Exhibit 10.3
Form of Restricted Stock Award Agreement (Executives)
RESTRICTED STOCK AWARD AGREEMENT
THIS RESTRICTED STOCK AWARD AGREEMENT (this "AGREEMENT") is made and entered
into by and between Citadel Security Software Inc., a Delaware corporation (the
"COMPANY"), and _________ (the "RECIPIENT"), effective as of December 22, 2005
(the "DATE OF AWARD").
1. GRANT OF RESTRICTED STOCK AWARD. The Company hereby awards (the "AWARD")
to the Recipient and the Recipient hereby accepts, subject to the terms and
conditions hereof including the forfeiture provisions and other restrictions set
forth herein, 50,000 shares (the "RESTRICTED STOCK") of the Company's common
stock (the "COMMON STOCK").
2. ADMINISTRATION. This Agreement shall be administered and may be
definitively interpreted by the Board of Directors (or any committee of the
Board of Directors which the Board has delegated such authority, the
"ADMINISTERING BODY"), and the Recipient agrees that the decisions of such
Administering Body concerning the administration and interpretation of this
Agreement (but not as an amendment hereto) shall be final, binding and
conclusive on all persons.
3. VESTING; CHANGE IN CONTROL; ADJUSTMENT PROVISIONS.
(a) VESTING SCHEDULE. On the first anniversary of the date of grant,
the forfeiture and other ownership restrictions imposed herein shall
terminate with respect to the shares of Restricted Stock granted under
this Agreement below if the Recipient's employment with the Company
and/or any Affiliated Entity has not terminated, subject to the
accelerated vesting provisions set forth in Section 3(b) below. Until
such time as the shares of Restricted Stock vest, the Recipient hereby
acknowledges that he does not hold title to such shares of Restricted
Stock and such shares are subject to forfeiture upon the terms and
conditions set forth in this Agreement, and the Recipient further
acknowledges the Company's right to cancel the certificate or
certificates issued in the name of the Recipient and representing the
unvested portion of the Restricted Shares in the event of such
forfeiture. The "VESTED PORTION" of the Award as of any particular
date shall be the cumulative total of all shares for which the
forfeiture or other ownership restrictions imposed herein shall have
lapsed as of that date.
(b) EFFECT OF CHANGE IN CONTROL. Notwithstanding anything to the
contrary contained herein, the Restricted Stock shall fully vest
immediately following a Change of Control (as hereinafter defined) of
the Company unless the Recipient shall agree otherwise.
(c) CHANGE IN CONTROL DEFINED. "Change in Control" means the following
and shall be deemed to occur if any of the following event specified
in (i), (ii), (iii) or (iv) occur:
(i) any person becomes, after the Date of Award, the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended), directly or indirectly,
of fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities; or
(ii) during any period of two (2) consecutive years, individuals,
who at the beginning of such period, constitute the Board and any new
Director of the Company (other than a Director designated by a person
who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition)
whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the Directors of the Company then still in office who either
were Directors of the Company at the beginning of the two-year period
or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of
the Board;
(iii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more
than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however,
that a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
person acquires more than fifty percent (50%) of the combined voting
power of the Company's then outstanding securities or a merger or
consolidation primarily effected to change the Company's jurisdiction
of incorporation shall not constitute a Change in Control, and
provided further a merger or
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consolidation in which the Company is the surviving entity (other than
as a wholly owned subsidiary of another entity) and in which the Board
of Directors of the Company or the successor to the Company after
giving effect to the merger or consolidation, is comprised of a
majority of members who are either (A) Directors of the Company
immediately preceding the merger or consolidation, or (B) appointed to
the Board of Directors by the Company (or the Board) as an integral
part of such merger or consolidation, shall not constitute a Change in
Control; or
(iv) approval by the stockholders of the Company or any order by
a court of competent jurisdiction of a plan of liquidation of the
Company, or the sale or disposition by the Company of all or
substantially all of the Company's assets other than (A) the sale or
disposition of all or substantially all of the assets of the Company
to a person or persons who beneficially own, directly or indirectly,
at least fifty percent (50%) or more of the combined voting power of
the outstanding voting securities of the Company at the time of the
sale; or (B) pursuant to a dividend in kind of spin-off type
transaction, directly or indirectly, of such assets to the
stockholders of the Company.
(d) TRANSACTIONS NOT INVOLVING A CHANGE IN CONTROL. If the Company
shall consummate any merger, consolidation, business combination,
other reorganization or other similar transaction (a "Reorganization")
not involving a Change in Control in which holders of shares of Common
Stock are entitled to receive in respect of such shares any
securities, cash or other consideration (including without limitation
a different number of shares of Common Stock), then the subsequent
vesting of each unvested share of Restricted Stock under this
Agreement shall at such time be deemed to be a vesting of the kind and
amount of securities, cash and/or other consideration receivable upon
such Reorganization by a holder of a share of the Company's Common
Stock, and any adjustments will be made to the terms of this
Agreement, in the sole discretion of the Administering Body as it may
deem appropriate to give effect to the Reorganization.
(e) ADJUSTMENT PROVISIONS.
(i) If (A) the outstanding shares of Common Stock are increased,
decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares
or other securities are distributed in respect of such shares of
Common Stock or any stock or securities received with respect to such
Common Stock), through merger, consolidation, sale or exchange of all
or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split, spin-off, split-off or other stock or securities
received with respect to such Common Stock (or any stock or securities
received with respect to such Common Stock), or (B) the value of the
outstanding shares of Common Stock is reduced by reason of an
extraordinary dividend payable in cash or property, an appropriate
adjustment may be made in the number and kind of shares or other
securities the Recipient is to receive in lieu of the unvested
portions of the Restricted Stock.
(ii) No fractional interests will be issued under this Agreement
resulting from any adjustments, but the Administering Body, in its
sole discretion, may make a cash payment in lieu of any fractional
shares of Common Stock or other securities issuable as a result of
such adjustments.
(iii) Any adjustment pursuant to this Section 3(e) shall be made
by the Administering Body, in its discretion, to preserve the benefits
or potential benefits intended to be made available under this
Agreement or with respect to any unvested portions of the Restricted
Stock or otherwise necessary to reflect any capital change or other
event described in Section 3(e). The determination made by the
Administering Body with respect to the foregoing shall be final,
binding and conclusive upon the Recipient.
4. TRANSFERABILITY OF AWARDS
(a) Except as otherwise provided by this Agreement or by the
Administering Body, no unvested portion of the Restricted Stock may be
sold, pledged, assigned, transferred, encumbered, alienated,
hypothecated or otherwise disposed of (whether voluntarily or
involuntarily or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including
bankruptcy) in any manner other than by will or the laws of descent
and distribution or, subject to the consent of the Administering Body,
pursuant to a Domestic Relations Order ("DRO") as defined by the
Internal Revenue Code ("IRC") or Title I of the Employee Retirement
Income Security Act of 1974 ("ERISA") or the rules thereunder, unless
and until such portion of the Restricted Stock has become vested. Any
attempted disposition of the unvested portions of the Restricted Stock
or any interest therein shall be null and void and of no effect,
except to the extent that such disposition is permitted by the
preceding sentence.
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(b) Except as otherwise provided by the Administering Body, during the
lifetime of the Recipient, only he or his court appointed guarding
holds the right to receive the shares of Restricted Stock as they vest
(or any portion thereof), unless such right has been transferred in
accordance with paragraph (c) of this Section 4 or, with the consent
of the Administering Body, pursuant to a DRO. After the death of the
Recipient, the unvested portion of the Restricted Stock may be
released to the beneficiary most recently named by the Recipient in a
written designation thereof filed with the Company, to the extent
permitted by this Agreement, or, in the absence of a validly
designated beneficiary, his or her personal representative or by any
person empowered to do so under the deceased Recipient's will or under
the then applicable laws of descent and distribution. In the event any
Restricted Stock is to be released, the executors, administrators,
heirs or distributees of the estate of the deceased Recipient, or the
Recipient's beneficiary, or the incapacitated Recipient's guardian, or
the transferee of such Restricted Stock, in any case pursuant to the
terms and conditions of this Agreement, and in accordance with such
terms and conditions as may be specified from time to time by the
Administering Body, the Company shall be under no obligation to
release any shares of the Restricted Stock unless and until the
Administering Body is satisfied that the person or persons exercising
or to receive the shares of Restricted Stock is the duly appointed
legal representative of the deceased Recipient's estate or the proper
legatee or distributee thereof.
(c) The Administering Body may, in its discretion, permit the transfer
of shares of the Restricted Stock to a person other than the Recipient
who received the grant of such Restricted Stock in accordance with
such terms and conditions as the Administering Body may specify from
time to time.
5. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) FORFEITURE FOR JUST CAUSE DISMISSAL, ETC. Subject to Sections 5(b)
and 5(c) and except as otherwise provided in a written agreement
between the Company and/or an "Affiliated Entity" (as defined below)
and the Recipient, which may be entered into at any time before or
after termination of employment of the Recipient, in the event of (1)
a "Just Cause Dismissal" (as defined below) of the Recipient from
employment with the Company or any Affiliated Entity, or (2) the
death, disability or retirement of the Recipient or (3) the voluntary
resignation of the Recipient (whether or not for good cause) then, in
any such event, all of the Recipient's unvested shares of Restricted
Stock shall be immediately forfeited and any and all rights the
Recipient may have had in such unvested shares of Restricted Stock
shall become void, as of the date of such event. Recipient shall not,
however, lose any rights to Restricted Stock then vested. For purposes
of this Agreement, an "Affiliated Entity" shall mean (i) any
corporation or limited liability company, other than the Company, in
an unbroken chain of corporations or limited liability companies
ending with the Company if each corporation or limited liability
company owns stock or membership interests (as applicable) possessing
more than fifty percent (50%) of the total combined voting power of
all classes of stock in one of the other corporations or limited
liability companies in such chain; (ii) any corporation, trade or
business (including, without limitation, a partnership or limited
liability company) which is more than fifty percent (50%) controlled
(whether by ownership of stock, assets or an equivalent ownership
interest or voting interest) by the Company or another Affiliated
Entity; or (iii) any other entity, approved by the Company, for
purposes of this Agreement, as an Affiliated Entity in which the
Company or any other Affiliated Entity has a material equity interest.
A "Just Cause Dismissal" shall mean a termination of the Recipient's
employment for any of the following reasons: (1) the Recipient
violates any reasonable rule or regulation of the Board, the Company's
Chief Executive Officer or the Recipient's superiors that results in
material damage to the Company or an Affiliated Entity or which, after
written notice to do so, the Recipient fails to correct within a
reasonable time; (2) any willful misconduct or gross negligence by the
Recipient in the material responsibilities assigned to the Recipient;
(3) any willful failure to perform the Recipient's job as required to
meet the objectives of the Company and/or an Affiliated Entity; (4)
any wrongful conduct of the Recipient that has a material adverse
impact on the Company or an Affiliated Entity or which constitutes a
misappropriation of assets of the Company or an Affiliated Entity; (5)
the Recipient's performing services for any other person or entity
that competes with the Company and/or an Affiliated Entity while the
Recipient is employed by the Company or an Affiliated Entity, without
the express written approval of the Chief Executive Officer of the
Company or an Affiliated Entity, as applicable; or (6) any other
conduct that the Administering Body determines constitutes just cause
for dismissal; provided, however, that if the Recipient is party to an
employment agreement with the Company and/or an Affiliated Entity
providing for just cause dismissal (or some comparable notion) of the
Recipient from his or her employment with the Company or an Affiliated
Entity, "Just Cause Dismissal" for purposes of this Agreement shall
have the same meaning as ascribed thereto or to such comparable notion
in such employment agreement.
(b) VESTING FOR REASONS OTHER THAN AS SPECIFIED IN SECTION 5(A).
Except as otherwise provided in a written agreement between the
Company and/or an Affiliated Entity and the Recipient, which may be
entered into at any time before or after termination of employment, in
the event of the Recipient's termination of employment with the
Company or any Affiliated Entity for any reason other than as
specified in Section 5(a) (for example, upon termination by the
Company for a reason other than Just Cause Dismissal), the Recipient's
unvested shares
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of Restricted Stock shall be immediately and fully vested and
Recipient shall then maintain all rights with respect to such
Restricted Stock.
(c) DISCRETIONARY ALTERATION OF VESTING. Notwithstanding anything to
the contrary in Section 5(a), the Administering Body may, in its
discretion, elect to accelerate the vesting of, or remove the
restrictions applicable to, all or any portion of the Restricted Stock
that had not become vested on or prior to the date of such
termination, in the event of a termination of employment due to the
Recipient's death or permanent disability, or in the event of
retirement or otherwise.
(d) TRANSFER; LEAVE OF ABSENCE. For purposes of this Agreement, the
transfer by a Recipient to the employment or engagement of (i) the
Company from an Affiliated Entity, (ii) from the Company to an
Affiliated Entity or (iii) from one Affiliated Entity to another
Affiliated Entity (including, with respect to consultants, the
assignment between the Company and an Affiliated Entity or between two
Affiliated Entities, as applicable, of an agreement pursuant to which
such services are rendered) or an approved leave of absence for
military service, sickness, or for any other purpose approved by the
Company, shall not be deemed a termination of employment or engagement
of the Recipient, as the case may be. Whether the Recipient's
employment or service with the Company or any Affiliated Entity has
terminated, and, if so, whether such termination constituted Just
Cause Dismissal, shall be determined by the Company, in its good faith
discretion, in accordance with this Agreement, and any such
determination shall be final, binding and conclusive upon all persons
and entities.
(e) NO EMPLOYMENT OR OTHER CONTINUING RIGHTS. Nothing contained in
this Agreement shall confer upon the Recipient (i) any right to
continue in the employ (or other business relationship) of the Company
or any Affiliated Entity or constitute any contract or agreement of
employment or engagement, or interfere in any way with the right of
the Company or any Affiliated Entity to reduce the Recipient's
compensation or other benefits or to terminate the employment of the
Recipient, with or without cause; or (ii) any right to exercise or
claim his rights under this Agreement otherwise than in accordance
with the express terms and conditions of this Agreement. Except as
expressly provided in this Agreement, the Company and any Affiliated
Entity, as applicable, shall have the right to deal with the Recipient
in the same manner as if this Agreement did not exist, including,
without limitation, with respect to all matters related to the hiring,
retention, discharge, compensation and conditions of the employment or
engagement of the Recipient. Any questions as to whether and when
there has been a termination of the Recipient's employment or
engagement, the reason (if any) for such termination, and/or the
consequences thereof under the terms of this Agreement or any
statement evidencing the Award of Restricted Stock pursuant to this
Agreement shall be determined by the Administering Body, and the
Administering Body's determination thereof shall be final, conclusive
and binding upon the Recipient.
6. MAINTENANCE BY THE COMPANY. Until a share of Restricted Stock vests, the
stock certificate representing such shares of Restricted Stock (together with
any shares received by the holder with respect to such shares of Restricted
Stock as a result of stock dividends, stock splits or other forms of
recapitalization) shall be maintained by the Company pursuant to and in
furtherance of the terms hereof.
7. RESTRICTIONS. Until a share of Restricted Stock vests,
(a) such share of Restricted Stock (including any shares received by
the holder with respect to such share of Restricted Stock as a result
of stock dividends, stock splits or any other forms of
recapitalization) may not be sold, assigned, conveyed, gifted,
pledged, hypothecated or otherwise transferred in any manner other
than in conformity with Section 4 of this Agreement;
(b) the Recipient shall not be entitled to exercise voting rights with
respect to such share of Restricted Stock (including any shares
received by the holder with respect to such share of Restricted Stock
as a result of stock dividends, stock splits or other forms of
recapitalization), and shall hereby be deemed to have granted to the
Chief Executive Officer of the Corporation an irrevocable proxy to
vote such shares; and
(c) the Recipient shall not be entitled to receive possession of any
dividends or other distributions paid or made with respect to such
share of Restricted Stock, which dividends or other distributions
(including any shares received by the holder with respect to such
shares of Restricted Stock as a result of stock dividends, stock
splits or other forms of recapitalization) shall be deemed forfeited
by the Recipient.
8. NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if (a) personally
delivered, (b) sent by nationally-recognized overnight courier or (c) sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows: (i) if to Recipient, at the address in the Company's
records; or (ii) if to the Company, at the address set forth in the signature
page hereto, or in either case, to such other address as the party to whom
notice
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is to be given may have furnished to each other party in writing in accordance
herewith. Any such communication shall be deemed to have been given (x) when
delivered, if personally delivered, (y) on the first Business Day (as
hereinafter defined) after dispatch, if sent by nationally recognized overnight
courier and (z) on the third Business Day following the date on which the piece
of mail containing such communication is posted, if sent by mail. As used
herein, "Business Day" means a day that is not a Saturday, Sunday or a day on
which banking institutions in the city to which the notice or communication is
to be sent are not required to be open.
9. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, regardless of the law that
might be applied under principles of conflict of laws.
IN WITNESS WHEREOF, this Agreement has been executed on behalf of the Company by
its duly authorized officer and by the Recipient all as of the day and year
first above written.
CITADEL SECURITY SOFTWARE, INC. GRANTEE:
By: ______________________________ ____________________________
Xxxxxx X. Xxxxxxx, Chairman, Name: __________________
President, and Chief
Executive Officer
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