Document:

Exhibit 10.4

 

Execution Copy

 

SECOND AMENDMENT TO

AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

 

THIS AMENDMENT
is made on May 8, 2006 by and between MOTHERS WORK, INC. (the “Company”)
and DAN W. MATTHIAS (“Executive”).

 

WHEREAS, the Company and Executive are parties
to an Amended and Restated Employment Agreement dated as of April 28, 2005, as
amended effective December 28, 2005 (the “Employment Agreement”); and

 

WHEREAS, Section 17 of the Employment
Agreement provides that the Company and Executive may amend the Employment
Agreement by agreement in writing; and

 

WHEREAS, the Company has requested that
Executive agree to certain changes with respect to the vesting of stock options
awarded annually to Executive, if any.

 

NOW, THEREFORE, in consideration of these
premises and intending to be legally bound hereby, the Employment Agreement is
amended as follows, effective as of the date first above written:

 

1.             The last sentence of Section 5.3 is
revised in its entirety to read as follows:

 

“Such Options
shall be exercisable at the closing price of the Common Stock as reported by
NASDAQ on the date of grant and shall vest immediately; provided,
however, that with respect to the 2006 fiscal year Option
Compensation, that Option shall vest on the first anniversary of the date of
grant, provided that Employee remains in continuous service with the Company
through such date (and subject to accelerated vesting in accordance with this
Agreement and the applicable plan under which that Option is issued).”

 

2.             The Employment Agreement, as
amended by the foregoing changes, is hereby ratified and confirmed in all
respects.

 

[signature page follows]

 

 

IN WITNESS WHEREOF, the Company
has caused this Amendment to be executed by its duly authorized officer and
Executive has executed this Amendment, in each case on the date first written
above.

 

 

	
   

  	
  MOTHERS
  WORK, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ EDWARD M. KRELL

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name &
  Title: Edward M. Krell, Executive Vice
  President 

  – Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DAN W.
  MATTHIAS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ DAN W.
  MATTHIASExhibit 10.5

 

Execution Copy

 

SECOND AMENDMENT TO

AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

 

THIS AMENDMENT
is made on May 8, 2006 by and between MOTHERS WORK, INC. (the “Company”)
and REBECCA C. MATTHIAS (“Executive”).

 

WHEREAS, the Company and Executive are
parties to an Amended and Restated Employment Agreement dated as of April 28,
2005, as amended effective December 29, 2005 (the “Employment Agreement”);
and

 

WHEREAS, Section 17 of the Employment
Agreement provides that the Company and Executive may amend the Employment
Agreement by agreement in writing; and

 

WHEREAS, the Company has requested that
Executive agree to certain changes with respect to the vesting of stock options
awarded annually to Executive, if any.

 

NOW, THEREFORE, in consideration of these
premises and intending to be legally bound hereby, the Employment Agreement is
amended as follows, effective as of the date first above written:

 

1.             The last sentence of Section 5.3 is
revised in its entirety to read as follows:

 

“Such Options
shall be exercisable at the closing price of the Common Stock as reported by
NASDAQ on the date of grant and shall vest immediately; provided, however, that
with respect to the 2006 fiscal year Option Compensation, that Option shall
vest on the first anniversary of the date of grant, provided that Employee
remains in continuous service with the Company through such date (and subject
to accelerated vesting in accordance with this Agreement and the applicable
plan under which that Option is issued).”

 

2.             The Employment Agreement, as
amended by the foregoing changes, is hereby ratified and confirmed in all
respects.

 

[signature page follows]

 

 

IN WITNESS WHEREOF, the Company
has caused this Amendment to be executed by its duly authorized officer and
Executive has executed this Amendment, in each case on the date first written
above.

 

 

	
   

  	
  MOTHERS
  WORK, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ EDWARD M. KRELL

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name &
  Title: Edward M. Krell, Executive Vice
  President 

  – Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  REBECCA
  C. MATTHIAS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ REBECCA
  C. MATTHIASExhibit 10.1

 

April 13, 2006

 

VIA HAND DELIVERY

 

Mr. Gene Hodges

CEO and President, Websense Inc.

 

Dear Gene,

 

This letter agreement between you and Websense, Inc. (the “Company”)
confirms an amendment to the terms of your employment agreement dated January 9,
2006, between you and the Company (the “Employment Agreement”). You acknowledge
and agree:

 

1.                                       Upon
your execution of this amendment to your Employment Agreement, which was
previously approved by the Company’s Board of Directors, your non-qualified stock
options to purchase an aggregate of 1,200,000 shares of the Company’s common
stock (which were adjusted to give effect to the Company’s two for one stock
split in the form of a stock dividend that was effective as of March 17,
2006 (the “Stock Split”)) granted on January 9, 2006 (the “Original
Options”) pursuant to your Employment Agreement as inducement grants outside of
the Company’s 2000 Stock Incentive Plan (the “Plan”), shall be cancelled and non-qualified
options to purchase an aggregate of 1,200,000 shares shall be re-granted under
the Plan (the “Regranted Options”) on the same date as the cancellation. The option
term, exercise price, vesting schedule and vesting commencement date of
the Regranted Options shall be the same as the option term, exercise price,
vesting schedule and vesting commencement date of the Original Options (as
adjusted for the Stock Split, as applicable).

 

2.                                       You
have agreed to this amendment at the request of the Company, and you are not,
by virtue of this amendment, receiving any benefit in excess of the Original
Options.

 

If this amendment of the Employment Agreement is acceptable to you,
please sign below and return one original to me.

 

Sincerely,

 

 

John B. Carrington

Chairman of the Board

 

AGREED:

 

	
  Date:

  	
    April 13, 2006

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Gene HodgesExhibit 10.2

 

WEBSENSE, INC.

 

NOTICE OF GRANT OF STOCK OPTION

 

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

 

	
  Optionee:

  	
  Vernon Gene Hodges

  
	
   

  	
   

  
	
  Grant Date:

  	
  April 13, 2006

  
	
   

  	
   

  
	
  Vesting Commencement
  Date:

  	
  January 9, 2006

  
	
   

  	
   

  
	
  Exercise Price:

  	
  $ 32.24 per share

  
	
   

  	
   

  
	
  Number of Option Shares:

  	
                shares

  
	
   

  	
   

  
	
  Expiration Date:

  	
   

  
	
   

  	
   

  
	
  Type of Option:

  	
  Non-Statutory Stock
  Option

  

 

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

 

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

 

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

 

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

 

 

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

 

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

 

	
  DATED:

  	
  April 13,
  2006

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WEBSENSE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
								

 

ATTACHMENTS

Exhibit A - Stock Option Agreement

Exhibit B – Option Summary and Prospectus

 

 

EXHIBIT A

 

STOCK OPTION AGREEMENT

 

 

EXHIBIT B

 

OPTION SUMMARY AND PROSPECTUS

 

 

WEBSENSE, INC.

 

STOCK OPTION AGREEMENT

 

RECITALS

 

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

 

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

 

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

 

D.                                    All
capitalized terms in this Agreement shall have the meaning assigned to them in
the attached Appendix.

 

NOW,
THEREFORE, it is hereby agreed as follows:

 

1.                                      Grant
of Option. The Corporation hereby grants to Optionee under the Plan, as
of the Grant Date, a Non-Statutory Option to purchase up to the number of
Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2
at the Exercise Price.

 

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

 

3.                                      Limited
Transferability.

 

(a)                                  This
option shall be neither transferable nor assignable by Optionee other than by
will or the laws of inheritance following Optionee’s death and may be
exercised, during Optionee’s lifetime, only by Optionee. However, Optionee may designate
one or more persons as the beneficiary or beneficiaries of this option, and
this option shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee’s death
while holding this option. Such beneficiary or beneficiaries shall take the
transferred

 

1

 

option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee’s death.

 

(b)                                  In
addition, to the extent that such action is permitted by the Board and is
consistent with applicable securities laws, this option may be assigned in
whole or in part during Optionee’s lifetime to one or more members of
Optionee’s family or to a trust established for the exclusive benefit of one or
more such family members or to Optionee’s former spouse, to the extent such
assignment is in connection with the Optionee’s estate plan or pursuant to a
domestic relations order. The assigned portion shall be exercisable only by the
person or persons who acquire a proprietary interest in the option pursuant to
such assignment. The terms applicable to the assigned portion shall be the same
as those in effect for this option immediately prior to such assignment.

 

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

 

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

 

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

 

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

 

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

 

(d)                                  During
the limited period of post-Service exercisability, this option may not be
exercised in the aggregate for more than the number of Option Shares for which
the

 

2

 

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

 

(e)                                  Should
Optionee’s Service be terminated for Misconduct or should Optionee otherwise
engage in any Misconduct while this option is outstanding, then this option
shall terminate immediately and cease to remain outstanding.

 

6.                                      Special
Acceleration of Option.

 

(a)                                  If
(i) within eighteen (18) months immediately following a Change in Control
Optionee’s Service is terminated by the Corporation without Cause or Optionee
resigns his employment for Good Reason or (ii) the Corporation terminates
Optionee’s Services without Cause during the pendency of a merger agreement or
tender offer which would result in a Change in Control, contingent upon
Optionee providing the Corporation with a fully-effective waiver and release of
claims in a form satisfactory to the Corporation, this option, to the
extent outstanding at the time of such termination without Cause or resignation
for Good Reason, as applicable, but not otherwise fully exercisable, shall
automatically accelerate so that this option shall become immediately
exercisable for all the Option Shares at such time subject to the Option and may be
exercised for any or all of those Option Shares as fully vested shares.

 

(b)                                  This
Agreement shall not in any way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of
its business or assets.

 

7.                                      Adjustment
in Option Shares. Should any change be made to
the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration, appropriate adjustments shall be made to (i) the
total number and/or class of securities subject to this option and (ii) the
Exercise Price in order to reflect such change and thereby preclude a dilution
or enlargement of benefits hereunder.

 

8.                                      Stockholder
Rights. The holder of this option shall not have any stockholder rights
with respect to the Option Shares until such person shall have exercised the
option, paid the Exercise Price and become a holder of record of the purchased
shares.

 

9.                                      Manner
of Exercising Option.

 

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

 

3

 

(i)                                    Execute
and deliver to the Corporation a Notice of Exercise for the Option Shares for
which the option is exercised.

 

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

 

(1)                                 cash
or check made payable to the Corporation;

 

(2)                                 shares
of Common Stock held by Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid an additional charge to the Corporation’s earnings for financial
reporting purposes over that recognized
at the date of grant and
valued at Fair Market Value on the Exercise Date; or

 

(3)                                 if
previously authorized by the Board, in its sole discretion, through a special
sale and remittance procedure pursuant to which Optionee (or any other person
or persons exercising the option) shall concurrently provide irrevocable
instructions (i) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (ii) to the Corporation to
deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.

 

Except to the extent the sale and remittance procedure
is utilized in connection with the option exercise, payment of the Exercise
Price must accompany the Notice of Exercise delivered to the Corporation in
connection with the option exercise.

 

(iii)                            Furnish
to the Corporation appropriate documentation that the person or persons
exercising the option (if other than Optionee) have the right to exercise this
option.

 

(iv)                               Make
appropriate arrangements with the Corporation (or Parent or Subsidiary
employing or retaining Optionee) for the satisfaction of all Federal, state and
local income and employment tax withholding requirements applicable to the
option exercise.

 

(b)                                  As
soon as practical after the Exercise Date, the Corporation shall issue to or on
behalf of Optionee (or any other person or persons exercising this option) a
certificate for the purchased Option Shares, with the appropriate legends
affixed thereto.

 

(c)                                  In
no event may this option be exercised for any fractional shares.

 

10.                               Compliance
with Laws and Regulations.

 

(a)                                  The
exercise of this option and the issuance of the Option Shares upon such
exercise shall be subject to compliance by the Corporation and Optionee with
all applicable

 

4

 

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

 

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

 

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

 

12.                               Notices.
Any notice required to be given or delivered to the Corporation under the terms
of this Agreement shall be in writing and addressed to the Corporation at its
principal corporate offices. Any notice required to be given or delivered to
Optionee shall be in writing and addressed to Optionee at the address indicated
below Optionee’s signature line on the Grant Notice. All notices shall be
deemed effective upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.

 

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

 

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

 

15.                               Excess
Shares. If the Option Shares covered by this Agreement exceed, as of
the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall be void
with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.

 

5

 

EXHIBIT I

 

NOTICE OF EXERCISE

 

I
hereby notify Websense, Inc. (the “Corporation”) that I elect to purchase               
shares of the Corporation’s Common Stock (the “Purchased Shares”) at the option
exercise price of $               per
share (the “Exercise Price”) pursuant to that certain option (the “Option”)
granted to me under the Corporation’s 2000 Stock Incentive Plan on                    ,
         .

 

Concurrently
with the delivery of this Exercise Notice to the Corporation, I shall hereby
pay to the Corporation the Exercise Price for the Purchased Shares in
accordance with the provisions of my agreement with the Corporation (or other
documents) evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise. Alternatively,
if previously authorized by the Board, in its sole discretion, I may utilize
the special broker-dealer sale and remittance procedure specified in my
agreement to effect payment of the Exercise Price.

 

                    ,
      

Date

 

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Optionee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print name in
  exact manner it is to

  	
   

  	
   

  	
   

  
	
  appear on the stock
  certificate:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address to which
  certificate is to

  	
   

  	
   

  	
   

  
	
  be sent, if different
  from address above:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Social Security
  Number:

  	
   

  	
   

  	
   

  
					

 

1

 

APPENDIX

 

The following definitions
shall be in effect under the Agreement:

 

A.                                    Agreement
shall mean this Stock Option Agreement.

 

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

 

C.                                    Cause
for termination shall mean a termination of your employment by the Corporation
based upon a good faith determination by the Board that one or more of the
following has occurred: (a) your commission of a material act of fraud
with respect to the Corporation, (b) your intentional refusal or willful
failure to carry out the reasonable instructions of the Board, (c) your
conviction of, or plea of nolo contendere to, at any time, a misdemeanor crime
of moral turpitude or a felony (even if such has occurred prior to your
employment with the Corporation), (d) your gross misconduct in connection
with the performance of your duties, or (e) your material breach of your
obligations to the Corporation or any agreement between you and the
Corporation.

 

D.                                    Solely
for purposes of the provisions of Paragraph 6 herein, Change in
Control shall mean any of the following:

 

(i)                                    the
acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act), other than by the Corporation or any
affiliate thereof or any affiliate of a shareholder of the Corporation
immediately prior to such acquisition, of beneficial ownership (within the
meaning of Rule 13d 3 promulgated under the Exchange Act) of 50% or more
of the combined voting power or economic interests of the then outstanding
voting securities of the Corporation entitled to vote generally in the election
of directors;

 

(ii)                                a
change in the composition of the Board occurring within a twenty-four month
period, as a result of which fewer than a majority of the directors of the
Board are Incumbent Directors;

 

(iii)                            a
reorganization, merger, or consolidation, in each case, with respect to which
all or substantially all of the persons that were the respective beneficial
owners of the voting securities of the Corporation immediately prior to such
reorganization, merger, or consolidation do not, following such reorganization,
merger, or consolidation, beneficially own, directly or indirectly, more than
50% of the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the Corporation
resulting from such reorganization, merger, or consolidation; or

 

(iv)                               the
sale, or other disposition of all or substantially all of the assets of the Corporation
in one transaction or series of related transactions;

 

(v)                                   Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur because a
majority or more of the outstanding voting securities of the Corporation is acquired
by (a) a trustee or other fiduciary holding securities under one or more
employee

 

A-1

 

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

 

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

 

F.                                      Common
Stock shall mean shares of the Corporation’s common stock.

 

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

 

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

 

I.                                         Exercise
Date shall mean the date on which the option shall have been exercised
in accordance with Paragraph 9 of the Agreement.

 

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

 

K.                                    Expiration
Date shall mean the date on which the option expires as specified in
the Grant Notice.

 

L.                                     Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

 

(i)                                    If
the Common Stock is at the time traded on the Nasdaq National Market, then the
Fair Market Value shall be deemed equal to the closing selling price per share
of Common Stock on the date in question, as the price is reported by the
National Association of Securities Dealers on the Nasdaq National Market and
published in The Wall Street Journal. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists, or

 

(ii)                                If
the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be deemed equal to the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such exchange and
published in The Wall Street Journal. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.

 

M.                                  Good
Reason shall mean your resignation within ninety (90) days of the
occurrence of any one or more of the following events without your written
consent, provided that you comply with a reasonable Good Reason process
providing the Corporation with an

 

A-2

 

opportunity to cure the
alleged Good Reason: (a) a material reduction in your base salary and/or
target bonus other than in connection with a Corporation-wide reduction in
executive compensation, (b) a material reduction in your benefits, other
than in connection with a Corporation-wide reduction in executive benefits, (c) a
material and significant reduction in your authority, title and/or duties
without Sufficient Basis, (d) a requirement that you relocate more than
thirty-five (35) miles from your then-current office location. Notwithstanding
the foregoing sentence, your receipt of less bonus or no bonus as a result of
not meeting the relevant goals for a bonus is not a Good Reason.

 

N.                                    Grant
Date shall mean the date of grant of the option as specified in the
Grant Notice.

 

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

 

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

 

Q.                                   Misconduct
shall mean the commission of any act of fraud, embezzlement or dishonesty by
Optionee, any unauthorized use or disclosure by Optionee of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by Optionee adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or
Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).

 

R.                                    Non-Statutory
Option shall mean an option not intended to satisfy the requirements of
Code Section 422.

 

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

 

T.                                     Option
Shares shall mean the number of shares of Common Stock subject to the
option as specified in the Grant Notice.

 

U.                                     Optionee
shall mean the person to whom the option is granted as specified in the Grant
Notice.

 

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

 

A-3

 

W.                                Permanent
Disability shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which is expected to result in death or has lasted or can
be expected to last for a continuous period of twelve (12) months or more.

 

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

 

Y.                                     Plan
Administrator shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.

 

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

 

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

 

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

 

CC.                           Sufficient
Basis shall mean a reassignment or reduction in duties as a result of
disciplinary action based upon serious violation of Corporation policy or
violation of an agreement between you and the Corporation.

 

A-4

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