Document:

Exhibit 4.3

 

GRAMERCY CAPITAL CORP.

 

2008 EMPLOYEE STOCK PURCHASE PLAN

 

1.             Purpose.  The Company wishes to attract employees to
the Company and its Subsidiaries and to induce employees to remain with the
Company and its Subsidiaries, and to encourage them to increase their efforts
to make the Company’s business more successful, whether directly or through its
Subsidiaries.  In furtherance thereof,
the Plan is designed to provide equity-based incentives to the eligible
employees of the Company and its Subsidiaries. 
The Plan is intended to comply with the provisions of Section 423
of the Code and shall be administered, interpreted and construed accordingly.

 

2.             Definitions.  As used herein, the following definitions
shall apply:

 

(a)           “Applicable Laws” means the
legal requirements relating to the administration of employee stock purchase
plans, if any, under applicable provisions of federal securities laws, state
corporate and securities laws, the Code, the rules of any applicable stock
exchange or national market system, and the rules of any foreign
jurisdiction applicable to participation in the Plan by residents therein.

 

(b)           “Board” means the Board of
Directors of the Company.

 

(c)           “Change in Control” shall be
deemed to occur upon:

 

(1)           any “person,” including a “group” (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act,
together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2
under the Exchange Act) of such person, shall become the “beneficial owner” (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of either (A) the
combined voting power of the Company’s then outstanding securities having the
right to vote in an election of the Board (“Voting Securities”) or (B) the
then outstanding shares of all classes of stock of the Company (in either such
case other than as a result of the acquisition of securities directly from the
Company); or

 

(2)           the members of the Board at the
beginning of any consecutive 24-calendar-month period commencing on or after
the initial effective date of the Plan (the “Incumbent Directors”) cease for
any reason including without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority of
the Board; provided that any person becoming a director of the Company whose
election or nomination was approved by a vote of at least a majority of the
members of the Board then still in office who were members of the Board at the
beginning of such 24-calendar-month period, shall, for purposes hereof, be
considered an Incumbent Director; or

 

(d)           the shareholders of the Company shall
approve (A) any consolidation or merger of the Company or any subsidiary
where the shareholders of the Company, immediately prior to the consolidation
or merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, shares representing in the aggregate at least 50%
of the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any), (B) any
sale, lease, exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company or (C) any plan or proposal
for the liquidation or dissolution of the Company.

 

 

 

 

Notwithstanding the foregoing clause (i), an
event described in clause (i) shall not be a Change in Control if such
event occurs solely as the result of an acquisition of securities by the
Company which, by reducing the number of shares of stock or other Voting
Securities outstanding, increases (x) the proportionate number of shares
of stock of the Company beneficially owned by any “person” (as defined above)
to 25% or more of the shares of stock then outstanding or (y) the
proportionate voting power represented by the Voting Securities beneficially
owned by any “person” (as defined above) to 25% or more of the combined voting
power of all then outstanding Voting Securities; provided, however, that if any
“person” referred to in clause (x) or (y) of this sentence shall
thereafter become the beneficial owner of any additional stock of the Company
or other Voting Securities (other than pursuant to a share split, stock
dividend, or similar transaction), then a Change in Control shall be deemed to
have occurred for purposes of the foregoing clause (i).

 

(e)           “Code”
means the Internal Revenue Code of 1986, as amended.

 

(f)            “Committee” means either the
Board, a committee of the Board, or such executive officer appointed by the
Board, that is responsible for the administration of the Plan as is designated
from time to time by resolution of the Board.

 

(g)           “Common Stock” means the
shares of common stock of the Company as constituted on the effective date of
the Plan, and any other shares into which such common stock shall thereafter be
changed by reason of a recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like.

 

(h)           “Company” means Gramercy
Capital Corp., a Maryland corporation.

 

(i)            “Compensation” means an
Employee’s base salary from the Company or one or more Designated Subsidiaries,
including such amounts of base salary as are deferred by the Employee (i) under
a qualified cash or deferred arrangement described in Section 401(k) of
the Code, or (ii) to a plan qualified under Section 125 of the Code.  Compensation does not include overtime,
commissions, bonuses, reimbursements or other expense allowances, fringe
benefits (cash or noncash), moving expenses, deferred compensation,
contributions (other than contributions described in the first sentence) made
on the Employee’s behalf by the Company or one or more Subsidiaries under any
employee benefit or welfare plan now or hereafter established, and any other
payments not specifically referenced in the first sentence.

 

(j)            “Designated Subsidiary” means
a Subsidiary that has been designated by the Committee from time to time for
participation in this Plan.

 

(k)           “Effective Date” means the
date the Committee deems appropriate to commence the first Offer Period.  However, should any Designated Subsidiary become
a participating company in the Plan after such date, then such entity shall
designate a separate Effective Date with respect to its employee-participants.

 

(l)            “Employee” means any
individual, including an officer or director, who is an employee of the Company
or a Designated Subsidiary for purposes of Section 423 of the Code.

 

(m)          “Enrollment Date” means the
first day of each Offer Period.

 

(n)           “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

 

(o)           “Exercise Date” means the last
day of each Purchase Period.

 

 

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(p)           “Fair Market Value” per share
of Common Stock as of a particular date means (i) if such shares are then
listed on a national stock exchange, the closing sales price per share on the
exchange as quoted in the Wall Street Journal for the applicable date or, if
there are no sales on such date, for the last preceding date on which there was
a sale of Shares on such exchange, (ii) if such shares are not then listed
on a national stock exchange but are then traded on an over-the-counter market,
the average of the closing bid and asked prices for the shares in such
over-the-counter market for the last preceding date on which there was a sale
of such shares in such market, as determined by the Committee, or (iii) if
such shares are not then listed on a national stock exchange or traded on an
over-the-counter market, such value as the Committee in its discretion may in
good faith determine; provided that, where the shares are so listed or traded,
the Committee may make such discretionary determinations where the shares have
not been traded for 10 trading days.

 

(q)           “Offer Period” means an Offer
Period established pursuant to Section 4 hereof.

 

(r)            “Parent” means a “parent
corporation,” whether now or hereafter existing, as defined in Section 424(e) of
the Code.

 

(s)           “Participant” means an
Employee of the Company or Designated Subsidiary who is actively participating
in the Plan.

 

(t)            “Plan” means this Gramercy
Capital Corp. 2008 Employee Stock Purchase Plan, as amended from time to time.

 

(u)           “Purchase Period” means a
period specified as such pursuant to Section 4(b) hereof.

 

(v)           “Purchase Price” shall mean
the purchase price for a share of Common Stock for a Purchase Period, which shall
be determined by the Committee before the beginning of the Offer Period that
contains such Purchase Period to be either:

 

(i)            A
fixed percentage (to be determined in the Committee’s discretion before the
beginning of such Offer Period, but not to be less than 85%) of the Fair Market
Value of a share of Common Stock on the Exercise Date, or

 

(ii)           The
lesser of (A) a fixed percentage (to be determined in the Committee’s
discretion before the beginning of such Offer Period, but not to be less than
85%) of the Fair Market Value of a share of Common Stock on the Exercise Date,
and (B) a fixed percentage (to be determined in the Committee’s discretion
before the beginning of such Offer Period, but not to be less than 85%) of the
Fair Market Value of a share of Common Stock on the Enrollment Date.

 

(w)          “Reserves” means the sum of the
number of shares of Common Stock covered by each option under the Plan which
have not yet been exercised and the number of shares of Common Stock which have
been authorized for issuance under the Plan but not yet placed under option.

 

(x)            “Subsidiary” means, with
respect to the Company, a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code.

 

 

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3.             Eligibility.

 

(a)           General.  Any individual who is an Employee on a given
Enrollment Date shall be eligible to participate in the Plan for the Offer
Period commencing with such Enrollment Date.

 

(b)           Limitations on Grant and Accrual.  Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan if, (i) immediately
after the grant, such Employee (taking into account stock owned by any other
person whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own stock and/or hold outstanding options to purchase stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Subsidiary, or (ii) such
option permits the Employee’s rights to purchase stock under all employee stock
purchase plans of the Company and its Subsidiaries to accrue at a rate which
exceeds $25,000 worth of stock (determined at the Fair Market Value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time.  Any
amounts received from an Employee which cannot be used to purchase Common Stock
as a result of this limitation will be returned as soon as practical to the
Employee without interest.  The
determination of the accrual of the right to purchase stock shall be made in
accordance with Section 423(b)(8) of the Code and the regulations
there under.

 

(c)           Other Limits on Eligibility.  Notwithstanding sub-section (a), above,
the following Employees shall not be eligible to participate in the Plan for
any relevant Offer Period, unless otherwise determined by the Committee: (i) Employees
whose customary employment is 20 hours or less per week; (ii) Employees
whose customary employment is for not more than five months in any calendar
year; (iii) Employees who have  been
employed less than one year; and (iv) Employees who are subject to rules or
laws of a foreign jurisdiction that prohibit or make impractical the participation
of such Employees in the Plan. Notwithstanding the foregoing, the employment of
an Employee of a Subsidiary which ceases to be a Subsidiary shall,
automatically and without any further action, be deemed to have been terminated
(and such employee shall cease to be an Employee hereunder).  The Committee may establish special rules with
respect to (i) the administration of the rules contained in this
sub-section (c), and (ii) the eligibility of and the prior service credit
for employees of companies that become affiliated with the Company prior to the
Effective Date or during an Offer Period.

 

4.             Offer Periods.

 

(a)           The Plan shall be implemented through
overlapping or consecutive Offer Periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased, or (ii) the Plan shall have been sooner
terminated in accordance with Section 19 hereof.  The duration of each Offer Period shall be
set in advance by the Committee, and no Offer Period shall have a duration
greater than 27 months.

 

(b)           A Participant shall be granted a
separate option for each Offer Period in which he or she participates.  The option shall be granted on the Enrollment
Date and shall be automatically exercised on the last day of the Offer
Period.  However, with respect to any
Offer Period, the Committee may specify shorter Purchase Periods within an
Offer Period, such that the option granted on the Enrollment Date shall be
automatically exercised in successive installments on the last day of each
Purchase Period ending within the Offer Period.

 

(c)           Except as specifically provided
herein, the acquisition of Common Stock through participation in the Plan for
any Offer Period shall neither limit nor require the acquisition of Common
Stock by a Participant in any subsequent Offer Period.

 

 

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5.     Participation.

 

(a)           An eligible Employee may become a
Participant in the Plan by completing a subscription agreement authorizing
payroll deductions on such form the Committee designates for evidencing
elections to participate in this Plan and filing it in accordance with
procedures established by the Committee for such purpose at least
10 business days prior to the Enrollment Date for the Offer Period in
which such participation will commence, unless a later time for filing the
subscription agreement is set by the Committee for all eligible Employees with
respect to a given Offer Period or the Committee establishes another procedure
for an eligible Employee to become a Participant in the Plan.

 

(b)           Payroll deductions for a Participant
shall commence with the first scheduled payroll date commensurate with or
immediately following the Enrollment Date and shall end on the last scheduled
payroll date during the Offer Period, unless sooner terminated by the
Participant as provided in Section 10.

 

6.             Payroll Deductions.

 

(a)           At the time a Participant files a
subscription agreement, unless otherwise determined by the Committee, the
Participant shall elect to have payroll deductions made during the Offer Period
in a fixed whole percentage of his or her Compensation, in accordance with
uniform rules established by the Committee, but such payroll deductions
shall not exceed 15% of such Participant’s Compensation in effect on the
Enrollment Date.

 

(b)           All payroll deductions made for a
Participant shall be credited to the Participant’s account under the Plan.

 

(c)           A Participant may discontinue
participation in the Plan as provided in Section 10, during the Offer
Period by completing and filing with the Company a change of status notice on
the form established by the Committee for such purpose authorizing a suspension
of the Participant’s payroll deductions. 
Any such suspension shall be effective with the first scheduled payroll
date commencing 10 business days after the Company’s receipt of the change of
status notice unless the Company elects to process a given change in
participation more quickly.

 

(d)           Notwithstanding the foregoing, to the
extent necessary to comply with the limits set forth in Section 423(b)(8) of
the Code and Section 3(b) herein, a Participant’s payroll deductions
shall be decreased to zero dollars ($0). 
Payroll deductions shall recommence at the rate provided in such
Participant’s subscription agreement, as amended, at the time when permitted
under Section 423(b)(8) of the Code and Section 3(b) herein,
unless such participation is sooner terminated by the Participant as provided
in Section 10.

 

7.             Grant of Option.  On the Enrollment Date of each Offer Period,
each eligible Employee participating in such Offer Period shall be granted an
option to purchase on the Exercise Date of such Offer Period (at the applicable
Purchase Price) up to a number of shares of the Company’s Common Stock determined
by dividing such Employee’s payroll deductions accumulated prior to such
Exercise Date and retained in the Participant’s account as of the Exercise Date
by the applicable Purchase Price; provided that in no event shall an Employee
be permitted to purchase during each Offer Period more than the number of
shares of Common Stock determined by dividing $25,000 by the Fair Market Value
of one share of Common Stock on the first day of the Offer Period, such limit
to be adjusted ratably by the Committee for Offer Periods greater than or less
than 12 months (subject to any adjustment pursuant to Section 18), and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof. 
Exercise of the option shall occur as provided in Section 8 hereof,
unless the 

 

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Participant has withdrawn pursuant to Section 10 hereof.  The Committee may, for future Offer Periods,
increase or decrease, in its absolute discretion, the maximum number of shares
of the Company’s Common Stock an employee may purchase during an Offer
Period.  Exercise of the option shall
occur as provided in Section 8 hereof, unless the Participant has
withdrawn pursuant to Section 10 hereof.  The option shall expire on the last day of
the Offer Period.

 

8.             Exercise of Option.  Unless a Participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase
of shares shall be exercised automatically on the Exercise Date, and the
maximum number of full, and to the extent permitted by the Committee,
fractional, shares subject to option shall be purchased for such Participant at
the applicable Purchase Price with the accumulated payroll deductions in his or
her account.  Any other monies left over
in a Participant’s account after the Exercise Date shall be retained in the
Participant’s account for the subsequent Offer Period, subject to earlier
withdrawal by the Participant as provided in Section 10 hereof.  A Participant’s option to purchase shares
hereunder is exercisable only by him or her.

 

9.             Delivery.

 

(a)           Prior
to the beginning of any Offer Period, the Committee may require that
Participants not be permitted to voluntarily or involuntarily sell or transfer
any shares acquired during such Offer Period, and any subsequent Offer Period,
for such period of time as shall be determined by the Committee and
communicated to Participants prior to beginning of such initial Offer Period.

 

(b)           Following
the purchase of shares after the exercise of a Participant’s option, a “book entry” (by
computerized or manual entry) shall be made in the records of the Company to
evidence such acquisition of shares under the Plan.  After the expiration of any required holding
period during which shares may not be transferred, upon receipt of a
request from a Participant, the Company shall arrange the delivery to such
Participant, as promptly as practicable, of a certificate representing the
shares purchased upon exercise of the Participant’s option.  Notwithstanding the foregoing, upon such a
request from a Participant, the Company may permit the electronic transfer of
the shares acquired upon exercise of the Participant’s option.

 

10.           Withdrawal;
Termination of Employment.

 

(a)           A
Participant may terminate participation during any Offer Period by electing to
withdraw all but not less than all the payroll deductions credited to the
Participant’s account and not yet used to exercise the Participant’s option
under the Plan.  Upon such election, all
of the Participant’s payroll deductions credited to the Participant’s account
will be paid to such Participant as promptly as practicable after receipt of
notice of withdrawal, and the Participant’s option for the Offer Period will be
automatically terminated, and no further payroll deductions for the purchase of
shares will be made during the Offer Period. 
If a Participant withdraws from an Offer Period, payroll deductions will
not resume at the beginning of the succeeding Offer Period unless the
Participant timely delivers to the Company a new subscription agreement.  The election described above will be
effective only upon a Participant giving written notice to the Company, at such
time as may be required by the Committee, on the form established by the
Committee for such purpose.

 

(b)           Upon termination of a Participant’s
employment relationship for any reason whatsoever, including with or without
cause, at a time more than three (3) months from the next scheduled
Exercise Date, the payroll deductions credited to such Participant’s account
during the Offer Period but not yet used to exercise the option will be
returned to such Participant or, in the case of his/her death, to the person or
persons entitled thereto under Section 14, and such Participant’s option
will be automatically terminated.  Upon
termination of a Participant’s employment relationship for any reason 

 

6

 

 

whatsoever, including with or without cause
within three (3) months of the next scheduled Exercise Date, the payroll
deductions credited to such Participant’s account during the Offer Period but
not yet used to exercise the option will be applied to the purchase of Common
Stock on the next Exercise Date, unless the Participant (or in the case of the
Participant’s death, the person or persons entitled to the Participant’s
account balance under Section 14) withdraws from the Plan by submitting a
change of status notice in accordance with sub-section (a) of this Section 10.  In such a case, no further payroll deductions
will be credited to the Participant’s account following the Participant’s
termination of employment and the Participant’s option under the Plan will be
automatically terminated after the purchase of Common Stock on the next
scheduled Exercise Date.

 

(c)           The Committee may, in its sole
discretion, require that any shares credited to a Participant’s account be
delivered to the Participant in the form of a physical certificate, or
otherwise transferred to an outside account maintained by the Participant,
following the termination of the Participant’s employment with the
Company.  A Participant shall execute any
documents required by the Company to effectuate the foregoing.

 

11.           Interest.  Unless otherwise determined by the Committee,
no interest shall accrue on the payroll deductions credited to a Participant’s
account under the Plan.

 

12.           Stock; Maximum Purchasable.

 

(a)           The maximum number of shares of
Common Stock which shall be made available for sale under the Plan shall be
250,000 shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 18. 
In addition, the Committee may, in its discretion, impose a maximum
limit on the number of shares of Common Stock available for sale during any
Offer Period or Purchase Period.  If the
Committee determines that on a given Exercise Date the number of shares with
respect to which options are to be exercised may exceed (x) the number of
shares then available for sale under the Plan or (y) the number of shares
available for sale under the Plan on the Enrollment Date of the Offer Period,
or on the first day of a Purchase Period, in which such Exercise Date is to
occur, the Committee may make a pro rata allocation of the shares remaining
available for purchase on such Enrollment Dates or Exercise Date, as
applicable, in as uniform a manner as shall be practicable and as it shall
determine to be equitable, and shall either continue all Offer Periods then in
effect or terminate any one or more Offer Periods then in effect pursuant to Section 19,
below.   If and to the extent that any right to
purchase reserved shares of Common Stock shall not be exercised by any Employee
for any reason or if such right to purchase shall terminate as provided herein,
such shares that have not been so purchased hereunder shall again become
available for the purposes of the Plan unless the Plan shall have been
terminated, but such unpurchased shares shall not be deemed to increase the
aggregate number of shares specified above to be reserved for purposes of the
Plan (subject to adjustment as provided in Section 18).

 

(b)           A Participant will have no interest
or voting right in shares covered by the Participant’s option until such shares
are actually purchased on the Participant’s behalf in accordance with the
applicable provisions of the Plan.

 

(c)           No adjustment shall be made with
respect to any shares subject to an option for dividends, distributions or
other rights for which the record date is prior to the actual date of purchase
of such shares.

 

(d)           Unless otherwise determined by the
Committee, shares to be delivered to Participants under the Plan will be
registered in the name of the Participant.

 

 

7

 

 

13.           Administration.

 

(a)           In General.  The Plan shall be administered by the
Committee which shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan.  Every finding, decision and determination
made by the Committee shall, to the full extent permitted by Applicable Law, be
final and binding upon all persons. 
Except as set forth in Section 13(b), the Committee may delegate
its duties to one or more officers of the Company or other persons.

 

(b)           Rule 16b-3 Limitations.  Notwithstanding the provisions of Section 13(a),
in the event that the Company shall at any time be subject to Section 16
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Rule 16b-3 promulgated there under or any successor provision (“Rule 16b-3”)
provides specific requirements for the administrators of plans of this type,
then at such time the Plan shall be administered with respect to Participants
who are “officers” within the meaning of Rule 16a-1(f) only by such a
body and in such a manner as shall comply with the applicable requirements of Rule 16b-3;
provided, however, that no failure of the Committee to meet such applicable
requirements of Rule 16b-3 shall render ineffective or void any option
granted under this Plan.

 

14.           Designation of Beneficiary.

 

(a)           Each Participant will file a written
designation of a beneficiary who is to receive any shares and cash, if any,
from the Participant’s account under the Plan in the event of such Participant’s
death.  If a Participant is married and
the designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.

 

(b)           Such designation of beneficiary may
be changed by the Participant (and the Participant’s spouse, if any) at any
time by written notice.  In the event of
the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living (or in existence) at the time of such Participant’s
death, the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the Participant.

 

15.           Transferability.  Neither payroll deductions credited to a
Participant’s account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14 hereof) by the
Participant.  Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Committee may treat such act as an election to withdraw funds from an Offer
Period in accordance with Section 10.

 

16.           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.

 

17.           Reports.  Individual accounts will be maintained for
each Participant in the Plan.  Statements
of account will be made available to Participants electronically, or in
hardcopy if requested, at least annually, which statements will set forth the
amounts of payroll deductions, the Purchase Price, the number of shares
purchased and the remaining cash balance, if any.

 

18.           Adjustments Upon Changes in
Capitalization; Changes in Control.

 

(a)           Adjustments Upon Changes in
Capitalization.  Subject to any
required action by the shareholders of the Company, the Reserves, the Purchase
Price, the maximum number of shares that 

 

 

8

 

 

may be
purchased in any Offer Period or Purchase Period, as well as any other terms
that the Committee determines require adjustment shall be proportionately
adjusted for any (i) merger,
consolidation, dissolution, liquidation, reorganization, exchange of shares,
sale of all or substantially all of the assets or stock of the Company or its
Subsidiaries or a transaction similar thereto, (ii) any stock dividend,
extraordinary cash dividends, stock split, reverse stock split, stock
combination, reclassification, recapitalization or other similar change in the
capital structure of the Company or its Subsidiaries, or any distribution to
holders of Common Stock other than ordinary course cash dividends, shall occur
or (iii) any other event shall occur which in the judgment of the
Committee necessitates action by way of adjusting the terms of the outstanding
Awards.  Such adjustment shall be made by
the Committee and its determination shall be final, binding and
conclusive.  Except as the Committee
determines, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason hereof shall be made with respect to, the Reserves and the
Purchase Price.

 

(b)           Changes in Control.  In the event of a proposed Change in Control,
each option under the Plan shall be assumed by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Committee
determines, in the exercise of its sole discretion and in lieu of such
assumption, to shorten the Offer Period then in progress by setting a new
Exercise Date (the “New Exercise Date”). 
If the Committee shortens the Offer Period then in progress in lieu of
assumption in the event of a Change in Control, the Committee shall notify each
Participant in writing, at least ten (10) days prior to the New Exercise
Date, that the Exercise Date for the Participant’s option has been changed to
the New Exercise Date and that the Participant’s option will be exercised
automatically on the New Exercise Date, unless prior to such date the
Participant has withdrawn from the Offer Period as provided in Section 10.  For purposes of this Subsection, an option
granted under the Plan shall be deemed to be assumed if, in connection with the
Change in Control, the option is replaced with a comparable option with respect
to shares of capital stock of the successor corporation or Parent thereof.  The determination of option comparability
shall be made by the Committee prior to the Change in Control and its
determination shall be final, binding and conclusive on all persons.

 

(c)           Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Offer Period shall terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board.

 

19.           Amendment or
Termination.

 

(a)           The
Committee may at any time and for any reason terminate or amend the Plan.  Except as provided in Section 18, no
such termination can affect options previously granted, provided that the Plan
or any one or more Offer Periods may be terminated by the Committee on any
Exercise Date or by the Committee establishing a new Exercise Date with respect
to any Offer Period and/or any Purchase Period then in progress if the
Committee determines that the termination of the Plan or such one or more Offer
Periods is in the best interests of the Company and its shareholders.  Except as provided in Section 18 and
this Section 19, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any Participant
without the consent of affected Participants. 
To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other Applicable Law), the Company
shall obtain shareholder approval in such a manner and to such a degree as
required.

 

(b)           Without shareholder
consent and without regard to whether any Participant rights may be considered
to have been “adversely affected,” the Committee shall be entitled to limit the
frequency and/or number of changes in the amount withheld during Offer Periods,
change the amount of shares of Common Stock available for purchase during an
Offer Period or a Purchase Period, change the 

 

9

 

 

length of
Purchase Periods within any Offer Period, determine the length of any future
Offer Period, determine whether future Offer Periods shall be consecutive or
overlapping, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions,
permit payroll withholding in excess of the amount designated by a Participant
in order to adjust for delays or mistakes in the Company’s processing of
properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Common Stock for each Participant
properly correspond with amounts withheld from the Participant’s Compensation,
and establish such other limitations or procedures as the Committee determines
in its sole discretion advisable and which are consistent with the Plan.

 

(c)           In the event the
Board determines that the ongoing operation of the Plan may result in
unfavorable financial accounting consequences, the Board may, in its discretion
and, to the extent necessary or desirable, modify or amend the Plan to reduce
or eliminate such accounting consequence including, but not limited to:

 

(1)           altering the Purchase Price for any
Offer Period including an Offer Period underway at the time of the change in
Purchase Price;

 

(2)           shortening any Offer Period so that
Offer Period ends on a new Exercise Date, including an Offer Period underway at
the time of the Board action; and

 

(3)           allocating shares.

 

Such modifications or amendments shall not
require shareholder approval or the consent of any Participants.

 

20.           Notices.  All notices or other communications by a
Participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Committee at
the location, or by the person, designated by the Committee for the receipt
thereof.

 

21.           Conditions Upon Issuance of Shares.

 

(a)           The Plan, and the grant and exercise
of the rights to purchase shares of Common Stock hereunder, and the Company’s
obligation to sell and deliver shares upon the exercise of rights to purchase
such shares, shall be subject to all applicable federal, state and foreign
laws, rules and regulations, and to such approvals by any regulatory or
governmental agency as may be required. 
The Company shall not be required to issue or deliver any certificates
for such shares prior to the completion of any registration or qualification of
such shares under, and the obtaining of any approval under or compliance with,
any state or federal law, or any ruling or regulation of any government body
which the Company shall, in its sole discretion, determine to be necessary or
advisable.  Certificates for shares issued
hereunder may be legended as the Committee may deem appropriate.

 

(b)           The Participant shall take whatever
additional actions and execute whatever additional documents the Committee may
in its reasonable judgment deem necessary or advisable in order to carry out or
effect one or more of the obligations or restrictions imposed on the
Participant pursuant to the Plan.

 

22.           Term of Plan.  The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company.  It shall
continue in effect until all 

 

10

 

 

shares of
Common Stock authorized for sale under Section 12(a) have been sold,
unless earlier terminated by the Committee under Section 19.

 

23.           Plan Approval.  The effective date of the Plan is January 1,
2008, provided that the Plan is approved by the requisite percentage of the
holders of the Common Stock of the Company.

 

24.           Disqualifying Dispositions.  If shares of Common Stock acquired under the
Plan are disposed of in a disposition that does not satisfy the holding period
requirements of Section 423(a) of the Code, such Participant shall
notify the Company in writing as soon as practicable thereafter of the date and
terms of such disposition and, if the Company (or any affiliate thereof)
thereupon has a tax-withholding obligation, shall pay to the Company (or such
affiliate) an amount equal to any withholding tax the Company (or affiliate) is
required to pay as a result of the disqualifying disposition (or satisfy such
other arrangements as may be permitted by the Committee.)

 

25.           No Employment Rights.  The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company
or a Subsidiary, and it shall not be deemed to interfere in any way with such
employer’s right to terminate, or otherwise modify, an employee’s employment at
any time for any reason, including with or without cause.

 

26.           No Effect on Retirement and Other
Benefit Plans.  Except as
specifically provided in a retirement or other benefit plan of the Company or a
Subsidiary, participation in the Plan shall not be deemed compensation for
purposes of computing benefits or contributions under any retirement plan of
the Company or a Subsidiary, and shall not affect any benefits under any other
benefit plan of any kind or any benefit plan subsequently instituted under
which the availability or amount of benefits is related to level of
compensation.  The Plan is not a “Retirement
Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of
1974, as amended.

 

27.           Effect of Plan.  The provisions of the Plan shall, in accordance
with its terms, be binding upon, and inure to the benefit of, all successors of
each Participant, including, without limitation, such Participant’s estate and
the executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.

 

28.           Governing Law.  The Plan is to be construed in accordance
with and governed by the internal laws of the State of Maryland (a) without
giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State of
Maryland to the rights and duties of the parties, except to the extent the
internal laws of the State of Maryland are superseded by the laws of the United
States, and (b) regardless of any provision in an employment agreement
that designates the applicable law for purposes of such employment agreement to
be other than the laws of the State of Maryland.  Should any provision of the Plan be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.

 

29.           Dispute Resolution.  Any controversy or claim arising out of or
relating to this Plan that is not resolved by the Company and a Participant
shall be submitted to arbitration in New York, New York in accordance with New
York law and the procedures of the American Arbitration Association.  The determination of the arbitrator(s) shall
be conclusive and binding on the Company and the Participant and judgment may
be entered on the arbitrator(s)’ award in any court having jurisdiction.

 

11Exhibit 10.1

 

CEO
Bonus Plan

 

Bonus Calculation

 

The
Chief Executive Officer (“CEO”) of Websense, Inc. (the “Company”) will be
eligible for a target bonus of 100% of his annual salary.  This bonus is
based upon the Company meeting its Billings and/or Operating Income objectives
determined by the Company’s Board of Directors or its Compensation Committee
near the beginning of each fiscal year.

 

Subject
to discretionary adjustment, one-half of the bonus (50%) is earned if the
Company meets its annual Billings objective and one-half is earned if the
Company achieves its annual Operating Income objective.  Achievement of at
least 90% of a goal is required for any payment of the portion of the CEO’s
bonus that is based on achievement by the Company of that goal.  Should
the Company achieve 90% of its Billings or Operating Income goals, bonuses for
that plan goal will be paid at half of the target payment for that goal. 
Should the Company achieve 110% of its Billings or Operating Income goals,
bonuses for that plan goal shall be paid at 1.5 times what the CEO would have
been paid on target for that goal.  Bonuses are prorated for goal
achievement between 90% - 110%.

 

The
Compensation Committee or Board of Directors has the discretion to adjust the
bonus based upon whether the CEO meets individual objectives set for him by the
Board of Directors. The bonus may be adjusted to be a percentage of the bonus,
ranging from 0% - 130% based upon achievement of such performance objectives.

 

Eligibility

 

The
CEO must be a current employee on the last day of the fiscal year to be
eligible to receive a bonus.  Bonus amounts are based upon actual base
salary paid during the period, exclusive of other payments or bonuses.

 

The
Company reserves the right to change these terms from time to time as it feels
necessary to accomplish its goals, including as a result of market conditions,
personnel, new or different product offerings and/or corporate restructuring.

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