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
1
<PAGE>
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 eq
