As filed with the Securities and Exchange Commission on November 21, 1996
Registration No. 333-________
============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CORRECTIONAL SERVICES CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 11-3182580
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1819 MAIN STREET, SUITE 1000
SARASOTA, FLORIDA 34236
(Address of principal executive offices)
CORRECTIONAL SERVICES CORPORATION - STOCK OPTION AGREEMENTS
CONTROL SECURITIES ISSUED OR TO BE ISSUED UPON THE EXERCISE OF OPTIONS
GRANTED UNDER CORRECTIONAL SERVICES CORPORATION STOCK OPTION AGREEMENTS
(Full title of the plan)
JAMES F. SLATTERY
PRESIDENT
CORRECTIONAL SERVICES CORPORATION
1819 Main Street, Suite 1000
Sarasota, Florida 34236
(941) 953-9199
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
RAYMOND S. EVANS, ESQ.
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
(516) 663-6500
(516) 663-6641 (facsimile)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Number of shares Proposed maximum Proposed maximum
Title of each class of to be offering price aggregate offering Amount of
securities to be registered registered per share (1) price (1) registration fee (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par 215,000 $8.875 $1,908,125 $657.97
value (2)
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
and based upon the price at which such options may be exercised.
(2) Pursuant to Rule 416, there are also being registered additional shares
of Common Stock as may become issuable pursuant to the anti-dilution provisions
of the stock option plan being registered.
===============================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION
In accordance with Rule 428 under the Securities Act of 1933, as amended
(the "Act"), and the Note to Part I of Form S-8, the information required by
this item has been omitted from this Registration Statement.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
In accordance with Rule 428 under the Act and the Note to Part I of Form
S-8, the information required by this item has been omitted from this
Registration Statement.
I-2
<PAGE>
PROSPECTUS
CORRECTIONAL SERVICES CORPORATION
215,000 Shares of Common Stock
--------------------
This Prospectus relates to an offering by certain directors and officers of
Correctional Services Corporation (the "Company") as selling stockholders
("Selling Stockholders") of up to an aggregate of 215,000 shares of Common
Stock, par value $.01 per share (the "Shares"), of the Company issued or to be
issued upon exercise of options granted to the Selling Stockholders in
connection with their employment with the Company. The Shares may be sold by the
Selling Stockholders from time to time in transactions on the Nasdaq National
Market at prices then prevailing, or in negotiated transactions at negotiated
prices, or a combination thereof. See "Selling Stockholders" and "Plan of
Distribution." The Company will not receive any proceeds from the shares sold by
the Selling Stockholders.
The Common Stock is traded in the over-the-counter market and quoted on the
Nasdaq National Market under the symbol "CSCQ." On November 20, 1996, the
closing price of the Common Stock, as reported by Nasdaq, was $13.00 per share.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is November 21, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, NW, Washington, D.C. 20549. The Company's Common
Stock is quoted on the Nasdaq Stock Market and reports, proxy statements and
other information concerning the Company may also be inspected and copied at the
offices of the Nasdaq Stock Market, Inc., 1735 K Street, NW, Washington, D.C.
20006.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Commission
are hereby incorporated by reference in this Registration Statement:
(1) The Company's Annual Report on Form 10-KSB, as amended, for the year
ended December 31, 1995;
(2) The Company's Proxy Statement dated April 22, 1996;
(3) The Company's Quarterly Reports on Form 10-QSB, as amended, for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996,
respectively; and
(4) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (No. 0-23038), as filed with the
Commission on December 10, 1993.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Registration
Statement and prior to the filing of a post-effective amendment which indicates
that all securities offered have been sold or which removes from registration
all securities then remaining unsold, shall be deemed to be incorporated by
reference into this Registration Statement and to be a part hereof from the date
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
The Company undertakes to provide without charge to each person to whom a
Prospectus is delivered, upon oral or written request of such person, a copy of
any document that has been
2
<PAGE>
incorporated in this Prospectus by reference. Requests for such documents
should be directed to the Company at its offices located at 1819 Main Street,
Suite 1000, Sarasota, Florida 34236 (telephone Number (941) 953-9199),
Attention: Executive Vice President - Finance.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
shares of the Company's Common Stock beneficially owned by them as of November
21, 1996 and being offered hereby by the Selling Stockholders:
Shares of Common Stock Beneficially Shares of Common Stock Beneficially
Owned Prior to Offering(1) Owned After Offering
<TABLE>
<CAPTION>
Name of Selling Stockholder
and Position with Company Number(2) Percent of Class Shares to be Sold(3) Number Percent of Class
- --------------------- --------- ---------------- -------------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Ira Cotler(4)..................... 50,701 * 100,000 17,368 *
Vice President-Finance
Michael Garretson(5).............. 36,458 * 100,000 3,125 *
Executive Vice President and
Chief Operating Officer
Stuart Gerson 0 * 15,000 0 *
</TABLE>
- ------------------------------
*Less than one percent
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the exercise of
options.
(2) Includes shares underlying options exercisable within 60 days hereof.
(3) Includes all shares underlying options whether or not exercisable
within the time period referenced in note (2) above.
(4) Also includes 2,612 shares of Common Stock owned by his wife as to
which he disclaims beneficial ownership, options to purchase 33,333 shares of
Common Stock and a Series A Warrant to purchase 3,850 shares of Common Stock not
being registered hereunder.
(5) Also includes options to purchase 3,125 shares of Common Stock not
being registered hereunder.
Each Selling Stockholder has acquired or will acquire the shares listed
under the caption "Shares to be Sold" through the exercise of options granted
pursuant to the Company's Stock Option Agreements and their employment with the
Company.
3
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders may sell the Shares from time to time through
dealers or brokers in transactions on the Nasdaq National Market at prices then
prevailing, or directly to one or more purchasers in negotiated transactions at
negotiated prices, or in a combination thereof. The Selling Stockholders and any
dealers or brokers that participate in such distribution may be deemed
"underwriters" within the meaning of the Securities Act and any commissions or
discounts received by any such dealer or broker may be deemed "underwriting
compensation."
The Selling Stockholders have been advised that they are subject to the
applicable provisions of the Exchange Act including, without limitation, Rules
10b-5, 10b-6 and 10b-7.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Registrant by the law firm of Ruskin, Moscou, Evans & Faltischek, P.C. Raymond
S. Evans, a partner of such firm, is a director of the Registrant and owns 8,619
shares of the Registrant's Common Stock and options to purchase 22,925 shares of
Common Stock.
4
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may affect
a director's liability with respect to any of the following: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not made in good faith or which involve intentional misconduct of
knowing violations of law; (iii) liability for dividends paid or stock
repurchased or redeemed in violation of the Delaware General Corporation Law; or
(iv) any transaction from which the director derived an improper personal
benefit. Section 102(b)(7) does not authorize any limitation on the ability of
the corporation or its stockholders to obtain injunctive relief, specific
performance or other equitable relief against directors.
Article Ninth of the Company's Certificate of Incorporation provides that
all persons who the Company is empowered to indemnify pursuant to the provisions
of Section 145 of the General Corporation Law of the State of Delaware (or any
similar provision or provisions of applicable law at the time in effect), shall
be indemnified by the Company to the full extent permitted thereby. The
foregoing right of indemnification shall not be deemed to be exclusive of any
other rights to which those seeking indemnification may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise.
Article Tenth of the Company's Certificate of Incorporation provides that a
director shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except: (i) for any
breach of the duty of loyalty; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violations of law; (iii) for
liability under Section 174 of the Delaware General Corporation Law (relating to
certain unlawful dividends, stock repurchases or stock redemptions); or (iv) for
any transaction from which the director derived any improper personal benefit.
The effect of this provision in the Certificate is to eliminate the rights of
the Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director for breach
of the fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in certain limited situations.
This provision does not limit or eliminate the rights of the Company or any
stockholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. These provisions will not
alter the liability of directors under federal securities laws.
The Company's By-Laws (the "By-Laws") provide that the Company shall
indemnify each director and such of the Company's officers, employees and agents
as the Board of Directors shall determine from time to time to the fullest
extent provided by the laws of the State of Delaware.
5
<PAGE>
The Company currently maintains directors' and officers' liability
insurance coverage for all directors and officers and has entered into
indemnification agreements with its directors and officers.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provision or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
6
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed by the Registrant with the
Commission are hereby incorporated by reference in this Registration Statement:
(1) The Registrant's Annual Report on Form 10-KSB, as amended, for the year
ended December 31, 1995;
(2) The Registrant's Proxy Statement dated April 22, 1996;
(3) The Company's Quarterly Reports on Form 10-QSB, as amended, for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996,
respectively; and
(4) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A (No. 0-23038), as filed with the
Commission on December 10, 1993.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") after the date of this Registration Statement and prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which removes from registration all securities then remaining unsold,
shall be deemed to be incorporated by reference into this Registration Statement
and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The validity of the Common Stock offered hereby will be passed upon for the
Registrant by the law firm of Ruskin, Moscou, Evans & Faltischek, P.C. Raymond
S. Evans, a partner of such firm, is a director of the Registrant and owns 8,619
shares of the Registrant's Common Stock and options to purchase 22,925 shares of
Common Stock.
II-1
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may affect
a director's liability with respect to any of the following: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not made in good faith or which involve intentional misconduct of
knowing violations of law; (iii) liability for dividends paid or stock
repurchased or redeemed in violation of the Delaware General Corporation Law; or
(iv) any transaction from which the director derived an improper personal
benefit. Section 102(b)(7) does not authorize any limitation on the ability of
the corporation or its stockholders to obtain injunctive relief, specific
performance or other equitable relief against directors.
Article Ninth of the registrant's Certificate of Incorporation provides
that all persons who the registrant is empowered to indemnify pursuant to the
provisions of Section 145 of the General Corporation Law of the State of
Delaware (or any similar provision or provisions of applicable law at the time
in effect), shall be indemnified by the registrant to the full extent permitted
thereby. The foregoing right of indemnification shall not be deemed to be
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
Article Tenth of the registrant's Certificate of Incorporation provides
that a director shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except: (i) for any breach of the duty of loyalty; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing violations
of law; (iii) for liability under Section 174 of the Delaware General
Corporation Law (relating to certain unlawful dividends, stock repurchases or
stock redemptions); or (iv) for any transaction from which the director derived
any improper personal benefit. The effect of this provision in the Certificate
is to eliminate the rights of the Registrant and its stockholders (through
stockholders' derivative suits on behalf of the Registrant) to recover monetary
damages against a director for breach of the fiduciary duty of care as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in certain limited situations. This provision does not limit or
eliminate the rights of the Registrant or any stockholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. These provisions will not alter the liability of
directors under federal securities laws.
The Registrant's By-Laws (the "By-Laws") provide that the Registrant shall
indemnify each director and such of the Registrant's officers, employees and
agents as the Board of Directors shall determine from time to time to the
fullest extent provided by the laws of the State of Delaware.
II-2
<PAGE>
The registrant currently maintains directors' and officers' liability
insurance coverage for all directors and officers and has entered into
indemnification agreements with its directors and officers.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provision or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
4.1 Stock Option Agreement between the Registrant and Ira Cotler.
4.2 Stock Option Agreement between the Registrant and Michael Garretson.
4.3 Stock Option Agreement between the Registrant and Stuart Gerson.
5.1 Opinion of Ruskin, Moscou, Evans & Faltischek, P.C.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Ruskin, Moscou, Evans & Faltischek, P.C. (contained in
Exhibit 5.1 hereof).
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-3
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification is
against public policy against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Sarasota, Florida on the 21st day of November, 1996.
CORRECTIONAL SERVICES CORPORATION
By: /s/ James F. Slattery, President
--------------------------------
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates indicated. Each person whose signature appears below hereby
authorized each of James F. Slattery and Aaron Speisman with full power of
substitution to execute in the name of such person and to file any amendment or
post-effective amendment to this Registration Statement making such changes in
this Registration Statement as the Registrant deems appropriate and appoints
each of James F. Slattery and Aaron Speisman with full power of substitution,
attorney-in-fact to sign and to file any amendment and post-effective amendment
to this Registration Statement.
<TABLE>
<CAPTION>
Signature Title Date
-------- ----- ----
<S> <C> <C>
/s/ James F. Slattery President, Chief Executive Officer November 21, 1996
- -------------------------------- (Principal Executive Officer) and
Director
/s/ Shimmie Horn Director November 21, 1996
- --------------------------------
/s/ Aaron Speisman Vice President, Secretary and November 21, 1996
- --------------------------------
Director
/s/ Lee Levinson Chief Financial Officer (Principal November 21, 1996
- --------------------------------
Financial Officer)
/s/ Raymond S. Evans Director November 21, 1996
- --------------------------------
/s/ Stuart M. Gerson Director November 21, 1996
- --------------------------------
/s/ Melvin Stith Director November 21, 1996
- --------------------------------
/s/ Richard Staley Vice President and Director November 21, 1996
- --------------------------------
</TABLE>
II-5
<PAGE>
Exhibit Index
4.1 Stock Option Agreement between the Registrant and Ira Cotler.
4.2 Stock Option Agreement between the Registrant and Michael Garretson.
4.3 Stock Option Agreement between the Registrant and Stuart Gerson.
5.1 Opinion of Ruskin, Moscou, Evans & Faltischek, P.C.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Ruskin, Moscou, Evans & Faltischek, P.C. (contained in
Exhibit 5.1 hereof).
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 Ira
Cotler (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).
<PAGE>
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
- 2 -
<PAGE>
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.
- 3 -
<PAGE>
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
- 4 -
<PAGE>
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
- 5 -
<PAGE>
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
- 6 -
<PAGE>
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
- 7 -
<PAGE>
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.
- 8 -
<PAGE>
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/ James F. Slattery, President
-----------------------------------
James F. Slattery, President
/s/ Ira Cotler, Optionee
-----------------------------------
- 9 -
Exhibit 4.2
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
Michael Garretson (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).
<PAGE>
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
- 2 -
<PAGE>
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
- 3 -
<PAGE>
exercise the Option. 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
- 4 -
<PAGE>
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
- 5 -
<PAGE>
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
- 6 -
<PAGE>
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
- 7 -
<PAGE>
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.
- 8 -
<PAGE>
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/ James F. Slattery, President
------------------------------------
/s/ Michael Garretson, Optionee
------------------------------------
- 9 -
Exhibit 4.3
ESMOR CORRECTIONAL SERVICES, INC.
STOCK OPTION AGREEMENT
AGREEMENT, made as of the 8th day of April, 1996, between Esmor
Correctional Service, Inc., a Delaware corporation (the "Corporation") and
Stuart Gerson (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 fifteen
thousand (15,000) 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 fifteen thousand
(15,000) 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 $8.75 per share (subject to adjustment as provided in Paragraph
6 hereof).
<PAGE>
3. Vesting of Option. The Option is exercisable as to 7,500 shares
commencing one year from the date hereof and as to an additional 7,500 shares
commencing two years from the date hereof. The Option granted hereby shall
expire April 8, 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 the foregoing, in the event the Optionee's relationship with the
Corporation is terminated for
- 2 -
<PAGE>
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.
The inability of the Corporation to effect such compliance with any
- 3 -
<PAGE>
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
Act and applicable state statutes; the exercise of the Option and resale of the
Option and the
- 4 -
<PAGE>
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 response from the staff of the Securities and
Exchange Commission to the effect that the
- 5 -
<PAGE>
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 during the preceding three months, an affiliate of the
Corporation, re-issue to such holder in
- 6 -
<PAGE>
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 10(b) 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. 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 the Optionee cases to be a member of the Board of
Directors of the Corporation for any reason other than death or permanent
disability, any then unexercised portion of the Option granted to the Optionee
shall, to the extent not then vested, immediately terminate and become void; any
portion of the Option which is then vested but has not been exercised at the
time the Optionee so ceases to be a member of the
- 7 -
<PAGE>
Board of Directors may be exercised, to the extent it is then vested, by
the Optionee within 180 days of the date the Optionee ceased to be a member of
the Board; and all options shall terminate after such 180 days have expired. (b)
In the event that the Optionee ceases to be a member of the Board by reason of
his or her death or permanent disability, any option granted to Optionee shall
be immediately and automatically accelerated and become fully vested and all
unexercised options shall be exercisable by Optionee (or by the Optionee's
personal representative, heir or legatee, in the event of death) until the
scheduled expiration date of the Option.
(c) April 8, 2001.
11. 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.
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/ James F. Slattery, President
-----------------------------------
/s/ Stuart Gerson, Optionee
-----------------------------------
- 8 -
Exhibit 5.1
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
(516) 663-6600
November 21, 1996
Correctional Services Corporation
1819 Main Street, Suite 1000
Sarasota, Florida 34236
Gentlemen:
In connection with the registration under the Securities Act of 1933 (the
"Act") of 215,000 shares of Common Stock (the "Shares") of Correctional Services
Corporation, a Delaware corporation (the "Corporation"), to be sold pursuant to
the Corporation's Stock Option Agreements (the "Agreements") and the Optionees'
employment with the Corporation, we have examined such corporate records,
certificates and documents as we deemed necessary for the purpose of this
opinion. Based on our examination, we advise you that, in our opinion, the
Shares to be issued and sold by the Corporation pursuant to the Agreements have
been duly and validly authorized and, when issued and paid for in accordance
with the terms set forth in the Agreements, will be legally issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement covering the Shares.
Very truly yours,
RUSKIN, MOSCOU, EVANS
& FALTISCHEK, P.C.
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED
PUBIC ACCOUNTANTS
We have issued our report dated March 1, 1996 (except for Notes L-1 and
L-2, as to which the dates are August 13, 1996 and March 6, 1996, respectively)
accompanying the consolidated financial statements of Correctional Services
Corporation and Subsidiaries included in the Annual Report on Form 10-KSB for
the year ended December 31, 1995, which is incorporated by reference in this
Registration Statement. We consent to the incorporation by reference in the
Registration Statement of the aforementioned report.
GRANT THORNTON LLP
New York, New York
November 19, 1996
- 10 -
