Document:

exv10w6

 

EXHIBIT 10.6

EMPLOYMENT AGREEMENT

          This AGREEMENT (the “Agreement”) dated as of the 29th day of November 2004 is executed by and
between CoStar Realty Information, Inc, a Delaware corporation (for purposes of this Agreement
other than Section 9 hereof, the “Company”), and Christopher Tully (the “Employee”). The effective
date of Employee’s employment with the Company shall be December 1, 2004 or such other date as
mutually agreed to by the Company and the Employee (the “Effective Date”).

     The Company desires to employ the Employee to devote his full time and best efforts to the
business of the Company, and the Employee desires to be so employed on the terms and conditions
outlined below.

     The parties agree as follows:

     1. Employment. The Company agrees to employ Employee at the Company’s offices in the
Greater Washington, D.C. metropolitan area and Employee agrees to be so employed, in the capacity
of Senior Vice President of Sales and Customer Service. Employee shall perform such functions and
undertake such responsibilities as are assigned from time to time by the Chief Executive Officer of
the Company or his delegate (the “Supervisor”).

     2. Term. The term of Employee’s employment under this Agreement shall commence on
the Effective Date and shall continue for the initial term of one (1) year (the “Initial Term”),
and for automatic and successive renewal terms of one (1) year each (each, a “Renewal Term” and
collectively, the “Renewal Terms”), unless either the Company or Employee elects not to extend the
term beyond the Initial Term or any Renewal Term (herein, the Initial Term or a Renewal Term is
sometimes referred to as the “Current Term”) and gives to the other party hereto written notice of
termination at least three (3) months prior to the end of the Initial Term or the Renewal Term.

     3. Full time and efforts. Employee shall diligently and conscientiously devote
substantially his full time and exclusive attention and best efforts to the Company and his duties
under this Agreement.

     4. Compensation.

          (a) Commencing as of the Effective Date of this Agreement, the Company shall pay Employee base
compensation for his services in the amount of $225,000 per year (the “Base Compensation”). Base
Compensation shall be payable in biweekly or such other installments as shall be consistent with
the Company’s payroll procedures for its employees.

          (b) In addition, Employee shall be eligible to earn an annual bonus (the “Annual Bonus”) of up
to 35% of Base Compensation for such year as determined by the Supervisor and the Compensation
Committee of the Board of Directors based on the accomplishment of the Employee’s goals as
determined by the Supervisor. The Annual Bonus will be based on Base Compensation during each
calendar year. With respect to the calendar year ending December 31, 2004, Employee’s bonus
potential shall be calculated pro rata for the period from the Effective Date through December

 

 

31, 2004. Employee must be employed on the last day of the calendar year in which the Annual
Bonus is earned in order to receive any of the Annual Bonus.

          (c) In addition, Employee and the Company agree that Employee shall be entitled to receive
monthly sales commissions from the Company as more fully described on Exhibit A attached
hereto.

          (d) In addition, on the Effective Date, Employee will be awarded 65,000 stock options (the
“Options”) in CoStar Group, Inc. (“CoStar”), the Company’s parent, vesting one fifth on the
Effective Date, one fifth on the six month anniversary of the Effective Date, one fifth on the
second anniversary of the Effective Date, one fifth on the third anniversary of the Effective Date,
and one fifth on the fourth anniversary of the Effective Date. The Options shall vest immediately
in the event of a Change of Control of the Company. All determinations regarding the Options shall
be made in accordance with the terms of CoStar’s 1998 Stock Incentive Plan. The exercise price for
the Options shall be the Fair Market Value (as defined in CoStar’s 1998 Stock Incentive Plan) of
the CoStar common stock on the Effective Date. In addition, the Supervisor shall recommend to the
Board of Directors that Employee receive a pro rata option grant (or equivalent award of restricted
stock) in 2005 based on Employee’s service to the Company in 2004. It is expected that such
options (or restricted stock) would be granted in early 2005, at the time that the Board of
Directors approves options (or restricted stock) for other officers of the Company.

     5. Benefits. Employee shall be entitled to accrue four (4) weeks of paid vacation
time per year under the Company’s standard vacation policy. Employee shall be entitled to
participate in, and receive benefits from any insurance, medical, disability, or pension plan of
the Company for which Employee satisfies the criteria for eligibility, and to other perquisites
which may be in effect at any time during the term hereof that are generally available to officers
of the Company. In the determination of eligibility of benefits, the terms of the actual plan
documents shall control.

     6. Expense reimbursement. The Company shall reimburse Employee for all categories of
expenses incurred in carrying out his duties under this Agreement that are reasonable and necessary
under the Company’s policies. Employee shall present to the Company from time to time an itemized
account of expenses to be reimbursed pursuant to this Section 6 in any form generally required by
the Company.

     7. Termination without cause.

          (a) By the Company. The Company may terminate this Agreement without cause (and
regardless of the time periods and provisions in Section 2 hereof) upon thirty (30) days written
notice prior to such termination. In such an event (other than a termination as provided for in
Section 2), Employee shall, as severance and liquidated damages and in consideration of his
execution of a complete and absolute release of the Company, its parent and its subsidiaries and
their respective officers, affiliates, employees and directors from any and all claims, receive on
a monthly basis, as if he had not been terminated, his Base Compensation for the greater of (x) the
term remaining under this Agreement had he not been terminated or (y) nine months (for the
avoidance of doubt, such nine month period shall commence upon the date of the notice set forth in
the first sentence of this subsection 7(a)).

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          (b) Termination after merger or acquisition. In the event of the merger of the
Company or CoStar, or the acquisition, directly or indirectly, of all or substantially all of the
Company’s or CoStar’s assets or a controlling interest in the voting shares of the Company or
CoStar by an unaffiliated party (a “Change of Control”), Employee may elect to treat that event as
a termination by the Company without cause unless the new party: (i) extends to him a reasonable
offer to (A) be retained by the Company in a position of responsibility, authority and compensation
comparable in material respects (including location) to the position of Employee immediately prior
to the Change of Control, and (B) retain all rights accorded under this Agreement; and (ii) in fact
retains Employee in such capacity for at least six (6) months after the Change of Control.

          (c) By Employee. Employee may without cause terminate this Agreement by giving ninety
(90) days written notice during the Initial Term or any Renewal Term to the Company. In such event,
at the sole discretion of the Company, Employee shall continue to render all services through the
date of termination. Employee shall be paid the Base Compensation and earned commissions up to the
date of termination, but shall not receive any salary, commissions or bonus payment thereafter.

     8. Termination for cause. The Company may terminate this Agreement (a) for cause at
any time by notifying Employee in writing of such termination and the cause thereof or (b) in the
event of Employee’s death or prolonged disability; provided, however, that the only
grounds constituting “cause” shall be: (i) Employee’s gross negligence in the performance of his
duties hereunder, nonperformance, poor performance or mis-performance of such duties, or refusal to
abide by or comply with the directives of the Board of Directors of the Company, his superior
officers, or the Company’s policies and procedures (including the provisions of Section 9) hereof
which actions continue uncured for a period of at least five (5) days after receipt by Employee of
written notice of the need to cure or cease or which recur thereafter; (ii) Employee’s dishonesty,
fraud, or misconduct with respect to the business or affairs of the Company; (iii) Employee’s
violation of any covenant in this Agreement; (iv) Employee’s material violation of the Company’s
Code of Conduct; (v) Employee’s indictment for, conviction of, or guilty or nolo contendere plea
to, a felony; and (vi) Employee’s abuse of alcohol or drugs (legal or illegal), other than legal
drugs taken under the directions of a physician, that, in the Company’s reasonable judgment,
materially impairs Employee’s ability to perform his duties hereunder. In any such event, Employee
will forfeit all unvested options and all claims to bonuses not yet awarded and paid, and will be
paid salary and commission, excluding bonus, through the date of the termination.

     9. Confidentiality, Non-Compete and Non-Solicitation Agreement.

          (a) Confidential Information. Employee agrees that during the course of employment
with the Company, Employee will learn, come into contact with and have access to various trade
secrets and other confidential information (collectively, “Confidential Information”), which are
the property of the Company. This Confidential Information relates both to the Company, its
customers and its employees. Such Confidential Information includes, but is not limited to: (i)
financial and business information, such as information with respect to costs, commissions, fees,
profits, sales, markets, mailing lists, strategies and plans for future business, new business,
product or other development, potential acquisitions or divestitures, and new marketing ideas; (ii)
product and technical information, such as product formulations, new and innovative product ideas,
methods,

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procedures, devices, machines, equipment, data processing programs, software, software codes,
computer models, and research and development projects; (iii) marketing information, such as the
identity of the Company’s customers, distributors and suppliers and their names and addresses, the
names of representatives of the Company’s customers, distributors or suppliers responsible for
entering into contracts with the Company, the amounts paid by such customers to the Company,
specific customer needs and requirements, and leads and referrals to prospective customers; (iv)
personnel information, such as the identity and number of the Company’s employees, their salaries,
bonuses, benefits, skills, qualifications, and abilities; and (v) research methods, methods of
compiling real estate information, methods of creating the Company’s database, procedures, devices,
machines, equipment, data processing programs, software, computer models, research projects, and
other means used by the Company in the conduct of its business. Employee acknowledges and agrees
that the Confidential Information is not generally known or available to the general public, but
has been developed, compiled or acquired by the Company at its great effort and expense.
Confidential Information and Trade Secrets can be in any form: oral, written or machine readable,
including electronic files.

          (b) Non-Disclosure of Confidential Information. Employee acknowledges and agrees that
the Company is engaged in a highly competitive business and that its competitive position depends
upon its ability to maintain the confidentiality of the Confidential Information. Employee agrees
to treat all Confidential Information in a secret and confidential manner and agrees he will not,
while employed by the Company and for so long thereafter that the pertinent information remains
confidential, directly or indirectly, without the prior written consent of the Chief Executive
Officer of the Company: (i) disclose or divulge any Confidential Information to any person, entity,
firm, or company, unless compelled by a valid subpoena; or (ii) reproduce, copy or use any
Confidential Information in any manner other than to perform his or her employment for the Company.
Employee agrees that, given the nature of the Company’s business and business plans there will
never come a time when disclosure of the Confidential Information would not be seriously injurious
to the Company.

          (c) Return of Material. Employee agrees to deliver to the Company, immediately upon
termination from employment or at any time the Company so requests: (i) any and all documents,
files, notes, memoranda, databases, computer files and/or other computer programs reflecting any
Confidential Information whatsoever or otherwise relating to the Company’s business; (ii) lists of
the Company’s customers or leads or referrals to prospective customers; and (iii) any computer
equipment, home office equipment, automobile or other business equipment belonging to the Company
which Employee may then possess or have under his control.

          (d) Non-Competition. Employee acknowledges and agrees that the Company is engaged in
a highly competitive business and, by virtue of Employee’s position and responsibilities with the
Company and Employee’s access to the Confidential Information, engaging in any business which is
directly competitive with the business of the Company will cause it great and irreparable harm.
Accordingly, Employee covenants and agrees that so long as Employee is employed by the Company and
for a period of two (2) years after such employment is terminated, whether voluntarily or
involuntarily, Employee will not, without the express written consent of the Chief Executive
Officer of the Company, directly or indirectly, own, manage, operate or control, or be employed in
an executive, management, sales, research, marketing, or customer service capacity (all areas for
which

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Employee had responsibility and/or involvement while employed by the Company), by any company
or other business engaged in the provision of commercial real estate information or software or
such other related business as the Company may become engaged during Employee’s employment by the
Company. Consistent with the broad responsibilities of Employee on behalf of the Company and the
geographic territory serviced by the Company, this restriction shall apply in the United States,
the United Kingdom and any other country where the Company is operating at the time Employee leaves
employment with the Company. Employee and the Company specifically agree that the companies
restricted by this Agreement include but are not limited to: LoopNet, Inc.; Xceligent; Black’s
Guide; Dorey Publishing; Commercial Search, Cityfeet, Octane Ventures, Officespace.com, Marshall &
Swift, Yale Robbins, Estates Gazette and REIS; provided, however, that the foregoing covenant shall
not be deemed to prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business whose stock is traded on a national securities
exchange or over-the-counter.

          (e) Non-Solicitation Of Customers. Employee acknowledges and agrees that solely by
reason of employment by the Company, Employee will come into contact with some, most or all of the
Company’s customers and prospective customers and will have access to Confidential Information
regarding the Company’s customers as set forth above. Consequently, Employee covenants and agrees
that in the event of separation from employment with the Company, whether such termination is
voluntary or involuntary, Employee will not, for a period of two (2) years following such
termination, directly or indirectly, solicit or initiate contact with any customer or prospective
customer of the Company for the purpose of providing, selling or soliciting to sell products and
services of the type offered by the Company for which Employee had responsibility or with respect
to which Employee obtained Confidential Information. This restriction shall apply to any customer,
former customer or prospective customer of the Company with whom Employee had contact or about whom
Employee obtained confidential information or trade secrets during the last two (2) years of his
employment with the Company. For the purposes of this Section 9, “contact” means interaction
between Employee and the customer or prospective customer which takes place to further the business
relationship, or making sales to or performing services for the customer or prospective customer on
behalf of the Company. A “prospective customer” shall mean a person that the Company or its
employees has contacted regarding selling or licensing its services or products.

          (f) Non-Solicitation Of Employees. Employee acknowledges and agrees that solely as a
result of employment with the Company, Employee will come into contact with and acquire
Confidential Information regarding some, most or all of the Company’s employees. Accordingly, both
during employment with the Company and for a period of two (2) years thereafter, Employee shall
not, either on Employee’s own account or on behalf of any person, company, corporation, or other
entity, solicit for employment any employee of the Company with whom Employee came into contact or
about whom Employee obtained confidential information, or cause or endeavor to cause any such
employee of the Company to leave employment with the Company.

          (g) Non-Solicitation of Potential Acquisition Candidates. Employee acknowledges and
agrees that solely by reason of employment by the Company, Employee will learn, come into contact
with and have access to Confidential Information regarding the Company’s plans for future business,
including potential acquisitions or expansion. Consequently, Employee covenants and agrees that in
the event of separation from employment with the Company, whether

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such termination
is voluntary or involuntary, Employee will not, for a period of two (2) years following such
termination, directly or indirectly and whether for himself or any person, business or entity other
than the Company or its affiliates, solicit or initiate contact with any person, company or
business who was known to Employee to be a prospective acquisition candidate or the subject of an
acquisition analysis conducted by the Company, for the purpose of establishing any business
combination with such potential acquisition candidate. Employee, to the extent lacking the
knowledge described in the preceding sentence, shall immediately cease all contact with any such
prospective acquisition candidate upon being informed that the Company had called upon such
candidate or made an acquisition analysis thereof.

          (h) Equitable Relief. Employee acknowledges and agrees that compliance with the
covenants set forth in this Agreement is necessary to protect the business and goodwill of the
Company and that any breach of Section 9 of this Agreement or any subparagraph hereof will result
in irreparable and continuing harm to the Company, for which money damages may not provide adequate
relief. Accordingly, in the event of any breach or anticipatory breach of any portion of this
Section 9 by Employee, the Company and Employee agree that the Company shall be entitled to the
following particular forms of relief as a result of such breach, in addition to any remedies
otherwise available to it at law or equity: (a) injunctions, both preliminary and permanent,
enjoining or restraining such breach or anticipatory breach, and Employee hereby consents to the
issuance thereof forthwith and without bond by any court of competent jurisdiction; and (b)
recovery of all reasonable sums and costs, including attorneys’ fees, incurred by the Company to
enforce the provisions of this Section 9.

          (i) Reasonableness of Covenants. Employee acknowledges and agrees that his training,
experience and technical skills are of such breadth that they can be employed to Employee’s
advantage in other areas which are not in direct competition with the business of the Company on
the date of termination of Employee’s employment and consequently the foregoing obligations will
not unreasonably impair Employee’s ability to engage in business activity after the termination of
Employee’s employment. Employee further agrees that the covenants contained in this Section 9 are
reasonable in scope, do not constitute a restraint of trade and are necessary for the protection of
the Confidential and Information.

          (j) Independent Agreement; Definition of “Company”. All of the covenants in this
Section 9 shall be construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of Employee against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of such covenants. Upon termination of this Agreement for any reason, the covenants
specified in this Section 9 shall survive for the term specified herein. For purposes of this
Section 9, the term “Company” shall mean CoStar Realty Information, Inc., its parent, and each of
its parent’s direct and indirect subsidiaries, and each of these entities’ predecessors in interest
and successors.

   10. Disclosure of Work Product.

          (a) Employee shall fully disclose to his Supervisor any idea, invention, discovery,
development, design, technique, improvement, plan, work of authorship, computer

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software, data
information, enhancement, or other work product, whether tangible or intangible, developed by

 Employee, solely or jointly with others, during Employee’s employment with the Company (1)
made with the Company’s equipment, supplies, facilities, trade secrets, or time; (2) that relate,
at the time of conception or reduction to practice to the Company’s business, or the Company’s
actual or demonstrably anticipated research; or (3) result from any work performed by Employee for
the Company (collectively the “Work Product”).

          (b) All Work Product shall be conclusively deemed to be conceived, made, developed, reduced to
practice, prepared, or otherwise created within the scope of Employee’s employment and shall be the
sole property of the Company. Employee hereby irrevocably assigns to the Company all right, title,
and interest of whatever nature that Employee may have in the Work Product.

          (c) Employee shall, at the expense and on behalf of Employer, do all acts and things requested
by Employer for Employer to obtain, establish, preserve, and protect Employer’s rights and
interests in the Work Product, including, but not limited to, preparing and signing such
applications, papers, instruments, and other documents as the Company may deem necessary for it, or
its nominee, to obtain and maintain patents, copyrights, trade secrets, trademarks, and service
markings within the United States or elsewhere or both. Employee’s obligations under this Section
10(c) of this Agreement shall be in effect at all times while Employee is employed by the Company
and for three years after Employee’s termination of employment with the Company.

     11. Notices. All notices required or permitted to be given under this Agreement shall
be in writing and shall be given by certified mail, return receipt requested, or by personal
delivery (including by express courier) to the parties at the following addresses (or such other
addresses as either may designate by notice in accordance with this section):

	 	 	 	 	 
	

	 	(a)
	 	If to the Company:
	 
	

	 	 	 	Andrew C. Florance
	

	 	 	 	Chief Executive Officer
	

	 	 	 	2 Bethesda Metro Center
	

	 	 	 	10th Floor
	

	 	 	 	Bethesda, Maryland 20814
	

	 	 	 	Telefax: 301-718-2444
	 
	 	 	 	 
	 	 	with a copy to:
	 
	 	 	 	 
	

	 	 	 	Carla J. Garrett
	

	 	 	 	General Counsel
	

	 	 	 	2 Bethesda Metro Center
	

	 	 	 	10th Floor
	

	 	 	 	Bethesda, Maryland 20814
	

	 	 	 	Telefax: 301-664-9176

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          (b) If to Employee, to the address set forth below Employee’s name on the signature page of
this Agreement.

     12. Arbitration

          (a) When Arbitration is Required. In the event of any dispute, claim or controversy
cognizable in a court of law between the Company and the Employee concerning any aspect of the
employment relationship, including disputes upon termination, the parties agree to submit such
dispute to final and binding arbitration before a single arbitrator pursuant to the provisions of
the American Arbitration Association’s Employment Dispute Resolution Procedures. The parties
acknowledge that this obligation to arbitrate disputes applies to claims for discrimination or
harassment under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of
1964, the Americans with Disabilities Act of 1990, Sections 1981 through 1988 of Title 42 of the
United States Code, the Maryland Fair Employment Practices Act, as well as any other federal,
state, or local law, ordinance, or regulation, or based on any public policy, contract, tort, or
common law or any claim for costs, fees, or other expenses including attorney’s fees. All claims
and defenses which could be raised before a government administrative agency or court must be
raised in arbitration and the arbitrator shall apply the law accordingly. Employee and the Company
further agree that this duty to arbitrate extends not only to disputes between Employee and the
Company, but also to disputes between Employee and the Company’s affiliates and the Company’s and
its affiliate’s respective officers, directors, employees and agents that arise out of Employee’s
employment with the Company or the termination of that employment.

          Notwithstanding the foregoing, Employee and the Company recognize and acknowledge each party’s
right to request injunctive relief under appropriate circumstances from any court of competent
jurisdiction, including but not limited to injunctive relief for any violations of Sections 9 of
this Agreement by Employee. The parties being desirous of having any disputes resolved in a forum
having a substantial body of law and experience with the matters contained herein, the parties
agree that any proceeding for injunctive relief and that any proceeding for any type of relief with
respect to an alleged violation of Section 9 of this Agreement shall be brought in the Circuit
Court of Montgomery County, Maryland, or in the United States District Court for the District of
Maryland and the parties agree to the jurisdiction thereof.

          (b) Time for Demanding Arbitration. Any demand for arbitration shall be made in
writing and served upon the other party to this Agreement. Such demand shall be served no later
than the expiration of the applicable statute of limitation period under governing law for such
dispute(s). Absent express written agreement of the parties, this time period shall not be
extended by virtue of informal attempts to resolve the dispute.

          (c) Remedies. The arbitrator shall have the power to award any types of legal or
equitable relief that would be available in a court of competent jurisdiction or administrative
tribunal.

          (d) Final and Binding Arbitration. The decision of the arbitrator shall be final and
binding on the parties.

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          (e) No Deletion, Addition or Modification. The arbitrator shall have no authority to
add to, delete from, or modify in any way the provisions of this Agreement.

          (f) Costs of Arbitration. The costs of commencing the arbitration and the
remainder of the arbitration fees will be paid by the Company.

          (g) Place of Arbitration. The arbitration hearing shall occur within Montgomery
County in the State of Maryland.

          (h) Time to Consider or Revoke Agreement. Employee acknowledges that Employee’s
acceptance of binding arbitration can be revoked any time within seven (7) days of his signing this
Agreement, but such revocation must be submitted in writing and will result in his immediate
termination and/or denial of consideration for employment. Employee further acknowledges that he
has had at least 21 days to consider this Agreement and has decided to sign knowingly, voluntarily,
and free from duress or coercion.

     13. Waiver of Jury Trial. Employee and the Company agree that if for any reason the
arbitration provisions of this Agreement are declared unenforceable, they waive any right they may
have to a jury trial with respect to any dispute or claim between them relating to any of the terms
and conditions of this Agreement, Employee’s employment with or termination from employment with
the Company, including, but not limited to, any of the claims enumerated in paragraph 12(a) of this
Agreement, as well as claims arising or relating to any confidentiality agreement Employee may
sign.

     14. Waiver of Breach. The waiver by either party of a breach of any provisions of
this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach.
A delay or failure by either party to exercise a right under this Agreement, or a partial or
single exercise of that right, shall not constitute a waiver of that or any other right.

     15. Governing Law, Interpretation. The Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Maryland. As used herein, the term
“including” means “including without limitation,” whether or not such words of non-limitation are
stated.

     16. Binding Effect. This Agreement shall be binding upon and share inure to the
benefit of the Company and its respective successors and assigns but the rights and obligations of
Employee are personal and may not be assigned or delegated without the Company’s prior written
consent.

     17. Counterparts. For the convenience of the parties, this Agreement may be executed
in any number of counterparts, all of which when taken together shall constitute one and the same
Agreement.

     18. Entire Agreement Concerning Employment, Modification and Amendment. This
Agreement constitutes the entire Agreement between the parties as to Employee’s employment and
compensation therefor and supersedes and replaces any and all agreements, written or oral, as to
such matters. This Agreement may not be modified or amended orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change, modification,
amendment, extension, or discharge is sought, wherein specific reference is made to this Agreement

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     19. Employability. Employee affirms he is not presently subject to a restrictive
covenant or other prior agreement which would prohibit or restrict employment with the Company. If
Employee learns or becomes aware or is advised that he is subject to an actual or alleged
restrictive covenant or other prior agreement which may prohibit or restrict employment by the Company,
Employee shall immediately notify the Company of the same. Employee agrees that he shall not
disclose to the Company, use for the Company’s benefit, or induce the Company to use any trade
secret or confidential information he may possess belonging to any former employer or other third
party.

     20. Severability. If any term or provision of this Agreement or any portion thereof is
declared illegal or unenforceable by any court of competent jurisdiction, such provision or portion
thereof shall be deemed modified so as to render it enforceable, and to the extent such provision
or portion thereof cannot be rendered enforceable, this Agreement shall be considered divisible as
to such provision which shall become null and void, leaving the remainder of this Agreement in full
force and effect.

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In witness whereof, Company and Employee have executed this Agreement, to be effective as of
the last date set forth below.

	 	 	 	 	 	 	 
	Employee:	 	 	 	Company:
	 
	 	 	 	 	 	 
	/s/ Christopher Tully

	 	 	 	By:
	 	/s/ Andrew C. Florance
	 

	 	 	 	 	 	 
	Christopher Tully	 	 	 	Andrew C. Florance
	20940 Lock Court	 	 	 	Chief Executive Officer and President
	Potomac Falls, VA 20165
	 	 	 	 	 	 
	703-948-7582
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date: November 29, 2004	 	 	 	Date: November 29, 2004

11exv10w8

 

Exhibit 10.8

	 	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	

	 	o
	 	Optionee’s Copy
	

	 	o
	 	Company’s Copy

COSTAR GROUP, INC.

1998 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

To                     :

          CoStar Group, Inc. (the “Company”) has granted you an option (the “Option”) under the CoStar
Group, Inc. 1998 Stock Incentive Plan (the “Plan”) to purchase                                 shares (the “Shares”)
of common stock of the Company (the “Common Stock”), at                      per share (the “Exercise
Price”). The date of grant is                                         .

          This Option is subject in all respects to the applicable provisions of the Plan, a copy of the
current form of which is attached, except as otherwise noted. By signing this agreement (the
"Agreement”), you acknowledge receiving the Plan. This Agreement incorporates the Plan by
reference and specifies other applicable terms and conditions. All terms not defined by this
Agreement have the meanings given in the Plan. The Compensation Committee of the Company’s Board
of Directors (or other administrator of the Plan, the “Administrator”) may adjust the number of
Shares and the Exercise Price from time to time under the Plan. Subject to the terms of the Plan,
the Option is intended to be an [incentive/non-qualified] stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

          In addition to the terms, conditions, and restrictions set forth in the Plan, the following
terms, conditions, and restrictions apply to the Option:

(1) The schedule for exercising the Option is as follows, subject to Section (3) below on
expiration:

	 	a.  	You may exercise the Option on the following schedule:

	 	i.  	One Quarter, on or after the first anniversary of the date of
grant;
	 
	 	ii.  	One Half, on or after the second anniversary of the date of grant;
	 
	 	iii.  	Three Quarters, on or after the third anniversary of the date of grant;
	 
	 	iv.  	Fully, on or after the fourth anniversary of the date of grant.

 

 

[The vesting schedule may vary for different employees based on the recommendation of the
Compensation Committee.]

	 	b.  	The Option will become immediately exercisable in full upon the occurrence of a
Change in Control as defined in the Plan.
	 
	 	c.  	The Administrator may, in its sole discretion, accelerate the time at which you
may exercise part or all of the Option.

	(2)  	Subject to this Agreement and the Plan, you may exercise the Option only by written notice to
the Company on or before the date the Option expires. Each such notice must:

	 	a.  	state the election to exercise the Option and the number of Shares with respect
to which you are exercising the Option;
	 
	 	b.  	be signed by you or, if you have died or become disabled, by the party entitled
to exercise the Option;
	 
	 	c.  	contain such representations as the Company reasonably requires; and
	 
	 	d.  	be accompanied by a cashier’s or certified check in the amount of the Exercise
Price payable to the order of the Company, or, to the extent the Plan and the
Administrator permit, by Common Stock of the Company with a Fair Market Value equal to
all or part of the Exercise Price (with any balance paid by cash or check), for the
Shares with respect to which the Option is being exercised; provided,
however, that you may not surrender (turn in) Common Stock of the Company as
payment unless you have held such stock for more than six months before the surrender.
Alternatively, your notice may direct the Company to send the share certificates to be
issued under this Option to a licensed broker acceptable to the Company as your agent
in exchange for the broker’s tendering to the Company cash (or acceptable cash
equivalents) equal to the Exercise Price, for the Shares with respect to which the
Option is being exercised, as part of a cashless exercise.

          For all purposes of the Plan, the date of exercise will be the date on which you have
delivered the notice and any required payment to the Company.

	(3)  	The Option will expire no later than the close of business on                                          (ten years
from the date of grant).

          Unless the Administrator determines otherwise at any time, you will forfeit any unexercised
portions of the Option (whether or not then exercisable) upon the first to occur of:

	 	(i)  	the Option’s expiration under the preceding sentence,

 

 

	 	(ii)  	the 90th day after your resignation (for other than Disability),
	 
	 	(iii)  	the 90th day after the Company terminates your employment (for other than
Disability),
	 
	 	(iv)  	in the event of the termination of your employment for Disability (as
determined by the Administrator), the earlier of (I) the first anniversary of your
termination of employment and (II) 30 days after you cease to have a Disability,
	 
	 	(v)  	the first anniversary of your date of death, and
	 
	 	(vi)  	the date you violate any covenant not to compete in effect between you and the
Company.

	(4)  	The Company may postpone issuing and delivering any Shares for so long as the Company
determines to be necessary or advisable to satisfy the following:

	 	a.  	completing or amending any registration or qualification of the Shares or
satisfying any exemption from registration under any Federal or state law, rule, or
regulation;
	 
	 	b.  	complying with any requests for representations under the Plan;
	 
	 	c.  	receiving proof satisfactory to the Company that a person seeking to exercise
the Option after your death or disability is authorized and entitled to exercise the
Option; and
	 
	 	d.  	satisfying any federal, state, or local tax withholding obligations.

(5) If, at the time the Company should issue you Shares because of your exercise of the Option, no
current registration statement under the Securities Act of 1933 (the “Act”) covers such issuance,
you must, before the Company will issue such Shares to you:

	 	a.  	represent to the Company, in form satisfactory to the Company’s counsel, that
you are acquiring the Shares for your own account and not with a view to reselling or
distributing the Shares; and
	 
	 	b.  	agree that you may not sell, transfer, or otherwise dispose of the Shares
issued to you under the Option unless:

	 	i.  	a registration statement under the Act is effective at the time of
disposition with respect to the Shares sold, transferred, or otherwise disposed
of; or

 

 

	 	ii.  	the Company has received an opinion of counsel or other
information and representations satisfactory to it to the effect that
registration under the Act is not required by reason of Rule 144 under the Act
or otherwise.

(6) To the extent the Plan provides, if you are then an employee or director and the Company (i)
dissolves or liquidates or sells substantially all of its assets to another corporation, (ii)
merges, consolidates, or reorganizes in a manner in which the Company is not the surviving
corporation, or (iii) takes part in any other Substantial Corporate Change (as defined in the
Plan), then, at the sole discretion of the Board and to the extent the law permits, the Option
will:

	 	(I)  	be or become exercisable in full before such event and then terminate or
	 
	 	(II)  	continue in full force and effect and, if applicable, the surviving corporation
or an affiliate of the surviving corporation will be required to assume the Option
and/or substitute a similar option or award in place of the Option.

Subject to the preceding paragraph, if any change is made in the Common Stock, without the
Company’s receiving consideration (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate structure, or other
transaction not involving the Company’s receipt of consideration), the Board will adjust the Option
as to the class(es) and number of shares and price per share of securities subject to the Option,
with the Board’s adjustments being final, binding, and conclusive. The conversion of any
convertible securities of the Company will not be treated as a “transaction not involving the
Company’s receipt of consideration.”

(7) You may not exercise the Option if issuing the Shares would violate any applicable federal or
state securities laws or other laws or regulations.

(8) Nothing in this Agreement restricts the right of the Company or any of its affiliates to
terminate your employment at any time, with or without cause. The termination of employment,
whether by the Company or any of its affiliates or otherwise, and regardless of the reason
therefor, has the consequences provided for under the Plan and any applicable employment or
severance agreement.

(9) You understand and agree that you will not be deemed for any purpose to be a stockholder of the
Company with respect to any of the Shares unless and until they have been issued to you after your
exercise of this Option and payment for the Shares.

(10) At the time of exercise, the Company will round down any fractional Shares but will not make
any cash or other payments in settlement of fractional shares eliminated by rounding. If you have
not then exercised the Option in full, the Company will carry forward the fractional Shares rather
than eliminating them.

 

 

(11) You understand and agree that the existence of this Option will not affect in any way the
right or power of the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company’s capital structure or its
business or any merger or consolidation of the Company, or any issuance of bonds, debentures,
preferred or other stocks with preference ahead of or convertible into, or otherwise affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

(12) The laws of the State of Delaware will govern all matters relating to this Agreement, without
regard to the principles of conflict of laws.

(13) Any notice you give to the Company (including notice of exercise of all or part of the Option)
must be in writing and either hand-delivered or mailed to the Corporate Secretary of the Company
(or to the Chief Financial Officer if either you would receive the notice or the position is
vacant). If mailed, it should be sent by certified mail and be addressed to the foregoing
executive at the Company’s then corporate headquarters. Any notice given to you will be addressed
to you at your address as reflected on the personnel records of the Company. You and the Company
may change the address for notice by like notice to the other. Notice will be deemed to have been
duly delivered when hand-delivered, or, if mailed, on the day such notice is postmarked.

(14) Wherever a conflict may arise between the terms of this Agreement and the terms of the Plan,
the terms of the Plan will control.

	 	 	 	 	 	 	 
	

	 	 	 	 	 	COSTAR GROUP, INC.
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name:	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Title:	 	 
	

	 	 	 	 	 	 

ACKNOWLEDGMENT

          I acknowledge receipt of a copy of the attached Plan. I represent that I have read and am
familiar with the Plan’s terms. I accept the Option subject to all of the terms and provisions of
this Agreement and of the Plan under which it is granted, as the Plan may be amended in accordance
with its terms. I agree to accept as binding, conclusive, and final all decisions or
interpretations of the Administrator concerning any questions arising under the Plan with respect
to the Option.

 

 

	 	 	 	 	 
	 
	 	 	 	 
	

	 	

	 	 
	

	 	Signature of Optionee	 	 
	 
	 	 	 	 

          No one may sell, transfer, or distribute this Option or the securities that may be
purchased upon exercise of this Option without an effective registration statement relating thereto
or a satisfactory opinion of counsel satisfactory to the Company or other information and
representations satisfactory to the Company that such registration is not required.

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