WHEREAS, the purpose of this CoStar Group
, Inc. Employee Stock Purchase Plan
(Plan) is to
provide eligible employees of CoStar Group
, Inc. (the Company) and certain of its subsidiaries
with the opportunity to purchase shares of the Companys common stock (Common Stock) at a 10%
WHEREAS, the Board of Directors initially approved the Plan by unanimous written consent dated
effective April 17, 2006.
WHEREAS, the Stockholders of the Company approved the Plan at the Annual Meeting of
Stockholders held on June 8, 2006.
WHEREAS, the Board of Directors of the Company approved certain amendments to the Plan to
clarify certain definitions related to the offering periods and exercise dates and to make certain
other administrative changes, all of which amendments are incorporated into the Plan as set forth
below. All references to the Plan herein refer to the Plan as so amended.
1. Administration. The Plan will be administered by the Companys Board of Directors
(the Board) or by one or more committees or subcommittees appointed by the Board (a Committee).
The Board or a Committee (in either case, the Administrator) may delegate to one or more
individuals the day-to-day administration of the Plan. The Administrator shall have full power and
authority to promulgate any rules and regulations which it deems necessary or advisable for the
proper administration of the Plan, to interpret the provisions and supervise the administration of
the Plan, to make factual determinations relevant to Plan entitlements, and to take all action in
connection with the administration of the Plan as it deems necessary or advisable, consistent with
any delegation from the Board; provided, however, the administration of the Plan shall be
consistent with Rule 16b-3 under the Securities Exchange Act of 1934. The administration,
interpretation or application of the Plan by the Administrator shall be final and binding upon all
participants and all other persons. The Company shall pay all expenses incurred in connection with
the administration of the Plan. No Board or Committee member shall be liable for any action or
determination made in good faith with respect to the Plan or any Option (as defined in Section 9)
2. Eligibility. All employees of the Company, including Directors who are employees,
and all employees of any subsidiary of the Company (as defined in Section 424(f) of the Internal
Revenue Code (the Code)) designated by the Board or a Committee from time to time (a Designated
Subsidiary), are eligible to participate in the Plan provided that:
(a) they are customarily employed by the Company or a Designated Subsidiary
for more than 20 hours a week and for more than five months in a calendar year; and
(b) they are employees of the Company or a Designated Subsidiary on the
applicable Offering Commencement Date (as defined below).
For purposes of the Plan, the employment relationship shall be treated as continuing intact while
the individual is on sick leave or other leave of absence approved by the Company or Designated
Subsidiary; provided that where the period of leave exceeds ninety (90) days and the individuals
right to reemployment is not guaranteed by statute or by contract, the employment relationship will
be deemed to have terminated on the ninety-first (91st) day of such leave.
No employee may be granted an Option hereunder if such employee, immediately after the Option
is granted, owns 5% or more of the total combined voting power or value of the stock of the Company
or any subsidiary. For purposes of the preceding sentence, the attribution rules of Section 424(d)
of the Code shall apply in determining the stock ownership of an employee, and all stock which the
employee has a contractual right to purchase shall be treated as stock owned by the employee.
Eligible employees who elect to participate in the Plan are referred to herein as
3. Offering Periods. Each offering period under the Plan will be two weeks beginning
on the second Saturday preceding each of the Companys regular pay dates (the Offering
Commencement Date) and ending on each of the Companys regular pay dates (the Offering Period);
provided, that if the regular pay date of a particular Offering Period falls on a day that is a
Company holiday, that Offering Period shall be deemed to end as of the pay date on which regular
Compensation (as defined below) is disbursed or paid to employees by the Company during the
Offering Period (generally the last business day prior to the regular pay date) (such pay date or
the regular pay date during the Offering Period, as applicable, the Exercise Date) and the
applicable Offering Period will be shortened accordingly. Any such shortening of an Offering
Period shall have no effect on the Offering Commencement Date or the duration of previous or
subsequent Offering Periods. For purposes hereof, the term pay date shall mean the date as of
which Compensation is disbursed or paid by the Company to its employees, not the date as of which
Compensation is earned; and the term regular pay date shall mean every other Friday on which the
Company typically disburses or pays Compensation to its employees. During each Offering Period,
payroll deductions will be made on behalf of a participant from one or more paychecks paid by the
Company to such participant during the Offering Period. Such payroll deductions will be held for
the purchase of Common Stock at the end of the Offering Period. The Administrator may, at any time
and at its discretion, change the frequency and/or duration of Offering Periods with respect to
future Offering Periods.
4. Participation. An eligible employee may participate in the Plan by completing and
forwarding a payroll deduction authorization form to the Companys benefits office or by any other
method which the Administrator specifies no later than 5:00 p.m., Eastern Time, on the last
business day prior to the applicable Offering Commencement Date. The payroll deduction
authorization form will authorize a regular payroll deduction from the Compensation received by the
participant during the Offering Period. Unless a participant files a new form or withdraws from
the Plan, his or her deductions and purchases will continue at the same rate for future Offering
Periods under the Plan as long as the Plan remains in effect (subject to Section 11 below). As
used herein, the term Compensation means total compensation subject to federal income tax and
paid to the participant by the Company, excluding reimbursements or other expense allowances,
fringe benefits, relocation expenses, stock-based compensation and severance benefits. For
purposes of the Plan, (a) salary deferrals in connection with participation in the Plan or any
other plan or arrangement (such as Section 401(k), Section 125 or qualified transportation fringe
benefit) shall be included as Compensation, and (b) compensation shall be recognized only for the
period in which a person is actually an eligible participant of the Plan.
Further, for purposes of the Plan, references to Compensation disbursed or paid by the Company
shall include compensation disbursed or paid by a Designated Subsidiary, as the case may be, and
the term Company in such context shall include any Designated Subsidiary.
5. Deductions. The Company will maintain payroll deduction accounts for all
participants. With respect to the Plan, a participant may authorize a payroll deduction in any
dollar amount up to a maximum of 15% of the Compensation he or she receives during the Offering
Period or such shorter period during which deductions from payroll are made. Payroll deductions
may be made in 1% increments of Compensation, between 1% and 15%, with any change in compensation
paid during the Offering Period to result in an automatic corresponding change in the dollar amount
withheld as soon as administratively practical.
6. Deduction Changes. A participant may increase, decrease or discontinue his or her
payroll deduction for a subsequent Offering Period by filing a new payroll deduction authorization
form, or indicating a change by any other method which the Administrator specifies, no later than
5:00 p.m., Eastern Time, on the last business day prior to the applicable Offering Commencement
Date. If a participant elects to discontinue his or her payroll deductions, but does not elect to
withdraw his or her funds pursuant to Section 8 below, funds deducted prior to such participants
election to discontinue will be applied to the purchase of Common Stock on the Exercise Date. The
Administrator may (i) establish rules limiting the frequency with which participants may change,
discontinue and resume payroll deductions under the Plan and may impose a waiting period on
participants wishing to resume payroll deductions following discontinuance, and (ii) change the
rules regarding discontinuance of participation or changes in participation in the Plan.
Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the
Code, the Administrator may reduce a participants payroll deductions to zero percent (0%) at any
time during an Offering Period scheduled to end during the current calendar year. Payroll
deductions shall re-commence at the rate provided in such participants enrollment form at the
beginning of the first Offering Period that is scheduled to end in the following calendar year,
unless participation in the Plan is discontinued by the participant.
If a participant has not followed the procedures prescribed by the Administrator to change the
rate of payroll deductions or to discontinue the payroll deductions, the rate of payroll deductions
shall continue at the properly elected rate in effect until such rate is changed in accordance with
7. Interest. All payroll withholdings hereunder shall be held in the corporate
general account. Interest will not be paid on any participant accounts, except to the extent that
the Administrator, in its sole discretion, elects to credit participant accounts with interest at
such per annum rate as it may from time to time determine.
8. Withdrawal of Funds. Except as otherwise provided by the Administrator pursuant to
Section 6 hereof, a participant may at any time prior to 5:00 p.m., Eastern time, on the fifth
business day prior to the Exercise Date and for any reason permanently draw out the balance
accumulated in the participants account and thereby withdraw from participation in an Offering
Period by notifying the Company by whatever method specified by the Administrator. Partial
withdrawals are not permitted. The participant may not begin participation again during the
remainder of the Offering Period. The participant may participate in any subsequent Offering
Period in accordance with terms and conditions established by the Administrator.
9. Purchase of Shares. On the Offering Commencement Date of each Offering Period, the
Company will grant to each eligible employee who is then a participant in the Plan an
option (the Option) to purchase whole shares of Common Stock of the Company on the Exercise
Date at the Option Price hereinafter provided for.
Notwithstanding the above, no participant may be granted an Option which permits his or her
rights to purchase Common Stock under this Plan and any other employee stock purchase plan
defined in Section 423(b) of the Code) of the Company and its subsidiaries, to accrue at a rate
which exceeds $25,000 of the fair market value of such Common Stock (determined at the Offering
Commencement Date of the Offering Period) for each calendar year in which the Option is outstanding
at any time.
The price for each share purchased under the Plan will be 90% of the closing price of the
Common Stock on the Exercise Date, rounded to the nearest $0.01 (the Option Price). Such closing
price shall be (a) the closing price on any national securities exchange on which the Common Stock
is listed, (b) the closing price of the Common Stock on the
Nasdaq Global or Global Select Market or (c) the
average of the closing bid and asked prices in the over-the-counter-market, whichever is
applicable, as published in The Wall Street Journal. If no sales of Common Stock were made
on such day, the price of the Common Stock for purposes of clauses (a) and (b) above shall be the
reported price for the next preceding day on which sales were made.
Unless an employee withdraws from participation prior to the Exercise Date pursuant to the
terms hereof, each such employee who is a participant in the Plan on the Offering Commencement Date
shall be deemed to have exercised his or her Option at the Option Price on the Exercise Date and
shall be deemed to have purchased from the Company the number of full shares of Common Stock
reserved for the purpose of the Plan that his or her accumulated payroll deductions as of the
Exercise Date will pay for, but not in excess of the maximum number determined in the manner set
Any balance remaining in a participants payroll deduction account at the end of an Offering
Period will be automatically refunded to the participant, except that any balance which is less
than the purchase price of one share of Common Stock will be carried forward into the participants
payroll deduction account for the Plan, except that if the participant requests a refund of the
residual, in accordance with procedures established by the Administrator, or if the participant
terminates his or her employment, the balance shall then be refunded.
10. Issuance of Shares. Shares of Common Stock purchased under the Plan may be issued
only in the name of the participant, in the name of the participant and another person of legal age
as joint tenants with rights of survivorship, or (in the Companys sole discretion) in the name of
a brokerage firm, bank or other nominee holder designated by the participant. The Company may, in
its sole discretion and in compliance with applicable laws, authorize the use of book entry
registration of shares.
11. Rights on Retirement, Death or Termination of Employment. In the event of a
participants termination of employment for any reason (including death), the participants
participation in the Plan shall terminate effective as of the Offering Commencement Date
immediately following such termination, and after the Exercise Date of the Offering Period during
which such participants employment was terminated no payroll deduction shall be taken from any pay
due and owing to such participant and the balance in the participants account shall be paid to the
participant or, in the event of the participants death, (a) to a beneficiary previously designated
in a revocable notice signed by the participant (with any spousal consent required under state law)
or (b) in the absence of such a designated beneficiary, to the executor or administrator of the
participants estate or (c) if no such executor or administrator has been
appointed to the knowledge of the Company, to such other person(s) as the Company may, in its
discretion or as may be required under applicable law, designate. In the event that the Designated
Subsidiary by which a participant is employed shall cease to be a subsidiary of the Company or the
participant is transferred to a subsidiary of the Company that is not a Designated Subsidiary, the
participant shall be deemed to have terminated employment as of the date of such action, and, as
set forth above, the participants participation in the Plan shall terminate effective as of the
Offering Commencement Date immediately following such termination.
12. Optionees Not Stockholders; No Enlargement of Employee Rights. Neither the
granting of an Option to a participant nor the deductions from his or her pay shall constitute such
participant a stockholder of the shares of Common Stock covered by an Option under this Plan until
such shares have been purchased by and issued to him or her. In addition, nothing contained in
this Plan shall be deemed to give any participant the right to be retained in the employ of the
Company or of the Designated Subsidiary or to interfere with the right of the Company or the
Designated Subsidiary to discharge any participant at any time.
13. Rights Not Transferable. Rights under this Plan and Options granted under this
Plan are not transferable by a participant other than by will or the laws of descent and
distribution, and are exercisable during the participants lifetime only by the participant. If a
participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or
interests under the Plan, other than as permitted by the Code, such act shall be treated as an
election by the Participant to discontinue participation in the Plan.
14. Use of Funds. All payroll deductions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated
to segregate such payroll deductions.
15. Adjustment in Case of Changes Affecting Common Stock. If the outstanding shares
of Common Stock are increased or decreased, or are changed into or are exchanged for a different
number or kind of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits, stock dividends or the
like, upon authorization of the Board or the Committee, the Board may make appropriate adjustments
in the number and/or kind of shares, and the per-share exercise price thereof, which may be issued
in the aggregate and to any participant upon exercise of Options granted under the Plan. The
Boards determinations under this Section 15 shall be conclusive and binding on all parties.
16. Merger. If the Company shall at any time merge or consolidate with another
corporation and the holders of the capital stock of the Company immediately prior to such merger or
consolidation continue to hold at least 51% by voting power of the capital stock of the surviving
corporation (Continuity of Control), the holder of each Option then outstanding will thereafter
be entitled to receive at the next Exercise Date upon the exercise of such Option for each share as
to which such Option shall be exercised the same securities or property to which a holder of one
share of the Common Stock was entitled upon and at the time of such merger or consolidation, and
the Administrator shall take such steps in connection with such merger or consolidation as the
Administrator shall deem necessary to assure that the provisions of Section 15 shall thereafter be
applicable, as nearly as reasonably may be, in relation to the said securities or property as to
which such holder of such Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into another corporation
which does not involve Continuity of Control, or of a sale of all or substantially all of
the assets of the Company while unexercised Options remain outstanding under the Plan, (i)
subject to the provisions of clauses (ii) and (iii), after the effective date of such transaction,
each holder of an outstanding Option shall be entitled, upon exercise of such Option, to receive in
lieu of shares of Common Stock, shares of such stock or other securities as the holders of shares
of Common Stock received pursuant to the terms of such transaction; or (ii) all outstanding Options
may be cancelled by the Administrator as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participants; or (iii) all
outstanding Options may be cancelled by the Administrator as of the effective date of any such
transaction, provided that notice of such cancellation shall be given to each holder of an Option,
and each holder of an Option shall have the right to exercise such Option in full based on payroll
deductions then credited to his or her account as of a date determined by the Board or a Committee,
which date shall not be less than three (3) business days preceding the effective date of such
17. Amendment of the Plan. The Board may at any time, and from time to time, amend
this Plan in any respect, except that (i) if the approval of any such amendment by the stockholders
of the Company is required by Section 423 of the Code, such amendment shall not be effected without
such approval, and (ii) in no event may any amendment be made which would cause the Plan to fail to
comply with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of Common Stock
specified in elections to be purchased during any Offering Period plus the number of shares
purchased during previous Offering Periods under this Plan exceeds the maximum number of shares
issuable or available under this Plan, the Administrator will allot the shares then available on a
pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by the Board.
Upon termination of this Plan all amounts in the accounts of participants shall be promptly
20. Governmental Regulations. The Company shall have no obligation to sell and
deliver shares of Common Stock under this Plan unless and until (i) it has taken all actions
required to register the shares of Common Stock under the Securities Act of 1933; (ii) any
applicable listing requirement of any stock exchange or the Nasdaq
Global or Global Select Market (to the extent
the Common Stock is then so listed or quoted) for the Common Stock is met; and (iii) all other
applicable provisions of state and federal law have been satisfied.
21. Governing Law
. The Plan shall be governed by Maryland
law except to the extent
that such law is preempted by federal law.
22. Available Shares. Shares may be issued upon exercise of an Option from authorized
but unissued Common Stock, from shares held in the treasury of the Company, or from any other
proper source. A maximum of 100,000 shares (subject to adjustment as set forth in Section 15)
shall be available for issuance under the Plan.
23. Notification Upon Sale of Shares. Each participant agrees, by entering the Plan,
to promptly give the Company notice of any disposition of shares purchased under the Plan where
such disposition occurs within two years after the date of grant of the Option pursuant to which
such shares were purchased. As a condition to the exercise of an Option, the Company may require
the participant exercising such Option to represent and warrant at the time of any such exercise
that the shares of Common Stock are being purchased only for investment and without
any present intention to sell or distribute such shares of Common Stock if such a
representation is required by applicable law.
24. Withholding. Each participant shall, no later than the date of the event creating
the tax liability, make provision satisfactory to the Administrator for payment of any taxes
required by law to be withheld in connection with any transaction related to Options granted to or
shares acquired by such participant pursuant to the Plan. The Company may deduct, to the extent
permitted by law, any such taxes from any payment of any kind otherwise due to a participant.
25. Effective Date and Approval of Shareholders. The Plan shall be effective July 1,
2006, subject, however, to approval of the Plan by the stockholders of the Company as required by
Section 423 of the Code, which stockholder approval must occur within twelve months of the adoption
of the Plan by the Board. No Option granted under this Plan may be exercised unless or until such
stockholder approval has been obtained.
||Adopted by the Board of Directors on
||April 17, 2006
||Approved by the stockholders on
||June 8, 2006
||Amended by the Board of Directors effective
||July 1, 2006