<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>
PRISON REALTY CORPORATION
- --------------------------------------------------------------------------------
(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
PRISON REALTY
CORPORATION
March 31, 1999
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Prison Realty Corporation (the "Company") to be held at 10:00 a.m., local time,
on Tuesday, May 11, 1999, at the Loews Vanderbilt Plaza Hotel, 2100 West End
Avenue, Nashville, Tennessee.
The formal Notice of the meeting, as well as the proxy statement and form
of proxy are included with this letter. A copy of the Company's 1998 Annual
Report to Stockholders is also enclosed for your review.
In addition to a discussion of the specific matters to be acted upon, which
are described in detail in the accompanying proxy statement, at the meeting
there will be a review of the beginning of the Company's operations earlier this
year as the result of the successful mergers of CCA Prison Realty Trust and
Corrections Corporation of America with and into the Company and a report on the
progress of the Company since the completion of the mergers. There will also be
a review of the results of the 1998 fiscal year of both CCA Prison Realty Trust
and Corrections Corporation of America and stockholders will be given an
opportunity to ask management questions of general interest concerning the
Company.
Regardless of the number of shares you own, it is important that your views
be represented. Accordingly, whether or not you plan to attend the meeting in
person, I urge you to complete, sign, date and promptly return the enclosed
proxy card in the envelope provided. If you choose to attend the meeting, you
may revoke your proxy and personally cast your votes.
Your Board of Directors and the Company's management look forward to
greeting those stockholders who are able to attend.
Sincerely,
/s/ DOCTOR R. CRANTS
Doctor R. Crants
Chairman and Chief Executive Officer
<PAGE> 3
PRISON REALTY CORPORATION
10 BURTON HILLS BOULEVARD, SUITE 100
NASHVILLE, TENNESSEE 37215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, MAY 11, 1999
Notice is hereby given that the annual meeting of stockholders (the "Annual
Meeting") of Prison Realty Corporation (the "Company") will be held at 10:00
a.m., local time, on Tuesday, May 11, 1999, at the Loews Vanderbilt Plaza Hotel,
2100 West End Avenue, Nashville, Tennessee, for the following purposes:
(1) To consider and elect five (5) Class I directors to serve on the
Company's Board of Directors until the 2002 annual meeting of the
Company's stockholders and until their respective successors are duly
elected and qualified and to consider and elect one (1) Class III
director to serve on the Company's Board of Directors until the 2001
annual meeting of the Company's stockholders and until his respective
successor is duly elected and qualified;
(2) To consider and approve an amendment to the Company's Charter to change
the name of the Company to "Prison Realty Trust, Inc.";
(3) To consider and ratify the action of the Company's Board of Directors
in selecting the firm of Arthur Andersen LLP to be the independent
auditors of the Company for the fiscal year ending December 31, 1999,
and to perform such other services as may be requested; and
(4) To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
Pursuant to the Bylaws of the Company, the Board of Directors of the
Company has fixed the close of business on Friday, March 26, 1999, as the record
date for determination of stockholders entitled to notice of and to vote at the
Annual Meeting and at any adjournments or postponements thereof. Only
stockholders of record of the Company's common stock at the close of business on
that date will be entitled to notice of and to vote at the Annual Meeting and at
any adjournments or postponements thereof.
Your attention is directed to the proxy statement accompanying this Notice
of Annual Meeting for more complete information regarding the matters to be
presented and acted upon at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
By Order of the Board of Directors,
/s/ Vida H.Carroll
VIDA H. CARROLL
Secretary
March 31, 1999
Nashville, Tennessee
YOUR VOTE IS VERY IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE MEETING IN PERSON, YOU MAY
WITHDRAW YOUR PROXY AND PERSONALLY CAST YOUR VOTE AT THE MEETING.
<PAGE> 4
PRISON REALTY CORPORATION
10 BURTON HILLS BOULEVARD, SUITE 100
NASHVILLE, TENNESSEE 37215
PROXY STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, MAY 11, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Prison Realty Corporation (the "Company")
for use at the 1999 Annual Meeting of Stockholders of the Company to be held on
Tuesday, May 11, 1999, and at any adjournments or postponements thereof (the
"Annual Meeting"). The Company, which was formed on September 24, 1998, began
operations on January 1, 1999 after the successful completion of the mergers of
CCA Prison Realty Trust ("Prison Realty") and Corrections Corporation of America
("CCA") with and into the Company (collectively, the "Merger"). At the Annual
Meeting, stockholders will be asked to vote: (i) to elect five (5) Class I
directors and one (1) Class III director; (ii) to approve an amendment to the
Company's Charter to change the name of the Company to "Prison Realty Trust,
Inc." (the "Name Change Amendment"); (iii) to ratify the selection of Arthur
Andersen LLP as the independent auditors of the Company for the fiscal year
ending December 31, 1999; and (iv) upon any other matters properly brought
before the Annual Meeting and at any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on Friday, March 26,
1999, as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting (the "Record Date"). Only
stockholders of record of shares of the Company's common stock, $0.01 par value
per share (the "Common Stock"), at the close of business on the Record Date will
be entitled to notice of and to vote at the Annual Meeting. As of the Record
Date, there were 113,041,110 shares of Common Stock outstanding and entitled to
vote at the Annual Meeting. This Proxy Statement and the accompanying Notice of
Annual Meeting and proxy card are being sent to stockholders entitled to notice
of and to vote at the Annual Meeting on or about Wednesday, March 31, 1999. The
Company has 4,300,000 shares of its 8% Series A Cumulative Preferred Stock,
$0.01 par value per share (the "Series A Preferred Stock"), issued and
outstanding. Pursuant to the terms of the Series A Preferred Stock, the holders
of such shares do not possess any voting rights. Holders of the Company's
outstanding Common Stock as of the close of business on the Record Date will be
entitled to one vote for each share of Common Stock held by them.
The presence, in person or by proxy, of the Company's stockholders entitled
to cast a majority of all the votes entitled to be cast at the Annual Meeting is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. For all proposals, shares that reflect abstentions or "broker nonvotes"
(i.e., shares represented at the meeting that are held by brokers or nominees as
to which instructions have not been received from the beneficial owners or
persons entitled to vote such shares and, with respect to one or more but not
all issues, such brokers or nominees do not have discretionary voting power to
vote such shares) will be counted for purposes of determining whether a quorum
is present for the transaction of business at the meeting. However, pursuant to
Maryland law, neither abstentions nor broker nonvotes will have any impact on
<PAGE> 5
the outcome of the vote for any proposal voted on at the Annual Meeting,
including the election of directors.
Stockholders of the Company are requested to complete, sign, date and
promptly return the accompanying proxy card in the enclosed, postage-prepaid
envelope. Shares represented by a properly executed proxy received prior to the
vote at the Annual Meeting which are not revoked will be voted at the Annual
Meeting as directed on the proxy. If a properly executed proxy is submitted and
no instructions are given, the proxy will be voted: (i) FOR the election of each
of the five (5) nominees for Class I directors of the Company and the one (1)
nominee for Class III director of the Company, each as named in this Proxy
Statement; (ii) FOR approval of the Name Change Amendment; and (iii) FOR
ratification of the Board of Directors' selection of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending December 31, 1999. It
is not anticipated that any matters other than those set forth in this Proxy
Statement will be presented at the Annual Meeting. If other matters are
presented, proxies will be voted in accordance with the discretion of the duly
appointed proxy holders.
A stockholder of record as of the Record Date may revoke a properly
submitted proxy at any time before it has been exercised by filing a written
revocation with the Secretary of the Company at the address of the Company set
forth herein, by filing a duly executed proxy bearing a later date, or by
appearing in person and voting by ballot at the Annual Meeting. Any stockholder
of record as of the Record Date attending the Annual Meeting may vote in person
whether or not a properly submitted proxy has been previously given, but the
presence (without further action) of a stockholder at the Annual Meeting will
not constitute revocation of a properly executed proxy previously received by
the Company.
The cost of soliciting proxies from stockholders will be borne by the
Company. Such solicitation will initially be made by mail. The Company has
retained Corporate Investor Communications, Inc. to assist in the solicitation
of proxies. It is estimated that the fees of Corporate Investor Communications,
Inc. for such services will be approximately $10,000, plus all out-of-pocket
costs and expenses. In addition, proxy solicitation may be made personally or by
telephone by directors, officers and employees of the Company, none of whom will
receive additional compensation for these services. Forms of proxies and proxy
materials will also be distributed through brokers, custodians and other like
parties to the beneficial owners of shares of Common Stock. The Company will
reimburse such parties for the reasonable out-of-pocket expenses incurred in
connection with such distribution.
2
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
The Company was formed in September 1998 with a Board of Directors
consisting of 13 initial directors (the "Initial Directors"). The Initial
Directors consisted of the same individuals who served as trustees of Prison
Realty immediately prior to the Merger. As set forth in the Charter of the
Company (the "Charter"), the Initial Directors are divided into three classes as
nearly equal as possible, with five of the Initial Directors serving as Class I
directors with their terms expiring at the Annual Meeting, four of the Initial
Directors serving as Class II directors with their terms expiring at the 2000
Annual Meeting, and four of the Initial Directors serving as Class III directors
with their terms expiring at the 2001 Annual Meeting. The Bylaws of the Company,
as amended (the "Bylaws"), provide that the Company's Board of Directors shall
consist of not less than three nor more than 16 members, with the actual number
of directors comprising the board to be set by resolution.
In connection with the completion of the Merger and the future governance
of the Company, the following events occurred in the first quarter of 1999
concerning the composition of the Company's Board of Directors:
- On January 1, 1999, by resolution of the Company's Board of Directors,
the number of seats on the board was increased by one, from 13 to 14, and
Jean-Pierre Cuny, an affiliate of Sodexho Alliance, S.A., a French
societe anonyme and the Company's largest stockholder ("Sodexho"), was
appointed by the board as a Class III director to fill the newly created
board seat.
- In March 1999, Rusty L. Moore, a Class I director, asked that he not be
nominated for re-election to the Company's Board of Directors at the
Annual Meeting. The board subsequently nominated Ned Ray McWherter to
take Mr. Moore's place and stand for election at the Annual Meeting for a
term of three years as a Class I director.
- In March 1999, Monroe J. Carell, Jr. resigned from his position as a
Class III director effective as of the date of the Annual Meeting. In an
effort to return the number of board seats back to its original number of
13, the Company's Board of Directors then adopted a resolution decreasing
the number of seats on the board by one, from 14 to 13, also effective as
of the date of the Annual Meeting.
The terms of the Company's five current Class I directors expire at the
Annual Meeting. Therefore, five Class I directors will be elected at the Annual
Meeting to hold office for a term of three years and until their respective
successors are duly elected and qualified. The Company has nominated D. Robert
Crants, III, John W. Eakin, Jr., Ted Feldman, and Jackson W. Moore, each of whom
currently serves as a Class I director, for re-election as Class I directors. In
addition, as previously mentioned, the Company has nominated Ned Ray McWherter
to stand for election at the Annual Meeting for a term of three years as the
fifth Class I director. Furthermore, pursuant to the provisions of Maryland law
regarding the election of directors appointed by the Company's Board of
Directors, Jean-Pierre Cuny, as a newly appointed Class III director, must be
nominated by the Company's Board of Directors to stand for election by the
stockholders of the Company to serve the remainder of his term and until his
respective successor is duly elected and qualified. The term of service of
Jean-Pierre Cuny as a Class III director will
3
<PAGE> 7
expire at the 2001 Annual Meeting. Each nominee has consented to be a candidate
and to be so named in this Proxy Statement and to serve, if elected.
Unless otherwise directed in the proxy, the persons named in the enclosed
proxy, or their substitute, will vote such proxy for the election of the five
nominees listed herein as Class I directors and the one nominee for Class III
director. If any nominee at the time of election is unavailable to serve, a
contingency not presently anticipated, it is intended that the persons named in
the proxy, or their substitute, will vote for an alternative nominee who will be
designated by the Company's Board of Directors. Proxies may be voted only for
the nominees named or such alternates.
Under the Bylaws and Maryland law, the affirmative vote of a plurality of
all the votes cast at the Annual Meeting, assuming a quorum is present, is
sufficient to elect a director. Under Maryland law, the Charter and the Bylaws,
proxies marked "withhold authority" will be counted for the purpose of
determining the presence of a quorum but such proxies and failures to vote
(including proxies from brokers or other nominees indicating that such persons
do not have discretionary power to vote shares in the election of Directors)
will not be counted as votes cast in the election of directors and thus will
have no effect on the result of the vote.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Set forth below is information with respect to each of the 14 current
directors of the Company, including the five nominees standing for election as
Class I directors at the Annual Meeting and the one nominee standing for
election as a Class III director at the Annual Meeting. (Monroe J. Carell, Jr.
has resigned from the board effective as of the date of the Annual Meeting, at
which time the number of directors will be decreased from 14 to 13, assuming the
election of all directors currently standing for election or re-election.)
Additionally, set forth below is information concerning the executive officers
of the Company, all of whom serve as directors of the Company except for Vida H.
Carroll. Independent Directors are those directors who are not employees of the
Company and are not otherwise affiliated with a lessee of the Company's
facilities or the Service Companies, as hereinafter defined (Mr. Bell and Rusty
L. Moore are not executive officers of the Company but are otherwise affiliated
with the Company. See "Certain Relationships and Related Transactions" contained
herein for a detailed description of these and other relationships.) Subject to
the rights enumerated in the Employment Agreements, as hereinafter defined, the
executive officers of the Company serve at the sole discretion of the Board of
Directors of the Company. Directors' and executive officers' ages are given as
of the date of this Proxy Statement.
CLASS I NOMINEES STANDING FOR RE-ELECTION AT THE 1999 ANNUAL MEETING DUE TO
EXPIRATION OF TERMS OR INITIAL NOMINATION FOR ELECTION (TERMS TO EXPIRE IN 2002)
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ---- --- ----------------
<S> <C> <C>
D. Robert Crants, III............... 30 President; Director
John W. Eakin, Jr................... 44 Independent Director
Ted Feldman......................... 45 Independent Director
Ned Ray McWherter................... 68 Nominee for Independent Director
Jackson W. Moore.................... 50 Independent Director
</TABLE>
4
<PAGE> 8
CLASS I DIRECTOR NOT STANDING FOR RE-ELECTION
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ---- --- ----------------
<S> <C> <C>
Rusty L. Moore...................... 39 Director
</TABLE>
CLASS II CONTINUING DIRECTORS NOT REQUIRING ELECTION AT THE 1999 ANNUAL MEETING
(TERMS TO EXPIRE IN 2000)
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ---- --- ----------------
<S> <C> <C>
Doctor R. Crants..................... 54 Chairman of the Board of Directors;
Chief Executive Officer
Richard W. Cardin.................... 63 Independent Director
J. Michael Quinlan................... 57 Vice-Chairman of the Board of Directors
Joseph V. Russell.................... 58 Independent Director
</TABLE>
CLASS III NOMINEE STANDING FOR ELECTION AT THE 1999 ANNUAL MEETING DUE TO
APPOINTMENT BY BOARD OF DIRECTORS (TERM TO EXPIRE IN 2001)
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jean-Pierre Cuny..................... 44 Director
</TABLE>
CLASS III CONTINUING DIRECTORS NOT REQUIRING ELECTION AT THE 1999 ANNUAL MEETING
(TERMS TO EXPIRE IN 2001)
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ---- --- ----------------
<S> <C> <C>
C. Ray Bell.......................... 57 Director
Michael W. Devlin.................... 39 Chief Operating Officer; Director
Charles W. Thomas, Ph.D.............. 56 Independent Director
</TABLE>
CLASS III DIRECTOR NOT STANDING FOR RE-ELECTION DUE TO RESIGNATION EFFECTIVE AS
OF THE DATE OF THE ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Monroe J. Carell, Jr. .............. 67 Independent Director
</TABLE>
EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Vida H. Carroll..................... 38 Chief Financial Officer;
Secretary/Treasurer
</TABLE>
5
<PAGE> 9
CLASS I NOMINEES STANDING FOR ELECTION AT THE 1999 ANNUAL MEETING
D. ROBERT CRANTS, III is a Director and the President of the Company.
Prior to the Merger Mr. Crants served as a Trustee and as President of Prison
Realty, which he co-founded in 1997. Mr. Crants also serves as a manager of DC
Investment Partners, LLC, which serves as the general partner of private
investment partnerships. From 1990 through 1996, Mr. Crants was associated with
Goldman Sachs & Company ("Goldman Sachs"), most recently serving as an associate
in the Goldman Sachs Special Investments Group. During his tenure with Goldman
Sachs, Mr. Crants was involved in structuring over $3.0 billion in real estate
transactions, including over $1.0 billion in real estate investment trust public
offerings. During this time, he also negotiated triple net leases for shopping
centers, free standing stores and other properties on behalf of several clients.
Mr. Crants graduated from Princeton University in 1990 with an A.B., summa cum
laude, in Economics. Mr. Crants is the son of Doctor R. Crants.
JOHN W. EAKIN, JR. is an Independent Director of the Company and, prior to
the Merger, served as an Independent Trustee for Prison Realty. Mr. Eakin
founded Eakin and Smith, Inc., a real estate development and management company
("Eakin and Smith") in 1987 and served as its President from that time until
1996, when Eakin and Smith was merged with Highwoods Properties, Inc.
("Highwoods"), a self-administered and self-managed, office and industrial real
estate investment trust based in Raleigh, North Carolina that is publicly traded
on the New York Stock Exchange. Mr. Eakin left Highwoods in January 1999 after
serving as a Senior Vice President and Director of Highwoods for three years.
Mr. Eakin is also a member of the Board of Directors of Central Parking
Corporation and a member of the advisory board of First American National Bank
of Nashville. Mr. Eakin is a graduate of the University of North Carolina.(1)(3)
TED FELDMAN is an Independent Director of the Company and is the Chairman
of the Audit Committee of the Board of Directors of the Company. Prior to the
Merger, he served as an Independent Trustee for Prison Realty. Mr. Feldman is
currently the Chief Operating Officer of StaffMark, Inc., ("StaffMark") a
provider of diversified staffing services to business, medical, professional and
service organizations and governmental agencies that is publicly traded on the
NASDAQ exchange, a position he has held since October 1996. Prior to joining
StaffMark, Mr. Feldman founded HRA, Inc., a Nashville provider of staffing
services, in 1991, and served as its President and Chief Executive Officer from
that time until it merged with StaffMark in October, 1996. (1-Chairman)(3)
NED RAY MCWHERTER is the Chairman of the Board of Directors of Volunteer
Distributing Company, Inc. and Eagle Distributors, Inc. in Dresden, Tennessee.
He also serves on the Board of Directors of Coca-Cola Bottling Co. Consolidated,
Phoenix Healthcare Corporation and SunTrust Bank. Mr. McWherter served as
Governor of the State of Tennessee from January 1987 to January 1995 and served
as the Speaker of the House of Representatives for the State of Tennessee prior
to his inauguration as Governor in 1987. It is anticipated that Mr. McWherter
will join the Audit Committee of the Board of Directors, assuming his election
to the board at the Annual Meeting.
- -------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Independent Committee of the Board of Directors.
6
<PAGE> 10
JACKSON W. MOORE is an Independent Director of the Company and is the
Chairman of the Independent Committee of the Board of Directors. Prior to the
Merger, Mr. Moore served as an Independent Trustee for Prison Realty and as the
Chairman of the Independent Committee of its Board of Trustees. Mr. Moore is
presently a Director of and is the President and Chief Operating Officer of
Union Planters Corporation, a multi-state bank and savings and loan holding
company headquartered in Memphis, Tennessee that is publicly traded on the New
York Stock Exchange, positions he has held since 1986, 1989, and 1994,
respectively, and is President and Chief Executive Officer of its principal
subsidiary, Union Planters Bank, N.A. He is also Chairman of PSB Bancshares,
Inc. and a Vice President and Director of its subsidiary, the People Savings
Bank in Clanton, Alabama. Prior to joining Union Planters, Mr. Moore practiced
law for 16 years. Mr. Moore is a graduate of the University of Alabama and
Vanderbilt University School of Law. Mr. Moore is not related to Rusty L. Moore.
(2)(3-Chairman)
CLASS III NOMINEE STANDING FOR ELECTION AT THE 1999 ANNUAL MEETING DUE TO
APPOINTMENT BY BOARD OF DIRECTORS
JEAN-PIERRE CUNY is a Director of the Company and, prior to the Merger,
served as a Director of CCA. Mr. Cuny serves as the Senior Vice President of The
Sodexho Group, a French-based, leading supplier of catering and various other
services to institutions and an affiliate of Sodexho. From February 1982 to June
1987, he served as Vice President in charge of Development for the Aluminum
Semi-Fabricated Productions Division of Pechiney, a diversified integrated
producer of aluminum and other materials. Mr. Cuny graduated from Ecole
Polytechnique in Paris in 1977 and from Stanford University Engineering School
in 1978.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES LISTED ABOVE.
CLASS I DIRECTOR NOT STANDING FOR RE-ELECTION
RUSTY L. MOORE is a Director of the Company and, prior to the Merger,
served as a Trustee of Prison Realty. Since 1996, Mr. Moore has been a principal
of the Nashville law firm of Moore & Waechter, PLC and the President of its
affiliate, Bankers Title & Escrow Corporation. He is also a principal and an
executive officer of a privately-held real estate investment and property
management company that owns multi-family residential properties throughout the
Southeast. Mr. Moore has over 13 years of experience in negotiating and
structuring real estate transactions, including the development, acquisition,
leasing and financing of various types of property. Prior to forming Moore &
Waechter, Mr. Moore was a partner at Stokes & Bartholomew, P.A. Mr. Moore
graduated from the University of Tennessee, where he received a B.S. in Public
Administration in 1981 and a J.D. in 1985. Mr. Moore is not related to Jackson
W. Moore. (2)
- -------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Independent Committee of the Board of Directors.
7
<PAGE> 11
CLASS II CONTINUING DIRECTORS NOT REQUIRING ELECTION AT THE 1999 ANNUAL
MEETING -- TERMS TO EXPIRE IN 2000
DOCTOR R. CRANTS is the Chairman of the Board of Directors and Chief
Executive Officer of the Company. Mr. Crants also serves as a member of the
Board of Directors, Chief Executive Officer, and President of Operating Company,
as hereinafter defined, and serves on the Boards of Directors of Service Company
A and Service Company B, as hereinafter defined. Prior to the Merger, Mr. Crants
served as Chairman, Chief Executive Officer and President of CCA, which he
co-founded in 1983, as well as Chairman of the Board of Trustees of Prison
Realty. Mr. Crants also currently serves on the Board of Directors of Sodexho
Marriott Services, Inc., which is the largest food service and facility
management company in North America. Mr. Crants graduated from the United States
Military Academy at West Point in 1966 and received a joint Masters in Business
Administration and Juris Doctor degree from the Harvard Business School and the
Harvard Law School, respectively, in 1974.
RICHARD W. CARDIN is an Independent Director of the Company and, prior to
the Merger, served as an Independent Trustee for Prison Realty. Mr. Cardin is a
certified public accountant and is currently a consultant and retired partner at
Arthur Andersen LLP. Prior to his retirement in 1995, Mr. Cardin was affiliated
with, and a partner in, Arthur Andersen LLP, an international firm of
independent public accountants and consultants, for 37 years. From 1980 through
1994, Mr. Cardin served as the managing partner of Arthur Andersen LLP's
Nashville office. Mr. Cardin is a member of the Boards of Directors of Atmos
Energy Corporation and United States Lime & Minerals, Inc. (1)(3)
MICHAEL QUINLAN is Vice-Chairman of the Board of Directors of the Company.
Prior to the Merger, Mr. Quinlan served as a member of the Board of Trustees and
Chief Executive Officer of Prison Realty. Mr. Quinlan has been employed in the
corrections and detention industry for 28 years. From July 1987 to December
1992, Mr. Quinlan served as the Director of the Federal Bureau of Prisons. In
such capacity, Mr. Quinlan was responsible for the total operations and
administration of a federal agency with an annual budget of more than $2.0
billion, more than 26,000 employees and 75 facilities. In 1988, Mr. Quinlan
received the Presidential Distinguished Rank Award, which is the highest award
given by the United States government to civil servants for service to the
United States. In 1992, he received the National Public Service Award of the
National Academy of Public Administration and the American Society of Public
Administration, awarded annually to the top three public administrators in the
United States. Mr. Quinlan is a 1963 graduate of Fairfield University with a
B.S.S. in History, and he received a J.D. from Fordham University Law School in
1966. He also received an LL.M. from the George Washington University School of
Law in 1970.
JOSEPH V. RUSSELL is an Independent Director of the Company and is the
Chairman of the Compensation Committee of the Board of Directors of the Company.
Prior to the Merger, served as an Independent Trustee for Prison Realty. Mr.
Russell is the President and Chief Financial Officer of Elan-Polo, Inc., a
Nashville-based, privately-held, world-wide producer and distributor of
footwear. Mr. Russell is also the Vice President of and a principal in RCR
Building Corporation, a Nashville-based, privately-held builder and
- -------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Independent Committee of the Board of Directors.
8
<PAGE> 12
developer of commercial and industrial properties. He also serves on the Boards
of Directors of Community Care Corp., the Footwear Distributors of America
Association and US Auto Insurance Company. Mr. Russell graduated from the
University of Tennessee in 1963 with a B.S. in Finance. (2-Chairman)(3)
CLASS III CONTINUING DIRECTORS NOT REQUIRING ELECTION AT THE 1999 ANNUAL
MEETING -- TERMS TO EXPIRE IN 2001
MICHAEL W. DEVLIN is a Director and the Chief Operating Officer of the
Company. Prior to the Merger, Mr. Devlin served as a Trustee and as Chief
Operating Officer of Prison Realty, which he co-founded in 1997. Mr. Devlin also
serves as a manager of DC Investment Partners, LLC, which serves as the general
partner of private investment partnerships. From 1993 through 1995, Mr. Devlin
was a Vice President in the business development group of Goldman Sachs.
Immediately prior to joining Goldman Sachs, Mr. Devlin practiced law for four
years at the law firm of Davis, Polk and Wardwell in New York, working on
various corporate transactions, including leveraged leasing. During that time,
he negotiated approximately $1.0 billion in leases, including triple net leases.
Mr. Devlin is a graduate of Yale University and the Duke University School of
Law.
C. RAY BELL is a Director of the Company and, prior to the Merger, served
as a Trustee for Prison Realty. Mr. Bell is the President and owner of Ray Bell
Construction, Inc. ("Ray Bell Construction"). Ray Bell Construction specializes
in the construction of a wide range of commercial buildings, and has constructed
approximately 40 correctional and detention facilities, consisting of over
15,000 beds in seven states, on behalf of various government entities and
private companies, including Operating Company, as hereinafter defined (and
prior to the Merger, CCA). Mr. Bell is a founding member of the Middle Tennessee
Chapter of Associated Builders and Contractors. Mr. Bell is a graduate of the
University of the South. (2)
CHARLES W. THOMAS, PH.D is a Director of the Company and, prior to the
Merger, served as a Trustee for Prison Realty. Dr. Thomas is a university
professor who has taught and written on the criminal justice and private
corrections fields for almost 30 years. Currently, he is Professor of
Criminology and the Director of the Private Corrections Project Center for
Studies in Criminology and Law (the "Center") at the University of Florida,
Gainesville, positions he has held since 1980 and 1989, respectively. While
serving as Director of the Center, Dr. Thomas authored the Center's annual
Private Adult Correctional Facility Census. In connection with the Merger, Dr.
Thomas performed certain consulting services for each of Prison Realty and CCA.
Dr. Thomas continues to perform consulting services for the Company and
Operating Company relating to each of their business objectives. Dr. Thomas
graduated from McMurry University in 1966 with a B.S. in Secondary Education and
from the University of Kentucky with a M.A. in Sociology in 1969, and a Ph.D. in
Sociology in 1971. (1)
- -------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Independent Committee of the Board of Directors.
9
<PAGE> 13
CLASS III DIRECTOR NOT STANDING FOR RE-ELECTION DUE TO RESIGNATION EFFECTIVE AS
OF THE DATE OF THE ANNUAL MEETING
MONROE J. CARELL, JR. is an Independent Director of the Company and, prior
to the Merger, served as an Independent Trustee for Prison Realty. For the past
19 years, Mr. Carell has served as Chief Executive Officer and Chairman of the
Board of Directors of Central Parking, a company which provides parking services
nationwide and is publicly traded on the New York Stock Exchange. Since 1991,
Mr. Carell has served as a Trustee of Vanderbilt University in Nashville, and he
is currently a member of the Board of Trust of the Urban Land Institute. Mr.
Carell is also a member of the Board of Directors of Vanderbilt University
Medical Center. (1)(3)
EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
VIDA H. CARROLL is Chief Financial Officer, Secretary and Treasurer of the
Company and, prior to the Merger, served as the Chief Financial Officer,
Secretary and Treasurer of Prison Realty. From 1991 to 1996, Ms. Carroll, as a
sole proprietor, worked as a financial consultant, specializing in accounting
conversions and systems design. Prior to this time, she worked in public
accounting, including working as an audit manager with KPMG Peat Marwick. Ms.
Carroll holds a Bachelor of Science Degree from Tennessee Technological
University and is a certified public accountant.
COMMITTEES OF THE BOARD OF DIRECTORS
Pursuant to the authority granted under the Bylaws, the Company's Board of
Directors has designated an Audit Committee, Compensation Committee, and
Independent Committee. Information regarding the members of each committee and
the authority granted to each committee by the Company's Board of Directors is
set forth below. Immediately prior to the Merger, each committee member served
on a committee of the Board of Trustees of Prison Realty which exercised
substantially similar authority.
AUDIT COMMITTEE. The Company's Audit Committee consists of Messrs. Cardin,
Carell, Eakin, Feldman, and Thomas, with Mr. Feldman serving as Chairman. The
Audit Committee makes recommendations concerning the engagement of independent
public accountants by the Company, reviews with the independent public
accountants the plans and results of the audit engagement, approves professional
services provided by the independent public accountants, reviews the
independence of the independent public accountants, considers the range of audit
and non-audit fees and reviews the adequacy of the Company's internal accounting
controls. The Company's Audit Committee has held two meetings to date in 1999
and did not meet in 1998. Prison Realty's Audit Committee held two meetings in
1998. To ensure that all members of the Audit Committee are independent, it is
anticipated that Mr. McWherter, if elected, will be appointed to replace Dr.
Thomas on the Audit Committee following the Annual Meeting. See "Certain
Relationships and Related Transactions" contained herein for a description of
certain consulting services previously rendered by Dr. Thomas in connection with
the Merger and currently being rendered in connection with the operations of the
Company and Operating Company.
- -------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Independent Committee of the Board of Directors.
10
<PAGE> 14
COMPENSATION COMMITTEE. The Company's Compensation Committee consists of
Mr. Bell, Jackson W. Moore, Rusty L. Moore, and Mr. Russell, with Mr. Russell
serving as Chairman. The Compensation Committee determines compensation,
including awards under the Company's Employee Share Incentive Plan, as assumed
by the Company from Prison Realty in the Merger (the "Share Incentive Plan"),
and the Non-Employee Directors' Share Option Plan, as amended, as also assumed
by the Company from Prison Realty in the Merger (the "Non-Employee Directors'
Plan") (the Share Incentive Plan and the Non-Employee Directors' Plan, as
assumed, are herein collectively referred to as the "Company's Plans"). The
Compensation Committee also administers the Company's Plans, as well as the
Company's Non-Employee Directors' Compensation Plan assumed by the Company from
Prison Realty in the Merger. The Compensation Committee also administers certain
former stock option and incentive plans of CCA, including the 1995 Employee
Stock Incentive Plan (the "1995 Stock Incentive Plan"), assumed by the Company
from CCA in connection with the Merger. The Company's Compensation Committee has
held one meeting to date in 1999 and did not meet in 1998. Prison Realty's
Compensation Committee held two meetings in 1998.
INDEPENDENT COMMITTEE. The Company's Independent Committee consists of all
of the Company's Independent Directors and currently consists of Messrs. Cardin,
Carell, Eakin, Feldman, Jackson W. Moore and Russell, with Jackson W. Moore
serving as Chairman. Pursuant to the Company's Bylaws, the Independent Committee
must approve of the following actions of the Company's Board of Directors: (i)
the election of the operators for the Company's properties; (ii) the entering
into of any agreement with any tenant of the Company's properties, including
Operating Company, the Company's primary tenant, Service Company A and Service
Company B; and (iii) the consummation of any transaction between the Company and
any of its tenants, including those parties mentioned above; including, but not
limited to, the negotiation, enforcement and renegotiation of the terms of any
lease of any of the Company's properties. For further discussion regarding the
duties and procedures of the Independent Committee, please see the information
provided herein under the heading "Certain Relationships and Related
Transactions." The Company's Independent Committee has held one meeting to date
in 1999 and did not meet in 1998. Prison Realty's Independent Committee held two
meetings in 1998. It is anticipated that Mr. McWherter, if elected, will serve
as a member of the Independent Committee following the Annual Meeting.
MEETINGS OF THE BOARD OF DIRECTORS OF THE COMPANY AND OF THE BOARD OF TRUSTEES
OF PRISON REALTY
The Company's Board of Directors has held one meeting to date in 1999, with
all directors except for Mr. Carell attending either in person or by
teleconference. The Company's Board of Directors held one meeting in 1998, with
all directors except for Mr. Carell attending either in person or by
teleconference. The Board of Trustees of Prison Realty held 11 meetings in 1998
and no trustee, with the exception of Mr. Carell, attended fewer than 75% of the
aggregate of all meetings of the board and the committees, if any, upon which
such trustees served and which were held during the period of time that such
person served on the Board of Trustees or such committee(s).
COMPENSATION OF DIRECTORS
The compensation policy of the Company as its relates to members of the
Company's Board of Directors is a continuation of the policy used by Prison
Realty to compensate its
11
<PAGE> 15
trustees prior to the Merger. Accordingly, the Company pays its Non-Employee
Directors, as hereinafter defined, annual compensation of $12,000 for their
services (the "Annual Retainer"). In addition, Non-Employee Directors receive a
fee of $1,000 for each meeting of the Board of Directors which they attend and
an additional fee of $500 for each meeting they attend of committees upon which
they serve (collectively, the "Meeting Fees") (the Annual Retainer and Meeting
Fees paid to Non-Employee Directors are collectively referred to herein as the
"Fees"). Directors who are not employees of the Company or one of its lessees or
any of their affiliates or subsidiaries (the "Non-Employee Directors") may
elect, on an annual basis, to receive up to 100% of their Fees in shares of
Common Stock. Non-Employee Directors are reimbursed for reasonable expenses
incurred to attend Board of Directors and committee meetings. Directors who are
employees of either the Company or one of its lessees or their affiliates are
not compensated for serving as Directors. Non-Employee Directors also
participate in the Non-Employee Directors' Plan, whereby they receive options to
purchase 5,000 shares of Common Stock for each year of service with the Board of
Directors. All other directors of the Company are eligible to participate in the
Share Incentive Plan.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL PROVISIONS
EMPLOYMENT AGREEMENTS.
Each of Doctor R. Crants, J. Michael Quinlan, D. Robert Crants, III and
Michael W. Devlin are subject to employment agreements with the Company
(collectively, the "Employment Agreements"). Doctor R. Crants and Mr. Quinlan
are subject to agreements dated January 1, 1999 executed in connection with the
completion of the Merger. Mr. Quinlan's employment agreement with Prison Realty
in effect immediately prior to the Merger was canceled and superseded by the
January 1 agreement, with the consent of Mr. Quinlan, in connection with the
Merger. D. Robert Crants, III and Mr. Devlin are subject to agreements
previously entered into by them with Prison Realty, effective as of June 1,
1997, which were assumed by the Company with their consent in connection with
the Merger.
Doctor R. Crants' employment agreement is for a term of three years from
the date of execution, with an additional three year renewal option. The
employment agreements relating to each of Mr. Quinlan, D. Robert Crants, III and
Mr. Devlin are for terms of four years from the date of their respective
execution. The Employment Agreements generally provide for annual compensation
and incentive compensation as determined by the Company's Compensation Committee
on the terms set forth therein. Since the Company did not commence operations
until completion of the Merger on January 1, 1999, the Company paid no
compensation to Doctor R. Crants, Mr. Quinlan, D. Robert Crants, III, and Mr.
Devlin in 1998. Information concerning actual compensation paid to each of
Doctor R. Crants, Mr. Quinlan, D. Robert Crants, III, and Mr. Devlin in 1998 by
each of CCA and Prison Realty, respectively, can be found herein under the
heading "Executive Compensation." The Employment Agreements also generally
provide for non-cash benefits such as life and health insurance to the extent
the Company makes such benefit plans available to the Company's employees.
Each Employment Agreement includes provisions restricting the officers from
competing, directly or indirectly, with the Company during the term of their
employment and, except in certain circumstances, for three years after
termination of employment, with the exception of Doctor R. Crants, who is
prohibited from competing with the Company for a period of one year after the
termination of his employment.
12
<PAGE> 16
Pursuant to the employment agreement with Doctor R. Crants, the Company may
terminate his employment at any time with or without cause, provided, however,
that if he is terminated without just "cause", as defined under the agreement,
he shall be entitled to receive his annual cash and non-cash compensation for a
period ending on the earlier of his death or three years from his date of
termination, subject to offset for compensation earned and other benefits
obtained by him from other sources during that period. Doctor R. Crants may
terminate his employment with the Company by providing 90 days written notice to
the Company. Pursuant to the employment agreements with Mr. Quinlan, D. Robert
Crants, III and Mr. Devlin, the Company may generally terminate the employment
of each of them with 30 days prior written notice upon the happening of certain
specified events. Each of Mr. Quinlan, D. Robert Crants, III and Mr. Devlin may
terminate his employment upon 30 days' written notice to the Company.
CHANGE OF CONTROL PROVISIONS.
The 1995 Stock Incentive Plan and the Share Incentive Plan each provide
that upon a "change-of-control" or "potential change-in-control" of the Company,
as those terms are defined in the 1995 Stock Incentive Plan and Share Incentive
Plan, the value of all outstanding share options granted under the plans, to the
extent vested, shall be cashed out on the basis of a "change-in-control price"
which is generally based on the highest price paid per share of Common Stock on
the New York Stock Exchange at any time during a 60 day period prior to the
occurrence of the "change-in-control" event. Doctor R. Crants has been granted
options to purchase shares of Common Stock under the 1995 Stock Incentive Plan,
and each of the Named Executive Officers, as hereinafter defined, has been
granted options to purchase shares of Common Stock under the Share Incentive
Plan, all as set forth in the table included herein under "Executive
Compensation -- Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Value." In addition, Doctor R. Crants has been granted
deferred shares of Common Stock under the Amended and Restated Corrections
Corporation of America 1989 Stock Bonus Plan, as assumed by the Company by CCA
in connection with the Merger, which shares are subject to accelerated vesting
upon the occurrence of certain "changes of control," as defined pursuant to the
plan.
13
<PAGE> 17
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Company began operations on January 1, 1999 upon the completion of the
Merger. Accordingly, the Company paid no compensation to its directors,
officers, or employees prior to that date. However, the Company's current Chief
Executive Officer received compensation from CCA in 1998, as well as in previous
years, and each of the Company's other officers received compensation from
Prison Realty in 1998 and since its commencement of operations in July 1997. The
following table sets forth certain summary information concerning the
compensation paid by CCA to Doctor R. Crants during the three fiscal years ended
December 31 1996, 1997 and 1998, and the compensation paid by Prison Realty to
each of Mr. Quinlan, D. Robert Crants, III, and Mr. Devlin, the three most
highly compensated executive officers of the Company, other than Doctor R.
Crants, who were, prior to the Merger, the three executive officers of Prison
Realty whose annualized compensation from Prison Realty exceeded $100,000
(collectively, the "Named Executive Officers"), for the fiscal years ended
December 31, 1997 and 1998.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ------------------------
------------------------- SECURITIES
BASE UNDERLYING SHARE BONUS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) AWARD(#)
- --------------------------- ---- ---------- ----- ---------- -----------
<S> <C> <C> <C> <C> <C>
Doctor R. Crants................ 1998 $393,383(1) -- 17,500(2) --
Chief Executive Officer 1997 366,873(3) -- 13,125(2) --
1996 351,580(4) -- 26,250(2) --
J. Michael Quinlan.............. 1998 160,625(5) -- -- --
Vice Chairman of the 1997 150,000(6) -- 375,000(7) --
Board of Directors
D. Robert Crants, III........... 1998 108,750(5) -- -- --
President 1997 100,000(6) -- 225,000(7) 150,000(8)
Michael W. Devlin............... 1998 108,750(5) -- -- --
Chief Operating Officer 1997 100,000(6) -- 225,000(7) 150,000(8)
</TABLE>
- -------------------------
(1) Includes $7,450 contribution to the Corrections Corporation of America
Amended and Restated Employee Stock Ownership Plan (the "CCA ESOP").
(2) These options were granted under the 1995 Stock Incentive Plan. In
connection with the Merger, the Company assumed all of the options
outstanding under the 1995 Stock Incentive Plan, with all of such options
being converted into options exercisable for shares of Common Stock, based
on the exchange ratio in the Merger pursuant to which CCA shareholders
received 0.875 shares of Common Stock for each share of CCA common stock
owned.
(3) Includes $7,450 contribution to the CCA ESOP.
(4) Includes $7,350 contribution to the CCA ESOP.
(5) Includes $5,000 contribution to the CCA Prison Realty Trust Amended and
Restated Employee Share Ownership Plan.
(6) Amounts are annualized salaries for the fiscal year ended December 31, 1997.
(7) Options to purchase all but 25,000 of the shares shown for each executive
officer above vest in 25% increments over a three-year period with the first
increment having vested on July 15, 1997 and are exercisable at a price of
$21.00 per share, the per share offering price of Prison Realty's initial
public offering of its common shares in
14
<PAGE> 18
July 1997 (the "Initial Offering"). The balance of the options vest in 25%
increments over a three-year period with the first increment having vested
on December 2, 1997 and are exercisable at a price of $37.81 per share, the
per share market price of Prison Realty's common shares on the date of the
grant. These options were granted under the Share Incentive Plan. In
connection with the Merger, the Company assumed all of the options
outstanding under the Share Incentive Plan, with all of such options being
converted into options exercisable for shares of Common Stock.
(8) Represent Prison Realty common shares issued as a development fee and as
reimbursement for actual costs incurred with the promotion and formation of
Prison Realty, the consummation of the Initial Offering and the closing of
the purchase of nine correctional and detention facilities by Prison Realty
from CCA in connection therewith.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company granted no options to purchase shares of Common Stock in 1998.
In connection with the Merger, however, options to purchase shares of CCA common
stock and Prison Realty common shares outstanding at the time of the Merger were
converted into the right to purchase shares of Common Stock. Doctor R. Crants
held options to purchase both CCA common stock and Prison Realty common shares
at the time of the Merger, which were converted, and each of the Named Executive
Officers and each of the trustees of Prison Realty held options to purchase
Prison Realty common shares at the time of the Merger, which were converted.
With the exception of a grant to the non-employee trustees of Prison Realty in
April 1998, Prison Realty did not grant any options to purchase its common
shares during 1998. Doctor R. Crants was granted options to purchase 20,000
shares of CCA common stock at $35.00 per share in March 1998, which were
converted in the Merger into options to purchase 17,500 shares of Common Stock
at $40.00 per share, based on the exchange ratio in the Merger, pursuant to
which CCA shareholders received 0.875 share of Common Stock for each share of
CCA common stock they owned. CCA did not grant any Named Executive Officers
options to purchase shares of its common stock during 1998.
15
<PAGE> 19
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUE
The following table sets forth information with respect to the value of
options to purchase Common Stock at December 31, 1998. The following information
assumes that the Merger had been completed on December 31, 1998 and that all
options to purchase shares of CCA common stock and Prison Realty common shares
had been converted into the right to purchase shares of Common Stock. In
addition, it assumes that the closing price of the Common Stock on December 31,
1998 would have been the same as that of Prison Realty's common shares.
Doctor R. Crants exercised options to purchase 240,000 shares of CCA common
stock on October 16, 1998, constituting his only option exercise during the 1998
fiscal year. These purchased shares were converted into 210,000 shares of Common
Stock in the Merger. Options to purchase shares of CCA common stock held by him
on December 31, 1998 were also converted into the right to purchase shares of
Common Stock in the Merger. Neither Doctor R. Crants nor any of the Named
Executive Officers exercised any options to purchase Prison Realty common shares
during the 1998 fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT OPTIONS
FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
<S> <C> <C>
Doctor R. Crants................. 270,625(1)/100,000(2) $1,115,887(3);0(4)/0(5)
J. Michael Quinlan............... 187,500(2)/187,500(2) 0(5)/0(5)
D. Robert Crants, III............ 112,500(2)/112,500(2) 0(5)/0(5)
Michael W. Devlin................ 112,500(2)/112,500(2) 0(5)/0(5)
</TABLE>
- -------------------------
(1) Constitutes options to purchase shares of Common Stock obtained as the
result of the Company's assumption of options to purchase 100,000 common
shares of Prison Realty and 195,000 shares of CCA common stock, in the
Merger, on a converted basis.
(2) Constitutes options to purchase shares of Common Stock obtained as the
result of the Company's assumption of options to purchase a like number of
Prison Realty common shares in the Merger.
(3) Reflects the value of exercisable options assumed from CCA in the Merger
relating to the purchase of 170,625 shares of Common Stock. The value of the
unexercised options at December 31, 1998 is based upon the closing market
price of Prison Realty common shares of $20.50 at such date. The exercise
price applicable to the options assumed from CCA is $13.96, based on the
weighted average exercise price of such options. Thus, the options assumed
by the Company from CCA had a value of $1,115,887.50 as of December 31,
1998.
(4) Reflects the value of exercisable options assumed from Prison Realty in the
Merger relating to the purchase of 100,000 shares of Common Stock. The
exercise price applicable to the options assumed from Prison Realty exceeded
the closing market price of $20.50. Thus, the options assumed from Prison
Realty had no value as of December 31, 1998.
(5) The value of the unexercisable options at December 31, 1998 is based upon
the closing market price of Prison Realty common shares of $20.50 at such
date. The weighted average exercise price applicable to the options assumed
from Prison Realty exceeded the closing market price of $20.50. Thus, the
options had no value as of December 31, 1998.
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<PAGE> 20
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company, comprised of those members of
the Company's Board of Directors who served on the Compensation Committee of the
Board of Trustees of Prison Realty (the "Prison Realty Compensation Committee")
immediately prior to the Merger, will continue the policies adopted and
implemented by the Prison Realty Compensation Committee in compensating the
Company's executive officers. Accordingly, the following report analyzes the
policy adopted as well as the actions of the Prison Realty Compensation
Committee in 1998.
OBJECTIVES OF EXECUTIVE COMPENSATION. The Company's executive compensation
program is designed to attract, retain and reward experienced, highly motivated
executives who are capable of leading the Company effectively and continuing its
growth and profitability. The Company's objective is to utilize a combination of
cash and equity-based compensation to provide appropriate incentives for
executive officers while aligning their interests with those of the Company's
stockholders.
COMPENSATION COMMITTEE PROCEDURES. Prison Realty's executive compensation
program was administered under the direction of the Prison Realty Compensation
Committee comprised of Joseph V. Russell (Chairman), C. Ray Bell, Jackson W.
Moore and Rusty L. Moore. The compensation determinations for Prison Realty's
executive officers for 1998 were made in April 1998 after audited financial
statements for such year had become available and were filed with the Securities
and Exchange Commission (the "Commission") and upon a review of the salaries of
the executive officers of comparable real estate investment trusts as disclosed
in available SNL Reviews (as hereinafter defined) and publicly filed documents.
In determining the executive officers' base salaries for the fiscal year
ended December 31, 1998, the Prison Realty Board of Trustees and the Prison
Realty Compensation Committee, as applicable, took into consideration the above
referenced factors and examined comparable executive compensation made by a peer
group of real estate investment trusts of similar size, makeup and performance
as reported in the SNL Executive Compensation Review 1998 -- REITS (the "SNL
Review"). While the companies included in the SNL Review may not be identical to
the companies used to calculate the NAREIT Index, as hereinafter defined, to
which Prison Realty's share performance is compared in this Proxy Statement, the
Prison Realty Compensation Committee believed that the compensation information
in such survey was comparable since it contained data pertaining to real estate
investment trusts of similar size, makeup and performance to that of Prison
Realty.
The Prison Realty Compensation Committee exercised its independent
discretion in determining the compensation of Prison Realty's executive
officers, and its members were permitted to consult by telephone prior to the
meeting at which compensation decisions were made.
Each element of Prison Realty's executive compensation for the fiscal year
ended December 31, 1998, as well as the compensation of the Chief Executive
Officer for such year, is discussed separately below.
BASE SALARY. In April 1998, the Prison Realty Board of Trustees set the
1998 base salaries for Prison Realty's executive officers in accordance with the
policies and considerations stated above. For the year ended December 31, 1998,
Prison Realty's executive officers (other than its Chief Executive Officer, who
is discussed separately below) received the following base salaries: D. Robert
Crants, III (President) -- $108,750; and Michael W. Devlin (Chief Operating
Officer) -- $108,750.
17
<PAGE> 21
SHARE OPTIONS. Under the Share Incentive Plan, the Prison Realty
Compensation Committee had the discretion to grant share options to its
executive officers. The Prison Realty Compensation Committee believed that the
grant of such share options could align an executive's long-term objectives with
those of Prison Realty's shareholders. The Share Incentive Plan was administered
by the Prison Realty Compensation Committee, which had the power to determine,
among other things, those individuals to whom options would be granted, the
number of shares issuable, the type of options granted and other terms and
conditions of the options. No options were granted to executive officers of the
Company under the Share Incentive Plan in 1998.
COMPENSATION OF PRISON REALTY CHIEF EXECUTIVE OFFICER IN 1998
In April 1998, the Prison Realty Board of Trustees set the 1998 base salary
for Prison Realty's Chief Executive Officer, J. Michael Quinlan, in accordance
with the policies and considerations stated above. For the year ended December
31, 1998, Prison Realty's Chief Executive Officer received a base salary of
$160,625. For fiscal year ended December 31, 1998, the Prison Realty
Compensation Committee did not award any options to purchase common shares of
Prison Realty to Prison Realty's Chief Executive Officer.
COMPENSATION OF CCA EXECUTIVE OFFICER IN 1998
Doctor R. Crants is the current Chief Executive Officer of the Company. In
March 1998, the CCA Compensation Committee set Doctor R. Crants' base salary in
accordance with criteria substantially similar to that used by the Prison Realty
Compensation Committee and set forth herein. For the year ended December 31,
1998, Doctor R. Crants, as CCA's Chief Executive Officer, received a base salary
of $387,608. The committee also awarded Doctor R. Crants incentive stock options
to purchase 20,000 shares of CCA's common stock at a purchase price of $35.00
per share, which were converted into 17,500 shares of Common Stock at a purchase
price of $40.00 per share in the Merger. The compensation levels established by
the CCA Compensation Committee were based on their judgment that these levels
were appropriate and desirable in light of Mr. Crants' actual and potential
contributions to CCA. The assessment of actual and potential contributions was
based on the committee's subjective evaluation of his abilities, skills, efforts
and continued leadership. Due to Doctor R. Crants' concurrent employment by
Operating Company, Doctor R. Crants' 1999 salary as Chief Executive Officer of
the Company has been set at $175,000 for 1999. Doctor R. Crants will also
receive a salary from Operating Company in 1999.
TAX DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal Revenue
Code of 1986, as amended, limits the deductibility on the Company's tax return
of compensation over $1.0 million to either the Chief Executive Officer or any
of the Named Executive Officers of the Company unless, in general, the
compensation is paid pursuant to a plan which is performance-related,
non-discretionary and has been approved by the Company's stockholders. The
Compensation Committee's policy with respect to Section 162(m) is to make every
reasonable effort to ensure that compensation is deductible to the extent
permitted while simultaneously providing Company executive officers with
appropriate rewards for their performance.
Submitted by the Compensation Committee of the Company's Board of
Directors:
Joseph V. Russell, Chairman
C. Ray Bell
Jackson W. Moore
Rusty L. Moore
18
<PAGE> 22
PERFORMANCE GRAPH
The Common Stock is traded on the New York Stock Exchange under the symbol
"PZN". On March 19, 1999, the last reported sales price of the Common Stock was
$19.50 per share. The Common Stock, however, did not begin trading on the New
York Stock Exchange until January 4, 1999, after the completion of the Merger.
As such, the information provided below relating to shareholder returns for the
periods indicated relates to each of Prison Realty and CCA. In the Merger, each
Prison Realty common share was converted into one share of Common Stock and each
share of CCA common stock was converted into the right to receive 0.875 share of
Common Stock.
PRISON REALTY
The following graph provides a comparison of the cumulative total
shareholder return on Prison Realty's common shares compared to the cumulative
total return of the Standard & Poor's 500 Index (the "S&P 500 Index") and the
National Association of Real Estate Investment Trusts ("NAREIT") Total Return
Equity Index (the "NAREIT Index") for the six months ended December 31, 1997 and
the year ended December 31, 1998. The graph assumes an investment of $100 on
June 30, 1997, a reinvestment of distributions and/or dividends and actual
increase of the market value of Prison Realty's common shares relative to the
initial investment of $100. The comparisons in this table are required by the
Commission and are not intended to forecast or be indicative of possible future
performance of the Company's Common Stock as a result of the Merger.
[graph]
<TABLE>
<CAPTION>
6/30/97* 12/31/97 12/31/98
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CCA Prison Realty Trust $100(1) $216.82 $106.70
- ----------------------------------------------------------------------------------------------
NAREIT Index $100 $112.17 $ 91.06
- ----------------------------------------------------------------------------------------------
S&P 500 Index $100 $110.58 $142.18
- ----------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
* Prison Realty's common shares did not begin trading on the New York Stock
Exchange until July 18, 1997. Accordingly, the table and graph reflect
Prison Realty's performance from that date only.
(1) Reflects a purchase price of $21.00 per share, the initial public offering
price of Prison Realty's common shares on the New York Stock Exchange on
July 18, 1997. The Company believes that the use of the initial offering
price better reflects shareholder return rather than the use of the opening
purchase price of Prison Realty's common shares on such date. If a purchase
price of $28.00 were used as the initial investment price (as was done in
determining Prison Realty's cumulative shareholder return in the performance
graph appearing in Prison Realty's proxy statement prepared in connection
with its 1998 Annual Meeting of Shareholders), the cumulative total
shareholder return would be $157.69 and $77.60 for the periods ending
December 31, 1997 and December 31, 1998, respectively.
19
<PAGE> 23
CCA
The following graph provides a comparison, for the period of five years
commencing December 31, 1993 and ending December 31, 1998, of the yearly
percentage change in the cumulative total shareholder return on CCA's common
stock with the cumulative total return of the S&P 500 Index and a Peer Group
Index consisting of companies that were either direct competitors of CCA or
other regional service organizations with similar market capitalization to CCA
prior to the Merger. CCA believed that these companies generally possessed
assets, liabilities and operations more similar to those of CCA than the
companies comprising other publicly-available indices. The graph assumes an
investment of $100 on December 31, 1993, a reinvestment of dividends and actual
increase of the market value of CCA's common stock relative to the initial
investment of $100. The comparisons in this table are required by the Commission
and are not intended to forecast or be indicative of possible future performance
of the Company's Common Stock as the result of the Merger.
[graph]
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Corrections Corp. $100.00 $179.17 $825.00 $1355.56 $1647.22 $783.33
- -----------------------------------------------------------------------------------------------------
Peer Group* $100.00 $108.76 $179.65 $ 201.31 $ 233.38 $179.57
- -----------------------------------------------------------------------------------------------------
S&P 500 Composite $100.00 $101.36 $139.48 $ 171.48 $ 228.69 $294.05
- -----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
* The Peer Group includes AMRESCO, Chattem, Inc., Command Security
Corporation, Correctional Services Corp.**, Hospital Staffing Services,
Inc., Insituform Technology, Inc., Medalliance, Inc., Nichols Research
Corporation, Phycor, Inc., Pinkerton, Inc., REN-Corporation-USA, Republic
Automotive Parts, Inc., Saks, Inc.*** and Wackenhut Corrections.
(Medalliance stopped trading stock on November 19, 1995 and Ren Corp stopped
trading stock on November 1, 1995; therefore, they have been deleted from
the Peer Group after December 31, 1994. Hospital Staffing Services, Inc.
stopped trading stock on March 27, 1998 and Republic Automotive Parts, Inc.
stopped trading stock on June 26, 1998; therefore, they have been deleted
from the Peer Group after December 31, 1997.)
** Correctional Services Corp was formerly known as Esmor Corporation.
*** Proffitts, Inc. merged with Saks, Inc. on September 17, 1998.
20
<PAGE> 24
COMMON STOCK
The following table sets forth, as of March 19, 1999, certain information
with respect to the beneficial ownership of shares of the Company's Common Stock
by: (i) each stockholder of the Company that the Company believes holds more
than a 5% beneficial interest in the Common Stock; (ii) each director, and each
nominee for director, of the Company; (iii) each of the Company's executive
officers; and (iv) all directors, nominees and executive officers as a group.
Except as otherwise indicated, the Company believes that the beneficial owners
of the shares of Common Stock listed below, based on information furnished by
such owners or information contained in publicly filed documents, have sole
voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
OF COMMON STOCK OF COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(2)
- ------------------------ --------------------- ---------------------
<S> <C> <C>
Sodexho Alliance, S.A.................... 10,442,568(3) 9.2%
Port de la Bourdonnais
75007, Paris
France
Doctor R. Crants......................... 2,277,494(4) 2.0%
J. Michael Quinlan....................... 232,462(5) *
D. Robert Crants, III.................... 880,642(6) *
Michael W. Devlin........................ 880,642(7) *
C. Ray Bell.............................. 143,915(8) *
Richard W. Cardin........................ 15,001(9) *
Monroe J. Carell, Jr..................... 20,811(9) *
Jean-Pierre Cuny......................... 26,250(10) *
John W. Eakin, Jr........................ 18,201(9) *
Ted Feldman.............................. 21,305(9) *
Ned Ray McWherter........................ 0 *
Jackson W. Moore......................... 31,139(9) *
Rusty L. Moore........................... 14,620(11) *
Joseph V. Russell........................ 95,138(12) *
Charles W. Thomas, Ph.D.................. 58,753(9) *
All executive officers, directors and
nominees for director as a group (16
persons)............................... 4,165,299(13) 3.7%
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.
(1) Includes shares as to which such person directly or indirectly, through any
contract, arrangement, understanding, relationship, or otherwise has or
shares voting power and/or investment power as these terms are defined in
Rule 13d-3(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Shares of Common Stock underlying options to purchase
shares of Common Stock, which are exercisable, or become exercisable within
sixty days after March 19, 1999, are deemed to be outstanding for the
purpose of computing the outstanding shares of Common Stock owned by the
particular person and by the group, but are not deemed outstanding for any
other purpose.
(2) Based on 113,041,110 shares of Common Stock issued and outstanding.
(3) Includes 59,062 shares of Common Stock issuable upon the exercise of
certain options issued by CCA to Jean-Pierre Cuny and transferred to
Sodexho. These
21
<PAGE> 25
options were assumed by the Company in the Merger. Pursuant to the
authority granted to the Board of Directors of the Company under the
Company's Charter, the Board of Directors of the Company has waived the
ownership limit contained in the Company's Charter after obtaining such
representations and undertakings from Sodexho to assure the Company's
status as a REIT would not be adversely affected by exempting it from such
ownership limit.
(4) Includes 299,062 shares of Common Stock issuable upon the exercise of
vested options, an aggregate of 238,000 shares of Common Stock held equally
in two trusts for the benefit of Doctor R. Crants' two children other than
D. Robert Crants, III, and 43,163 shares of Common Stock allocated to
Doctor R. Crants pursuant to an Employee Stock Ownership Plan maintained by
Operating Company.
(5) Includes 198,750 shares of Common Stock issuable upon the exercise of
vested options, 900 shares of Common Stock owned by Mr. Quinlan's
daughters, 21,000 shares of Common Stock owned by Mr. Quinlan's wife and
2,363 shares of Common Stock held in an Individual Retirement Account.
(6) Includes 125,625 shares of Common Stock issuable upon the exercise of
vested options, as well as 592,267 shares of Common Stock held by a private
investment partnership. Each of D. Robert Crants, III and Michael W. Devlin
serve as a manager of the general partner of the private investment
partnership. Therefore, each are deemed to beneficially own the 592,267
shares of Common Stock held by the private investment partnership.
(7) Includes 125,625 shares of Common Stock issuable upon the exercise of
vested options, as well as 592,267 shares of Common Stock held by a private
investment partnership. Each of Michael W. Devlin and D. Robert Crants, III
serve as a manager of the general partner of the private investment
partnership. Therefore, each are deemed to beneficially own the 592,267
shares of Common Stock held by the private investment partnership.
(8) Includes 10,000 shares of Common Stock issuable upon the exercise of vested
options and 1,000 shares of Common Stock owned jointly by Mr. Bell and his
wife.
(9) Includes 10,000 shares of Common Stock issuable upon the exercise of vested
options.
(10) Mr. Cuny serves as the Senior Vice-President of The Sodexho Group, an
affiliate of Sodexho. Mr. Cuny beneficially owns 26,250 shares of Common
Stock issuable upon the exercise of vested options. This number does not
include 10,442,568 shares of Common Stock beneficially owned by Sodexho.
(11) Includes 10,000 shares of Common Stock issuable upon the exercise of vested
options, 1,050 shares of Common Stock owned by Mr. Moore's wife, and 2,200
shares of Common Stock owned by Mr. Moore jointly with his wife.
(12) Includes 10,000 shares of Common Stock issuable upon the exercise of vested
options and 437 shares of Common Stock owned jointly by Mr. Russell and his
daughter.
(13) Includes an aggregate of 904,374 shares of Common Stock issuable upon the
exercise of vested options.
22
<PAGE> 26
SERIES A PREFERRED STOCK
The following table sets forth, as of March 19, 1999, certain information
with respect to the beneficial ownership of shares of the Company's Series A
Preferred Stock by: (i) each director, and each nominee for director, of the
Company; and (ii) the directors and nominees as a group. No executive officers
of the Company owned any shares of Series A Preferred Stock as of March 19,
1999. In addition, the Company is aware of no beneficial holder of more than 5%
of the Series A Preferred Stock.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF SERIES A PERCENTAGE OF SHARES OF
PREFERRED STOCK SERIES A PREFERRED STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(2)
- ------------------------ --------------------- ------------------------
<S> <C> <C>
C. Ray Bell............................ 5,000 *
Monroe J. Carell, Jr................... 5,000 *
All directors and nominees for director
as a group (15 persons).............. 10,000 *
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
Series A Preferred Stock.
(1) Includes shares as to which such person directly or indirectly, through any
contract, arrangement, understanding, relationship, or otherwise has or
shares voting power and/or investment power as these terms are defined in
Rule 13d-3(a) of the Exchange Act.
(2) Based on 4,300,000 shares of Series A Preferred Stock issued and
outstanding.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of a registered class of the
Company's equity securities ("10% Holders"), to file reports of ownership and
changes in ownership with the Commission and the New York Stock Exchange.
Executive officers, directors and 10% Holders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms that
they file. The Company's officers and directors, in their capacity as such with
the Company, became subject to these reporting requirements upon completion of
the Merger, and as such did not file any reports with the Commission in 1998.
The officers and directors, in their capacity as officers and trustees of Prison
Realty in 1998, were subject to these reporting requirements as they related to
Prison Realty. In addition, Doctor R. Crants, in his capacity as an officer and
director of CCA in 1998, and Jean-Pierre Cuny in his capacity as a director of
CCA in 1998, were also subject to these reporting requirements as they related
to CCA. To the Company's knowledge, based solely on review of the copies of such
reports and amendments thereto furnished to Prison Realty and CCA, as the case
may be, prior to the Merger, and on written representations made to the Company
that no other reports were required during or with respect to the fiscal year
ended December 31, 1998, all Section 16(a) filing requirements relating to
Prison Realty and CCA, as the case may be, were timely made.
23
<PAGE> 27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company commenced operations on January 1, 1999 following the
completion of the Merger. Immediately prior to the Merger, CCA transferred
certain management contracts relating to the operation of correctional and
detention facilities to Correctional Management Services Corporation, a
newly-formed Tennessee corporation and currently the Company's primary tenant
("Operating Company"). Also immediately prior to the Merger, CCA transferred its
remaining management contracts to two newly-formed Tennessee corporations,
Prison Management Services, Inc. ("Service Company A") and Juvenile and Jail
Facility Management Services, Inc. ("Service Company B," and, collectively with
Service Company A, the "Service Companies"). Each correctional and detention
facility owned by each of CCA and Prison Realty prior to the Merger was
transferred to the Company in the Merger. As a result of the Merger, the Company
and Operating Company entered into long-term, non-cancellable triple net leases
with respect to each facility leased by the Company to Operating Company. Upon
completion of the Merger and the related transactions, Operating Company became
the lessee of a substantial majority of the Company's facilities. As of March
19, 1999, Operating Company leased 30 of the Company's 47 facilities, and the
Company expects that Operating Company will additionally lease nine of the
Company's 47 facilities which are currently under construction.
Doctor R. Crants serves as the Chairman of the Board of Directors of the
Company and Chief Executive Officer of the Company. Doctor R. Crants is also a
member of Operating Company's Board of Directors and serves as Operating
Company's Chief Executive Officer and President and serves as a member of the
Boards of Directors of each of the Service Companies. In addition, Doctor R.
Crants was appointed to the Board of Directors of Sodexho Marriott Services,
Inc., an entity which is 49% owned by Sodexho. D. Robert Crants, III, a director
and President of the Company, is the son of Doctor R. Crants. Charles W. Thomas,
a director of the Company, performed certain consulting services in connection
with the Merger for a fee of $3.0 million, and currently performs consulting
services for each of the Company and Operating Company relating to their
respective business objectives. Rusty L. Moore, a director of the Company who
has asked not to stand for re-election at the Annual Meeting, is the spouse of a
shareholder of Stokes & Bartholomew, P.A., tax and securities counsel to the
Company. Stokes & Bartholomew, P.A. also provides certain legal services to
Operating Company. Samuel W. Bartholomew, Jr., a shareholder of Stokes &
Bartholomew, P.A., serves as Chairman of the Board of Directors of Service
Company B. C. Ray Bell, a director of the Company, is the principal of a
construction company which, as a part of its business, builds correctional and
detention facilities, including facilities for the Company. In 1998, Mr. Bell's
construction company received fees in the amount of $40,754,000 and $8,700,000
for construction services provided to CCA and Prison Realty, respectively.
Additionally, in 1998, CCA paid fees of $1,559,000 to a member of its Board of
Directors, Joseph F. Johnson, Jr., or to an entity controlled by him, for
consulting services rendered to CCA.
The Company owns all of the outstanding non-voting common stock of
Operating Company, which represents approximately 9.5% of the value of all of
the outstanding common stock of Operating Company. D. Robert Crants, III,
Michael W. Devlin, J. Michael Quinlan, and certain other executive officers and
employees of the Company collectively own 9.4% of the outstanding capital stock
of Operating Company. Sodexho, the Company's largest stockholder, owns 16% of
the outstanding capital stock of Operating Company and has the right to appoint
a member of the Board of Directors of Operating
24
<PAGE> 28
Company. Jean-Pierre Cuny, an affiliate of Sodexho, is a member of the Board of
Directors of the Company. The remainder of the outstanding capital stock of
Operating Company is owned by an institutional investor and employees of
Operating Company other than Doctor R. Crants.
The terms of certain agreements between Operating Company and the Company
entered into in connection with the Merger, including the Company's leases with
Operating Company, a trade name use agreement between the Company and Operating
Company and a promissory note given by Operating Company in consideration for
CCA's transfer of management contracts, were determined by Prison Realty and CCA
in consultation with their financial advisers in a manner to reflect fair market
values and to meet the requirements applicable to REITs. However, there were no
arm's-length negotiations regarding these financial terms.
Pursuant to the Bylaws of the Company, the Independent Committee must
approve actions of the Company's Board of Directors regarding the election of
the operators for the Company's properties, including Operating Company or its
affiliates, the entering into of any agreement with Operating Company, the
Service Companies or any of their respective affiliates, and the completion of
any transaction between the Company and Operating Company or its affiliates,
including the negotiation and enforcement of any lease of the Company's
properties and the other agreements between the Company and Operating Company
entered into in connection with the Merger.
The Company has adopted a business conduct policy which provides guidelines
for the Company's Board of Directors' assessment of a conflict, stating that a
potential conflict would exist whenever an employee or director has an interest
in or connection with an enterprise with which the Company has transacted or
might transact business or with individuals associated with such an enterprise,
when that interest is of such a nature that it might influence the independent
judgment of such employee or director. The policy will cover conflicting
interests that are direct or indirect, through an enterprise in which an
employee or director has an interest. Whether or not a conflict of interest
exists will be determined by the Independent Committee, on a case-by-case basis
in accordance with the policies and procedures established by the Board of
Directors of the Company. Such procedures may include requiring Doctor R. Crants
to abstain from making management decisions in his capacity as an officer or
director of the Company and Operating Company, with respect to matters that
present a conflict of interest between the companies, and to abstain from voting
as a director of either company, with respect to matters that present a conflict
of interest between the companies.
25
<PAGE> 29
PROPOSAL 2
APPROVAL OF THE NAME CHANGE AMENDMENT
The Company's Board of Directors has determined that it is in the best
interests of the Company and its stockholders to amend Article SECOND of the
Company's Charter to change the name of the Company from Prison Realty
Corporation to "Prison Realty Trust, Inc." Prior to the Merger, while its actual
name was CCA Prison Realty Trust, Prison Realty did business as Prison Realty
Trust and became commonly known as "Prison Realty Trust" to its customers.
Prison Realty gained a substantial amount of name recognition and market
identity under this name in the course of conducting its business operations.
Therefore, the Company's Board of Directors believes the name "Prison Realty
Trust, Inc." is a more appropriate name for the Company and will enable the
Company to continue the reputation developed under this name prior to the
Merger. Therefore, at a meeting on March 4, 1999, the Company's Board of
Directors approved a resolution, in accordance with the Bylaws of the Company
and subject to stockholder approval, amending Article SECOND of the Company's
Charter to change the name of the Company to "Prison Realty Trust, Inc." and
recommends a vote for approval of the Name Change Amendment. The text of the
proposed amendment is included as Appendix A to this Proxy Statement.
The affirmative vote of the holders of two-thirds of all the votes entitled
to be cast is required to adopt the proposed Name Change Amendment. If approved
by the required number of stockholders, the amendment to the Charter of the
Company will take effect upon filing with the Department of Assessments and
Taxation of the State of Maryland, which is expected to occur as soon as is
practicable after the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY THEREFORE RECOMMENDS A VOTE FOR
APPROVAL OF THE NAME CHANGE AMENDMENT.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has selected the accounting firm of Arthur Andersen LLP to serve as
independent auditors of the Company for the fiscal year ending December 31,
1999. Arthur Andersen LLP served as CCA's independent auditors from 1991 until
completion of the Merger and as Prison Realty's independent auditors from its
formation in April 1997 until completion of the Merger. Arthur Andersen LLP also
rendered services in connection with the Merger to each of CCA, Prison Realty
and the Company in connection with the Merger. Arthur Anderson LLP has served as
the Company's independent auditors since the Company's formation in September
1998 and is considered by management of the Company to be well qualified. The
Company has been advised by that firm that neither it nor any member thereof has
any financial interest, direct or indirect, in the Company or any of its
subsidiaries in any capacity. A representative of Arthur Andersen LLP will be
present at the Annual Meeting, will be given the opportunity to make a statement
if he or she so desires and will be available to respond to appropriate
questions.
Although the Company is not required to submit the ratification and
approval of the selection of its independent auditors to a vote of stockholders,
the Board of Directors believes that it is sound policy to do so. The
affirmative vote of the holders of a majority
26
<PAGE> 30
of the shares of the outstanding shares of Common Stock cast at the Annual
Meeting is required for ratification of the selection of Arthur Andersen LLP. In
the event that the majority of the votes cast are against the selection of
Arthur Andersen LLP, the directors will consider the vote and the reasons
therefor in future decisions on the selection of independent auditors.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR RATIFICATION OF
ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Under the rules of the Commission, if a stockholder wants the Company to
include a proposal in the Company's proxy statement and form of proxy for
presentation at the Company's 2000 Annual Meeting of stockholders (the "2000
Annual Meeting"), the proposal must be received by the Company, on or before
December 2, 1999, at the following address: Prison Realty Corporation,
Attention: Ms. Vida H. Carroll, Secretary, 10 Burton Hills Boulevard, Suite 100,
Nashville, Tennessee 37215. Such proposal will also need to comply with the
regulations of the Commission regarding the inclusion of stockholder proposals
in Company-sponsored proxy materials.
Under the Bylaws of the Company, and as permitted by the rules of the
Commission, a stockholder may nominate a director or present a stockholder
proposal not included in the Company's proxy statement at the Company's 2000
Annual Meeting. Written notice of such a nomination or proposal, along with
appropriate supporting information and documentation, must be submitted, via
certified mail, return receipt requested, to: Prison Realty Corporation,
Attention: Ms. Vida H. Carroll, Secretary, 10 Burton Hills Boulevard, Suite 100,
Nashville, Tennessee 37215. For a nomination or proposal to be presented at the
Company's 2000 Annual Meeting, it must be received at the Company's principal
executive offices:
- not less than 60 days nor more than 90 days prior to the anniversary date
(May 11, 1999) of this year's meeting (if the 2000 Annual Meeting is
scheduled to be held on a date no more than 30 days before the
anniversary date of this year's meeting and no more than 60 days after
the anniversary date of this year's meeting); or
- not earlier than the 90th day prior to the 2000 Annual Meeting, and not
later than the 60th day prior to the 2000 Annual Meeting or the 10th day
following the day on which public announcement of the date of the 2000
Annual Meeting is first made (if the 2000 Annual Meeting is scheduled to
be held on a date more than 30 days prior to the anniversary date of this
year's meeting or more than 60 days after the anniversary date of this
year's meeting).
The Company's annual meeting of stockholders will generally be held during
the month of May of each year. Assuming that the 2000 Annual Meeting is held on
schedule, the Company must receive notice of a nomination or proposal from a
stockholder after February 11, 2000 and on or before March 12, 2000. If the
Company does not receive notice during such period, the nomination or proposal
will not be presented at the 2000 Annual Meeting. Additionally persons named as
proxies in the Company's proxy materials relating to the 2000 Annual Meeting
will use their discretion in voting the proxies when any nominations or
proposals from stockholders not received during such period are raised at the
meeting.
27
<PAGE> 31
ANNUAL REPORT AND FORM 10-K
All stockholders of record on the Record Date will receive with this Proxy
Statement a copy of the Company's 1998 Annual Report to Stockholders. The Annual
Report to Stockholders, however, is not part of the proxy solicitation
materials. Any stockholder who desires a copy of the Company's 1998 Annual
Report to Stockholders, the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 or Prison Realty's Annual Report on Form 10-K for the
year ended December 31, 1998, each as filed with the Commission, may obtain a
copy without charge by addressing a request to Prison Realty Corporation,
Attention: Vida H. Carroll, Secretary, 10 Burton Hills Boulevard, Suite 100,
Nashville, Tennessee 37215.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement that will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
By Order of the Board of Directors,
/s/DOCTOR R. CRANTS
DOCTOR R. CRANTS
Chairman and Chief Executive Officer
March 31, 1999
Nashville, Tennessee
YOUR COOPERATION IN GIVING THESE MATTERS YOUR IMMEDIATE
ATTENTION AND IN RETURNING YOUR PROXY PROMPTLY IS APPRECIATED.
28
<PAGE> 32
APPENDIX A
PRISON REALTY CORPORATION
ARTICLES OF AMENDMENT
PRISON REALTY CORPORATION, a Maryland corporation (the "Corporation"),
having its principal office in Nashville, Tennessee, hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: Article SECOND of the Charter of the Corporation is hereby amended
as follows:
"SECOND: Name.
The name of this corporation shall be Prison Realty Trust, Inc.
(the "Corporation")." ;
SECOND: The amendment does not increase the authorized stock of the
Corporation; and
THIRD: The foregoing amendment to the Charter of the Corporation has been
advised by the Board of Directors of the Corporation and approved by the
stockholders of the Corporation.
IN WITNESS WHEREOF, Prison Realty Corporation has caused these presents to
be signed in its name and on its behalf by its President and witnessed by its
Secretary on , 1999.
<TABLE>
<S> <C>
WITNESS: PRISON REALTY CORPORATION:
By:
- ------------------------------------------------ ------------------------------------------
Vida H. Carroll D. Robert Crants, III
Secretary President
</TABLE>
THE UNDERSIGNED, President of the Corporation, who executed on behalf of
the Corporation the foregoing Articles of Amendment of which this certificate is
made a part, hereby acknowledges in the name and on behalf of said Corporation
the foregoing Articles of Amendment to be the corporate act of said Corporation
and hereby certifies that to the best of his knowledge, information and belief
the matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
--------------------------------------
D. Robert Crants, III
President
A-1
<PAGE> 33
APPENDIX B
PROXY
PRISON REALTY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Prison Realty Corporation (the
"Company") hereby acknowledge(s) receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, dated March 31, 1999, and hereby appoint(s) D.
Robert Crants, III and Vida H. Carroll, and each of them, proxies of the
undersigned, each with full power of substitution and revocation, and
authorize(s) them, or either of them, to vote the number of shares which the
undersigned would be entitled to cast if personally present at the Annual
Meeting of Stockholders of the Company to be held on Tuesday, May 11, 1999, at
10:00 a.m., local time, at the Loews Vanderbilt Plaza Hotel, 2100 West End
Avenue, Nashville, Tennessee, and any adjournments or postponements thereof.
The Board of Directors recommends a vote "FOR" the election of each of
the nominees for Director listed below and "FOR" each of the following
proposals:
1. ELECTION OF DIRECTORS.
[ ] FOR ALL NOMINEES NAMED
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
NOMINEES: D. Robert Crants, III; John W. Eakin, Jr.; Ted Feldman; Ned
Ray McWherter; Jackson W. Moore; and Jean-Pierre Cuny
[ ]
---------------------------------------
FOR ALL NOMINEES EXCEPT AS LISTED ABOVE
2. APPROVAL OF THE NAME CHANGE AMENDMENT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF THE ACTION OF THE BOARD OF DIRECTORS IN SELECTING THE
FIRM OF ARTHUR ANDERSEN LLP TO BE THE INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION ON ANY OTHER BUSINESS AS MAY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS AND POSTPONEMENTS THEREOF.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
PLEASE FULLY COMPLETE, DATE, PROPERLY SIGN, AND RETURN THIS PROXY PROMPTLY.
<PAGE> 34
This Proxy, when properly executed, will be voted in accordance with the
directions given by the undersigned stockholder(s). If no direction is made,
this proxy will be voted FOR the election of each nominee and FOR each of the
proposals.
Signature:________________ Date:________ Signature:______________ Date:_______
NOTE: PLEASE DATE AND SIGN THE PROXY EXACTLY AS YOUR NAME APPEARS ON YOUR STOCK
CERTIFICATE(S) OR ON THIS PROXY. IF SHARES ARE HELD BY MORE THAN ONE OWNER OR BY
JOINT TENANCY, EACH OWNER MUST SIGN PERSONALLY. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC., PLEASE PROVIDE YOUR FULL TITLE
AS SUCH. IF A CORPORATION IS A STOCKHOLDER, PLEASE HAVE THE PROXY EXECUTED BY AN
AUTHORIZED OFFICER AND USE THE FULL CORPORATE NAME OF THE STOCKHOLDER. IF A
PARTNERSHIP OR LIMITED LIABILITY COMPANY IS A STOCKHOLDER, PLEASE SIGN IN SUCH
ORGANIZATION'S NAME BY AN AUTHORIZED PERSON. THE PROXY SHALL BE DEEMED A GRANT
OF AUTHORITY TO VOTE.
