Exhibit 4.1
ESMOR CORRECTIONAL SERVICES, INC.
STOCK OPTION AGREEMENT
AGREEMENT, made as of the 21st day of January, 1996, between Esmor
Correctional Service, Inc., a Delaware corporation (the "Corporation") and Xxx
Xxxxxx (the "Optionee").
WHEREAS, the simultaneously herewith the Corporation has entered into an
employment agreement with the Optionee pursuant to which the Corporation has
agreed to grant to the Optionee an option to purchase an aggregate of one
hundred thousand (100,000) authorized but unissued shares of the Corporation's
Common Stock, par value $.01 per share (the "Common Shares").
NOW, THEREFORE, for good and valuable consideration paid by the Optionee to
the Corporation, the adequacy of which is hereby acknowledged, and the mutual
covenants hereinafter set forth, the parties agree as follows:
1. Grant of Option. The Corporation hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of one hundred thousand
(100,000) Common Shares (subject to adjustment as provided in Paragraph 6
hereof) on the terms and conditions set forth herein (the "Option"). The
Optionee acknowledges that the Option is not an "incentive option" within the
meaning of an "incentive stock option plan" and Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of the Common Shares covered by the
Option shall be $8.875 per share (subject to adjustment as provided in Paragraph
6 hereof).
3. Vesting of Option. The Option is exercisable as to 33,333 shares
commencing on the date hereof, as to an additional 33,333 shares commencing one
year from the date hereof and as to an additional 33,334 shares commencing two
years from the date hereof. The Option granted hereby shall expire January 21,
2001, unless earlier terminated as hereinafter set forth.
4. Method of Exercising Option. If the Optionee elects to exercise the
Option, he may do so in whole or in part at any time subject to the termination
dates specified herein. The Option, or any part thereof, may be exercised by the
Optionee in either of the following ways:
(a) If the Optionee decides to exercise all or part of his Option and make
payment for the Common Shares in full, he shall give written notice to the
Corporation, specifying therein the number of Common Shares which he then elects
to purchase, accompanied by cash or certified check payable to the order of the
Corporation.
(b) If the Optionee decides to exercise all or part of the Option and make
payment in installments, the Optionee shall give written notice to the
Corporation specifying therein the number of Common Shares which he then elects
to purchase, accompanied by a promissory note, in a form satisfactory to the
Corporation, executed by the Optionee and evidencing the obligation of the
Optionee to pay the option price to the Corporation in equal annual installments
payable on the annual anniversary date of exercise beginning one year after the
date of such exercise and terminating on the third anniversary of the date of
exercise of the Option, together with interest at the lowest rate imputed by the
Internal Revenue Service when an interest rate is not stated in a contract.
Notwithstanding
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the foregoing, in the event the Optionee's relationship with the
Corporation is terminated for any reason, (a) then any such promissory note
shall immediately be due and payable, and (b) the Optionee shall not be eligible
to exercise the Option and make payment in installments, but shall be required
to make payment by cash or certified check payable to the order of the
Corporation.
As soon as practicable after receipt by the Corporation of such notice and
of payment in full of the Option price of all the Common Shares with respect to
which the Option has been exercised (including interest if payment is made in
installments), a certificate or certificates representing such Common Shares
shall be issued in the name of the Optionee, or, if the Optionee shall so
request in the notice exercising the Option, in the name of the Optionee and
another person jointly, with right of survivorship, and shall be delivered to
the Optionee. All Common Shares shall be issued only upon receipt by the
Corporation of the Optionee's representation that the shares are purchased for
investment and not with a view toward distribution thereof.
5. Availability of Shares. The Corporation, during the term of this Option,
at all times shall keep available the number of shares of common stock required
to satisfy the Option.
The Corporation shall utilize its best efforts to comply with the
requirements of each regulatory commission or agency having jurisdiction in
order to issue and sell the Common Shares to satisfy the Option; provided,
however, that the Corporation shall not be required to register the Common
Shares issuable on exercise of the Option under the Securities Act of 1933. Such
compliance will be a condition precedent to the right to exercise the Option.
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The inability of the Corporation to effect such compliance with any such
regulatory commission or agency which counsel for the Corporation deems
necessary for the lawful issuance and sale of the Common Shares to satisfy this
Option shall relieve the Corporation from any liability for failure to issue and
sell the Common Shares to satisfy the Option for such period of time as such
compliance is not effectuated.
6. Adjustments. If prior to the exercise of any option granted hereunder
the Corporation shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Common Shares subject to the option hereby
granted shall (a) if a net increase shall have been effected in the number of
outstanding shares of the Corporation's Common Shares, be proportionately
increased and the cash consideration payable per Common Share shall be
proportionately reduced; and (b) if a net reduction shall have been effected in
the number of outstanding shares of the Corporation's Common Shares, be
proportionately reduced and the cash consideration payable per Common Share be
proportionately increased.
7. Restrictions. The holder of this Option, by acceptance hereof,
represents and warrants as follows:
(a) This Option and the right to purchase common stock hereunder is
personal to the holder and shall not be transferred to any other person. The
Option may not be pledged or otherwise hypothecated.
(b) The holder hereof has been advised and understands that the Option has
been issued in reliance upon exemptions from registration under the Securities
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Act and applicable state statutes; the exercise of the Option and resale of
the Option and the Common Shares have not been registered under the Securities
Act or applicable state statutes and must be held and may not be sold,
transferred, or otherwise disposed of for value unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available; except as set forth herein, the Corporation is under no obligation to
register the Option or the Common Shares under the Securities Act or the
applicable state statutes; in the absence of such registration, (i) the sale of
the Option or the Common Shares may be practicably impossible, and (ii) the
Corporation's registrar and transfer agent will maintain stop-transfer
instructions against registration or transfer of the Option and the Common
Shares and any certificate issued upon exercise of the Option representing the
Common Shares will bear on its face a legend in substantially the following form
restricting the sale of the Common Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND ARE "RESTRICTED SECURITIES" WITHIN THE
MEANING OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD
OR TRANSFERRED WITHOUT COMPLYING WITH RULE
144 IN THE ABSENCE OF EFFECTIVE REGISTRATION OR
OTHER COMPLIANCE UNDER THE SECURITIES ACT.
(c) In the absence of registration, prior to two years from the date the
Option has been exercised and the Common Shares fully paid for, the Corporation
may refuse to transfer the Common Shares unless the holder thereof provides an
opinion of legal counsel reasonably satisfactory to the Corporation or a "no
action" letter or interpretive
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response from the staff of the Securities and Exchange Commission to the
effect that the transfer is proper; further, unless such opinion letter or
response states that the Common Shares are free of any restrictions under the
Securities Act, the Corporation may refuse to transfer the Common Shares to any
transferee who does not furnish in writing to the Corporation the same
representations and agree to the same conditions with respect to such Common
Shares as are set forth herein. Notwithstanding any of the foregoing, the
Corporation may refuse to transfer the Common Shares if any circumstances are
present reasonably indicating that the transferee's representations are not
accurate.
(d) In the absence of registration, after two years but prior to three
years from the date the Option has been exercised and the Common Shares fully
paid for, the Corporation may refuse to transfer the Common Shares unless the
holder either (i) meets the requirements of Subparagraph (b) above; or (ii)
sells such Common Shares in accordance with Rule 144 and furnishes to the
Corporation written assurances of compliance therewith in the form of a copy of
the Notice of Form 144 and appropriate letters of compliance from the holder of
such Common Shares and the securities broker-dealer to or through which such
Common Shares are being sold. No opinion of counsel for the holder of the Common
Shares shall be required respecting sales in reliance on Rule 144 pursuant to
Clause (ii) of this Subparagraph (d).
(e) In the absence of registration, after three years from the date of the
Option has been exercised and the Common Shares fully paid for, the Corporation
shall, upon the written request of any persons who have held the Common Shares
for three years (excluding any tolling period provided for by Rule 144) and who
is not, and has not been
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during the preceding three months, an affiliate of the Corporation,
re-issue to such holder in such names and denominations as the holder shall
request, one or more certificates for the Common Shares without any restriction
whatsoever on their further transfer and cancel any and all stop transfer
instructions regarding such Common Shares on the books and records of the
Corporation.
8. Shareholders's Rights. This Option is non-transferable by the Optionee,
except in the event of the Optionee's death as provided in Section 9(d) hereof
and during the Optionee's lifetime is exercisable only by the Optionee. On any
attempt to transfer or otherwise dispose of this Option other than pursuant to
the terms hereof or the terms of the Plan, this Option shall immediately become
null and void. The Optionee shall have no rights as a shareholder with respect
to Option Shares until payment of the Option price and delivery to the Optionee
of the Common Shares as provided herein.
9. Registration Rights. The Corporation agrees to promptly file a
registration statement on Form S-8, or other permissible form, with the
Securities and Exchange Commission with respect to the Common Shares.
10. Mergers, Reorganizations, Etc. In the event the Corporation merges
into, consolidates with or otherwise reorganizes or combines (the "Merger") with
another company, wherein immediately following such Merger, the shareholders of
the Corporation prior to the Merger own either (a) less than 50% of the
outstanding voting stock of the Corporation (if the Corporation is the survivor
of the Merger), or (b) less than fifty (50%) percent of the outstanding voting
stock of the surviving entity, then, notwithstanding anything
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in this Agreement to the contrary, all unvested options shall vest and
become immediately exercisable, subject to the provisions of Section 11 hereof.
11. Termination of Option. Except as otherwise stated herein, the Option to
the extent not heretofore exercised shall terminate upon the first of the
following dates to occur:
(a) In the event of the Optionee's death, the Optionee's executors or
administrators may exercise, within twelve (12) months following the date of the
Optionee's death, the Option as to all or part of such number of shares which
the Optionee was entitled to purchase at the time of his death, as determined in
accordance with Section 2, not theretofore exercised during the Optionee's
lifetime.
(b) On the date of the termination of the Optionee's employment for cause
or on the date the Optionee voluntarily quits his employment.
(c) The expiration of three months after the date on which the Optionee's
employment by the Corporation is terminated not for cause (except if such
termination be by reason of death or permanent and total disability).
(d) The expiration of twelve (12) months after the date on which the
Optionee's employment by the Corporation is terminated, if such termination be
by reason of the Optionee's permanent and total disability.
(e) January 21, 2001, the fifth anniversary of this Agreement.
12. Validity and Construction. The validity and construction of this Option
shall be governed by the laws of the State of Delaware. Such construction is
vested in the board and its construction shall be final and conclusive.
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IN WITNESS WHEREOF, the Corporation has caused this Option Agreement to be
executed by its proper corporate officers thereunto duly authorized.
ESMOR CORRECTIONAL SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxxx, President
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Xxxxx X. Xxxxxxxx, President
/s/ Xxx Xxxxxx, Optionee
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