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Exhibit 10.6
RESTRICTED STOCK AGREEMENT
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This AGREEMENT (the "Agreement") is made as of May 11, 1998 (the "Date
of Grant") by and between Conley, Canitano & Assoc., Inc., an Ohio corporation
(the "Company"), and Paul A. Farmer (together with any successors in interest,
the "Grantee").
1. GRANT OF RESTRICTED STOCK. Subject to and upon the terms, conditions,
and restrictions set forth in this Agreement and in the Company's 1997 Equity
and Performance Incentive Plan (the "Plan"), the Company hereby grants to the
Grantee as of the Date of Grant 7,695 shares of Restricted Stock. The Restricted
Stock shall be fully paid and nonassessable and shall be represented by a
certificate registered in the name of the Grantee and bearing a legend referring
to the restrictions hereinafter set forth. The Grantee shall pay the Company
$46.70 for each share of Restricted Stock (the "Purchase Price"), payable on the
Date of Grant by issuing a Promissory Note to the Company in the form attached
hereto as Exhibit A.
2. RESTRICTIONS ON TRANSFER OF RESTRICTED STOCK. The shares of
Restricted Stock may not be transferred, sold, pledged, exchanged, assigned or
otherwise encumbered or disposed of by the Grantee, except to the Company, until
they have become nonforfeitable in accordance with Section 3; provided, however,
that the Grantee's interest in the Restricted Stock may be transferred at any
time by will or the laws of descent and distribution. Any purported transfer,
encumbrance or other disposition of the Restricted Stock that is in violation of
this Section 2 shall be null and void, and the other party to any such purported
transaction shall not obtain any rights to or interest in the Restricted Stock.
3. VESTING OF RESTRICTED STOCK. On each anniversary of the Date of
Grant, the number of shares of Restricted Stock equal to thirty three and one
third percent (33.3%) multiplied by the initial number of shares of Restricted
Stock specified in this Agreement shall become nonforfeitable on a cumulative
basis until all of the shares of Restricted Stock have become nonforfeitable,
subject to the Grantee's remaining in the continuous employ of the Company. For
the purposes of this Agreement the continuous employment of the Grantee with the
Company shall not be deemed to have been interrupted, and the Grantee shall not
be deemed to have ceased to be an employee of the Company, by reason of the
transfer of the Grantee's employment among the Company and its Subsidiaries or a
leave of absence of not more than 30 days unless otherwise approved by the Board
or a committee thereof
4. ACCELERATION OF RESTRICTED STOCK AND EFFECT OF CERTAIN TRANSACTIONS.
Notwithstanding anything herein to the contrary, all the Restricted Stock
covered by this Agreement will become immediately nonforfeitable in the event of
a Change in Control of the Company.
5. COMPANY'S RIGHT OF REPURCHASE.
(a) REPURCHASE RIGHT. The Company shall have the right (the
"Repurchase Right") to repurchase some or all of the Restricted Stock which have
become nonforfeitable ("Vested Shares") from the Grantee, upon the occurrence of
any of the events specified in Section 5(b) below (the "Repurchase Event"). The
Repurchase Right may be exercised by the Company
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within 180 days following the date of such event (the "Repurchase Period"). The
Repurchase Right shall be exercised by the Company by giving the holder written
notice on or before the last day of the Repurchase Period of its intention to
exercise the Repurchase Right, and, together with such notice, tendering to the
holder an amount equal to the greater of the Purchase Price or the fair market
value of the shares, determined as provided in Section 5(c). The Company may
assign the Repurchase Right to one or more persons. Upon exercise of the
Repurchase Right in the manner provided in this Section 5(a), the Grantee shall
deliver to the Company the stock certificate or certificates representing the
Restricted Stock being repurchased, duly endorsed and free and clear of any and
all liens, charges and encumbrances.
If shares of Restricted Stock are not purchased under the Repurchase
Right, the Grantee will hold any such shares in his possession subject to all of
the provisions of this Section 5 and Section 6 hereof
(b) COMPANY'S RIGHT TO EXERCISE REPURCHASE RIGHT. The Company shall
have the Repurchase Right in the event that any of the following events shall
occur;
(i) The termination of the Grantee's employment with the
Company and its Subsidiaries for any reason whatsoever,
regardless of the circumstances thereof, and including
without limitation upon death, disability, retirement,
discharge or resignation for any reason, whether
voluntary or involuntarily; or
(ii) The (x) filing of a voluntary petition under any
bankruptcy or insolvency law, or a petition for the
appointment of a receiver or the making of an assignment
for the benefit of creditors, with respect to the
Grantee, or (y) the Grantee being subjected
involuntarily to a petition or assignment or to an
attachment or other legal or equitable interest with
respect to his or her assets, which involuntary petition
or assignment or attachment is not discharged within 60
days after its date and (z) the Grantee being subject to
a transfer of Restricted Stock by operation of law,
except by reason of death.
(c) DETERMINATION OF FAIR MARKET VALUE. The fair market value of the
Restricted Stock shall be, for purposes of this Section 5 and Section 6,
determined as of the date of the Repurchase Event by a Special Committee of the
Company's Board of Directors. The Special Committee shall meet annually and
determine the Company's fair market value in the event the Company has not
conducted an initial public offering of its equity securities.
(d) EXPIRATION OF COMPANY'S REPURCHASE RIGHT. The Repurchase Right
shall remain in effect until the closing of the first public offering of the
Company's equity securities registered under the Securities Act of 1933, as
amended, or any successor statute, or such other event as a result of which
outstanding equity securities of the Company (or any successor entity) shall be
publicly traded (an "Initial Public Offering").
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6. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) EXERCISE OF RIGHT. If the Company does not elect to purchase any
Vested Shares within the period specified in Section 5(a) and thereafter the
Grantee desires to transfer all or any part of the Vested Shares to any person
other than the Company (an "Offeror"), the Grantee shall: (i) obtain in writing
an irrevocable and unconditional bona fide offer (the "Offer") for the purchase
thereof from the Offeror; and (ii) give written notice (the "Option Notice") to
the Company setting forth the Grantee's desire to transfer such shares, which
Option Notice shall be accompanied by a photocopy of the Offer and shall set
forth the name and address of the Offeror and the price and terms of the Offer.
Upon receipt of the Option Notice, the Company shall have an assignable option
to purchase any or all of such Vested Shares (the "Company Option Shares")
specified in the Option Notice, such option to be exercisable by giving, within
10 days after receipt of the Option Notice, a written counter notice to the
Grantee. If the Company elects to purchase any or all of such Company Option
Shares, it shall be obligated to purchase, and the Grantee shall be obligated to
sell to the Company, such Company Option Shares at the price and terms indicated
in the Offer within 30 days from the date of delivery by the Company of such
counter-notice.
(b) SALE OF VESTED SHARES TO OFFEROR. The Grantee may, for 60 days
after the expiration of the 10-day option period as set forth in Section 6(a),
sell to the Offeror, pursuant to the terms of the Offer, any or all of such
Company Option Shares not purchased or agreed to be purchased by the Company or
its assignee. If any or all of such Company Option Shares are not sold pursuant
to an Offer within the time permitted above, the unsold Company Option Shares
shall remain subject to the terms of Section 5 and Section 6.
(c) ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. If there shall be
any change in the Common Stock of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination or
exchange of shares, or the like, the restrictions contained in this Section 6
shall apply with equal force to additional and/or substitute securities, if any,
received by the Grantee in exchange for, or by virtue of his ownership of Vested
Shares.
(d) FAILURE TO DELIVER VESTED SHARES. If the Grantee fails or
refuses to deliver on a timely basis duly endorsed certificates representing
Company Option Shares to be sold to the Company or its assignee pursuant to this
Section 6, the Company shall have the right to deposit the purchase price for
such Company Option Shares in a special account with any bank or trust company,
giving notice of such deposit to the Grantee, whereupon such Company Option
Shares shall be deemed to have been purchased by the Company. All such monies
shall be held by the bank or trust company for the benefit of the Grantee. All
monies deposited with the bank or trust company but remaining unclaimed for two
years after the date of deposit shall be repaid by the bank or trust company to
the Company on demand, and the Grantee shall thereafter look only to the Company
for payment. The Company may place a legend on any certificate for Vested Shares
delivered to the Grantee reflecting the restrictions on transfer provided in
this Section 6.
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(e) EXPIRATION OF COMPANY'S RIGHT OF FIRST REFUSAL. The first
refusal rights of the Company set forth above shall remain in effect until the
closing of an Initial Public Offering.
7. FORFEITURE OF RESTRICTED STOCK. Subject to Section 3, and except as
the Board may determine on a case-by-case basis, any shares of Restricted Stock
that have not theretofore become nonforfeitable shall be forfeited if the
Grantee ceases to be continuously employed by the Company at any time prior to
the applicable vesting date. In the event of a termination for cause, all shares
of Restricted Stock on which the restrictions described in Section 2 have not
lapsed shall be forfeited. For this purpose, cause shall mean that the Grantee
has committed prior to termination of employment any of the following acts:
(a) an intentional act of fraud, embezzlement, theft, moral
turpitude, or any other material violation of law in connection with the
Grantee's duties or in the course of the Grantee's employment;
(b) intentional wrongful damage to material assets of the Company;
(c) intentional wrongful disclosure of material confidential
information of the Company;
(d) intentional wrongful engagement in any competitive activity that
would constitute a material breach of the duty of loyalty; or
(e) intentional breach of any stated material employment policy of
the Company.
In the event of a forfeiture, the Company shall pay to the Grantee the lesser of
(i) the fair market value of the forfeited shares or (ii) Purchase Price and the
certificate(s) representing the shares of Restricted Stock shall be cancelled.
8. DIVIDEND, VOTING AND OTHER RIGHTS. Except as otherwise provided
herein, the Grantee shall have all of the rights of a shareholder with respect
to the shares of Restricted Stock, including the right to vote such shares and
receive any dividends that may be paid thereon; provided, however, that any
additional Common Shares or other securities that the Grantee may become
entitled to receive pursuant to a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, separation or reorganization or
any other change in the capital structure of the Company shall be subject to the
same restrictions as the shares of Restricted Stock.
9. RETENTION OF STOCK CERTIFICATE(S) BY THE COMPANY. The certificate(s)
representing the Restricted Stock shall be held in custody by the Company,
together with a stock power endorsed in blank by the Grantee with respect
thereto, until those shares have become nonforfeitable in accordance with
Section 3. In order for the Grant under this Agreement to be effective, the
Grantee must sign and return the attached stock powers to the attention of the
Company's President.
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10. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement shall
confer upon the Grantee any right with respect to continuance of employment by
the Company, nor limit or affect in any manner the right of the Company to
terminate the employment or adjust the compensation of the Grantee.
11. TAXES AND WITHHOLDING. To the extent that the Company shall be
required to withhold any federal, state, local or foreign taxes in connection
with the issuance or vesting of any restricted or nonrestricted Common Shares or
other securities pursuant to this Agreement, and the amounts payable to the
Company for such withholding are insufficient, it shall be a condition to the
issuance or vesting of the Common Shares, as the case may be, that the Grantee
shall pay such taxes or make provisions that are satisfactory to the Company for
the payment thereof The Grantee may elect to satisfy all or any part of any such
withholding obligation by surrendering to the Company a portion of the Vested
Shares that are issued or transferred to the Grantee hereunder, and the Common
Shares so surrendered by the Grantee shall be credited against any such
withholding obligation at the fair market value per Common Share of such shares
on the date of such surrender.
12. COMPLIANCE WITH LAW. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Company shall not be
obligated to issue any restricted or nonrestricted Common Shares or other
securities pursuant to this Agreement if the issuance thereof would result in a
violation of any such law.
13. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Grantee under this Agreement without the Grantee's consent.
14. SEVERABILITY. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof and the remaining provisions hereof shall continue
to be valid and fully enforceable.
15. RELATION TO PLAN. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistency between the provisions
of this Agreement and the Plan, the Plan shall govern. Capitalized terms used
herein without definition shall have the meanings assigned to them in the Plan.
The Board, acting pursuant to the Plan, as constituted from time to time, shall,
except as expressly provided otherwise herein, have the right to determine any
questions that arise in connection with this Agreement.
16. GOVERNING LAW. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of Ohio.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized officer and Grantee has also executed this
Agreement in duplicate, as of the day and year first above written.
CONLEY, CANITANO & ASSOC., INC.
By: /s/ Nicholas A. Canitano
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Title: Chairman & CEO
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The undersigned Grantee hereby (i) acknowledges receipt of an executed
original of this Agreement and (ii) accepts the right to receive the Common
Shares or other securities covered hereby, subject to the terms and conditions
of the Plan and the terms and conditions hereinabove set forth.
/s/ Paul A. Farmer
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Paul A. Farmer
Date: 5-11-98
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Exhibit A
PROMISSORY NOTE
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$359,356.50 May 11, 1998
Paul A. Farmer (the "Grantee"), FOR VALUE RECEIVED, hereby promises to
pay to the order of Conley, Canitano & Assoc., Inc., an Ohio corporation (the
"Company "), the principal amount of Three Hundred Fifty-Nine Thousand Three
Hundred Fifty-Six Dollars and Fifty Cents ($359,356.50), in lawful money of the
United States of America. Such principal amount is due and payable in full on
May 11, 2004 (the "Maturity Date").
The Grantee also promises to pay interest on the unpaid principal amount
hereof in like money at the office of the Company at an annual rate of 6%; said
interest to accrue for the period beginning on the date hereof and ending on and
including the Maturity Date or an earlier date on which the principal amount
hereof is paid in full. The accrued interest is payable on (i) June 1 and
December 1 of each year prior to the Maturity Date beginning on December 1,1998,
and (Ii) the Maturity Date. Interest shall be calculated based on a 360-day year
of twelve 304ay months, but in no event shall the rate of interest exceed the
maximum rate, if any, allowable under law.
The Grantee may at any time and from time to time prepay the unpaid
principal amount hereof, in whole or in part, without premium or penalty.
The Grantee shall prepay this Promissory Note in an amount equal to each
bonus, if any, paid by the Company, or any affiliate or subsidiary of the
Company to the Grantee on or prior to the Maturity Date (it being understood
that all such prepayments shall be mede net of any and all withholding taxes
associated with each such bonus).
At any time during the continuance of any Event of Default (as defmed
below), the Company, by written notice to the Grantee, may declare the principal
of and accrued interest in respect of this Promissory Note to be, whereupon the
same will become, forthwith due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived by the
Grantee provided that if an Event of Default described in clause (li) below
occurs in respect of the Grantee, the result which would otherwise occur only
upon the giving of written notice by the Company to the Grantee as specified in
this paragraph will occur automatically without the giving of any such notice.
For the purposes of this Promissory Note, the term "Event of Default" means (i)
the failure by the Grantee to pay when due any amount owed to the Company under
this Promissory Note; or (ii) the Grantee's flling a petition or otherwise
voluntarily commencing a case or proceeding or filing an answer or other
pleading in any proceeding seeking relief under any federal or state bankruptcy,
imolvency or debtors' reorganization law, being the voluntary or involuntary
subject of an order for relief by any court under any such law, or being
adjudicated a "bankrupt," "debtor" or "insolvent" under any such law, or there
being appointed under any such law, a "trustee," "receiver" or "custodian" to
manage the Grantee's business or properties, or there being commenced under any
such law a case or proceeding proposing such an order for relief, adjudication
or appointment with respect to the Grantee or the Grantee's business, which
proceeding is consented to by the Grantee or which is not dismissed within 90
days after being commenced or (iii) the Grantee ceases to be continuously
employed by the Company; provided, however, in the event the Grantee ceases to
be continuously employed within one year following a Change in Control (as
defined in the Company's 1997 Equity and Performance Incentive Plan) of the
Company, this Note shall not be due and payable until six months after Grantee
ceases to be an employee, advisor or consultant of the Company.
The Grantee hereby waives presentment, protest or notice of any kind in
connection with this Note. This Note must be construed in accordance with and be
governed by the law of the State of Ohio.
/s/ Paul A. Farmer
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Paul A. Farmer