<PAGE> 1
SCHEDULE 14A
(RULE 14-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 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:
[ ] 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
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 25, 2000
The Annual Meeting of the Shareholders of Correctional Properties Trust, a
Maryland real estate investment trust (the "Trust"), will be held on Tuesday,
April 25, 2000, at 2:00 p.m. at the Embassy Suites Hotel, 4380 PGA Boulevard,
Palm Beach Gardens, Florida, for the purpose of considering and acting on the
following matters:
(1) the election of three Trustees for a three-year term until the 2003
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 2000 Stock Option 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 2000; and
(4) the transaction of any other business that may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 13, 2000, the
record date and time fixed by the Board of Trustees, are entitled to notice of
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 postage-paid return envelope 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 24, 2000
<PAGE> 3
PROXY STATEMENT
March 24, 2000
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, a Maryland real
estate investment trust (the "Trust"), for the Annual Meeting of Shareholders to
be held at the Embassy Suites Hotel, 4380 PGA Boulevard, Palm Beach Gardens,
Florida, at 2:00 pm on April 25, 2000, 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 for the fiscal year
2000, and the proposal to ratify the action of the Board of Trustees in
approving and adopting the Correctional Properties Trust 2000 Stock Option 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 - The proposal to ratify the action of the Board of
Trustees in approving and adopting the Correctional
Properties Trust 2000 Stock Option Plan
FOR - The proposal to ratify the appointment of Arthur
Andersen LLP as the independent certified public
accountants of the Trust for fiscal year 2000
In the discretion of the Proxies on such other business
as may properly come before the meeting or any
adjournment thereof.
Holders of record of the Trust's common shares of beneficial interest (the
"Common Shares"), as of the close of business on March 13, 2000 will be entitled
to one vote for each share standing in their name on the books of the Trust.
On March 13, 2000, 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 as the independent certified public
accountants for the Trust for the fiscal year 2000, to ratify the action of the
Board of Trustees in adopting the Correctional Properties Trust 2000 Stock
Option Plan, and on any other matter that may properly come before the meeting.
The presence, in person or by proxy, of holders entitled to cast at least a
majority of all the votes entitled to be cast is necessary to constitute a
quorum for the transaction of business at the Annual Meeting. Under Maryland
Law, abstentions will count towards the presence of a quorum but are not counted
as votes cast and will have no
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effect on the votes for the election of Trustees, the approval of the adoption
of the Correctional Properties Trust 2000 Stock Option Plan, or the proposal to
ratify the appointment of Arthur Anderson LLP.
Any person giving a proxy has the power to revoke it any time before it is voted
by written notice to the Trust, by executing a proxy having a later date or by
attending the meeting and voting in person.
The cost of preparing, 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 24, 2000.
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<PAGE> 5
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, George R. Wackenhut, Anthony D. Travisono and Clarence E.
Anthony are presently Class II 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>
GEORGE R. WACKENHUT Mr. Wackenhut is Chairman and founder of The Wackenhut
1998 Corporation, the parent company of Wackenhut Corrections
Age 80 Corporation ("Wackenhut Corrections"). Mr. Wackenhut has
also served as a director of Wackenhut Corrections since
July 1988. Mr. Wackenhut was President of The Wackenhut
Corporation from the time of its founding in 1955 until
[PHOTO] 1986. Prior to that, Mr. Wackenhut had been a Special Agent
of the Federal Bureau of Investigation from 1950 to 1954. He
received a Bachelor of Science Degree from the University of
Hawaii and a Masters of Education Degree from Johns Hopkins
University. Mr. Wackenhut is on the Dean's Advisory Board of
the University of Miami School of Business, the National
Council of Trustees, Freedom Foundation at Valley Forge, the
President's Advisory Council for the Small Business
Administration, Region IV, and is a member of the National
Board of the National Soccer Hall of Fame. Mr. Wackenhut is
a past member of the Law Enforcement Council, National
Council on Crime and Delinquency, and the Board of Visitors
of the United States Army Military Police School. His son,
Richard R. Wackenhut, is a Trustee of the Company.
- --------------------------------------------------------------------------------------------------
ANTHONY D. TRAVISONO Mr. Travisono is on the faculty at Salve Regina University
1998 in Rhode Island. He serves as an international consultant on
Age 74 corrections issues. From 1974 to 1991, Mr. Travisono was
Executive Director of the American Correctional Association.
His career in the correctional field extends over 50 years,
during which Mr. Travisono has been Director, Rhode Island
Department of Corrections; Director, Rhode Island Department
of Social Welfare; Superintendent, Iowa Training School for
[PHOTO] Boys; and Superintendent, Rhode Island Training School for
Boys. He serves on the Advisory Committee for Women at the
Rhode Island Department of Corrections and on the Advisory
Committee for the Rhode Island Salvation Army Rehabilitation
Center, and he is President of New Time, a halfway house for
men. Mr. Travisono is a 1950 Graduate of Brown University
and received a Masters Degree in Social Work from Boston
University in 1953. Mr. Travisono served as a Director of
Wackenhut Corrections from April 1994 to February 1998.
- --------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
NOMINEE AND YEAR PRESENT AND PAST POSITIONS
FIRST BECAME TRUSTEE AND OTHER INFORMATION
- --------------------------------------------------------------------------------------------------
<C> <S>
CLARENCE E. ANTHONY Mr. Anthony has been the President and Chief Executive
1998 Officer of Emerge Consulting Corporation, a government
Age 40 contracts consulting and marketing firm located in South
Bay, Florida, since October 1997. Prior thereto, Mr. Anthony
was the Director, Client Management Services of CH2M Hill, a
government consulting firm located in West Palm Beach,
Florida from 1995-1997 where his duties included developing
and implementing tactical action plans for client
procurements. From 1992 to 1995, Mr. Anthony served as Vice
President of William R. Hough & Company, an investment
banking firm in Palm Beach Gardens, Florida where he was
responsible for developing financial strategies for
municipal capital projects. Mr. Anthony is a former
President of the Florida League of Cities and immediate past
President of the National League of Cities. He has been the
Mayor of South Bay, Florida since 1984 and serves on the
Board of Directors of the National Conference of Black
Mayors
- --------------------------------------------------------------------------------------------------
</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.
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<PAGE> 7
BOARD AND COMMITTEE MEETINGS
A total number of four meetings of the Board of Trustees were held during the
past fiscal year. All Trustees attended at least 75% of such meetings, and at
least 75% of the meetings of each of the Committees on which they served (during
the period that they served as Trustees).
AUDIT COMMITTEE
The Trust has an Audit Committee (the "Audit Committee") whose members during
fiscal 1999 were as follows:
Robert R. Veach, Jr., Chairman
James D. Motta
William M. Murphy
The Audit Committee met five (5) times during the past fiscal year.
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.
NOMINATING AND COMPENSATION COMMITTEE
The Trust has a Nominating and Compensation Committee (the "Compensation
Committee") whose members during fiscal 1999 were as follows:
Clarence E. Anthony, Chairman
Anthony P. Travisono
James D. Motta
The Nominating and Compensation Committee met once during 1999.
Beginning in fiscal 1999, the Compensation Committee formally evaluated the
performance of the Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"). 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 oversees the Trust's compensation plans for
key employees.
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.
NOMINATING AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
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
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<PAGE> 8
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 1999. The Compensation Committee considered a
number of factors in determining the compensation to be paid to the Trust's
Chief Executive Officer, including levels generally paid to executives in the
Trust's industry, the capabilities of the Chief Executive Officer and his
projected contribution to the Trust's performance on a short- and long-term
basis.
The Trust also maintains a Share Incentive Plan for executive officers,
including the CEO, and proposes the adoption of the 2000 Stock Option Plan.
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
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<PAGE> 9
EXECUTIVE COMPENSATION
The following table shows remuneration paid or accrued by the Trust during the
fiscal year ended December 31, 1999 to the Trust's Chief Executive Officer, and
to the other executive officer of the Trust whose total compensation during the
last fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
AWARDS
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) SARS(#) ($)(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Jones 1999 $200,000 $60,000 -- 30,000 --
President and 1998 $150,000* $45,000 -- 75,000 2,333(1)
Chief Executive Officer
Patrick T. Hogan 1999 $100,000 25,000 -- 15,000 --
Vice President, 1998 80,000* 20,000 -- 10,000 2,318(1)
Chief Financial Officer,
Secretary and Treasurer
</TABLE>
NOTES
* Annualized because Trust commenced operations on April 28, 1998.
(1) Consists of approximately $2,333 contributed by the Trust to Mr. Jones'
401(k), and $2,318 contributed to Mr. Hogan's 401(k).
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<PAGE> 10
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SAR EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles R. Jones 30,000(1) 49% $17.31 1/20/2009 $ 15,300(2)
Patrick T. Hogan 15,000(1) 25% $17.31 1/20/2009 $ 7,650(2)
</TABLE>
(1) These options vested immediately as to one-fourth of the total and vest
as to the remaining shares ratably on the first, second, and third
anniversary of the grant date.
(2) Based on present value of $0.51 per share determined under the
Black-Scholes' pricing model. Assumptions used are as follows:
<TABLE>
<CAPTION>
1999
- -------------------------------------------------------------------
<S> <C>
Discount interest rate 4.69%
Expected life (years) 10
Expected volatility 13.9%
Quarterly dividend rate 8.1%
</TABLE>
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ON VALUE YEAR-END FISCAL YEAR-END
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Jones -- -- 45,000 60,000 $0 $0
Patrick T. Hogan -- -- 8,750 16,250 $0 $0
</TABLE>
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TRUSTEES' COMPENSATION
During fiscal year 1999, 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 receives an option to purchase 5,000
shares from the Trust upon appointment to the Board of Trustees and receives
annually options to purchase up to 2,000 shares of the Trust. The Trust paid no
other compensation to Trustees or their affiliates during 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1999, 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.
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PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table shows the number of Common Shares that were beneficially
owned as of March 10, 2000, 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 84,000(2) *
Charles R. Jones 87,703(3) *
George R. Wackenhut 89,000(2) *
Richard R. Wackenhut 91,074(2) *
Anthony P. Travisono 12,000(4) *
Clarence E. Anthony 7,509(4) *
James D. Motta 7,000(4) *
William M. Murphy 9,600(4) *
Robert R. Veach, Jr. 8,000(4) *
Patrick T. Hogan 18,000(5) *
ALL EXECUTIVE OFFICERS AND TRUSTEES AS A GROUP (10 PERSONS) 413,886 5.8%
J.W. Seligman & Co. Incorporated 1,292,545 18.1%
</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 40,000 Common Shares which have vested,
20,000 Common Shares which will vest on the second anniversary of the
Offering, 2,000 shares which vested in January 1999 and 2,000 shares which
vested in January 2000. Does not include options to purchase 20,000 Common
Shares, which vest on the third anniversary of the consummation of the
Offering.
(3) Includes options to purchase 37,500 Common Shares, which have vested,
18,750 Common Shares which will vest on the second anniversary of the
Offering, 7,500 shares which vested in January 1999, and 7,500 shares
which vested in January 2000. Does not include options to purchase 18,750
Common Shares, which vest on the third anniversary of the consummation of
the Offering. Also does not includes 15,000 shares vesting in two equal
annual installments beginning in January 2001.
(4) Includes options to purchase 7,000 Common Shares (5,000 of 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 which have vested and
2,500 Common Shares which will vest on the second anniversary of the
Offering. Does not include options to purchase 2,500 Common Shares, which
vest on the third anniversary of the consummation of the Offering. Also
includes 3,750 shares which vested in January 1999 and 3,750 which vested
in January 2000 but does not include 7,500 shares vesting in two equal
annual installments beginning in January 2001.
(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.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
Correctional Properties Trust, NAREIT-All, and Russell 2000 Indexes
- --------------------------------------------------------------------------------
(Performance through December 31, 1999)
<TABLE>
<CAPTION>
CORRECTIONAL PROPERTIES
TRUST NAREIT - ALL RUSSELL 2000
----------------------- ------------ ------------
<S> <C> <C> <C>
April 23, 1998 100.00 100.00 100.00
December 31, 1998 82.10 85.11 87.81
December 31, 1999 59.84 79.54 105.09
</TABLE>
Assumes $100 invested on April 23, 1998 in Common Shares and the Index
companies.
* Total return assumes reinvestment of dividends.
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<PAGE> 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the organization of the Trust and the consummation of the
Trust's initial public offering on April 28, 1998 (the "Offering"), the Trust
has entered into a series of contractual arrangements with Wackenhut
Corrections. Dr. George C. Zoley, the Chairman of the Trust, and George R.
Wackenhut and Richard R. Wackenhut, each also a trustee, are members of the
Board of Directors of Wackenhut Corrections. Dr. Zoley is the Chief Executive
Officer of Wackenhut Corrections. In addition Charles R. Jones, the President
and Chief Executive Officer of the Trust and Patrick T. Hogan, the Vice
President and Chief Financial Officer of the Trust, were employed by Wackenhut
Corrections. Messrs. Jones and Hogan resigned their positions with Wackenhut
Corrections upon completion of the Offering.
INITIAL FACILITIES
The Trust and Wackenhut Corrections entered into a Purchase Agreement dated
April 28, 1998 (the "Purchase Agreement"), pursuant to which the Trust 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 have
survived the consummation of an offering for a period of one year.
OPTION FACILITIES
The Trust and Wackenhut Corrections entered into Option Agreements dated April
28, 1999 pursuant to which Wackenhut Corrections granted the Trust 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, development, 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
Trust elects to purchase all of the currently available Option Facilities, the
aggregate purchase price is estimated to be approximately $37.0 million.
On October 30, 1998, Correctional Properties Trust completed the acquisition of
the 600-bed medium security Lea County Correctional Facility in Hobbs, New
Mexico (the "Hobbs Facility") for approximately $26,500,000. During January
1999, the Company completed the acquisition of the 600-bed expansion of the
Hobbs Facility for approximately $20,000,000.
The Company also purchased from WCC on January 15, 1999 for approximately
$46,000,000 the Lawton Correctional Facility (the "Lawton Facility"). The prices
of both facilities consisted of WCC's project costs. WCC has agreed to leaseback
the Lawton Facility from the Company for an initial term of ten years, with
three additional renewal options for terms of five years each. The renewal terms
are to be determined by fair market rental rates.
The Trust purchased the Jena Juvenile Justice Center from Wackenhut Corrections
on January 7, 2000 for approximately $15,300,000 with funds available under the
Trust's credit facility. Wackenhut Corrections leased the facility at an initial
rate of 11% with 4% annual escalators throughout the ten year lease term.
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<PAGE> 16
LEASES
Concurrent with the Trust's acquisitions, the Trust leased such facilities to
Wackenhut Corrections pursuant to leases with initial terms 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 Trust 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 Trust of any of the facilities owned by the Trust (the
"Owned Facilities"). If acquired, the Option Facilities are to be leased to
Wackenhut Corrections pursuant to leases virtually identical to the leases for
the Owned Facilities. The Trust received approximately $22 million from
Wackenhut Corrections in rental payments during 1999.
RIGHT TO PURCHASE
The Trust and Wackenhut Corrections entered into a Right to Purchase Agreement
dated April 28, 1998, pursuant to which the Trust has the right, during the 15
years following the consummation of the Offering (so long as there are any
leases in force between the Trust 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 Trust 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 is to equal
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 is to be
the greater of (i) the fair market rental rate as mutually agreed upon by the
Trust 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 is to be the fair market rental rate as mutually agreed upon by the Trust
and Wackenhut Corrections, or in the absence of such agreement, as determined by
binding arbitration.
Pursuant to the Trust's Bylaws, the Independent Committee, which consists of 5
independent Trustees from 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 Trust's
facilities.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Trust during and with respect to its most recent fiscal year, all SEC Forms
3, 4 and 5 filings have been made when due.
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PROPOSAL NO. 2
APPROVAL OF THE ADOPTION OF
CORRECTIONAL PROPERTIES TRUST 2000 STOCK OPTION PLAN
The Board of Trustees asks shareholders to ratify the action of the Board of
Trustees in approving and adopting the Correctional Properties Trust 2000 Stock
Option Plan.
On January 20, 2000, the Board adopted, subject to shareholder approval, the
Correctional Properties Trust 2000 Stock Option Plan (the "Plan"). The Plan sets
forth the terms pursuant to which options to purchase Common Shares may be
granted by the Board of Trustees, or a committee designated by the Board of
Trustees.
The purpose of the Plan is to provide key employees and trustees (including
non-employee trustees), of the Trust or any parent or subsidiary with the
opportunity to acquire, or increase a proprietary interest in the Trust. The
Board believes the Plan will create a stronger incentive for these individuals
to expend maximum effort toward the growth and success of the Trust, and will
encourage such individuals to remain in the employ of the Company or one or more
of its subsidiaries.
The material features of the Plan are summarized below. Such summary does not,
however, purport to be complete and is qualified in its entirety by the terms of
the plan. A copy of the Plan is attached hereto as Annex A and is incorporated
herein by reference.
AWARDS AVAILABLE FOR ISSUANCE UNDER THE PLAN
Nonqualified options, if granted, will provide for the right to purchase Common
Shares at a price specified by the Board or committee 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" ("ISO") 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. ISOs may be modified after the grant date to disqualify
them from treatment as an "incentive stock option."
SHARES SUBJECT TO THE PLAN
A maximum of 170,000 Common Shares will be reserved for issuance under the Plan.
Based upon the closing price of $10.81 for a common share on March 17, 2000, the
aggregate value of the Common Shares reserved for issuance under the Plan is
approximately $1,800,000. The Plan provides that no single individual may be
granted in any one year options to purchase greater than 50,000 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 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 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 occurs while the participant is an
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<PAGE> 18
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.
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 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 dispositions of Common Shares acquired upon the exercise of an
ISO.
The transfer of a nonqualified stock option to an immediate family member of the
optionee will have no immediate tax consequences to the Trust, the participant
or the immediate 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 fair market value and the price at which the immediate 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.
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
a majority of the votes cast on the matter at the Annual Meeting is required to
approve the adoption of the Correctional Properties Trust 2000 Share Incentive
Plan.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
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 2000. 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
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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 will 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 at the Annual Meeting, the affirmative vote of
a majority of the votes cast on the matter 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 2000.
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.
SHAREHOLDER PROPOSAL DEADLINE
The Company's Bylaws require shareholders who intend to nominate directors or
propose new business at any annual meeting to provide advance notice of such
intended action as well as certain additional information. This Bylaw provision
requires shareholders to provide the Company with notice of their intent to
nominate directors or propose new business at an annual meeting not less than 30
days nor more than 60 days prior to such annual meeting. Accordingly, for a
matter to be properly presented at the Annual Meeting by a shareholder, the
Secretary of the Company must have received written notice thereof after January
26, 2000 and before February 26, 2000.
Shareholder proposals intended to be presented at the 2001 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 25, 2000.
A shareholder otherwise desiring to bring a proposal before the 2001 Annual
Meeting of Shareholders must deliver the proposal to the Secretary of the
Company at the principal executive offices of the Company on or after January
25, 2001 and on or before February 25, 2001.
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<PAGE> 20
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 24, 2000
- --------------------------------------------------------------------------------
A COPY OF THE TRUST'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999, 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.
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APPENDIX A
CORRECTIONAL PROPERTIES TRUST
2000 STOCK OPTION PLAN
1. ESTABLISHMENT
Correctional Properties Trust, a Maryland real estate investment trust (the
"Company"), hereby establishes the "Correctional Properties Trust 2000 Stock
Option Plan" (the "Plan").
2. PURPOSE
The purpose of the Plan is to advance the interests of the Company by providing
Eligible Individuals (as defined in Section 6 below) with an opportunity to
acquire or increase a proprietary interest in the Company, which will thereby
create a stronger incentive to expend maximum effort for the growth and success
of the Company and its subsidiaries, and will encourage such individuals to
remain in the employ of the Company or one or more of its subsidiaries.
3. ADMINISTRATION
(a) Board of Trustees. The Plan shall be administered by the Company's Board of
Trustees (the "Board"), which shall have the full power and authority to take
all actions, and to make all determinations required or provided for under the
Plan or any stock option granted under the Plan ("Option") or Option Agreement
(as defined in Section 9 below) entered into under the Plan and all such other
actions and determinations not inconsistent with the specific terms and
provisions of the Plan deemed by the Board to be necessary or appropriate to the
administration of the Plan or any Option granted or Option Agreement entered
into hereunder. The Board may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Option Agreement in the manner
and to the extent it shall deem expedient to carry the Plan into effect and
shall be the sole and final judge of such expediency. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting at which any issue relating to the Plan is
properly raised for consideration or without a meeting by written consent of the
Board executed in accordance with the Company's Declaration of Trust and
By-Laws, as amended, and applicable law. The interpretation and construction by
the Board of any provision of the Plan or of any Option granted or Option
Agreement entered into hereunder shall be final, conclusive and binding on all
Optionees (as defined in Section 7 hereof).
(b) Committee. The Board may, in its discretion, from time to time appoint a
committee (the "Committee") consisting of not less than two members of the
Board, none of whom shall be an officer or other salaried employee of the
Company or any Parent or Subsidiary (as defined in Section 4 hereof), and each
of whom shall qualify in all respects as a "non-employee director" as defined in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and an "outside director" for purposes of Section 162(m)
of the Internal Revenue Code of 1986, as amended from time to time (the "Code").
The Board, in its sole discretion, may provide that the role of the Committee
shall be limited to making recommendations to the Board concerning any
determinations to be made and actions to be taken by the Board pursuant to or
with respect to the Plan, or the Board may delegate to the Committee such powers
and authorities related to the administration of the Plan, as set forth in
Section 3(a) above, as the Board shall determine, consistent with the
Declaration of Trust and the By-Laws of the Company, as amended, and applicable
law. The Board may remove members, add members and fill vacancies on the
Committee from time to time, all in accordance with the Company's Declaration of
Trust and By-Laws, as amended, and applicable law. The majority vote of the
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Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.
(c) No Liability. No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Option granted or Option Agreement entered into hereunder.
(d) Delegation to the Committee. In the event that the Plan or any Option
granted or Option Agreement entered into hereunder provides for any action to be
taken by or determination to be made by the Board, such action may be taken by
or such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in
Section 3(b) above. Unless otherwise expressly determined by the Board, any such
action or determination by the Committee shall be final, conclusive and binding
on all Optionees (as defined in Section 7 hereof).
4. TYPE OF OPTIONS
Each Option may be designated by the Board, in its sole discretion, either as
(i) an "incentive stock option" ("Incentive Stock Options") within the meaning
of Section 422 of the Code, or (ii) as a non-qualified stock option which is not
intended to meet the requirements of Section 422 of the Code; provided, however,
that Incentive Stock Options may only be granted to employees of the Company,
any "subsidiary corporation" as defined in Section 424 of the Code (a
"Subsidiary") or any "parent corporation" as defined in Section 424 of the Code
(a "Parent"). In the absence of any designation, Options granted under the Plan
will be deemed to be non-qualified stock options. The Plan shall be administered
and interpreted so that all Incentive Stock Options granted under the Plan will
qualify as incentive stock options under Section 422 of the Code. Options
designated as Incentive Stock Options that fail to continue to meet the
requirements of Section 422 of the Code shall be redesignated as non-qualified
stock options automatically on the date of such failure to continue to meet such
requirements without further action by the Board.
5. COMMON SHARES
The capital stock of the Company that may be issued pursuant to Options granted
under the Plan shall be common shares of beneficial interest, par value $.001
per share, of the Company (the "Common Shares"), which shares may be treasury
shares or authorized but unissued shares. The total number of Common Shares that
may be issued pursuant to Options granted under the Plan, which number shall be
subject to adjustment as provided in Section 18 below, shall be one hundred
seventy thousand (170,000) shares. If any Option expires, terminates or is
terminated or canceled for any reason prior to exercise in full, the Common
Shares that were subject to the unexercised portion of such Option shall be
available for future Options granted under the Plan.
6. ELIGIBILITY
Options may be granted under the Plan to any key employee or trustee (including
any non-employee trustee) of the Company or any Parent or Subsidiary, as
determined by the Board from time to time on the basis of their importance to
the business of the Company (collectively, "Eligible Individuals"), provided,
however, that Incentive Stock Options may only be granted to employees of the
Company or any Parent or Subsidiary. An individual may hold more than one
Option, subject to such restrictions as are provided herein.
7. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board may, at any time and
from time to time, prior to the date of termination of the Plan, grant to such
Eligible Individuals as the Board may determine ("Optionees"), Options to
purchase such number of Common Shares on such terms and conditions as the Board
may determine. The date on which the Board approves the grant of an Option (or
such later date as is specified by the
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Board) shall be considered the date on which such Option is granted. The maximum
number of Common Shares subject to Options that may be granted during any
calendar year under the Plan to any executive officer or other employee of the
Company whose compensation is subject to Section 162(m) of the Code shall be
fifty thousand (50,000) shares, unless otherwise determined by the Board in
writing. The immediately preceding sentence shall only be effective if the
Company is a "publicly held corporation," as defined in Section 162(m) of the
Code.
8. LIMITATION ON INCENTIVE STOCK OPTIONS
(a) Ten Percent Shareholder. Notwithstanding any other provision of this Plan
to the contrary, no individual may receive an Incentive Stock Option under the
Plan if such individual, at the time the award is granted, owns (after
application of the rules contained in Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary, unless (i) the
purchase price for each Common Share subject to such Incentive Stock Option is
at least one hundred and ten percent (110%) of the fair market value of a Common
Share on the date of grant (as determined in good faith by the Board) and (ii)
such Incentive Stock Option is not exercisable after the date which is five
years from the date of grant.
(b) Limitation on Grants. The aggregate fair market value (determined with
respect to each Incentive Stock Option at the time such Incentive Stock Option
is granted) of the Common Shares with respect to which Incentive Stock Options
are exercisable for the first time by an individual during any calendar year
(under this Plan or any other plan of the Company or a Parent or Subsidiary)
shall not exceed $100,000. If an Incentive Stock Option is granted pursuant to
which the aggregate fair market value of shares with respect to which it first
becomes exercisable in any calendar year by an individual exceeds such $100,000
limitation, the portion of such Option which is in excess of the $100,000
limitation, and any Options issued subsequently in the same calendar year, shall
be treated as a non-qualified stock option pursuant to Section 422(d)(1) of the
Code. In the event that an individual is eligible to participate in any other
stock option plan of the Company or any Parent or Subsidiary which is also
intended to comply with the provisions of Section 422 of the Code, such $100,000
limitation shall apply to the aggregate number of shares for which Incentive
Stock Options may be granted under this Plan and all such other plans.
9. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements ("Option Agreements"), which shall be executed by the Company and by
the Optionee, in such form or forms and containing such terms and conditions not
inconsistent with the terms of the Plan as the Board shall from time to time
determine. Option Agreements covering Options granted from time to time or at
the same time need not contain similar provisions; provided, however, that all
such Option Agreements shall comply with all terms of the Plan.
10. OPTION PRICE
The purchase price of each Common Share subject to an Option (the "Option
Price") shall be fixed by the Board and stated in each Option Agreement.
Notwithstanding anything to the contrary set forth in the Plan or in any Option
Agreement, the Option Price of any Incentive Stock Option shall be not less than
one hundred percent (100%) of the fair market value of a Common Share on the
date the Option is granted. If the Common Shares are then listed on any national
securities exchange, the fair market value shall be the closing price of a
Common Share on such exchange on the last trading day immediately prior to the
date of grant; provided, however, that when granting Incentive Stock Options,
the Board shall determine fair market value in accordance with the provisions of
Section 422 of the Code. If the Common Shares are not listed on any such
exchange, the fair market value shall be determined in good faith by the Board.
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11. TERM AND VESTING OF OPTIONS
(a) Option Period. Subject to the provisions of Sections 8(a) and 14 hereof,
each Option granted under the Plan shall terminate and all rights to purchase
shares thereunder shall cease upon the expiration of ten (10) years from the
date such Option is granted, or on such date prior thereto as may be fixed by
the Board and stated in the Option Agreement relating to such Option.
Notwithstanding the foregoing, the Board may in its discretion, at any time
prior to the expiration or termination of any Option, extend the term of any
such Option for such additional period as the Board in its discretion may
determine; provided, however, that in no event shall the aggregate option period
with respect to any Option, including the initial term of such Option and any
extensions thereof, exceed 10 years.
(b) Vesting.
(i) Incentive Stock Options. Subject to the provisions of Sections
11(c) and 14 hereof, each Option Agreement will specify the vesting
schedule applicable to Incentive Stock Options; provided, however, that
except as provided in Sections 11(c) and 14 hereof, and unless otherwise
specified in the Option Agreement, Incentive Stock Options shall be
exercisable as follows: 25% on the date of grant and 25% each on the first
three anniversaries of the date of grant. If the Board provides, in its
sole discretion, that any Incentive Stock Option is exercisable only in
installments, the Board may waive such installment exercise provisions at
any time at or after grant in whole or in part, based on such factors as
the Board shall determine, in its sole discretion.
(ii) Non-qualified Stock Options. Subject to the provisions of Sections
11(c) and 14 hereof, each Option Agreement will specify the vesting
schedule applicable to non-qualified stock Options ("Non-qualified Stock
Options"); provided, however, that except as provided in Sections 11(c) and
14 hereof, and unless otherwise specified in the Option Agreement,
Non-qualified Stock Options shall be exercisable as follows: 25% on the
date of grant and 25% each on the first three anniversaries of the date of
grant. If the Board provides, in its sole discretion, that any
Non-qualified Stock Options is exercisable only in installments, the Board
may waive such installment exercise provisions at any time at or after
grant in whole or in part, based on such factors as the Board shall
determine, in its sole discretion.
(c) Change of Control. In the event of:
(i) a "Change in Control" as defined in Section 11(d), or
(ii) a "Potential Change in Control" as defined in section 11(e), but
only if and to the extent so determined by the Board at or after grant
(subject to any right of approval expressly reserved by the Board at the
time of such determination), the following acceleration and valuation
provisions shall apply:
A. Any Option awarded under the Plan not previously exercisable and
vested shall become fully exercisable and vested.
B. The value of all outstanding Options, to the extent vested, shall,
unless otherwise determined by the Board in its sole discretion at or
after grant but prior to any Change in Control, be cashed out on the
basis of the "Change in Control Price" as defined in Section 11(f) as of
the date such Change in Control or such Potential Change in Control is
determined to have occurred or such other date as the Board may
determine prior to the Change in Control.
(d) Definition of "Change in Control." For purposes of Section 11(c), a "Change
in Control" means the happening of any of the following:
(i) any person or entity, including a "group" as defined in Section
13(d)(3) of the Exchange Act, other than the Company or a wholly-owned
subsidiary thereof or any employee benefit plan of the Company
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or any of its Subsidiaries, becomes the beneficial owner of the Company's
securities having 20% or more of the combined voting power of the then
outstanding securities of the Company that may be cast for the election of
trustees of the Company (other than as a result of an issuance of
securities initiated by the Company in the ordinary course of business); or
(ii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions less
than a majority of the combined voting power of the then outstanding
securities of the Company or any successor corporation or entity entitled
to vote generally in the election of the trustees of the Company or such
other corporation or entity after such transaction are held in the
aggregate by the holders of the Company's securities entitled to vote
generally in the election of trustees of the Company immediately prior to
such transaction; or
(iii) during any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's shareholders, of each trustee of
the Company first elected during such period was approved by a vote of at
least two-thirds of the trustees of the Company then still in office who
were trustees of the Company at the beginning of any such period.
(e) Definition of "Potential Change in Control." For purposes of Section 11(c),
a "Potential Change in Control" means the happening of any one of the following:
(i) The approval by shareholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the Company as
defined in Section 11(c); or
(ii) The acquisition of beneficial ownership, directly or indirectly, by
any entity, person or group (other than the Company or a Subsidiary or any
Company employee benefit plan (including any trustee of such plan acting as
such trustee)) of securities of the Company representing 10% or more of the
combined voting power of the Company's outstanding securities and the
adoption by the Board of a resolution to the effect that a Potential Change
in Control of the Company has occurred for purposes of this Plan.
(f) Definition of "Change in Control Price." For purposes of this Section 11,
"Change in Control Price" means the highest price per share paid in any
transaction reported on the New York Stock Exchange or paid or offered in any
bona fide transaction related to a potential or actual Change in Control of the
Company at any time during the 60 day period immediately preceding the
occurrence of the Change in Control (or, where applicable, the occurrence of the
Potential Change in Control event), in each case as determined by the Board.
12. MANNER OF EXERCISE AND PAYMENT
(a) Manner of Exercise. An Option that is exercisable hereunder may be
exercised by delivery to the Company on any business day, at its principal
office, of written notice of exercise, which notice shall specify the number of
shares with respect to which the Option is being exercised, and shall be
accompanied by payment in full of the Option Price of the shares for which the
Option is being exercised, by one or more of the methods provided below. The
minimum number of Common Shares with respect to which an Option may be
exercised, in whole or in part, at any time shall be the lesser of one hundred
(100) shares or the maximum number of shares available for purchase under the
Option at the time of exercise.
(b) Payment. Subject to whatever installment exercise provisions apply under
Section 11(b), Options may be exercised in whole or in part at any time during
the option period, by giving written notice of exercise to the Company
specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by check, note or
such other instrument as the Board may accept. As determined by the Board, in
its sole discretion, at or after grant, payment in full or in part may also be
made in the form of an
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Option or unrestricted Common Shares already owned by the Optionee or (based on
the fair market value (as defined in Section 10 hereof) of the Option or the
Common Shares on the date the option is exercised, as determined by the Board).
(c) Issuance of Certificates. Promptly after the exercise of an Option, the
individual exercising the Option shall be entitled to the issuance of a
certificate or certificates evidencing his ownership of such Common Shares. An
individual holding or exercising an Option shall have none of the rights of a
shareholder until the Common Shares covered thereby are fully paid and issued to
him and, except as provided in Section 18 below, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
13. TRANSFERABILITY OF OPTIONS
Incentive Stock Options shall be transferable by the Optionee only by will or by
the laws of descent and shall be exercisable, during the Optionee's lifetime,
only by the Optionee. Non-qualified Stock Options shall be transferable by the
Optionee by will or by the laws of descent or, with the consent of the Board, to
(i) the spouse, children or grandchildren of the Optionee ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, (iii) a partnership in which such Immediate Family Members are
the only partners, or (iv) one or more entities in which the Optionee has a 10%
or greater equity interest, provided that (x) the share option agreement
pursuant to which such Non-qualified Stock Options are granted must be approved
by the Board, and (y) subsequent transfers of transferred Non-qualified Stock
Options shall be prohibited except those in accordance with this subparagraph
(iv). Following transfer, any such Non-qualified Stock Options shall continue to
be subject to the same terms and conditions as were applicable immediately prior
to transfer, provided that for purposes of this Plan or the option agreement
executed pursuant hereto, the term "Optionee" shall be deemed to refer to the
transferee.
14. TERMINATION OF EMPLOYMENT, DEATH, DISABILITY OR BREACH OF RESTRICTIVE
COVENANTS
(a) General. If an Optionee's employment with or service as a trustee
(including a non-employee trustee) or consultant to the Company or any Parent or
Subsidiary terminates for any reason other than cause (as defined below), death
or Retirement of such Optionee, any vested Option held by such Optionee may
thereafter be exercised by the Optionee, to the extent it was exercisable at the
time of termination or on such accelerated basis as the Board may determine at
or after grant (or as may be determined in accordance with procedures
established by the Board), for a period of two (2) years from the date of such
termination or until the expiration of the stated term of such Option, whichever
period is the shorter. In the event of such termination of employment, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Option will thereafter
be treated as a Non-qualified Stock Option.
(b) Cause. Notwithstanding any provisions set forth in this Plan, unless
otherwise determined by the Board at or after grant, if an Optionee's employment
(including without limitation employment as an independent contractor or
consultant) by the Company or any Parent or Subsidiary terminates for cause, all
Options held by the Optionee shall thereupon terminate. For purposes of this
paragraph, "cause" shall mean the following (i) the commission, or the alleged
commission, by the Optionee of any act embezzlement, fraud or criminal
misconduct, (ii) gross negligence, (ii) willful or continuing disregard for the
safety or soundness of the Company, (iii) willful or continuing violation of the
published rules of the Company, (iv) a request from a state or federal
governmental agency having regulatory authority over the Company that the
services of the Optionee be terminated, or (v) any act which constitutes
termination for cause under any employment, independent contractor, consulting
or other agreement the Optionee may have with the Company or any Parent or
Subsidiary which defines the term "cause" for purposes of such agreement. The
Board shall determine whether cause exists for purposes of this Plan and such
determination shall be final, conclusive and binding on the Optionees.
A-6
<PAGE> 27
(c) Death. If an Optionee dies while serving as an employee of Consultant to
the Company or any Parent or Subsidiary or as a non-employee member of the
Board, all Options held by the Optionee shall vest immediately and may
thereafter be exercised by the executors or administrators or legatees or
distributees of such Optionee's estate at any time within two (2) years after
the date of such Optionee's death, or if earlier, the date specified in the
Option Agreement pursuant to Section 11(a) above, to exercise such Options in
whole or in part.
(d) Retirement. If an Optionee's service as an employee of or consultant to the
Company or any Parent or Subsidiary or as a non-employee member of the Board
terminates by reason of Retirement, any Options held by the Optionee shall vest
immediately and may thereafter be exercised by the Optionee from the date of
such termination until the expiration of the stated term of such Option. In the
event of termination of service by reason of Retirement, if an Incentive Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the Option will thereafter be treated as a
Non-qualified Stock Option. For purposes of this Section, "Retirement" shall
mean retirement from active employment with the Company or any Parent or
Subsidiary or after age 60. (h)
15. USE OF PROCEEDS
The proceeds received by the Company from the sale of Common Shares upon
exercise of Options granted under the Plan shall constitute general funds of the
Company.
16. GENERAL PROVISIONS
(a) Distribution. The Board may require each person purchasing shares pursuant
to an Option or other award under the Plan to represent to and agree with the
Company in writing that the Optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Board deems appropriate to reflect any restrictions
on transfer.
(b) Transfer Restrictions. All certificates for Common Shares or other
securities delivered under the Plan shall be subject to such transfer orders and
other restrictions as the Board may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Common Shares are then listed, and any applicable
Federal or state securities law, and the Board may cause a legend or legends to
be put on any such certificates to make appropriate reference to such
restrictions.
(c) Other Plans. Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(d) No Rights. The adoption of the Plan shall not confer upon any employee of
the Company or its Parent or Subsidiary any right to continued employment with
the Company or a Parent or Subsidiary, as the case may be, nor shall it
interfere in any way with the right of the Company or its Parent or Subsidiary
to terminate the employment of any of its employees at any time.
(e) Taxes. No later than the date as of which an amount first becomes
includable in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Board regarding the
payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the Board,
withholding obligations may be settled with Common Shares that is part of an
award that gives rise to the withholding requirement. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements and
the Company and its Parent and Subsidiaries shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.
(f) Law. The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Maryland.
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<PAGE> 28
17. AMENDMENT AND TERMINATION OF THE PLAN
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of an
Optionee or participant under an Option theretofore granted, without the
Optionee's or participant's consent, or which, without the approval of the
Company's shareholders, would: (a) except as expressly provided in this Plan,
increase the total number of shares reserved for the purpose of the Plan; or (b)
change the employees or class of employees eligible to participate in the Plan.
The Board may amend the terms of any Option theretofore granted, prospectively
or retroactively, but, subject to Section 18 hereof, no such amendment shall
impair the rights of any holder without the holder's consent. The Board may also
substitute new Options for previously granted Options (on a one for one or other
basis), including previously granted Options having higher option exercise
prices. Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.
18. EFFECT OF CHANGES IN CAPITALIZATION
In the event of any merger, reorganization, consolidation, recapitalization,
Common Share dividend, Common Share split or other change in corporate structure
affecting the Common Shares, an adjustment shall be made in the aggregate number
of Common Shares reserved for issuance under the Plan, in the number and option
price of shares of Common Shares subject to outstanding Options granted under
the Plan, as may be determined to be appropriate by the Board, in its sole
discretion, provided that the number of Common Shares subject to any Option
shall always be a whole number.
19. UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a participant or
Optionee by the Company, nothing contained herein shall give any such
participant or Optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Board may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Common Shares or payments in lieu of or with respect to
awards hereunder; provided, however, that, unless the Board otherwise determines
with the consent of the affected participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
20. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date of the Plan's approval by the Board
and the Company's shareholders.
21. OWNERSHIP LIMITATION
All awards hereunder shall be subject to the ownership limitations set forth in
the Declaration of Trust of the Company as such may be amended from time to
time. Without limiting the generality of the foregoing, any award which causes a
recipient, or any constructive or beneficial owner of Common Shares (as
determined under Section 318 and 544, respectively, of the code), to own or be
deemed to own shares in excess of such ownership limitation shall be void.
22. TERM OF PLAN
No Option shall be granted pursuant to the Plan on or after the tenth
anniversary of the effective date as set forth in Section 22 above, but awards
granted prior to such tenth anniversary may extend beyond that date.
A-8
<PAGE> 29
Appendix B
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 hereof, all the
Common Shares of Beneficial Interest of Correctional Properties Trust held of
record by the undersigned on March 13, 2000, at the Annual Meeting of
Shareholders to be held at the Embassy Suites Hotel, 4380 PGA Boulevard, Palm
Beach Gardens, Florida at 2:00 p.m. (EST) April 25, 2000, 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.)
<PAGE> 30
<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 II TRUSTEES:
Nominees: George R. Wackenhut, 2. To ratify the action of FOR AGAINST ABSTAIN
Anthony D Travisono the Board of Trustees in [ ] [ ] [ ]
Clarence E. Anthony approving and adopting
VOTE FOR all nominees VOTE WITHHELD the Correctional Properties
listed as to all nominees. Trust 2000 Stock Option
(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:_____________________________, 2000
_________________________________________
Signature
_________________________________________
Signature if held jointly
</TABLE>
