CoStar Group, Inc. Employee Stock Purchase Plan


    Exhibit
      10.1


    COSTAR
      GROUP, INC.

     

    EMPLOYEE
      STOCK PURCHASE PLAN

     

    


     

    WHEREAS,
      the purpose of this CoStar Group, Inc. Employee Stock Purchase Plan (“Plan”) is
      to provide eligible employees of CoStar Group, Inc. (the “Company”) and certain
      of its subsidiaries with the opportunity to purchase shares of the Company’s
      common stock (“Common Stock”) at a 10% discount. 

     

    WHEREAS,
      the Board of Directors initially approved the Plan by unanimous written consent
      dated effective April 17, 2006. 

     

    WHEREAS,
      the Stockholders of the Company approved the Plan at the Annual Meeting of
      Stockholders held on June 8, 2006.

     

    WHEREAS,
      the Board of Directors of the Company approved certain amendments to the Plan
      to
      clarify certain definitions related to the offering periods and exercise dates
      and to make certain other administrative changes, all of which amendments are
      incorporated into the Plan as set forth below. All references to the “Plan”
herein refer to the Plan as so amended.

     

    1.  Administration.
      The
      Plan will be administered by the Company’s Board of Directors (the “Board”) or
      by one or more committees or subcommittees appointed by the Board (a
“Committee”). The Board or a Committee (in either case, the “Administrator”) may
      delegate to one or more individuals the day-to-day administration of the Plan.
      The Administrator shall have full power and authority to promulgate any rules
      and regulations which it deems necessary or advisable for the proper
      administration of the Plan, to interpret the provisions and supervise the
      administration of the Plan, to make factual determinations relevant to Plan
      entitlements, and to take all action in connection with the administration
      of
      the Plan as it deems necessary or advisable, consistent with any delegation
      from
      the Board; provided, however, the administration of the Plan shall be consistent
      with Rule 16b-3 under the Securities Exchange Act of 1934. The administration,
      interpretation or application of the Plan by the Administrator shall be final
      and binding upon all participants and all other persons. The Company shall
      pay
      all expenses incurred in connection with the administration of the Plan. No
      Board or Committee member shall be liable for any action or determination made
      in good faith with respect to the Plan or any Option (as defined in Section
      9)
      granted hereunder.

     

    2.  Eligibility.
      All
      employees of the Company, including Directors who are employees, and all
      employees of any subsidiary of the Company (as defined in Section 424(f) of
      the Internal Revenue Code (the “Code”)) designated by the Board or a Committee
      from time to time (a “Designated Subsidiary”), are eligible to participate in
      the Plan provided that:

     

    (a)  they
      are
      customarily employed by the Company or a Designated Subsidiary for more than
      20
      hours a week and for more than five months in a calendar year; and

     

    (b)  they
      are
      employees of the Company or a Designated Subsidiary on the applicable Offering
      Commencement Date (as defined below).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    For
      purposes of the Plan, the employment relationship shall be treated as continuing
      intact while the individual is on sick leave or other leave of absence approved
      by the Company or Designated Subsidiary; provided that where the period of
      leave
      exceeds ninety (90) days and the individual’s right to reemployment is not
      guaranteed by statute or by contract, the employment relationship will be deemed
      to have terminated on the ninety-first (91st) day of such leave.

     

    No
      employee may be granted an Option hereunder if such employee, immediately after
      the Option is granted, owns 5% or more of the total combined voting power
      or value of the stock of the Company or any subsidiary. For purposes of the
      preceding sentence, the attribution rules of Section 424(d) of the Code
      shall apply in determining the stock ownership of an employee, and all stock
      which the employee has a contractual right to purchase shall be treated as
      stock
      owned by the employee.

     

    Eligible
      employees who elect to participate in the Plan are referred to herein as
“participants”.

     

    3. Offering
      Periods.
      Each
      offering period under the Plan will be two weeks beginning on the second
      Saturday preceding each of the Company’s regular pay dates (the “Offering
      Commencement Date”) and ending on each of the Company’s regular pay dates (the
“Offering Period”); provided, that if the regular pay date of a particular
      Offering Period falls on a day that is a Company holiday, that Offering Period
      shall be deemed to end as of the pay date on which regular Compensation (as
      defined below) is disbursed or paid to employees by the Company during the
      Offering Period (generally the last business day prior to the regular pay date)
      (such pay date or the regular pay date during the Offering Period, as
      applicable, the “Exercise Date”) and the applicable Offering Period will be
      shortened accordingly. Any such shortening of an Offering Period shall have
      no
      effect on the Offering Commencement Date or the duration of previous or
      subsequent Offering Periods. For purposes hereof, the term “pay date” shall mean
      the date as of which Compensation is disbursed or paid by the Company to its
      employees, not the date as of which Compensation is earned; and the term
“regular pay date” shall mean every other Friday on which the Company typically
      disburses or pays Compensation to its employees. During each Offering Period,
      payroll deductions will be made on behalf of a participant from one or more
      paychecks paid by the Company to such participant during the Offering Period.
      Such payroll deductions will be held for the purchase of Common Stock at the
      end
      of the Offering Period. The Administrator may, at any time and at its
      discretion, change the frequency and/or duration of Offering Periods with
      respect to future Offering Periods. 

     

    4. Participation.
      An
      eligible employee may participate in the Plan by completing and forwarding
      a
      payroll deduction authorization form to the Company’s benefits office or by any
      other method which the Administrator specifies no later than 5:00 p.m., Eastern
      Time, on the last business day prior to the applicable Offering Commencement
      Date. The payroll deduction authorization form will authorize a regular
      payroll deduction from the Compensation received by the participant during
      the
      Offering Period. Unless a participant files a new form or withdraws from the
      Plan, his or her deductions and purchases will continue at the same rate for
      future Offering Periods under the Plan as long as the Plan remains in effect
      (subject to Section 11 below). As used herein, the term “Compensation” means
      total compensation subject to federal income tax and paid to the participant
      by
      the Company, excluding reimbursements or other expense allowances, fringe
      benefits, relocation expenses, stock-based compensation and severance
      benefits.  For purposes of the Plan, (a) salary deferrals in connection
      with participation in the Plan or any other plan or arrangement (such as Section
      401(k), Section 125 or qualified transportation fringe benefit) shall be
      included as Compensation, and (b) compensation shall be recognized only for
      the
      period in which a person is actually an eligible participant of the Plan.
      Further, for purposes of the Plan, references to Compensation disbursed or
      paid
      by the Company shall include compensation disbursed or paid by a Designated
      Subsidiary, as the case may be, and the term “Company” in such context shall
      include any Designated Subsidiary. 

     

    
      
        
        

      

      
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    5. 
Deductions. 
The
      Company will
      maintain payroll deduction accounts for all participants. With respect to the
      Plan, a participant may authorize a payroll deduction in any dollar amount
      up to
      a maximum of 15% of the Compensation he or she receives during the Offering
      Period or such shorter period during which deductions from payroll are made.
      Payroll deductions may be made in 1% increments of Compensation, between 1%
      and
      15%, with any change in compensation paid during the Offering Period to result
      in an automatic corresponding change in the dollar amount withheld as soon
      as
      administratively practical.

     

    6. Deduction
      Changes.
      A
      participant may increase, decrease or discontinue his or her payroll deduction
      for a subsequent Offering Period by filing a new payroll deduction
      authorization form, or indicating a change by any other method which the
      Administrator specifies, no later than 5:00 p.m., Eastern Time, on the last
      business day prior to the applicable Offering Commencement Date. If a
      participant elects to discontinue his or her payroll deductions, but does not
      elect to withdraw his or her funds pursuant to Section 8 below, funds
      deducted prior to such participant’s election to discontinue will be applied to
      the purchase of Common Stock on the Exercise Date. The Administrator may (i)
      establish rules limiting the frequency with which participants may change,
      discontinue and resume payroll deductions under the Plan and may impose a
      waiting period on participants wishing to resume payroll deductions following
      discontinuance, and (ii) change the rules regarding discontinuance of
      participation or changes in participation in the Plan. Notwithstanding the
      foregoing, to the extent necessary to comply with Section 423(b)(8) of the
      Code,
      the Administrator may reduce a participant’s payroll deductions to zero percent
      (0%) at any time during an Offering Period scheduled to end during the current
      calendar year. Payroll deductions shall re-commence at the rate provided in
      such
      participant’s enrollment form at the beginning of the first Offering Period that
      is scheduled to end in the following calendar year, unless participation in
      the
      Plan is discontinued by the participant.

     

    If
      a
      participant has not followed the procedures prescribed by the Administrator
      to
      change the rate of payroll deductions or to discontinue the payroll deductions,
      the rate of payroll deductions shall continue at the properly elected rate
      in
      effect until such rate is changed in accordance with Plan
      procedures.

     

    7. 
Interest. 
All
      payroll
      withholdings hereunder shall be held in the corporate general account. Interest
      will not be paid on any participant accounts, except to the extent that the
      Administrator, in its sole discretion, elects to credit participant
      accounts with interest at such per annum rate as it may from time to time
      determine.

     

    8. 
Withdrawal
      of Funds.  Except as
      otherwise provided by the Administrator pursuant to Section 6 hereof, a
      participant may at any time prior to 5:00 p.m., Eastern time, on the fifth
      business day prior to the Exercise Date and for any reason permanently draw
      out
      the balance accumulated in the participant’s account and thereby withdraw from
      participation in an Offering Period by notifying the Company by whatever
      method specified by the Administrator. Partial withdrawals are not permitted.
      The participant may not begin participation again during the remainder of the
      Offering Period. The participant may participate in any subsequent Offering
      Period in accordance with terms and conditions established by the
      Administrator.

     

    9. 
Purchase
      of Shares.  On the
      Offering Commencement Date of each Offering Period, the Company will grant
      to
      each eligible employee who is then a participant in the Plan an option (the
      “Option”) to purchase whole shares of Common Stock of the Company on the
      Exercise Date at the Option Price hereinafter provided for. 

     

    
      
         

      

      
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    Notwithstanding
      the above, no participant may be granted an Option which permits his or her
      rights to purchase Common Stock under this Plan and any other employee stock
      purchase plan (as defined in Section 423(b) of the Code) of the Company and
      its
      subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market
      value
      of such Common Stock (determined as of each Exercise Date) for each calendar
      year in which the Option is outstanding at any time.

     

    The
      price
      for each share purchased under the Plan will be 90% of the closing price of
      the
      Common Stock on the Exercise Date, rounded to the nearest $0.01 (the “Option
      Price”). Such closing price shall be (a) the closing price on any national
      securities exchange on which the Common Stock is listed, (b) the closing
      price of the Common Stock on the Nasdaq Global or Global Select Market or
      (c) the average of the closing bid and asked prices in the
      over-the-counter-market, whichever is applicable, as published in The
      Wall Street Journal.
      If no
      sales of Common Stock were made on such day, the price of the Common Stock
      for
      purposes of clauses (a) and (b) above shall be the reported price for the
      next preceding day on which sales were made.

     

    Unless
      an
      employee withdraws from participation prior to the Exercise Date pursuant to
      the
      terms hereof, each such employee who is a participant in the Plan on the
      Offering Commencement Date shall be deemed to have exercised his or her Option
      at the Option Price on the Exercise Date and shall be deemed to have purchased
      from the Company the number of full shares of Common Stock reserved for the
      purpose of the Plan that his or her accumulated payroll deductions as of the
      Exercise Date will pay for, but not in excess of the maximum number determined
      in the manner set forth above. 

     

    Any
      balance remaining in a participant’s payroll deduction account at the end of an
      Offering Period will be automatically refunded to the participant, except that
      any balance which is less than the purchase price of one share of Common Stock
      will be carried forward into the participant’s payroll deduction account for the
      Plan, except that if the participant requests a refund of the residual, in
      accordance with procedures established by the Administrator, or if the
      participant terminates his or her employment, the balance shall then be
      refunded. 

     

    10.  Issuance
      of Shares.
      Shares
      of Common Stock purchased under the Plan may be issued only in the name of
      the
      participant, in the name of the participant and another person of legal age
      as
      joint tenants with rights of survivorship, or (in the Company’s sole discretion)
      in the name of a brokerage firm, bank or other nominee holder designated by
      the
      participant. The Company may, in its sole discretion and in compliance with
      applicable laws, authorize the use of book entry registration of shares.


     

    11.  Rights
      on Retirement, Death or Termination of Employment.
      In the
      event of a participant’s termination of employment for any reason (including
      death), the participant’s participation in the Plan shall terminate effective as
      of the Offering Commencement Date immediately following such termination, and
      after the Exercise Date of the Offering Period during which such participant’s
      employment was terminated no payroll deduction shall be taken from any pay
      due
      and owing to such participant and the balance in the participant’s account shall
      be paid to the participant or, in the event of the participant’s death,
      (a) to a beneficiary previously designated in a revocable notice signed by
      the participant (with any spousal consent required under state law) or
      (b) in the absence of such a designated beneficiary, to the executor or
      administrator of the participant’s estate or (c) if no such executor or
      administrator has been appointed to the knowledge of the Company, to such other
      person(s) as the Company may, in its discretion or as may be required under
      applicable law, designate.  In the event that the Designated Subsidiary by
      which a participant is employed shall cease to be a subsidiary of the Company
      or
      the participant is transferred to a subsidiary of the Company that is not a
      Designated Subsidiary, the participant shall be deemed to have terminated
      employment as of the date of such action, and, as set forth above, the
      participant’s participation in the Plan shall terminate effective as of the
      Offering Commencement Date immediately following such termination.

     

    
      
        
        

      

      
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    12.  Optionees
      Not Stockholders; No Enlargement of Employee Rights.
      Neither
      the granting of an Option to a participant nor the deductions from his or
      her pay shall constitute such participant a stockholder of the shares of Common
      Stock covered by an Option under this Plan until such shares have been purchased
      by and issued to him or her. In addition, nothing contained in this Plan shall
      be deemed to give any participant the right to be retained in the employ of
      the
      Company or of the Designated Subsidiary or to interfere with the right of the
      Company or the Designated Subsidiary to discharge any participant at any
      time.

     

    13.  Rights
      Not Transferable.
      Rights
      under this Plan and Options granted under this Plan are not transferable by
      a
      participant other than by will or the laws of descent and distribution, and
      are
      exercisable during the participant’s lifetime only by the participant. If a
      participant in any manner attempts to transfer, assign or otherwise encumber
      his
      or her rights or interests under the Plan, other than as permitted by the Code,
      such act shall be treated as an election by the Participant to discontinue
      participation in the Plan.

     

    14.  Use
      of
      Funds.
      All
      payroll deductions received or held by the Company under the Plan may be used
      by
      the Company for any corporate purpose, and the Company shall not be obligated
      to
      segregate such payroll deductions.

     

    15.  Adjustment
      in Case of Changes Affecting Common Stock.
      If the
      outstanding shares of Common Stock are increased or decreased, or are changed
      into or are exchanged for a different number or kind of shares, as a result
      of
      one or more reorganizations, restructurings, recapitalizations,
      reclassifications, stock splits, reverse stock splits, stock dividends or the
      like, upon authorization of the Board or the Committee, the Board may make
      appropriate adjustments in the number and/or kind of shares, and the per-share
      exercise price thereof, which may be issued in the aggregate and to any
      participant upon exercise of Options granted under the Plan. The Board’s
      determinations under this Section 15 shall be conclusive and binding on all
      parties.

     

    16.  Merger.
      If the
      Company shall at any time merge or consolidate with another corporation and
      the
      holders of the capital stock of the Company immediately prior to such merger
      or consolidation continue to hold at least 51% by voting power of the
      capital stock of the surviving corporation (“Continuity of Control”), the
      holder of each Option then outstanding will thereafter be entitled to receive
      at
      the next Exercise Date upon the exercise of such Option for each share as to
      which such Option shall be exercised the same securities or property to which
      a
      holder of one share of the Common Stock was entitled upon and at the time of
      such merger or consolidation, and the Administrator shall take such steps in
      connection with such merger or consolidation as the Administrator shall deem
      necessary to assure that the provisions of Section 15 shall thereafter be
      applicable, as nearly as reasonably may be, in relation to the said securities
      or property as to which such holder of such Option might thereafter be entitled
      to receive thereunder.

     

    
      
        
        

      

      
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    In
      the
      event of a merger or consolidation of the Company with or into another
      corporation which does not involve Continuity of Control, or of a sale of all
      or
      substantially all of the assets of the Company while unexercised Options remain
      outstanding under the Plan, (i) subject to the provisions of clauses
      (ii) and (iii), after the effective date of such transaction, each holder
      of an outstanding Option shall be entitled, upon exercise of such Option, to
      receive in lieu of shares of Common Stock, shares of such stock or other
      securities as the holders of shares of Common Stock received pursuant to the
      terms of such transaction; or (ii) all outstanding Options may be cancelled
      by the Administrator as of a date prior to the effective date of any such
      transaction and all payroll deductions shall be paid out to the participants;
      or
      (iii) all outstanding Options may be cancelled by the Administrator as of
      the effective date of any such transaction, provided that notice of such
      cancellation shall be given to each holder of an Option, and each holder of
      an
      Option shall have the right to exercise such Option in full based on payroll
      deductions then credited to his or her account as of a date determined by the
      Board or a Committee, which date shall not be less than three (3) business
      days
      preceding the effective date of such transaction.

     

    17.  Amendment
      of the Plan.
      The
      Board may at any time, and from time to time, amend this Plan in any respect,
      except that (i) if the approval of any such amendment by the stockholders
      of the Company is required by Section 423 of the Code, such amendment shall
      not
      be effected without such approval, and (ii) in no event may any amendment
      be made which would cause the Plan to fail to comply with Section 423 of
      the Code.

     

    18.  Insufficient
      Shares.
      In the
      event that the total number of shares of Common Stock specified in elections
      to
      be purchased during any Offering Period plus the number of shares purchased
      during previous Offering Periods under this Plan exceeds the maximum number
      of
      shares issuable or available under this Plan, the Administrator will allot
      the
      shares then available on a pro rata basis. 

     

    19.  Termination
      of the Plan.
      This
      Plan may be terminated at any time by the Board. Upon termination of this Plan
      all amounts in the accounts of participants shall be promptly
      refunded.

     

    20.  Governmental
      Regulations.
      The
      Company shall have no obligation to sell and deliver shares of Common Stock
      under this Plan unless and until (i) it has taken all actions required to
      register the shares of Common Stock under the Securities Act of 1933; (ii)
      any
      applicable listing requirement of any stock exchange or the Nasdaq Global or
      Global Select Market (to the extent the Common Stock is then so listed or
      quoted) for the Common Stock is met; and (iii) all other applicable provisions
      of state and federal law have been satisfied.

     

    21.  Governing
      Law.
      The
      Plan shall be governed by Maryland law except to the extent that such law is
      preempted by federal law.

     

    22.  Available
      Shares.
      Shares
      may be issued upon exercise of an Option from authorized but unissued Common
      Stock, from shares held in the treasury of the Company, or from any other proper
      source. A maximum of 100,000 shares (subject to adjustment as set forth in
      Section 15) shall be available for issuance under the Plan.

     

    23.  Notification
      Upon Sale of Shares.
      Each
      participant agrees, by entering the Plan, to promptly give the Company notice
      of
      any disposition of shares purchased under the Plan where such disposition occurs
      within two years after the Exercise Date as of which such shares were purchased
      (the deemed date of grant pursuant to the Code). As a condition to the exercise
      of an Option, the Company may require the participant exercising such Option
      to
      represent and warrant at the time of any such exercise that the shares of Common
      Stock are being purchased only for investment and without any present intention
      to sell or distribute such shares of Common Stock if such a representation
      is
      required by applicable law. 

     

    
      
        
        

      

      
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    24.  Withholding.
      Each
      participant shall, no later than the date of the event creating the tax
      liability, make provision satisfactory to the Administrator for payment of
      any
      taxes required by law to be withheld in connection with any transaction related
      to Options granted to or shares acquired by such participant pursuant to the
      Plan. The Company may deduct, to the extent permitted by law, any such taxes
      from any payment of any kind otherwise due to a participant.

     

    25.  Effective
      Date and Approval of Shareholders.
      The
      Plan shall be effective July 1, 2006, subject, however, to approval of the
      Plan
      by the stockholders of the Company as required by Section 423 of the Code,
      which stockholder approval must occur within twelve months of the adoption
      of
      the Plan by the Board. No Option granted under this Plan may be exercised unless
      or until such stockholder approval has been obtained. 

     

    


     

    Adopted
      by the Board of Directors on

    April
      17,
      2006

     

    Approved
      by the stockholders on 

    June
      8,
      2006

     

    Amended
      by the Board of Directors 

    effective
      July 1, 2006

     

     

    
      
         

      

      
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