NONQUALIFIED STOCK OPTION
THIS NONQUALIFIED STOCK OPTION, granted this 12th day of July, 1996, by
AMERICA SERVICE GROUP INC., a Delaware corporation (the "Company"), to Xxxxxxx
Xxxxxxxx (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Optionee is an employee of the Company and the Company and the
employee are parties to an Employment Agreement dated July 12, 1996; and
WHEREAS, the Compensation Committee of the Board of Directors of the Company
is of the opinion that the interests of the Company will be advanced by
encouraging and enabling those individuals upon whose judgement, initiative and
efforts of the Company is largely dependent for the successful conduct of the
business of the Company, to acquire or increase their proprietary interest in
the Company, thus providing them with a more direct stake in its welfare and
assuring a closer identification of their interests with those of the Company;
and
WHEREAS, the Committee believes that the acquisition of such an interest in
the Company will stimulate such individuals and strengthen their desire to
remain with the Company;
NOW, THEREFORE, in consideration of the premises and of the service to be
performed by the Optionee under paragraph 2 hereunder, the Company hereby grants
this nonqualified stock option to the Optionee on the terms hereinafter
expressed.
1. Option Grant. The Company hereby grants to the Optionee an option to
purchase a total of 60,000 shares of Common Stock of the Company at an option
exercise price of $13.125 per share, being not less than 100% of the Fair Market
Value of the Common Stock on the date of grant hereof. This option is not
intended to qualify as an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986.
2. Time of Exercise. This option may be exercised (in the manner provided in
paragraph 3 hereof) in whole or in part, and from time to time after the date
hereof, subject to the following limitations:
(a) This option may be exercised to a maximum extent of one-third of the
total shares covered by the option after one year from the date hereof,
two-thirds of the total shares after two years from the date hereof, and all
of the total shares after three years from the date hereof.
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(b) This option may not be exercised:
(i) More than one year after the termination of the Optionee's
employment with the Company for any reason (and then only to the extent
the Optionee could have exercised this option on the date of such
termination); or
(ii) more than 10 years from the date hereof, whichever shall
first occur.
(c) This option shall be accelerated and become fully exercisable in the
event of a change in control (as defined in Section 7(d) of Optionee's
Employment Agreement) or following the termination of the Optionee's
employment with the Company without cause pursuant to Section 7(c) of his
Employment Agreement.
3. Method of Exercise. This option may be exercised only by notice in
writing delivered to the Treasurer of the Company and accompanied by:
(a) The full purchase price of the shares purchased payable by a
certified or cashier's check payable to the order of the Company and/or
certificates of Common Stock of the Company equal in value (based on
their Fair Market Value on the date of surrender) to such purchase price
or the portion thereof so paid; provided, however, that payment of the
exercise price by delivery of Common Stock of the Company then owned by
the Optionee may be made only if such payment does not result in a
charge to earnings for financial accounting purposes as determined by
the Company; and
(b) Such other documents or representations as the Company may
reasonably (request in order to comply with securities, tax or other laws
then applicable to the exercise of the option.
In the discretion of the Company, payment may also be made by delivering a
properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
4. Non-Transferability; Death. This option is not transferable by the
Optionee otherwise than by will or the laws of descent and distribution and is
exercisable only by him. If the Optionee dies while an employee of the Company,
this option may be exercised during the period described in paragraph 2(b) (ii)
(but not later than 10 years from the date hereof) by his estate or the person
to whom the option passes by will or the laws of descent and distribution, but
only to the extent that the Optionee could have exercised this option on the
date of his death.
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5. Registration. The Company shall not be required to issue or deliver
any certificate for its Common Stock purchased upon the exercise of this
option prior to the admission of such shares to listing on any stock exchange
on which shares may at that time be listed. In the event of the exercise of
this option with respect to any shares subject hereto, the Company shall make
prompt application for such listing. If at any time during the option period
the Company shall be advised by its counsel that shares deliverable upon
exercise of the option are required to be or that delivery of the shares must
be accompanied or preceded by a prospectus meeting the requirements of the
Act, the Company will use its best efforts to effect such registration or
provide such prospectus not later than a reasonable time following each
exercise of this option, but delivery of shares by the Company may be
deferred until registration is effected or a prospectus available. The
Optionee shall have no interest in shares covered by this option until
certificates for the shares are issued.
6. Adjustments.
In the event that there is any increase in the number of issued shares of
Common Stock of the Company without new consideration to the Company therefore,
by reason of stock dividends, stock split-ups or like recapitalization, the
number of shares which may thereafter be purchased under this option shall be
increased in the same proportion as said increase in issued shares of Common
Stock. In such event, the per share purchase price specified in paragraph 1
above shall be reduced so that the total consideration payable to the Company
for the increased number of issued shares of Common Stock remaining subject to
this option shall not be changed by reason of such increase in number of shares.
In the case of any sale of assets, merger consolidation, combination or
other corporate reorganization or restructuring of the Company with or into
another corporation which results in the outstanding Common Stock being
converted into or exchanged for different securities, cash or other property, or
any combination thereof (an "Acquisition"), the Optionee shall have the right
thereafter and during the term of this option, to receive upon exercise thereof
the Acquisition Consideration (as defined below) receivable upon the Acquisition
by a holder of the number of shares of Common Stock which might have been
obtained upon exercise of the option or portion thereof, as the case may be
immediately prior to the Acquisition.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of Common Stock, upon consummation of an Acquisition.
If during the term of this option the Common Stock of the Company shall be
combined or be changed into the same or another kind of stock of the Company or
into securities of another corporation, whether through recapitalization,
reorganization, sale, merger, consolidation, etc., the Company shall cause
adequate provision to be made whereby the Optionee shall thereafter be entitled
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to receive, upon the due exercise of any then unexercised portion of this
option, the securities which he would have been entitled to receive for
Common Stock acquired through exercise of such portion of the option
(regardless of whether or to what extent the option would then have been
exercisable) immediately prior to the effective date of such
recapitalization, reorganization, sale, merger, consolidation, etc.
7. Subject to Plan. This option is subject to all of the terms and
conditions set forth in the Company's Amended Incentive Stock Plan (the "Plan").
Any capitalized terms not defined herein shall be subject to the definitions set
forth in the Plan.
IN WITNESS WHEREOF, the Company has caused this nonqualified stock option to
be executed on the date first above written.
AMERICA SERVICE GROUP INC.
By:------------------------
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