<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Correctional Properties Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(Correctional Properties Trust Logo)
EXECUTIVE OFFICES
3300 PGA Boulevard, Suite 430
Palm Beach Gardens, Florida 33410
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS ON APRIL 27, 1999
The Annual Meeting of the Shareholders of Correctional Properties Trust (the
"Trust") will be held on Tuesday, April 27, 1999, at 2:00 p.m. at the PGA
National Resort & Spa, 400 Avenue of the Champions, Palm Beach Gardens, Florida,
for the purpose of considering and acting on the matters following:
(1) the election of three Trustees for a three-year term until the 2002
Annual Meeting and until their successors have been duly elected and
qualified;
(2) ratification of the action of the Board of Trustees in approving and
adopting the Correctional Properties Trust 1999 Employee Share
Incentive Plan;
(3) ratification of the action of the Board of Trustees in appointing the
firm of Arthur Andersen LLP to be the independent certified public
accountants of the Trust for the fiscal year 1999, and to perform such
other services as may be requested by the Trust;
(4) the transaction of any other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 19, 1999, the
record date and time fixed by the Board of Trustees, are entitled to notice and
to vote at said meeting.
ALL SHAREHOLDERS ARE URGED EITHER TO ATTEND THE MEETING IN PERSON OR TO VOTE BY
PROXY.
You are requested to promptly sign and mail the enclosed proxy, which is being
solicited on behalf of the Board of Trustees, regardless of whether you expect
to be present at this meeting. A return envelope that requires no postage is
enclosed for that purpose. If you attend the meeting in person, you may, if you
wish, revoke your proxy and vote in person.
By order of the Board of Trustees.
Patrick T. Hogan
Vice President, Chief Financial
Officer,
Secretary and Treasurer
March 31, 1999
<PAGE> 3
PROXY STATEMENT
March 31, 1999
Correctional Properties Trust
Executive Offices
3300 PGA Boulevard, Suite 430
Palm Beach Gardens, Florida 33410
Telephone: (561) 630-6336
General Information
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Trustees of Correctional Properties Trust (the "Trust") for the
Annual Meeting of Shareholders to be held at the PGA National Resort & Spa, 400
Avenue of the Champions, Palm Beach Gardens, Florida, at 2:00 pm on April 27,
1999, and all adjournments thereof. Please note the Proxy Card provides a means
to withhold authority to vote for any individual trustee-nominee. Also note the
format of the Proxy Card which provides an opportunity to specify your choice
between approval, disapproval or abstention with respect to both the proposal to
ratify the appointment of Arthur Andersen LLP as independent certified public
accountants of the Trust, and the proposal to ratify the action of the Board of
Trustees in approving and adopting the Correctional Properties Trust 1999
Employee Share Incentive Plan. If the enclosed Proxy Card is executed properly
and returned, the shares represented will be voted in accordance with those
instructions. If no instructions are given, the Proxy Card will be voted as
follows:
FOR - The election of the Trustees nominated by the Board
of Trustees
FOR - Proposal to ratify the action of the Board of
Trustees in approving and adopting the Correctional
Properties Trust 1999 Employee Share Incentive Plan
FOR - Proposal to ratify the appointment of Arthur Andersen
LLP as the independent certified public accountants
of the Trust
Holders of record of the Trust's common shares of beneficial interest (the
"Common Shares"), as of the close of business on March 19, 1999 will be entitled
to one vote for each share standing in their name on the books of the Trust.
On March 19, 1999, 7,130,000 Common Shares were outstanding. The Common Shares
will vote as a single class for the election of Trustees, to ratify the
appointment of Arthur Andersen LLP, to ratify the action of the Board of
Trustees in adopting the Correctional Properties Trust 1999 Employee Share
Incentive Plan, and on any other matter that may properly come before the
meeting.
Any person giving a proxy has the power to revoke it any time before it is voted
by written notice to the Trust or attending the meeting and voting the shares.
The cost of preparation, assembling and mailing this Proxy Statement material
will be borne by the Trust. It is contemplated that the solicitation of proxies
will be entirely by mail. This Proxy Statement and the accompanying form of
proxy are being mailed to shareholders of the Trust on or about March 31, 1999.
Shareholders desiring to suggest qualified nominees for Trustee should advise
the Secretary of the Trust in writing and include sufficient biographical
material to permit an appropriate evaluation.
A total number of three meetings of the Board of Trustees were held during the
past fiscal year. All Trustees attended at least 75% of such meetings.
1
<PAGE> 4
PROPOSAL NO. 1
THE ELECTION OF TRUSTEES
The Board of Trustees is comprised of nine (9) members consisting of three
classes. Each class is elected to serve a three year staggered term. Unless
instructed otherwise, the persons named on the accompanying Proxy Card will vote
for the election of the nominees named below to serve for the ensuing three-year
period and until their successors are elected and have qualified. All three (3)
of the nominees, Richard R. Wackenhut, William M. Murphy and Robert R. Veach,
Jr., are presently Trustees who were elected in April 1998.
If any nominee for trustee shall become unavailable (which management has no
reason to believe will be the case), it is intended that the shares represented
by the enclosed Proxy Card will be voted for any such replacement or substitute
nominee as may be nominated by the Board of Trustees. A brief biographical
statement for each nominee follows:
<TABLE>
<CAPTION>
NOMINEE AND YEAR PRESENT AND PAST POSITIONS
FIRST BECAME TRUSTEE AND OTHER INFORMATION
- --------------------------------------------------------------------------------------------------
<C> <S>
RICHARD R. WACKENHUT Mr. Wackenhut is currently Vice-Chairman of Correctional
1998 Properties Trust. Mr. Wackenhut has served as President and
Age 51 Chief Operating Officer of The Wackenhut Corporation ("TWC")
since April 26, 1986. He was formerly Senior Vice President,
(PHOTO) Operations from 1983-1986. He was Manager of Physical
Security of TWC from 1973-74. He also served as Manager,
Development at TWC Headquarters from 1974-76; Area Manager
of TWC, Columbia, SC from 1976-77; District Manager,
Columbia, SC from 1977-79; Director, Physical Security Divi-
sion at TWC Headquarters 1979-80; Vice President, Operations
of TWC from 1981-82, and Senior Vice President, Domestic
Operations from 1982-83. Mr. Wackenhut is a member of the
Board of Directors of The Wackenhut Corporation, a Director
of Wackenhut del Ecuador, S.A.; Wackenhut UK, Limited;
Wackenhut Dominicana, S.A.; Chairman of the Board of
Directors of Wackenhut Resources, Inc.; Director of
Wackenhut Corrections Corporation ("Wackenhut Corrections");
and a Director of several domestic subsidiaries of TWC and
Wackenhut Corrections. He is Vice Chairman of Associated
Industries of Florida. He is also a member of the American
Society for Industrial Security, a member of the
International Security Management Association, and a member
of the International Association of Chiefs of Police. Mr.
Wackenhut currently volunteers to serve on the Police
Advisory Board for the Town of Sewall's Point, Florida. He
received his BA Degree from The Citadel in 1969, and
completed the Advanced Management Program of Harvard
University School of Business Administration in 1987. Mr.
Wackenhut is the son of George R. Wackenhut, who also serves
as a Trustees of the Trust.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NOMINEE AND YEAR PRESENT AND PAST POSITIONS
FIRST BECAME TRUSTEE AND OTHER INFORMATION
- --------------------------------------------------------------------------------------------------
<C> <S>
- ----------------------------------
WILLIAM M. MURPHY Mr. Murphy has been a self-employed real estate developer
1998 and investor in Ft. Lauderdale, Florida since 1984. He also
Age 48 presently serves as President of Douglas Management &
Realty. From 1975-84, he was a Vice President with Chase
(PHOTO) Manhattan Bank specializing in real estate workouts and
construction lending. Prior to 1975, he was employed by
Travers Associates performing real estate feasibility
studies. He earned a Masters Degree in Urban Planning from
New York University and a Bachelors Degree in Civil
Engineering from the National University of Ireland.
- --------------------------------------------------------------------------------------------------
ROBERT R. VEACH, JR. Mr. Veach is an attorney in private practice in Dallas,
1998 Texas, specializing in corporate law and structured finance.
Age 48 From 1987-98, he was a Senior Shareholder of the law firm of
Locke Purnell Rain Harrell (A Professional Corporation) and
(PHOTO) represented clients in financial transactions including
mortgage and asset securitization, mortgage loan purchase
and servicing, synthetic lease transactions and
collateralized debt offerings. From 1983-87, he was an
officer of Rauscher Pierce Refsnes, Inc. responsible for its
asset and mortgage-backed securities investment banking
activities. He has been responsible for structuring over $12
billion in secured debt and real estate transactions.
Previously, he was an officer of a national real estate
finance firm where he was involved with administration of
tax-exempt mortgage revenue bond housing programs,
origination of residential and commercial mortgage-backed
pass-through securities and participation in the pension and
institutional real estate advisory group. From 1975-80, he
was a law clerk to a United States District Court and Court
of Appeals Judge and an attorney with Locke Purnell. He
received a JD from Southern Methodist University and a BS in
Accounting from Arizona State University.
- --------------------------------------------------------------------------------------------------
</TABLE>
VOTE REQUIRED AND BOARD RECOMMENDATION
Assuming the presence of a quorum at the Annual Meeting, each Trustee may be
elected by the affirmative vote of a plurality of the votes cast by the holders
of Common Shares present at the Annual Meeting, in person or by proxy and
entitled to vote on the election of Trustees.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
OF THE ABOVE NOMINEES FOR TRUSTEE. PROXY CARDS EXECUTED AND RETURNED WILL BE SO
VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
3
<PAGE> 6
COMPOSITION AND FUNCTIONS OF SPECIFIC COMMITTEES
OF THE BOARD OF TRUSTEES
AUDIT COMMITTEE
The Trust has an Audit Committee whose members during fiscal 1998 were are as
follows:
Robert R. Veach, Jr., Chairman
James D. Motta
William M. Murphy
The Audit Committee met three (3) times during the past fiscal year.
Upon the consummation of the Trust's initial public offering in April 1998 (the
"IPO" or the "Offering"), the Board of Trustees established an audit committee
consisting of three trustees (the "Audit Committee"). All of the members of the
Audit Committee are independent non-employee Trustees. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, and reviews the adequacy of the Company's internal
accounting controls.
The Trust also has a Compensation Committee which, in addition to its role in
recommending compensation for the Chief Executive Officer and the other
executive officers, administers the Trust's Employee Share Incentive Plan and
Non Employee Trustee's Share Option Plan. See the Report of the Compensation
Committee later in this Proxy Statement.
4
<PAGE> 7
COMPENSATION COMMITTEE
The Trust has a Nominating and Compensation Committee (the "Compensation
Committee") whose members during fiscal 1998 were as follows:
Clarence E. Anthony, Chairman
Anthony P. Travisono
James D. Motta
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee did not meet during 1998.
Compensation for 1998 was set before the IPO by the initial founding Trustees,
Dr. George C. Zoley and Mr. Charles R. Jones.
Beginning in fiscal 1999, the Compensation Committee formally evaluated the
performance of the CEO. The Compensation Committee is composed of three
independent, non-employee Trustees who are not eligible to participate in any of
the executive compensation programs. Among its other duties, the Compensation
Committee is responsible for recommending to the full Board of Trustees the
annual remuneration for all executive officers, including the Chief Executive
Officer and the other officers, and to oversee the Trust's compensation plans
for key employees. The Compensation Committee seeks to provide, through its
administration of the Trust's compensation program, salaries that are
competitive and incentives that are primarily related to corporate performance.
The components of the compensation program are base salary and annual incentive
bonuses.
Base salary is the fixed amount of total annual compensation paid to executives
on a regular basis during the course of the fiscal year. Management of the Trust
determines a salary for each senior executive position that it believes is
appropriate to attract and retain talented and experienced executives. The
starting point for this analysis is each officer's base salary for the
immediately preceding fiscal year. From time to time, management will obtain
reports from independent organizations concerning compensation levels for
reasonably comparable companies. This information will be used as a market check
on the reasonableness of the salaries proposed by management. Management will
then recommend executive salaries to the Compensation Committee.
The Compensation Committee reviews and adjusts the salaries suggested by
management as it deems appropriate, and generally asks management to justify its
recommendations, particularly if there is a substantial difference between the
recommended salary and an officer's compensation for the prior fiscal year. In
establishing the base salary for each officer (including that of the CEO), the
Compensation Committee will evaluate numerous factors, including the Trust's
operating results, net income trends, and stock market performance, as well as
comparisons with financial and stock performance of other companies, including
those that are in competition with the Trust. In addition, data developed as a
part of the strategic planning process, but which may not directly relate to
corporate profitability will be utilized as appropriate.
The Summary Compensation Table set forth elsewhere in this Proxy Statement shows
the salary paid to the CEO in 1998.
The Company also maintains a Share Incentive Plan for executive officers,
including the CEO. Participants receive stock incentive grants based upon their
overall contribution to the Trust. Such grants are at market value at the time
of grant and have variable vesting periods in order to encourage retention.
By the Nominating and Compensation Committee
Clarence E. Anthony, Chairman
Anthony P. Travisono
James D. Motta
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table shows remuneration paid or accrued by the Trust during the
fiscal year ended December 31, 1998 to the Chief Executive Officer. No other
executive officer of the Trust had salary combined with a bonus greater than
$100,000 during such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
AWARDS
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION OPTIONS/ COMPENSATION
POSITION SALARY($)(1) BONUS($) ($) SARS(#) ($)(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles R. Jones $100,000 $45,000 -- 75,000 $2,333
President and
Chief Executive Officer
</TABLE>
NOTES
(1) Includes compensation from commencement of operations (April 28, 1998)
through December 31, 1998.
(2) Consists of approximately $2,333 contributed by the Trust to Mr. Jones'
401(k).
6
<PAGE> 9
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE OR
UNDERLYING GRANTED TO BASE
OPTIONS/SAR EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED FISCAL YEAR ($/SHARE) DATE PRESENT VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles R. Jones 75,000 45% $20.00 4/28/2008 $181,500(1)
</TABLE>
(1) Based on present value of $2.42 per share determined under the
Black-Scholes' pricing model.
7
<PAGE> 10
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ON VALUE YEAR-END(1) FISCAL YEAR-END
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Jones -- -- 18,750 56,250 $0 $0
</TABLE>
(1) All options under the Correctional Properties Trust 1998 Share
Incentive Plan
8
<PAGE> 11
TRUSTEES' COMPENSATION
During fiscal year 1998, Trustees who are not executive officers of the Trust
were paid $2,500 quarterly and $1,000 for each Trustees' Meeting attended. In
addition, Trustees who are not executive officers of the Trust receive $500 for
each committee meeting attended as a committee member and $750 for each
committee meeting attended as committee Chairman on days that the full Board
does not also convene. Each Trustee also received an option to purchase 5,000
shares from the Trust and will receive annually an option to purchase up to
2,000 shares of the Trust. The Trust paid no other compensation to Trustees or
their affiliates during 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1998 the following members of the Board participated in deliberations
concerning executive officer compensation: Clarence E. Anthony, Anthony P.
Travisono, and James D. Motta. None of the members of the Board served as an
executive or a member of the compensation committee (or equivalent) of another
entity, one of whose executive officers or directors served on the Board of the
Company. None of the executive officers who are members of the Board
participated in discussions with respect to issues relating to their own
compensation.
9
<PAGE> 12
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table shows the number of Common Shares that were beneficially
owned as of March 19, 1999, by each named executive officer, by Trustees and
Trustee nominees and executive officers as a group, and by each person or group
who was known by the Trust to beneficially own more than 5% of the Trust's
outstanding Common Shares.
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------
AMOUNT & NATURE PERCENT
OF BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(A)(B) CLASS
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Dr. George C. Zoley 62,000(2) *
Charles R. Jones 60,341(3) *
George R. Wackenhut 67,000(2) *
Richard R. Wackenhut 69,074(2) *
Anthony P. Travisono 12,000(4) *
Clarence E. Anthony 7,509(4) *
James D. Motta 7,933(4) *
William M. Murphy 12,000(4) *
Robert R. Veach, Jr. 8,000(4) *
Patrick T. Hogan 10,750(5) *
ALL EXECUTIVE OFFICERS AND TRUSTEES AS A GROUP (10 PERSONS) 316,607 4.3%
J.W. Seligman & Co. Incorporated 1,196,082 16.3%
The Equitable Companies 814,100 11.1%
Dresdner RCM Global Investor LLC 719,875 9.8%
AIM Management Group Inc. 422,900 5.8%
</TABLE>
* Beneficially owns less than 1%
(1) Unless provided otherwise, the business address of each beneficial owner is
3300 PGA Boulevard, Suite 430, Palm Beach Gardens, Florida 33410.
(2) Includes options to purchase 20,000 Common Shares, which vested immediately
upon grant on the consummation of the Offering, 20,000 Common Shares which
will vest on the first anniversary of the Offering, and 2,000 shares which
vested in January 1999. Does not include options to purchase 40,000 Common
Shares, which vest in two equal annual installments beginning on the second
anniversary of the consummation of the Offering.
(3) Includes options to purchase 18,750 Common Shares, which vested immediately
upon grant on the consummation of the Offering, 18,750 Common Shares which
will vest on the first anniversary of the Offering, and 7,500 shares which
vested in January 1999. Does not include options to purchase 37,500 Common
Shares, which vest in two equal annual installments beginning on the second
anniversary of the consummation of the Offering. Also does not include
22,500 shares vesting in three equal installments beginning in January,
2000.
(4) Includes options to purchase 7,000 Common Shares (5,000 which vested upon
the consummation of the Offering and 2,000 which vested in January 1999).
(5) Includes options to purchase 5,000 Common Shares, 2,500 of which vested
immediately upon the consummation of the Offering and 2,500 Common Shares
which will vest in the first anniversary of the Offering. Does not include
options to purchase 5,000 Common Shares, which vest in two equal annual
installments beginning on the second anniversary of the consummation of the
Offering. Also includes 3,750 shares which vested in January 1999 but does
not include 11,250 shares vesting in three equal annual installments
beginning in January 2000.
(A) Information concerning beneficial ownership was furnished by the persons
named in the table or derived from documents filed with the Securities and
Exchange Commission.
(B) Total shares include options that are immediately exercisable and options
exercisable within 60 days.
10
<PAGE> 13
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
Correctional Properties Trust, NAREIT-All, and Russell 2000 Indexes
- --------------------------------------------------------------------------------
(Performance through December 31, 1998)
<TABLE>
<CAPTION>
Correctional
Measurement Period Properties
(Fiscal Year Covered) Trust NAREIT-All Russell 2000
<S> <C> <C> <C>
April 23, 1998 100.00 100.00 100.00
Dec. 1998 82.10 85.11 87.81
</TABLE>
Assumes $100 invested on April 23, 1998 in Common Shares and the Index
companies.
* Total return assumes reinvestment of dividends.
11
<PAGE> 14
OTHER TRANSACTIONS AND RELATIONSHIPS
In connection with the consummation of the Trust and the IPO, the Company has
entered into a series of contractual arrangements with Wackenhut Corrections.
Dr. Zoley, the Chairman of the Company, and George Wackenhut and Richard
Wackenhut, each a trustee of the Company, are members of the Board of Directors
of Wackenhut Corrections. In addition Charles R. Jones, the President and Chief
Executive Officer of the Company and Patrick T. Hogan, the Vice President and
Chief Financial Officer of the Company, were employed by Wackenhut Correction.
Messrs. Jones and Hogan resigned their positions with Wackenhut Corrections upon
completion of the IPO.
INITIAL FACILITIES
The Company and Wackenhut Corrections have entered into the Purchase Agreement,
pursuant to which the Company has acquired, directly or as assignee of Wackenhut
Corrections' contract rights, eight correctional and detention facilities
operated by Wackenhut Corrections (the "Initial Facilities") for an aggregate
cash purchase price of approximately $113.0 million. The Purchase Agreement
contains representations and warranties by Wackenhut Corrections customarily
found in agreements of such types that survive the consummation of the IPO for a
period of one year. In addition, in October 1998, pursuant to an agreement
substantially similar to the Purchase Agreement, the Company completed the
acquisition of the Lea County Facility (together with the Initial Facilities,
the "Owned Facilities") for an aggregate cash purchase price of approximately
$26.5 million.
OPTION FACILITIES
The Company and Wackenhut Corrections have entered into the Option Agreements
pursuant to which Wackenhut Corrections has granted the Company the option to
acquire three correctional and detention facilities under development by
Wackenhut Corrections (the "Option Facilities") at any time during the earlier
of (i) four years after receipt of a certificate of occupancy for the subject
facility, or (ii) six months after such facility achieves an occupancy level of
75% of the number of beds authorized under the certificate of occupancy for the
facility. The purchase price for a given Option Facility equals 105% (or such
lower percentage as may be agreed to by Wackenhut Corrections) of the aggregate
cost related to the acquisition, devleopment, design, construction, equipment
and start-up of such Option Facility (which in the case of goods and services
provided by Wackenhut Corrections, will not exceed the costs which would be paid
therefor if purchased from a third party) (the "Total Facility Cost"). If the
Company elects to purchase all of the current Option Facilities, the aggregate
purchase price is estimated to be approximately $127.9 million.
LEASES
Concurrent with the Company's acquisition of the Owned Facilities, the Company
leased such facilities to Wackenhut Corrections pursuant to leases with an
initial term of 10 years. Subject to certain limited exceptions, the term of
each of the leases may be extended by Wackenhut Corrections for three additional
five-year terms at a fair market rental rate as mutually agreed upon by the
Company and Wackenhut Corrections or, in the absence of such an agreement, as
determined by binding arbitration. In addition, the term of any of the leases
may be automatically extended upon expiration thereof on the same terms as
provided in the leases (including the then applicable base rent and base rent
escalation) if Wackenhut Corrections is obligated under an unexpired sublease
with respect to such facility. Under the terms of the leases, Wackenhut
Corrections has a right of first refusal on the proposed sale by the Company of
any of the Owned Facilities. If acquired, the Option Facilities will be leased
to Wackenhut Corrections pursuant to leases virtually identical to the leases
for the Owned Facilities. The Company received approximately $7.7 million from
Wackenhut Corrections in rental payments during 1998.
12
<PAGE> 15
RIGHT TO PURCHASE
The Company and Wackenhut Corrections have entered into the Right to Purchase
Agreement pursuant to which the Company has the right, during the 15 years
following the consummation of the IPO (so long as there are any leases in force
between the Company and Wackenhut Corrections), to acquire and lease back to
Wackenhut Corrections any correction or detention facility or facilities which
Wackenhut Corrections acquires or has the right to acquire (the "Future
Facilities"), subject to certain limited exceptions where Wackenhut Corrections
is restricted from transferring ownership of a facility. Under the terms of the
Right to Purchase Agreement, the Company may purchase a particular Future
Facility at any time during the earlier of (i) four years from the receipt of a
certificate of occupancy for a Future Facility developed by Wackenhut
Corrections or from the date of acquisition of a Future Facility acquired by
Wackenhut Corrections, or (ii) six months after the Future Facility attains an
occupancy level of 75% of the number of beds authorized under the certificate of
occupancy for the Future Facility. The purchase price equals 105% (or such lower
percentage as may be agreed to by Wackenhut Corrections) of the Total Facility
Cost of such Future Facility. In the case of any Future Facilities acquired
during the first five years of the Right to Purchase Agreement, the initial
annual rental rate for such Future Facilities will be the greater of (i) the
fair market rental rate as mutually agreed upon by the Company and Wackenhut
Corrections, and in the absence of such agreement, as determined by binding
arbitration, or (ii) 9.5% of the purchase price of such Future Facility. For
facilities acquired thereafter, the initial annual rental rate will be the fair
market rental rate as mutually agreed upon by the Company and Wackenhut
Corrections, or in the absence of such agreement, as determined by binding
arbitration.
Pursuant to the Company's Bylaws, the Company's Independent Committee, which
consists of 5 independent Trustees of the Company's Board of Trustees, is
required to approve the entering into or the consummation of any agreement or
transaction with Wackenhut Corrections or its affiliates including, but not
limited to enforcement and negotiation of the terms of any lease of any of the
Company's facilities.
Any future transactions between the Company and its executive officers, trustees
and affiliates will be on terms no less favorable to the Company than can be
obtained from unaffiliated third parties.
SECTION 16 FILING VIOLATIONS
All SEC Forms 3, 4 and 5 filings appear to have been made when due.
13
<PAGE> 16
PROPOSAL NO. 2
APPROVAL AND ADOPTION OF
CORRECTIONAL PROPERTIES TRUST 1999 SHARE INCENTIVE PLAN
The Board of Trustees asks shareholders to ratify the action of the Board of
Trustees in approving and adopting the Correctional Properties Trust 1999
Employee Share Incentive Plan.
On January 21, 1999, the Board adopted, subject to shareholder approval, the
Correctional Properties Trust 1999 Employee Share Incentive Plan (the "Plan"),
to enable executive officers and other key employees of and consultants to the
Trust to participate in the ownership of the Trust. The Plan is designed to
attract and retain executive officers and other key employees of and consultant
to the Trust to provide incentives to such persons to maximize the Trust's funds
from operations. The Plan provides for the award to executive officers and other
key employees of and consultants to the Trust of a broad variety of share-based
compensation alternatives such as nonqualified share options, incentive share
options, restricted shares, deferred shares and other share-based awards.
The Plan will be administered by the Compensation Committee, which is authorized
to select from among the eligible employees of or consultants to the Trust
individuals to whom options, restricted shares, deferred shares and other
share-based awards are to be granted and to determine the number of shares to be
subject thereto and the terms and conditions thereof. The Compensation Committee
is also authorized to adopt, amend and rescind rules relating to the
administration of the Plan. No member of the Compensation Committee will be
eligible to participate in the Plan.
AWARDS AVAILABLE FOR ISSUANCE UNDER THE PLAN
Nonqualified options, if granted, will provide for the right to purchase Common
Shares at a specific price which may not be less than fair market value on the
date of grant and usually will become exercisable in installments after the
grant date, Nonqualified options may be granted for any reasonable term and may
be transferable in certain limited circumstances.
Incentive options, if granted, will be designed to comply with the "incentive
stock option" provisions of the Internal Revenue Code of 1986, as amended (the
"Code") and will be subject to restrictions contained therein, including that
the exercise price must generally equal at least 100% of fair market value of
Common Shares on the grant date and that the term generally must not exceed ten
years. Incentive options may be modified after the grant date to disqualify them
from treatment as an "incentive stock option."
Restricted shares, if issued, may be sold to participants at various prices (or
issued without monetary consideration) and may be subject to such restrictions
as may be determined by the Compensation Committee. Restricted shares typically
may be repurchased by the Trust at the original purchase price if the conditions
or restrictions are not met. In general, restricted shares may not be sold, or
otherwise transferred or hypothecated, until restrictions are removed or
expired. Purchasers of restricted shares, unlike recipients of options, will
have voting rights and will receive dividends or distributions prior to the time
when the restrictions lapse.
Deferred shares, if issued, will obligate the Trust to issue Common Shares upon
the occurrence or nonoccurrence of conditions specified in the deferred share
award. Under a typical deferred share award, the Trust may agree to issue Common
Shares to an employee if he or she achieves certain performance goals or remains
employed by the Trust for a specified period of time. Recipients of deferred
shares will not have voting rights or receive dividends or distributions until
the shares are actually issued.
Other share-based awards, if granted, may be granted by the Compensation
Committee on an individual or group basis. Generally, these awards will be based
upon specific agreements and may be paid in cash or in Common Shares or in a
combination of cash and Common Shares. Other share-based awards may include
share
14
<PAGE> 17
appreciation rights and "phantom" share awards that provide for payments based
upon increases in the price of the Trust's Common Shares over a predetermined
period. They may also include bonuses which may be granted by the Compensation
Committee on an individual or group basis and which may be payable in cash or in
Common Shares or in a combination of cash and Common Shares.
SHARES SUBJECT TO THE PLAN
A maximum of 400,000 shares will be reserved for issuance under the Plan. The
Plan provides that no single individual may be granted in any one year options
to purchase greater than 100,000 Common Shares. Otherwise, there is no limit on
the number of awards that may be granted to any one individual so long as the
grant does not violate the ownership limit actions imposed by the Trust's
organization documents or cause the Trust to fail to qualify as a REIT for
federal income tax purposes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In general, a participant will not recognize taxable income upon the grant or
exercise of an option that qualifies as an "incentive stock option" ("ISO").
However, upon the exercise of an ISO, the excess of the fair market value of the
shares received on the date of exercise over the exercise price of the shares
will be treated as an adjustment to alternative minimum taxable income. When a
participant disposes of shares acquired by exercise of an ISO, the participant's
gain (the difference between the sale proceeds and the price paid by the
participant for the shares) upon the disposition will be taxed as capital gain
provided the participant does not dispose of the shares within two years after
the date of grant nor within one year after the date of exercise, and exercise
the option while an employee of the Trust or a subsidiary of the Trust or within
three months after termination of employment for reasons other than death or
disability. If the first condition is not met, the participant generally will
realize ordinary income in the year of the disqualifying disposition. If the
second condition is not met, the participant generally will recognize ordinary
income upon exercise of the ISO.
In general, a participant who receives a nonqualified stock option will
recognize no income at the time of the grant of the option. Upon exercise of a
nonqualified stock option, a participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option. Special training rules may apply
to a participant who is subject to Section 16(a) of the Exchange Act.
A participant will recognize income upon the settlement of a performance share
award or incentive award, A participant will recognize income equal to any cash
that is paid and with respect to performance share awards, which are settled in
shares, will recognize the fair market value of Common Shares (on the date that
the share are first transferrable or not subject to a substantial risk in
forfeiture) that is received in settlement of the award.
The employer (either the Trust or its affiliate) will be entitled to claim a
federal income tax deduction on account of the exercise of a nonqualified
option, the vesting of a restricted share award, payment under an incentive
award and the settlement of a performance share award. The amount of the
deduction will be equal to the ordinary income recognized by the participant.
The employer will not be entitled to a federal income tax deduction on account
of the grant or the exercise of an ISO. The employer may claim a federal income
tax deduction on account of certain disqualifying depositions of Common Shares
acquired upon the exercise of an ISO.
The transfer of a nonqualified stock option to be permitted family member will
have no immediate tax consequences to the Trust, the participant or the
permitted family member. Upon the subsequent exercise of the transferred option
by the permitted family member, the participant will realize ordinary income in
an amount measured by the difference between the option exercise price and the
fair market value of the shares on the date of exercise, and the employer will
be entitled to a deduction in the same amount. Any difference between such
15
<PAGE> 18
fair market value and the price at which the permitted family member may
subsequently sell such shares will be treated as capital gain or loss to the
permitted family member, long-term or short-term depending on the length of time
the shares have been held by the permitted family member. There has been no
formal pronouncement on the tax consequences of the transfer of other awards.
Accordingly, if such transfers are permitted, participants will be directed to
consult their own tax advisers.
Section 162(m) of the Code places a limitation of $1,000,000 on the amount of
compensation payable to certain executive officers of a publicly-held
corporation that may be deducted for federal income tax purposes. This
limitation does not apply to certain performance-based compensation paid under a
plan that meets the requirements of the Code and the Treasury Regulations
promulgated thereunder. While the Plan generally complies with the requirements
for performance-based compensation, the $1,000,000 deduction limitation may
apply to the exercise of certain options granted to executive officers in the
future.
VOTE REQUIRED AND BOARD RECOMMENDATION
Assuming the presence of a quorum at the Annual Meeting, the affirmative vote of
the holders of a majority of the total Common Shares present at the Annual
Meeting, in person or by proxy, and entitled to vote at the Annual Meeting is
required to approve and adopt the Correctional Properties Trust 1999 Share
Incentive Plan.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL AND ADOPTION
OF THE PLAN. PROXY CARDS EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY
INSTRUCTIONS ARE INDICATED THEREON.
PROPOSAL NO. 3
APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Although not required by the By-Laws, the Board of Trustees, in the interest of
accepted corporate practice, asks shareholders to ratify the action of the Board
of Trustees in appointing the firm of Arthur Andersen LLP to be the independent
certified public accountants of the Trust for the fiscal year 1999, and to
perform such other services as may be requested. If the shareholders do not
ratify this appointment, the Trust's Board of Trustees will reconsider its
action. Arthur Andersen LLP has advised the Trust that no partner or employee of
Arthur Andersen LLP has any direct financial interest or any material indirect
interest in the Trust other than receiving payment for its services as
independent certified public accountants.
A representative of Arthur Andersen LLP, the principal independent public
accountants of the Trust for the most recently completed fiscal year, is
expected to be present at the shareholders' meeting and shall have an
opportunity to make a statement if he or she so desires. This representative
will also be available to respond to appropriate questions raised orally at the
meeting.
VOTE REQUIRED AND BOARD RECOMMENDATION
Assuming the presence of a quorum of the Annual Meeting, the affirmative vote of
the holders of a majority of the total Common Shares present at the Annual
Meeting, in person of by proxy, and entitled to vote at the Annual Meeting is
required to ratify the action of the Board of Trustees in appointing the firm of
Arthur Anderson LLP to be independent certified public accountants of the Trust
for the fiscal year 1999, and to perform such other services as may be required
by the Trust.
THE TRUSTEES DEEMS PROPOSAL NO. 3 TO BE IN THE BEST INTEREST OF THE COMPANY AND
ITS SHAREHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF. PROXIES EXECUTED
AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED
THEREON.
16
<PAGE> 19
SHAREHOLDER PROPOSAL DEADLINE
Shareholder proposals intended to be presented at the 2000 Annual Meeting of
Shareholders must be received by the Trust for inclusion in the Trust's proxy
statement and form of proxy relating to that meeting by November 15, 1999.
OTHER MATTERS
The Board of Trustees knows of no other matters to come before the shareholders'
meeting. However, if any other matters properly come before the meeting or any
of its adjournments, the person or persons voting the proxies will vote them in
accordance with their best judgment on such matters.
BY ORDER OF THE BOARD OF TRUSTEES.
Patrick T. Hogan
Vice President, Chief Financial
Officer,
Secretary and Treasurer
March 31, 1999
- --------------------------------------------------------------------------------
A COPY OF THE TRUST'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO,
BUT EXCLUDING EXHIBITS THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WILL BE MADE AVAILABLE WITHOUT CHARGE TO INTERESTED
SHAREHOLDERS UPON WRITTEN REQUEST TO PATRICK T. HOGAN, VICE PRESIDENT, CHIEF
FINANCIAL OFFICER, SECRETARY AND TREASURER, CORRECTIONAL PROPERTIES TRUST, 3300
PGA BOULEVARD, SUITE 430, PALM BEACH GARDENS, FLORIDA, 33410.
17
<PAGE> 20
CORRECTIONAL PROPERTIES TRUST
3300 PGA Boulevard Suite 430
Palm Beach Gardens, Florida 33410
This Proxy is Solicited on Behalf of the Board of Trustees
The undersigned hereby appoints Charles R. Jones and Patrick T. Hogan
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side, all the Common
Shares of Beneficial Interest of Correctional Properties Trust held of record by
the undersigned on March 19, 1999, at the Annual Meeting of Shareholders to
be held at the PGA National Resort & Spa, 400 Avenue of the Champions, Palm
Beach Gardens, Florida at 2:00 p.m. (EST) April 27, 1999, or at any
adjournment thereof.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES AND WILL BE VOTED IN
ACCORDANCE WITH THE ABOVE INSTRUCTIONS. IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. ON ANY OTHER BUSINESS WHICH MAY
PROPERLY COME BEFORE THE MEETING, THE SHARES WILL BE VOTED IN ACCORDANCE WITH
THE JUDGMENT OF THE PERSONS NAMED AS PROXIES.
(Continued, and to be signed, on other side.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
Please mark
your votes as [X]
indicated in
this example
1. ELECTION OF CLASS I TRUSTEES: Nominees: Richard R. Wackenhut, 2. To ratify the action of FOR AGAINST ABSTAIN
William M. Murphy, Robert R. the Board of Trustees in [ ] [ ] [ ]
Veach, Jr. approving and adopting
VOTE FOR all nominees VOTE WITHHELD the Correctional Properties
listed to the right as to all nominees. Trust 1999 Share Incentive
(except as marked Plan.
to the contrary)
3. To ratify the action of [ ] [ ] [ ]
[ ] [ ] the Board of Trustees in
appointing ARTHUR ANDERSEN LLP
as the independent certified
public accountants of
Correctional Properties Trust.
INSTRUCTION: To withhold authority 4. In their discretion, the Proxies are authorized
to vote for any individual nominee, to vote upon such other business as may properly
strike a line through the nominee's come before the meeting or any adjournment
name in the list above. thereof.
Please date and sign exactly as name
appears below. Joint owners should each
sign. Attorneys-in-fact, Executors,
Administrators, Trustees, Guardians, or
corporate officers should give full title.
Dated:_____________________________, 1999
_________________________________________
Signature
_________________________________________
Signature if held jointly
PLEASE SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ADDRESSED ENVELOPE.
</TABLE>
