SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Solicitation Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AVALON COMMUNITY SERVICES, INC.
-------------------------------------------------------
(Name of registrant as Specified in Charter)
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 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>
AVALON COMMUNITY SERVICES, INC.
13401 Railway Drive
Oklahoma City, OK 73114
Telephone: (405) 752-8802
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1998
--------------
To the Shareholders:
Notice is hereby given that the 1998 Annual Meeting of Shareholders of Avalon
Community Services, Inc. (The "Company") will be held at 13401 Railway Drive,
Oklahoma City, Oklahoma 73114, on Friday, May 29, 1998, at 10:00 A.M. local
time, for the following purposes:
1. Approve an amendment to the by-laws to change the terms of directors
from annual elections to staggered elections with three year terms.
2. To elect four directors to serve until the next Annual meeting and
until the election and qualification of their successors.
3. To ratify the appointment of Grant Thornton L.L.P., independent
certified public accountants, as auditor to examine the financial
statements of the Company for the year ending December 31, 1998.
4. To consider and transact such other business as may properly be brought
before the Annual Meeting or any adjournment thereof.
The Board of Director has fixed the close of business on April 24, 1998, as
the record date for the determination of shareholders entitled to notice and to
vote. Such shareholders may vote in person or by proxy. A complete list of the
shareholders entitled to vote at the Annual Meeting will be available for
examination by shareholders, for any purpose germane to the meeting, during
ordinary business hours, during a 10-day period preceding the date of the
meeting, at the executive office of the Company, 13401 Railway Drive, Oklahoma
City, Oklahoma 73114.
Shareholders are invited to attend the meeting in person. Whether or not you
plan on attending the meeting in person, it is important that your shares be
represented and voted at the meeting in accordance with your instructions.
Therefore, you are urged to fill in, sign, date and return the accompanying
proxy in the enclosed envelope. No postage is required if mailed in the United
States.
/s/ Randall J. Wood
-------------------------
April 23, 1998 Randall J. Wood Secretary
<PAGE>
AVALON COMMUNITY SERVICES, INC.
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PROXY STATEMENT
----------------
GENERAL INFORMATION
This Proxy Statement together with the Annual Report on Form 10-KSB are being
furnished to Shareholders by the Board of Directors of Avalon Community
Services, Inc. (The "Company") for the Annual Meeting of Shareholders to be held
at 13401 Railway Drive, Oklahoma City, Oklahoma 73114 on May 29, 1998, at 10:00
a.m. local time. The Company's Shareholders will consider and vote upon the
proposals described herein and referred to in the Notice of Annual Meeting
accompanying this Proxy Statement.
The close of business on April 24, 1998, has been fixed as the record date for
the determination of the shareholders entitled to notice of, and to vote at, the
Annual Meeting. On March 31, 1998, there were outstanding and entitled to vote
3,004,380 Shares of Class A Common Stock. Each Share of Common Stock (the
"Shares") is entitled to one vote on each matter to be considered at the Annual
Meeting. For a description of the principal holders of such Shares, see "Voting
Securities and Principal Holders Thereof" below.
The Company's principal executive office is located at 13401 Railway Drive,
Oklahoma City, Oklahoma 73114.
This Proxy Statement is being furnished to Shareholders on or about April 29,
1998.
SOLICITATION OF PROXIES AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of one-third (1/3) of the
votes represented by the outstanding shares of the Corporation's common stock is
necessary to constitute a quorum at the Annual Meeting. Holders of shares are
entitled to one vote per share of common stock and are not allowed to cumulate
votes in the election of directors.
Subject to the rights of shareholders to revoke their proxies, the shares
represented by each proxy executed in the accompanying form of proxy will be
voted at the meeting in accordance with the instructions therein. Proxies on
which no voting instructions are indicated will be voted FOR ratifying the
amendment to the by-laws permitting staggered terms for the directors, FOR the
election of nominees for directors and FOR the appointment of Grant Thornton,
L.L.P. as auditors and in the best judgment of proxy holders on any other matter
that may properly come before the Annual Meeting. If a broker indicates on a
proxy that it does not have discretionary authority to vote shares on a certain
matter, those shares will not be considered present and entitled to vote with
respect to that matter. If a shareholder indicates on a proxy card that such
shareholder abstains from voting with respect to a proposal, the shares will be
considered as present and entitled to vote with respect to that matter, and
abstention will have the effect of a vote AGAINST the proposal. In accordance
with Nevada law, a shareholder entitled to vote for the election of directors
can withhold authority to vote for all nominees for directors or can withhold
authority to vote for certain nominees for directors.
<PAGE>
Shareholders have the unconditional right to revoke their proxies at any time
prior to the voting of their proxies at the Annual Meeting by giving written
notice to the Secretary of the Corporation or by attending the Annual Meeting
and voting in person.
The expenses of the solicitation of the proxies for the meeting, including the
cost of preparing, assembling and mailing the notice, proxy, proxy statement and
return envelopes, the handling and tabulation of proxies received, and charges
of brokerage houses and other institutions, nominees or fiduciaries for
forwarding such documents to beneficial owners, will be paid by the Corporation.
The Corporation does not intend to solicit proxies other than the mailing of
proxy materials. All Proposals require the affirmative vote of a majority of
shares represented and voting at the Annual Meeting.
AMENDMENT TO THE BY-LAWS
(Proposal One)
The by-laws of the Corporation have been amended by the Board of Directors to
have the Board of Directors divided into three classes of directors with three
year terms and with the term of office of one class expiring each year. The
Board of Directors is authorized to make such an amendment under the laws of the
State of Nevada, the Articles of Incorporation, and the by-laws. The Corporation
is now asking the Shareholders to ratify this change to the by-laws. Staggered
terms for Directors are considered anti-takeover in nature, inhibiting a change
in control of the Corporation and so possibly reduce the value of the stock to
anyone attempting to acquire control of the Corporation. The Board of Directors
recommends voting FOR this proposal to ratify the amendment to the by-laws to
create three classes of directors with terms lasting three years and with the
term of office of one class expiring each year.
ELECTION OF DIRECTORS
(Proposal Two)
The by-laws of the Corporation as amended by the Board of Directors and as
ratified by the Shareholders in Proposal One provide that the number of
directors who shall constitute the whole board shall be such number as may be
fixed from time to time by the Board of Directors and vacancies in the Board may
be filled by the Board of Directors until the next annual meeting of the
Shareholders. The by-laws provide that the Board shall be divided into three
classes of directors with the term of office of one class expiring each year
(assuming the amendment is ratified by the shareholders at this meeting).
Staggered terms for Directors are considered anti-takeover in nature, inhibiting
a change in control of the Corporation and so possibly reduce the value of the
stock to anyone attempting to acquire control of the Corporation. The Board of
Directors currently consists of three members, Donald E. Smith, Jerry M.
Sunderland and Robert O. McDonald. The addition of Mark S. Cooley would increase
the Board of Directors to four members. This would be the first year staggered
terms would be voted on. All three director classes are to be voted on by the
Shareholders.
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<PAGE>
The four nominees, Donald E. Smith, Jerry M. Sunderland, Robert O. McDonald,
and Mark S. Cooley are proposed to be elected to hold office until the election
of their successors or their earlier resignation or removal. Messrs. Sunderland
and McDonald are nominated to serve three year terms, Mr. Cooley to serve a two
year term and Mr. Smith to serve a one year term. Should any such nominee become
unable to serve, proxies may be voted for another person designated by
management or the Board. All nominees have advised that they will serve if
elected.
Certain Information Regarding Nominees
The names of the nominees, their ages as of the date of the Annual Meeting,
the date each first became a director, their principal occupations during at
least the past five years, certain other directorships held and certain other
biographical information are as set forth below.
<TABLE>
<CAPTION>
Term nominated Director
Name of Nominee Age Current Position(s) to Serve Since
<S> <C> <C> <C>
Donald E. Smith 45 Chief Executive Officer, Director 1 Year 1992
Jerry M. Sunderland 61 President, Director 3 Years 1992
Robert O. McDonald 59 Director 3 Years 1994
Mark S. Cooley 40 Director Nominee 2 Years N/A
</TABLE>
Directors
The Company's current directors and director nominees are:
Name Age Position(s) with the Company
Donald E. Smith ...................45 Chief Executive Officer, Director
Jerry M. Sunderland ...............61 President, Director
Robert O. McDonald ................59 Director
Mark S. Cooley ................. 40 Director Nominee
The following is a brief description of the business experience during the
past five years of each of the above-name persons:
Donald E. Smith is the founder of the Company's corrections operations and has
served as the Chief Executive Officer of Avalon and its subsidiaries since their
inception. Mr. Smith has owned, managed and developed a number of private
corporations since 1985 to provide private corrections, residential care, mental
health care, and other related services. Mr. Smith received a Bachelor of
Science degree in 1974 from Northwestern Oklahoma State College. Mr. Smith was
employed by Arthur Andersen & Co. for seven years prior to founding the Company.
3
<PAGE>
Jerry M. Sunderland has served as President of Avalon since June, 1995. Mr.
Sunderland served as a Correctional Administrator for the Company and affiliates
since 1988. Mr. Sunderland also serves as a Director of Avalon's subsidiaries.
Mr. Sunderland was employed by the Oklahoma Department of Corrections for
sixteen years including ten years as warden of a maximum security prison. Mr.
Sunderland also served as an agent for the Oklahoma State Department of
Investigation for twelve years. Mr. Sunderland has a Bachelors degree in
Sociology and a Masters degree in Corrections.
Robert O. McDonald was appointed as a Director of Avalon in October, 1994. Mr.
McDonald is Chairman of the Board of Directors of Capital West Securities and
its parent holding company, Affinity Holding Corp. Mr. McDonald started his
investment career in 1961 with Allen and Company and left in 1967 to form
McDonald Bennahum and Co., which later joined with Ladenburg Thalmann and Co.
where Mr. McDonald was a Senior Partner. Mr. McDonald joined Planet Oil Mineral
Corporation in 1971 and became president in 1973. From 1975 until 1993, Mr.
McDonald was affiliated with Stifel Nicolaus & Company and headed its municipal
syndicated effort. Mr. McDonald received a Bachelor's Degree in Finance from the
University of Oklahoma in 1960. He also served as an Officer in the United
States Army and Army Reserve.
Mark S. Cooley was appointed as a Director of Avalon in January 1998, subject
to shareholder approval at the 1998 annual meeting. Mr. Cooley is a Principal of
Cooley & Company and Pro Trust Equity Partners. Mr. Cooley was with Citicorp and
Chemical Bank for twelve years in their Corporate Finance Divisions in New York
and Denver. Mr. Cooley received his Bachelors degree in Economics from DePauw
University and an MBA in Finance from Indiana University.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of March 31, 1998, information concerning
the beneficial ownership of the Company's Class A Common Stock by (i) each
person known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's Common Stock, (ii) each director of the
Company, (iii) each of the executive officers of the Company and (iv) all
directors and executive officers as a group. To the best of the Company's
knowledge, each of the persons named in the table has sole voting and investment
power with respect to all the shares of Common Stock beneficially owned by such
person as set forth opposite such person's name except as otherwise noted.
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Amount and
Nature of
Beneficial
Ownership of Total
Common Percent Voting
Name & Address Stock of Class Percentage
- -------------- ------ -------- ----------
Donald E. Smith (2)
13401 Railway Drive 1,078,500 (1) 35.90% 35.90%
Oklahoma City, OK 73114
Deborah A. Salerno
355 South End Avenue
Suite 22B
New York, NY 10280 187,000 6.22% 6.22%
Jerry M. Sunderland (2)
13401 Railway Drive
Oklahoma City, OK 73114 52,000 1.73% 1.73%
Robert O. McDonald (2)
3316 Preston Drive
Oklahoma City, OK 73120 22,000 * *
Gary D. Parsons (2)
13401 Railway Drive
Oklahoma City, OK 73114 5,000 * *
Randall J. Wood (2)
13401 Railway Drive
Oklahoma City, OK 73114 4,375 * *
Tiffany Wright (2)
13401 Railway Drive
Oklahoma City, OK 73114 13,875 * *
All executive officers and
directors as a group 1,175,750 39.13% 39.13%
( 6 persons) (1) (2)
- ------------------
* Less than 1%.
(1) Includes 77,313 shares held in the name of Mr. Smith's children and Teresa
Smith.
(2) Includes 25,000 shares to Mr. Smith, 52,000 shares to Mr. Sunderland,
22,000 shares to Mr. McDonald, 5,000 shares to Mr. Parsons, 4,375
shares to Mr. Wood and 13,875 shares to Ms. Wright issuable within 60
days upon exercise of options granted pursuant to the Company's Stock
Option Plan.
Note: Under the rules of the Securities and Exchange Commission, a person is
deemed to be a beneficial owner of a security if he has or shares the powers to
vote or direct the voting of such security or the power to dispose of or to
direct the disposition of such security.
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<PAGE>
Accordingly, more than one person may be deemed to be a beneficial owner of the
same securities. A person is also deemed to be a beneficial owner of any
securities of which that person has the right to acquire beneficial ownership
within 60 days. Unless otherwise indicated by footnote, the named individuals
have sole voting and investment power with respect to the shares held by them.
DIRECTORS AND EXECUTIVE OFFICERS
The following four individuals serve as the Company's directors and
have been nominated to serve various terms as directors. All nominees have
advised that they will serve if elected.
<TABLE>
<CAPTION>
Term nominated Director
Name of Nominee Age Current Position(s) to Serve Since
<S> <C> <C> <C>
Donald E. Smith 45 Chief Executive Officer, Director 1 Year 1992
Jerry M. Sunderland 61 President, Director 3 Years 1992
Robert O. McDonald 59 Director 3 Years 1994
Mark S. Cooley 40 Director Nominee 2 Years N/A
</TABLE>
Biographical information on Messrs. Smith, Sunderland, McDonald and Cooley are
included under Certain Information Regarding Nominees above.
Executive Officers
The Company's current officers are:
Name Age Position(s) with the Company
Donald E. Smith ..................45 Chief Executive Officer,
Treasurer, & Director
Jerry M. Sunderland ..............61 President, Director
Gary D. Parsons..................54 Vice President of Operations
Randall J. Wood .................40 Corporate Secretary
Tiffany Wright....................30 Public Information Officer,
Assistant Secretary
Paul D. Voss ....................30 Vice President of Finance
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Officers of the Company -
The following is a brief description of the business experience during the
past five years of each of the above-name officers, excluding the Director
nominees:
Gary D. Parsons was appointed as Vice President of Operations in December
1997. Mr. Parsons has over 24 years of experience in developing and operating
quality programs and facilities for adult offenders. Mr. Parsons was employed by
the Oklahoma Department of Corrections for twenty four years. Mr. Parsons is
responsible for Avalon's correctional operations, including recruitment and
training of personnel, maintaining accreditation by the American Correctional
Association, and compliance with contractual requirements. Mr. Parsons received
a Bachelors degree in Business Administration and a Masters degree in Business
Administration from the University of Central Oklahoma.
Randall J. Wood serves as Corporate Secretary and General Counsel for the
Company. Prior to joining the Company in 1995, Mr. Wood's practice was focused
primarily in the field of real property and commercial litigation. Mr. Wood
practiced with the firm of Stack & Barnes, P.C. for ten years, and was with the
firm of Hammons, Vaught & Conner prior to joining the Company. Mr. Wood is a
member of the Oklahoma Bar Association and is authorized to practice in Oklahoma
Federal Courts and the Tenth Circuit Court of Appeals. Mr. Wood is responsible
for the duties of the Corporate Secretary, management of legal matters, and
compliance with government regulations for the Company and its subsidiaries. Mr.
Wood received his law degree from the University of Oklahoma in 1983.
Tiffany Wright serves as Public Information Officer and assistant Corporate
Secretary for the Company. Ms. Wright served for four years as marketing manager
for Eagle Picher Industries, a New York Stock Exchange listed company, prior to
joining Avalon in 1994. Ms. Wright has developed and is responsible for
directing the Company's public relations department and implementing marketing
strategies. Ms. Wright is the primary contact for the Company's shareholders and
investors. Ms. Wright received a Bachelors Degree in Business Administration,
Marketing and Management from Missouri Southern State College.
Paul D. Voss was appointed Vice President of Finance in January, 1998. Mr.
Voss was Controller at Magic Circle Energy from 1994 to 1996. Mr. Voss was a
senior auditor for Grant Thornton for five years and more recently an accounting
manager for Finley & Cook, P.L.L.C. Mr. Voss received a degree in Business
Administration from Angelo State University in 1989, holds CPA licenses in
Oklahoma and Texas and is a member of both the American Institute of CPAs and
the Oklahoma Society of CPAs.
There are no family relationships among the Company's present officers and
directors.
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INFORMATION WITH RESPECT TO STANDING COMMITTEES OF THE
BOARD AND MEETINGS
Two meetings of the Board of Directors were held during the last fiscal year
and were attended by all of the Directors. Attendance fees were not paid in
connections with said meetings. The Board also took action by unanimous written
consents in lieu of meetings on nine occasions. Board members did not receive
directors fees for serving in such capacities, nor did they receive attendance
fees for attendance at meetings. The Board approved payment of an attendance fee
of $500 per meeting and reimbursement of travel costs for nonemployee Directors
at the last Directors meetings. The payments will begin with the next Directors
meeting. Nonemployee Directors also participate in the Company's stock option
plan.
The Company does not currently utilize nominating or compensation committees.
The Board presently has an audit committee consisting of Donald E. Smith and
Robert O. McDonald, with Mark Cooley appointed as a provisional member of the
Audit Committee. Upon shareholder confirmation of Mr. Cooley's election as a
Director of the Company, Mr. Cooley will become a standing member of the Audit
Committee. Two of the members of the Audit Committee will be outside board
members.
Executive Compensation
The following table sets forth the compensation paid or accrued during each of
the years in the three years ended December 31, 1997, to the Company's Executive
Officers. The Company did not compensate any executive officer in excess of
$100,000 in total compensation for the same period: Other Annual Compensation
Year Salary Bonus Automobile All Other
---- ------- ----- ---------- ---------
1997 $60,000 $ --- $ --- $ ---
1996 60,000 --- 7,200 9,000
1995 60,000 --- 7,200 9,000
Other annual compensation includes the use of an automobile owned by the
Company and payment of monthly dues.
Employment Agreements
Donald E. Smith serves as the Company's Chief Executive Officer pursuant to an
employment agreement executed with the Company in August 1997. The employment
agreement provides for an initial annual compensation rate of $60,000 until
certain assets related to discontinued operations are sold or specified cash
flow objectives are achieved. Any changes in compensation during the term of the
agreement are to be determined by the Board of Directors. Mr. Smith receives
vacation, insurance, and similar benefits together with the use of a car for
Company-related travel. Mr. Smith's employment agreement contains provisions for
severance pay and disability payments, as well as a non-compete agreement. The
term of the employment agreement is three years.
Jerry M. Sunderland serves as the Company's President pursuant to an
employment agreement executed with the Company in August 1997. The employment
agreement specifies an initial annual compensation rate of $85,000. Any changes
in compensation during the term
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<PAGE>
of the agreement are to be determined by the Board of Directors. Mr. Sunderland
receives vacation, insurance, and similar benefits together with the use of a
car for Company-related travel. Mr. Sunderland's employment agreement contains
provisions for severance pay and disability payments, as well as a non-compete
agreement. The term of the employment agreement is three years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The attention of the shareholders is directed to Financial Statement Note 7 on
page 20 and Financial Statement Note 13 on page 26 of the Company's Annual
Report on Form 10- KSB for the year ended December 31, 1997 (copies of the
Annual Report were mailed together with the Proxy Statements), describing in
detail certain relationships and transactions involving the Company and certain
officers and directors of the Company. Such matters pertain to the execution of
employment agreements as described hereinabove, guarantee of the Company's
financial obligations, the issuance and cancellation of Class B Common Stock,
and other related party transactions.
SECTION 16A FILINGS
Messrs. Smith, Sunderland, and McDonald are required to file pursuant to 16(a)
of the Securities and Exchange Act of 1934, a statement of any changes in
ownership of the Company's securities within 10 days after the end of any month
in which a transaction took place and an annual statement of ownership of the
Company's securities within 45 days after the end of the Company's fiscal year.
All required filings for the annual statement of ownership on Form 5 with the
Securities and Exchange Commission have been made in 1998.
PROPOSAL TO RATIFY THE
ENGAGEMENT OF AUDITORS
(Proposal Three)
The Company's Board of Directors has selected Grant Thornton, L.L.P., as the
Company's independent public accountants and auditors for the fiscal year ending
December 31, 1998 and will ask the Shareholders to ratify that selection at the
Annual Meeting. Grant Thornton L.L.P., served as the Company's independent
certified accountants and auditors for the fiscal years ended December 31, 1996
and 1997. A representative of Grant Thornton, L.L.P., is expected to attend the
Annual Meeting and will be provided an opportunity to make a statement if
desired, and/or to answer appropriate questions from Shareholders, if any.
The Board recommends ratification and approval of the election of Grant
Thornton, LLP as the Company's independent public accountants and auditors for
fiscal year ended December 31, 1998.
SHAREHOLDER PROPOSALS
There have been no Shareholder proposals submitted to the Company for
consideration at the Annual Meeting. Should a Shareholder wish to present a
proposal at the 1999 Annual Meeting of Shareholders, such proposal must be
received by the Company at its address shown on this Proxy Statement prior to
January 10, 1999. Any proposals received by that date will be reviewed by the
Board to determine whether it is a proper proposal to present to the 1999 Annual
Meeting.
9
<PAGE>
VOTE REQUIRED
One-third (1/3) of the Company's Shares of Common Stock issued and outstanding
as of April 24,1998 shall constitute a quorum at the Annual Meeting. The
affirmative vote of at least a majority of the Shares represented at the Annual
Meeting is required for all proposals to come before the Meeting. The Company
anticipates that all proposals will be approved.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not intend
to present a matter for action at the Annual Meeting other than as set forth
herein and in the Notice of Annual Meeting, nor has the Board been informed that
any other person intends to present any additional matter. Should any other
matters be brought before the Meeting, the proxies served in the enclosed form
of proxy will be eligible to vote in accordance with the Proxy holder's judgment
on such matters.
ANNUAL REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS
Copies of the Company's Annual Report as filed with the Securities and
Exchange Commission on Form 10-KSB, including consolidated financial statements
for the year ended December 31, 1997, are enclosed together with the Proxy
Statement. Additional copies may be obtained, upon payment of the reasonable
expenses involved, by writing to the Company at its address set forth in the
Proxy Statement.
By Order of the Board of Directors
April 23, 1998 /s/ Randall J. Wood
---------------------
Randall J. Wood, Secretary
YOUR COOPERATION IN GIVING THIS MATTER YOUR IMMEDIATE
ATTENTION AND RETURNING YOUR PROXY PROMPTLY WILL BE
APPRECIATED
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