Exhibit 10.3

 

ENTRUST, INC.

 

Stock Appreciation Right Agreement

 

Granted Under the Amended and Restated 1996 Stock Incentive Plan

 

1) Grant of Stock Appreciation Right. This agreement evidences the grant by
Entrust, Inc., a Maryland corporation (the “Company”), on
                         (“Grant Date”) to                         , (the
“Participant”), of a stock appreciation right (“Stock Appreciation Right”), on
the terms provided herein and in the Company’s Amended and Restated 1996 Stock
Incentive Plan (the “Plan”), for a total of                          shares of
common stock, $0.01 par value, of the Company (“Common Stock”) (the “Shares”) at
                         per Share (“Exercise Price”). Unless earlier
terminated, this Stock Appreciation Right shall expire on the seventh
anniversary of the Grant Date (the “Expiration Date”). In the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Award Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Award Agreement.

 

2) Vesting Schedule. This Stock Appreciation Right shall vest, in whole or in
part, as to one-third of the original number of Shares on the first anniversary
of the Grant Date and as to an additional 1/24th of the remaining number of
Shares on the day of the month of the Grant Date for each of the next 24 months
thereafter.

 

Accelerated vesting. Upon the occurrence of an Acquisition Event (as defined
herein), then the vesting schedule of this Stock Appreciation Right shall be
accelerated so that all of the number of shares which would otherwise have first
become exercisable on any vesting date scheduled to occur on or after the date
of such Acquisition Event shall become vested immediately prior to such
Acquisition Event. An “Acquisition Event” shall mean: (a) any merger or
consolidation which 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 or acquiring entity) less than 60% of the combined voting power of the
voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (b) any sale of all
or substantially all of the assets of the Company; (c) the complete liquidation
of the Company; or (d) the acquisition of “beneficial ownership” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934 (the “Exchange Act”) of
securities of the Company representing 60% or more of the combined voting power
of the Company’s then outstanding securities (other than through an acquisition
of securities directly from the Company) by any “person,” as such term is used
in Sections 13(d) and 14(d) of the Exchange Act other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportion as their ownership of stock
of the Company.

 

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3) Exercise of Stock Appreciation Right. Each election to exercise this Stock
Appreciation Right shall be in writing, signed by the Participant and received
by the Company at its principal office, accompanied by this agreement and shall
state the election to exercise the Stock Appreciation Right and the number of
Shares in respect of which the Stock Appreciation Right is being exercised (the
“Exercised Shares”). This Stock Appreciation Right shall be deemed to be
exercised upon receipt by the Company of such fully executed notice.
Notwithstanding the foregoing, the Company may in its sole discretion establish
alternative means for Participant to exercise Stock Appreciation Rights,
including electronic forms using electronic signatures and interactive voice
response systems using PIN numbers, in a manner directed by the Company, and
this Stock Appreciation Right shall be deemed to be exercised upon fulfillment
of such alternative means.

 

This Stock Appreciation Right shall be exercisable for ninety (90) days after
Participant ceases to be a Service Provider, unless such termination is due to
Participant’s death, Disability or Retirement. If Participant ceases to be a
Service Provider due to Participant’s death, Disability, this Stock Appreciation
Right shall be exercisable for one (1) year after Participant ceases to be
Service Provider. If Participant ceases to be a Service Provider due to
Participant’s Retirement, this Stock Appreciation Right shall be exercisable
until the Expiration Date. Notwithstanding the foregoing, in no event may this
Stock Appreciation Right be exercised after the Expiration.

 

Upon exercising the Stock Appreciation Right, the Participant shall receive from
the Company, for each Share exercised, an amount equal to the lesser of:

 

  (i) the Fair Market Value of the Common Stock as of the date of such exercise,
minus the Exercise Price; and

 

  (ii) four times the Exercise Price.

 

Until Shares are issued in respect of the exercise of this Stock Appreciation
Right in accordance with Plan Section 7, the Participant shall not have any of
the rights or privileges of a stockholder of the Company in respect of any of
the Shares covered by this Stock Appreciation Right.

 

The Company’s obligation arising upon the exercise of this Stock Appreciation
Right shall be paid 100% in Shares. Shares withheld to satisfy withholding
obligations shall also be valued at its Fair Market Value on the date of
exercise. Any fractional Share due to a Participant upon exercise shall be
rounded down to the nearest whole Share.

 

4) Non-Transferability of Stock Appreciation Right. Except to the limited extent
provided in paragraph 5, this Stock Appreciation Right may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Participant only by Participant.
Notwithstanding the foregoing sentence, Participant may, in a manner and in
accordance with terms specified by the Board, transfer this Stock Appreciation
Right to Participant’s spouse, former spouse or dependent pursuant to a
court-approved domestic relations order which relates

 

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to the provision of child support, alimony payments or marital property rights.
Subject to the limitation on the transferability of this grant contained herein,
this Agreement will be binding upon and inure to the benefit of the heirs,
legatees, legal representatives, successors and assigns of the parties hereto.

 

5) Withholding Taxes. Notwithstanding any contrary provision of this Award
Agreement, no certificate representing the Shares will be issued to the
Participant, unless and until satisfactory arrangements (as determined by the
Board) will have been made by the Participant with respect to the payment of
income, employment and other taxes which the Company determines must be withheld
with respect to such shares so issuable. The Board, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit the
Participant to satisfy such tax withholding obligation, in whole or in part
(without limitation) by one or more of the following: (a) paying cash, (b)
electing to have the Company withhold otherwise deliverable shares of Common
Stock having a Fair Market Value equal to the minimum amount required to be
withheld, (c) delivering to the Company already vested and owned shares of
Common Stock having a Fair Market Value equal to the amount required to be
withheld, or (d) selling a sufficient number of such shares of Common Stock
otherwise deliverable to Participant through such means as the Company may
determine in its sole discretion (whether through a broker or otherwise) equal
to the amount required to be withheld. Participant acknowledges and agrees that
the Company may refuse to honor the exercise and refuse to deliver Shares if
such withholding amounts are not delivered at the time of exercise.

 

6) Rights as Stockholder. Neither the Participant nor any person claiming under
or through the Participant will have any of the rights or privileges of a
stockholder of the Company in respect of any Shares deliverable hereunder unless
and until certificates representing such Shares will have been issued, recorded
on the records of the Company or its transfer agents or registrars, and
delivered to the Participant.

 

7) No Effect on Continued Service. Participant acknowledges and agrees that the
vesting of shares pursuant to the vesting schedule hereof is earned only by
continuing as an employee, consultant or non-employee director at the will of
the company (and not through the act of being hired, being granted an option or
purchasing shares hereunder). Participant further acknowledges and agrees that
this agreement, the transactions contemplated hereunder and the vesting schedule
set forth herein do not constitute an express or implied promise of continued
engagement as an employee, consultant or non-employee director for the vesting
period, for any period, or at all, and will not interfere with Participant’s
right or the company’s right to terminate Participant’s relationship as an
employee, consultant or non-employee director at any time, with or without
cause.

 

8) Tax Consultation. Participant understands that Participant may suffer adverse
tax consequences as a result of Participant’s exercise hereunder. Participant
represents that Participant has consulted with any tax consultants Participant
deems

 

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advisable in connection with the purchase or disposition of the Shares and that
Participant is not relying on the Company for any tax advice.

 

9) Address for Notices. Any notice to be given to the Company under the terms of
this Agreement will be addressed to the Company at Entrust, Inc., One Hanover
Park, Suite 800, 16633 Dallas Parkway, Addison, Texas 75001 or at such other
address as the Company may hereafter designate in writing.

 

10) Board Authority. The Board will have the power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret or
revoke any such rules (including, but not limited to, the determination of
whether or not any Restricted Stock Units have vested). All actions taken and
all interpretations and determinations made by the Board in good faith will be
final and binding upon Participant, the Company and all other interested
persons. No member of the Board or its Committee administering the Plan will be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or this Award Agreement.

 

11) Agreement Severable. In the event that any provision in this Award Agreement
will be held invalid or unenforceable, such provision will be severable from,
and such invalidity or unenforceability will not be construed to have any effect
on, the remaining provisions of this Award Agreement.

 

12) Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Award Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Participant
with respect to the subject matter hereof, and may not be modified adversely to
the Participant’s interest except by means of a writing signed by the Company
and Participant. This Award Agreement is governed by Maryland law except for
that body of law pertaining to conflict of laws.

 

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By Participant’s signature and the signature of the Company’s representative
below, Participant and the Company agree that this Stock Appreciation Right is
granted under and governed by the terms and conditions of the Plan and this
Award Agreement. Participant has reviewed the Plan and this Award Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Award Agreement and fully understands all provisions of the Plan
and Award Agreement. Participant hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
relating to the Plan and Award Agreement. Participant further agrees to notify
the Company upon any change in the residence address indicated below.

 

PARTICIPANT

      

ENTRUST, INC.

          

Signature

      

By

          

Print Name

      

Title

 

DATED:                                     
                                                        

                   

Residence Address

        

 

 

[Signature page to Stock Appreciation Right Agreement]

 

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