                              **Makeappropriate arrangements with the Corporation (or Parent or Subsidiaryemploying or retaining Optionee) for the satisfaction of all Federal, state andlocal income and employment tax withholding requirements applicable to theoption exercise.

 

**(b)****                                 **Assoon as practical after the Exercise Date, the Corporation shall issue to or onbehalf of Optionee (or any other person or persons exercising this option) acertificate for the purchased Option Shares, with the appropriate legendsaffixed thereto.

 

**(c)****                                 **Inno event may this option be exercised for any fractional shares.

 

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

 

**(a)****                                 **Theexercise of this option and the issuance of the Option Shares upon suchexercise shall be subject to compliance by the Corporation and Optionee withall applicable

 

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requirementsof law relating thereto and with all applicable regulations of any stockexchange (or the Nasdaq National Market, if applicable) on which the CommonStock may be listed for trading at the time of such exercise and issuance.

 

**(b)****                                 **Theinability of the Corporation to obtain approval from any regulatory body havingauthority deemed by the Corporation to be necessary to the lawful issuance andsale of any Common Stock pursuant to this option shall relieve the Corporationof any liability with respect to the non-issuance or sale of the Common Stockas to which such approval shall not have been obtained. The Corporation,however, shall use its best efforts to obtain all such approvals.

 

**11.****                               Successorsand Assigns**. Except to the extent otherwise provided in Paragraphs 3and 6, the provisions of this Agreement shall inure to the benefit of, and bebinding upon, the Corporation and its successors and assigns and Optionee,Optionee’s assigns, the legal representatives, heirs and legatees of Optionee’sestate and any beneficiaries of this option designated by Optionee.

 

**12.****                               Notices**.Any notice required to be given or delivered to the Corporation under the termsof this Agreement shall be in writing and addressed to the Corporation at itsprincipal corporate offices. Any notice required to be given or delivered toOptionee shall be in writing and addressed to Optionee at the address indicatedbelow Optionee’s signature line on the Grant Notice. All notices shall bedeemed effective upon personal delivery or upon deposit in the U.S. mail,postage prepaid and properly addressed to the party to be notified.

 

**13.****                               Construction**.This Agreement and the option evidenced hereby are made and granted pursuant tothe Plan and are in all respects limited by and subject to the terms of thePlan. To the extent the Plan is determined to limit the application of anyprovision herein, the Board, by its approval of this Agreement, hereby deemssuch provision to be permissible by the Plan and such permission shall bedeemed an amendment to the Plan to the extent such amendment would not requirestockholder approval under the Nasdaq marketplace rules. All decisions of thePlan Administrator with respect to any question or issue arising under the Planor this Agreement shall be conclusive and binding on all persons having an interestin this option.

 

**14.****                               GoverningLaw**. The interpretation, performance and enforcement of this Agreementshall be governed by the laws of the State of California without resort to thatState’s conflict-of-laws rules.

 

**15.****                               ExcessShares.**If the Option Shares covered by this Agreement exceed, as ofthe Grant Date, the number of shares of Common Stock which may withoutstockholder approval be issued under the Plan, then this option shall be voidwith respect to those excess shares, unless stockholder approval of anamendment sufficiently increasing the number of shares of Common Stock issuableunder the Plan is obtained in accordance with the provisions of the Plan.

 

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**EXHIBIT I**

 

**NOTICE OF EXERCISE**

 

Ihereby 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 under the Corporation’s 2000 Stock Incentive Plan on                    ,         .

 

Concurrentlywith the delivery of this Exercise Notice to the Corporation, I shall herebypay to the Corporation the Exercise Price for the Purchased Shares inaccordance with the provisions of my agreement with the Corporation (or otherdocuments) evidencing the Option and shall deliver whatever additionaldocuments may be required by such agreement as a condition for exercise. Alternatively,if previously authorized by the Board, in its sole discretion, I may utilizethe special broker-dealer sale and remittance procedure specified in myagreement to effect payment of the Exercise Price.

 

                    ,      Date

 

 
|                                       |   |     |   |
|--------------------------------------------|--------|----------|--------|
|                                       |   | Optionee |   |
|                                       |   |     |   |
|                                       |   | Address: |   |   |
|                                       |   |     |   |
|                                       |   |     |   |
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| 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 Stock Option Agreement.

 

**B.****                                    Board**shall mean the Corporation’s Board of Directors.

 

**C.****                                    Cause**for termination shall mean a termination of your employment by the Corporationbased upon a good faith determination by the Board that one or more of thefollowing has occurred: (a) your commission of a material act of fraudwith respect to the Corporation, (b) your intentional refusal or willfulfailure to carry out the reasonable instructions of the Board, (c) yourconviction of, or plea of nolo contendere to, at any time, a misdemeanor crimeof moral turpitude or a felony (even if such has occurred prior to youremployment with the Corporation), (d) your gross misconduct in connectionwith the performance of your duties, or (e) your material breach of yourobligations to the Corporation or any agreement between you and theCorporation.

 

**D.****                                   **Solelyfor purposes of the provisions of Paragraph 6 herein, **Change inControl** shall mean 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 the Corporationin one transaction or series of related transactions;

 

**(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 is acquiredby (a) a trustee or other fiduciary holding securities under one or moreemployee

 

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benefit plans maintainedby the Corporation or any of its affiliates, or (b) any person that,immediately prior to such acquisition, is owned directly or indirectly by thestockholders of the Corporation in approximately the same proportion as theirownership of stock in the Corporation immediately prior to such acquisition.

 

**E.****                                      Code**shall mean the Internal Revenue Code of 1986, as amended.

 

**F.****                                      CommonStock** shall mean shares of the Corporation’s common stock.

 

**G.****                                    Corporation**shall mean Websense, Inc., a Delaware corporation, and any successorcorporation to all or substantially all of the assets or voting stock ofWebsense, Inc. which shall by appropriate action adopt the Plan.

 

**H.****                                    Employee**shall mean an individual who is in the employ of the Corporation (or any Parentor Subsidiary), subject to the control and direction of the employer entity asto both the work to be performed and the manner and method of performance.

 

**I.****                                         ExerciseDate** shall mean the date on which the option shall have been exercisedin accordance with Paragraph 9 of the Agreement.

 

**J.****                                      ExercisePrice** shall mean the exercise price per Option Share as specified inthe Grant Notice.

 

**K.****                                    ExpirationDate** shall mean the date on which the option expires as specified inthe Grant Notice.

 

**L.****                                     FairMarket Value** per share of Common Stock on any relevant date shall bedetermined in accordance with the following 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 thePlan Administrator to be the primary market for the Common Stock, as such priceis officially quoted in the composite tape of transactions on such exchange 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.

 

**M.****                                  GoodReason** shall mean your resignation within ninety (90) days of theoccurrence of any one or more of the following events without your writtenconsent, provided that you comply with a reasonable Good Reason processproviding the Corporation with an

 

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opportunity to cure thealleged Good Reason: (a) a material reduction in your base salary and/ortarget bonus other than in connection with a Corporation-wide reduction inexecutive compensation, (b) a material reduction in your benefits, otherthan in connection with a Corporation-wide reduction in executive benefits, (c) amaterial and significant reduction in your authority, title and/or dutieswithout Sufficient Basis, (d) a requirement that you relocate more thanthirty-five (35) miles from your then-current office location. Notwithstandingthe foregoing sentence, your receipt of less bonus or no bonus as a result ofnot meeting the relevant goals for a bonus is not a Good Reason.

 

**N.****                                    GrantDate** shall mean the date of grant of the option as specified in theGrant Notice.

 

**O.****                                   GrantNotice** shall mean the Notice of Grant of Stock Option accompanying theAgreement, pursuant to which Optionee has been informed of the basic terms ofthe option evidenced hereby.

 

**P.****                                     IncumbentDirectors**shall mean members of the Board who are (a) members ofthe Board as of the date hereof, or (b) elected, or nominated forelection, to the Board with the affirmative votes of at least a majority of theIncumbent Directors at the time of such election or nomination.

 

**Q.****                                   Misconduct**shall mean the commission of any act of fraud, embezzlement or dishonesty byOptionee, any unauthorized use or disclosure by Optionee of confidentialinformation or trade secrets of the Corporation (or any Parent or Subsidiary),or any other intentional misconduct by Optionee adversely affecting thebusiness or affairs of the Corporation (or any Parent or Subsidiary) in amaterial manner. The foregoing definition shall not be deemed to be inclusiveof all the acts or omissions which the Corporation (or any Parent orSubsidiary) may consider as grounds for the dismissal or discharge ofOptionee or any other individual in the Service of the Corporation (or anyParent or Subsidiary).

 

**R.****                                    Non-StatutoryOption** shall mean an option not intended to satisfy the requirements ofCode Section 422.

 

**S.****                                     Noticeof Exercise** shall mean the notice of exercise in the form attachedhereto as Exhibit I.

 

**T.****                                     OptionShares** shall mean the number of shares of Common Stock subject to theoption as specified in the Grant Notice.

 

**U.****                                     Optionee**shall mean the person to whom the option is granted as specified in the GrantNotice.

 

**V.****                                    Parent**shall mean any corporation (other than the Corporation) in an unbroken chain ofcorporations ending with the Corporation, provided each corporation in theunbroken chain (other than the Corporation) owns, at the time of thedetermination, stock possessing fifty percent (50%) or more of the totalcombined voting power of all classes of stock in one of the other corporationsin such chain.

 

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**W.****                                PermanentDisability** shall mean the inability of Optionee to engage in anysubstantial gainful activity by reason of any medically determinable physicalor mental impairment which is expected to result in death or has lasted or canbe expected to last for a continuous period of twelve (12) months or more.

 

**X.****                                    Plan**shall mean the Corporation’s 2000 Stock Incentive Plan.

 

**Y.****                                     PlanAdministrator** shall mean either the Board or a committee of the Boardacting in its capacity as administrator of the Plan.

 

**Z.****                                     Service**shall mean the Optionee’s performance of services for the Corporation (or anyParent or Subsidiary) in the capacity of an Employee, a non-employee member ofthe board of directors or a consultant or independent advisor.

 

**AA.****                           StockExchange** shall mean the American Stock Exchange or the New York StockExchange.

 

**BB.****                           Subsidiary**shall mean any corporation (other than the Corporation) in an unbroken chain ofcorporations beginning with the Corporation, provided each corporation (otherthan the last corporation) in the unbroken chain owns, at the time of thedetermination, stock possessing fifty percent (50%) or more of the totalcombined voting power of all classes of stock in one of the other corporationsin such chain.

 

**CC.****                           SufficientBasis** shall mean a reassignment or reduction in duties as a result ofdisciplinary action based upon serious violation of Corporation policy orviolation of an agreement between you and the Corporation.

 

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