CORRECTIONAL SERVICES CORPORATION
(a Delaware corporation)
_______________________
NOTICE OF 1998 ANNUAL
MEETING OF STOCKHOLDERS TO BE
HELD AT 10:00 A.M. ON JUNE 18, 1998
__________________________
To the Stockholders of CORRECTIONAL SERVICES CORPORATION:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Meeting") of CORRECTIONAL SERVICES CORPORATION, (the "Company") will be held
on June 18, 1998, at 10:00 a.m. at the Hyatt Hotel, 1000 Boulevard Of The Arts,
Sarasota, Florida 34236 for the following purposes:
1. To elect six directors;
2. To ratify the appointment of Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998; and
3. To transact such other business as may properly come before the
Meeting and any adjournment or postponement thereof.
The Board of Directors has fixed May 8, 1998, at the close of business,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting, and only holders of record of shares of the
Company's Common Stock at the close of business on that day will be entitled to
vote. The stock transfer books of the Company will not be closed.
A complete list of stockholders entitled to vote at the Meeting shall be
available at the offices of the Company during ordinary business hours from
May 1, 1998 until the Meeting for the examination by any stockholder for any
purpose relevant to the Meeting. This list will also be available at the
Meeting.
All stockholders are cordially invited to attend the Meeting in person.
However, whether or not you expect to be present at the Meeting, you are urged
to mark, sign, date and return the enclosed Proxy, which is solicited by the
Board of Directors, as promptly as possible in the postage-prepaid envelope
provided to ensure your representation and the presence of a quorum at the
Meeting. The shares represented by the Proxy will be voted according to your
specified response. The Proxy is revocable and will not affect your right to
vote in person in the event you attend the Meeting.
By Order of the Board of Directors
Debra Dawn, Secretary
Sarasota, Florida
May 8, 1998
<PAGE>
CORRECTIONAL SERVICES CORPORATION
1819 Main Street, Suite 1000
Sarasota, Florida 34236
_______________________
PROXY STATEMENT
_______________________
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 10:00 A.M. ON June 18, 1998
The enclosed proxy is solicited by the Board of Directors of CORRECTIONAL
SERVICES CORPORATION (the "Company") in connection with the 1998 Annual Meeting
of Stockholders (the "Meeting") to be held on June 18, 1998 at 10:00 a.m. at
the Hyatt Hotel, 1000 Boulevard Of The Arts, Sarasota, Florida 34236 and any
adjournment or postponement thereof, the Board of Directors has fixed May 8,
1998, at the close of business, as the record date for the determination of
stockholders entitled to notice of and to vote at the Meeting. A stockholder
executing and returning a proxy has the power to revoke it at any time before
it is exercised by filing a later proxy with, or other communication to, the
Secretary of the Company or by attending the Meeting and voting in person. The
proxy will be voted in accordance with your directions as to:
1. the election of the persons listed as directors of the Company;
2. the ratification of the appointment of Grant Thornton LLP as the
Company's independent auditors for the fiscal year ending December 31, 1998; and
3. the transaction of such other business as may properly come before
the Meeting and any adjournment or postponement thereof.
In the absence of direction, the proxy will be voted in favor of these
proposals.
The entire cost of soliciting proxies will be borne by the Company. The
cost of solicitation, which represents an amount believed to be normally
expended for a solicitation relating to an uncontested election of directors,
will include the cost of supplying necessary additional copies of the
solicitation materials and the Company's 1997 Annual Report to Stockholders
(the "Annual Report") to beneficial owners of shares held of record by brokers,
dealers, banks, trustees, and their nominees, including the reasonable expenses
of such recordholders for completing the mailing of such materials and Annual
Report to such beneficial owners.
Only stockholders of record of the Company's 7,763,557 shares of Common
Stock (the "Common Stock") outstanding at the close of business on May 8, 1998
will be entitled to vote. Each share of Common Stock is entitled to one vote.
Holders of a majority of the outstanding shares of Common Stock must be
represented in person or by proxy in order to achieve a quorum. The Proxy
Statement, the attached Notice of meeting, the enclosed form of Proxy and the
Annual Report are being mailed to stockholders on or about May 15, 1998. The
mailing address of the Company's principal executive offices is 1819 Main
Street, Suite 1000, Sarasota, Florida 34236.
1. ELECTION OF DIRECTORS
Six directors are to be elected by a plurality of the votes cast at the
Meeting, each to hold office until the next Annual Meeting of Stockholders and
until his respective successor is elected and qualified. The persons named in
the accompanying Proxy have advised management that it is their intention to
vote for the election of the following nominees as directors unless authority is
withheld:
Stuart M. Gerson
Shimmie Horn
James F. Slattery
Aaron Speisman
Richard P. Staley
Melvin T. Stith
<PAGE>
Management believes that each nominee will be able to serve. In the event
any nominee becomes unable to unwilling to serve, proxies may be voted for the
election of such person or persons as the Board of Directors may determine.
Information Regarding Directors and Officers
The following is information regarding the current directors and executive
officers of the Company:
Name Age Position with Company
Stuart M. Gerson(1) 54 Director
Shimmie Horn 25 Director
James F. Slattery 48 President, Chief Executive Officer and Director
Aaron Speisman 50 Executive Vice President, Secretary and Director
Richard P. Staley 66 Senior Vice President and Director
Melvin T. Stith(1) 51 Director
-------------------------
(1) Member of Audit, Compensation and Stock Option Committees.
Stuart M. Gerson was elected a director in June 1994. Since March 1993,
Mr. Gerson has been a partner of the law firm of Epstein Becker & Green, P.C.
From January 1993 to March 1993, he was acting Attorney General of the United
States. From January 1989 to January 1993, Mr. Gerson was the Assistant U.S.
Attorney General for the Civil Division of the Department of Justice.
Shimmie Horn was elected a director of the Company in June 1996. Mr. Horn,
received a B.A. degree in Economics from Yeshiva College in 1993, and graduated
from the Benjamin Cardozo School of Law in 1996. He is the son of the late
Morris Horn, the former Chairman and a founder of the Company.
James F. Slattery co-founded the Company in October 1987 and has been its
President, Chief Executive Officer and a director since the Company's inception
and Chairman since August 1994. Prior to co-founding the Company, Mr. Slattery
had been a managing partner of Merco Properties, Inc., a hotel operation
company, Vice President of Coastal Investment Group, a real estate development
company, and had held several management positions with the Sheraton Hotel
Corporation.
Aaron Speisman co-founded the Company in October 1987 and has been its
Executive Vice President, Secretary and a director since the Company's
inception. From October 1987 to March 1994, Mr. Speisman also served as Chief
Financial Officer of the Company. Since June 1, 1996, Mr. Speisman has been
employed by the Company on a part-time basis.
Richard P. Staley has served as the Company's Senior Vice President of
Operations since November 1988 and as a director since May 1994. From 1984 to
1987, Mr. Staley was the Evaluation and Compliance Director for Corrections
Corporation of America and from 1953 to 1983, held various positions with the
United States Department of Justice, Immigration and Naturalization Service.
Mr. Staley is a certified American Correctional Association standards auditor
for jail and detention facilities.
Melvin T. Stith was elected a director of the Company in November 1994.
Since July 1991, Mr. Stith has been Dean of the Florida State University College
of Business. From December 1989 to July 1991, Mr. Stith was Chairman of the
Marketing Department of the Florida State University College of Business where
he was also a Professor. Mr. Stith is also a director of Sprint and United
Telephone of Florida.
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
family relationships between any of the directors, executive officers or persons
nominated or chosen by the Company to become directors or executive officers.
The Company's officers are elected annually by the Board of Directors and serve
at the discretion of the Board.
The Company's By-Laws provide that the Company shall indemnify each
director and such of the Company's officers, employees and agents as the Board
of Directors shall determine from time to time to the fullest extend provided by
the laws of the State of Delaware.
The Company carries insurance providing indemnification, under certain
circumstances, to all of the Company's directors and
<PAGE>
officers for claims against them by reason of, among other things, any act or
failure to act in their capacities as directors or officers. The current annual
premium for this insurance is approximately $108,000, all of which is paid by
the Company. To date, no sums have been paid to any past or present director or
officer of the Company under this or any prior indemnification insurance policy.
The Company has also entered into Indemnity Agreements with all of its
directors and executive officers. The Indemnity Agreements provide that the
Company will pay any costs which an indemnitee actually and reasonably incurs
because of the claims made against him by reason of the fact that he is or was a
director or officer of the Company, except that the Company is not obligated to
make any payment which the Company is prohibited by law from paying as
indemnity, or where (a) a final determination is rendered on a claim based upon
the indemnitee's obtaining a personal profit or advantage to which he was not
legally entitled; (b) a final determination is rendered on a claim for an
accounting of profits made in connection with a violation of Section 16(b) of
the Securities and Exchange Act of 1934, or similar state or common law
provisions; (c) a claim where the indemnitee was adjudged to be deliberately
dishonest; or (d) a final determination is rendered that indemnification is not
lawful.
Director's Compensation
Employee-directors receive no compensation for serving on the Board of
Directors other than reimbursement of expenses incurred in attending meetings.
Non-employee directors elected or appointed to the Board of Directors are paid
an annual directors' fee of $5,000 plus $500 for each Board meeting attended and
$250 for each Committee meeting attended. In addition, all non-employee
directors participate in the Company's 1994 Non-Employee Director Stock Option
Plan and are reimbursed for expenses incurred in attending meetings.
Meetings and Committees of the Board of Directors
The Board of Directors has an audit committee, a compensation committee and
a stock option committee. The Board of Directors does not have a nominating
committee or a committee performing the functions of a nominating committee.
The members of the Audit Committee are Melvin T. Stith and Stuart M.
Gerson. The Audit Committee held one meeting during the year ended December 31,
1997 and acted only by unanimous consent. The functions of the Audit Committee
are to recommend annually to the Board of Directors the appointment of the
Company's independent public accountants, discuss and review the scope and the
fees of the prospective annual audit and review the results thereof with the
independent public accountants, review and approve non-audit services of the
independent public accounts, review compliance with existing major accounting
and financial policies of the Company, review the adequacy of the financial
organization of the Company and review management's procedures and policies
relative to the adequacy of the Company's internal accounting controls.
Messrs. Stith and Gerson also serve on the Stock Option and Compensation
Committees. The Compensation Committee held one meeting during the year ended
December 31, 1997 and the Stock Option Committee acted four times by unanimous
written consent during the year ended December 31, 1997. The function of the
Compensation Committee is to determine the compensation of the Company's
executives. The Stock Option Committee administers the Company's stock option
plans and awards stock options.
The Board of Directors held a total of five meetings and acted nine times
by unanimous written consent during the last fiscal year.
Executive Compensation
The following table sets the compensation paid or accrued by the Company
during the three fiscal years ended December 31, 1997, 1996 and 1995 to the
Company's Chief Executive Officer and to the Company's three most highly
compensated executive officers whose total cash compensation for such periods
exceeded $100,000 (the "Named Executives"):
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<CAPTION> Long Term
Compensation
Awards
Other Annual Number of Shares All Other
Name and Principal Compensation Underlying Options Compensation
Position Year Salary Bonus (1) Granted (2)
<S> <C> <C> <C> <C> <C> <C>
James F. Slattery 1997 $208,373 $200,000 $17,988 0 $27,270
President and
Chief Executive Officer 1996 $208,685 0 $19,984 0 $20,139
1995 $189,000 0 $13,010 5,000 $30,263
Michael Garretson 1997 $118,834 $ 75,000 $12,000(3) 0 $ 288
Executive Vice President
1996 $112,406 $ 507 $13,000(3) 100,000 0
1995 $ 55,926 0 0 6,250 0
Ira Cotler 1997 $135,115 $ 75,000 $ 6,000 0 $ 54
Executive Vice President
Chief Financial Officer 1996 $107,261 $ 507 $50,396(4) 100,000 0
1995 N/A N/A N/A N/A N/A
- ------------------
(1) Consists of car lease payments.
(2) Consists of life insurance premiums.
(3) Also includes housing allowance.
(4) Also includes relocation and related costs.
In addition to the compensation described above, for 1995, Mr. Slattery
received S Corporation distributions of $134,400.
</TABLE>
Employment Agreements
The Company has entered into an employment agreement with Mr. Slattery
which expires February 9, 1999 and provides for minimum annual compensation of
$189,000, cost of living increases, use of an automobile, reimbursement of
business expenses, health insurance, related benefits and a bonus equal to 5%
of pre-tax profits in excess of $1,000,000, such bonus not to exceed $200,000.
As of June 1, 1996, Mr. Speisman is employed under an agreement which provides
for Mr. Speisman's employment on a part-time basis at an annual salary of
$35,000.
The Company has entered into an employment agreement with Mr. Garretson
which expires January 20, 1999 and provides for compensation of $115,000, annual
salary increases, automobile allowances, reimbursement of business expenses,
health or disability
<PAGE>
insurance, related benefits, a bonus equal to 3% of pre-tax profits in excess of
$1,000,000, such bonus not to exceed $75,000, and the grant to purchase 100,000
shares of Common Stock.
The Company's current employment agreement with Mr. Cotler was extended in
July, 1997 and has a term of three years with automatic annual renewal
provisions. Mr. Cotler receives $135,000, annual salary increases, automobile
allowances and a bonus equal to 3% of pre-tax profits in excess of $1,000,000,
such bonus not to exceed $75,000.
In October 1989, a subsidiary of the Company, entered into an employment
agreement with William Banks. Under this agreement, Mr. Banks was responsible
for developing and implementing community relations projects on behalf of the
Company and for acting as a liaison between the Company and local community and
civic groups who may have concerns about Company's facilities being established
in their communities, and with government officials throughout the State of New
York. As compensation, Mr. Banks received 3% of the gross revenue from all
Federal Bureau of Prisons, state and local correctional agency contracts within
the State of New York with a guaranteed minimum monthly income of $4,500. In
December 1993, Mr. Banks agreed to become a consultant to the Company upon the
same terms and conditions in order to accurately reflect the level and nature
of the services he provided. In 1996 and 1997, Mr. Banks earned approximately
$296,000 and $239,000 respectively.
Stock Options
There were no stock options granted to the Named Executives during the
Company's fiscal year ended December 31, 1997.
The following table sets forth information concerning stock options granted
executive officers named in the Summary Compensation Table:
Option Values at December 31, 1997
Number of Value of
Shares Underlying In-The-Money Options
Options at Year End at Year End
Name Exercisable/Unexercisable Exercisable/Unexercisable
James F. Slattery 16,458/ 1,667 $ 8,939/$ 4,471
Mike Garretson 70,832/35,366 $109,199/$ 54,601
Ira Cotler 66,666/33,334 $109,199/$ 54,601
Stock Option Plans
1993 Stock Option Plan
The 1993 Stock Option Plan (the "1993 Plan") was modified by the Board of
Directors on March 24, 1998 to increase the number of shares available under the
1993 Plan from 500,000 to 1,000,000. These shares of Common Stock are reserved
for issuance upon exercise of options designated as either (i) incentive stock
options ("ISOs") under the Internal Revenue Code of 1986, as amended (the
"Code") or (ii) non-qualified options. Under the 1993 Plan, ISOs may be granted
to employees and officers of the Company and non-qualified options may be
granted to consultants, directors (whether or not they are employees), employees
or officers of the Company.
The 1993 Plan is administered by the Company's Stock Option Committee which
determines the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be ISO's,
the rate of exercise of each option, the option purchase price per share, the
manner of exercise, the form of payment upon exercise, and whether restrictions
such as repurchase rights are to be imposed on the shares following exercise.
Options granted under the 1933 Plan expire five years after the date of grant
and may not be granted at a price less than the fair market value of the Common
Stock on the date of grant (or 110% of fair market value in the case of persons
holding 10% or more of the voting stock of the Company). The aggregate fair
market value of shares for which ISOs granted to any employee are exercisable
for the first time by such employee during any calendar year (under all stock
option plans of the Company and any related corporation) may not exceed
$100,000. No options may be granted under the 1993 Plan after October 2003;
however, options granted under the 1993 Plan prior thereto may extend beyond
that date. Options granted under the 1993 Plan are not transferable during an
optionee's lifetime but are transferable at death by will or by the laws of
descent and distribution.
<PAGE>
During fiscal 1995 and 1994, options to purchase 54,375 and 50,700 shares,
respectively, were granted under the 1993 Plan at exercise prices ranging from
$4.76 to $20.63 per share. In 1997, options to purchase 155,500 shares were
granted under the 1993 Plan at exercise prices ranging from $8.75 to $17.88 per
share.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 14, 1998,
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of the Company's Common Stock by (i) each person
known by the Company to beneficially own more than 5% of the outstanding shares
of Common Stock, (ii) each executive officer and director of the Company, and
(iii) all officers and directors of the Company as a group:
Name and Address Amount and Nature of Percentage of
Beneficial Owner(1) Beneficial Ownership Beneficial Ownership
Esther Horn 659,175 8.6%
James F. Slattery(2) 788,125 10.2%
Aaron Speisman(3) 447,263 5.8%
Jennifer Anna Speisman 1992 Trust 83,438 1.1%
Joshua Israel Speisman 1992 Trust 83,438 1.1%
Ira M. Cotler (4) 117,368 1.5%
Richard P. Staley (5) 62,583 *
Michael C. Garretson (6) 106,198 1.4%
Stuart Gerson (7) 26,975 *
Melvin T. Stith (8) 17,500 *
Shimmie Horn (9) 3,333 *
All officers and directors as a group
(eight persons) (2) (3) (4) (5) (6) (7)
(8) (9) 1,736,221 22.6%
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* Less than 1%
(1) All addresses are c/o Correctional Services Corporation, 1819 Main
Street, Suite 1000, Sarasota, Florida 34236.
(2) Includes options to purchase 16,458 shares of Common Stock. Does not
include options to purchase 1,667 shares of Common Stock not exercisable within
60 days.
(3) Director and founder. Does not include 83,438 shares of Common Stock
owned by the Jennifer Anna Speisman 1992 Trust and 83,438 shares of Common Stock
owned by the Joshua Israel Speisman 1992 Trust, trusts for the benefit of Mr.
Speisman's children, as to which Mr. Speisman disclaims beneficial ownership.
Includes options to purchase 16,458 shares of Common Stock and a Series A
Warrant to purchase 6,700 shares of Common Stock but does not include options to
purchase 1,667 shares of Common Stock not exercisable within 60 days.
(4) Includes 2,612 shares of Common Stock owned by his wife as to which he
disclaims beneficial ownership. Also includes options to purchase 100,000 shares
of Common Stock, a Series A Warrant to purchase 3,850 shares of Common Stock and
other warrants to purchase 10,906 shares of Common Stock.
(5) Includes options to purchase 62,083 shares of Common Stock. Does not
include options to purchase 1,667 shares of Common Stock not exercisable within
60 days.
(6) Consists of options to purchase 106,198 shares of Common Stock.
(7) Consists of options to purchase 23,125 shares of Common Stock and a
Series A Warrant to purchase 3,850 shares of Common Stock. Does not include
options to purchase 10,000 shares of Common Stock not exercisable within 60
days.
(8) Consists of options to purchase 17,500 shares of Common Stock. Does
not include options to purchase 10,000 shares of
<PAGE>
Common Stock not exercisable within 60 days.
(9) Consists of options to purchase 3,333 shares of Common Stock. Does not
include options to purchase 10,000 shares of Common Stock not exercisable within
60 days.
The Company is unaware of any arrangements which may result in a change in
control of the Company.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, the "Reporting
Persons"), to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and to furnish the Company with copies of
these reports. Based solely on the Company's review of the copies of such forms
received by it during the Company's fiscal year ended December 31, 1996, the
Company believes that the Reporting Persons complied with all filing
requirements applicable to them.
Certain Relationships and Related Transactions
The Company subleases a building located at 12-16 East 31st Street, New
York, New York from LeMarquis Operating Corp. ("LMOC"), a corporation owned 25%
by Ester Horn and 8% by James F. Slattery. The Company currently utilizes
approximately fifty percent of the building for the Manhattan Community
Corrections and the New York Community Corrections programs. LMOC leases this
building from an unaffiliated party at a current base monthly rental of
approximately $16,074 (the "Base Rent"), plus taxes, currently approximately
$14,000, and water and sewer charges, currently approximately $3,500, for a
total monthly rental of approximately $33,000. The Company has the right
to use as much of the building as it requires for its business subject to the
rights of certain residential subtenants to remain in the building. These
rights include the right to housing at a predetermined rental for an indefinite
period of time pursuant to New York State rent stabilization laws.
As a result of the lease negotiations, under a sublease dated as of
January 1, 1994, since May 1, 1995, the Company has paid rent of $18,000 per
month above the rent paid by LMOC to the building's owner for a total monthly
rent of approximately $51,420. The Company has, to date, invested $739,000 in
leasehold improvements and will not receive any credit, in terms of a reduction
in rent or otherwise, for these improvements. The terms of this sublease were
not negotiated at arm's length due to the relationship of Mrs. Horn and Mr.
Slattery with both the Company and LMOC. The negotiation of the sublease,
including the renewal terms, was requested by the Representative of the
Underwriters of the Company's February 2, 1994 initial public offering to
substantially track the renewal terms of the Company's management contract.
The negotiations were not subject to the board resolution, adopted subsequent to
the negotiations, relating to affiliated transactions, although the terms were
approved by all of the directors. The initial term of the Company's sublease
expired April 30, 1995, and is currently in its first renewal term expiring
April 30, 2000. The sublease contains two additional successive five-year
renewal options beginning May 1, 2000. The monthly rent above the rent paid by
LMOC to the building's owner will increase to $22,000 per month during the
second renewal term beginning May 1, 2000 and to $26,000 per month during the
third renewal term beginning May 1, 2005. The Company paid $40,000 to LMOC for
the renewal options. These renewal options were separately negotiated between
the Board of Directors of the Company and LMOC. Mr. Slattery participated in
such negotiations. Mrs. Horn and Mr. Slattery will receive their proportionate
shares of rents received by LMOC under the terms of this sublease.
Previously, residential and commercial tenants of this building paid rent
to LeMarquis Enterprise Corp. ("Enterprises"), a company owned 30% by Mrs. Horn,
28% by Mr. Slattery and 25% by Mr. Speisman, and Enterprises paid all expenses
of operating the residential and commercial portions of the building as well as
a portion of the overall expenses of the building. As of February 1994,
however, all of the building's revenues, including rent from the residential and
commercial tenants are now received and expenses paid by the Company. The
revenue from this portion of the building was approximately $193,000 in 1996 and
$184,000 in 1997. The Company anticipates that operating the portion of the
building occupied by residential and commercial tenants will result in a net
expense to the Company of approximately $6,500 per month. Due to New York rent
stabilization laws, the Company is unable to increase the rent paid by the
residential tenants in this building in response to increased rent or expenses
incurred by the Company.
The Company leases the entire building located at 988 Myrtle Avenue,
Brooklyn, New York from Myrtle Avenue Family Center, Inc. ("MAFC") pursuant to a
lease which commenced January 1, 1994 and expires December 31, 1998. The lease
establishes a monthly rental of $40,000 and contains three five-year renewal
options. The monthly rental for the first option period, which runs from
January 1, 1999 through December 31, 2003, is $40,000. The monthly rental for
the second option period, which runs from January 1, 2004 through December 31,
2008, is $45,000, and the monthly rental for the third option period, which runs
from January 1, 2009 through December 31, 2013, is $50,000. In addition, the
Company pays taxes, insurance, repairs and maintenance on this building.
<PAGE>
MAFC is a corporation owned by Mrs. Horn (27.5%) and Messrs. Slattery (8%) and
Speisman (27.5%). The terms of the lease were not negotiated at arm's length
due to their relationship with MAFC and the Company. Messrs. Slattery and
Speisman participated in such negotiations.
The Company leases a building located at 2534 Creston Avenue, Bronx, New
York from Creston Realty Associates, L.P. ("CRA"), the corporation owned 10% by
Ester Horn. The lease term is two years commencing October 1, 1996 and has three
additional one year option periods. The Company also pays a base rent of
$180,000 per year which will escalate five percent per year for each of the
three year options if they are exercised. The Company pays taxes, insurance,
repairs and maintenance on this building which will be used to house a community
correctional center. The terms of this lease were not negotiated at arms length
due to the relationship between the Company, Ms. Horn and CRA.
Pursuant to the terms of a Board of Directors resolution adopted in
connection with the Company's initial public offering, all transactions between
the Company and any of its officers, directors or affiliates (except for
wholly-owned subsidiaries) must be approved by a majority of the unaffiliated
members of the Board of Directors and be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties and be in
connection with bona fide business purposes of the Company. In the event the
Company makes a loan to an individual affiliate (other than a short-term advance
for travel, business expense, relocation or similar ordinary operating
expenditure), such loan must be approved by a majority of the unaffiliated
directors.
"PERFORMANCE GRAPH"
The following performance graph compares the cumulative total shareholder
return on the Common Stock to the cumulative total return of the Russell 2000
Stock Index and the NASDAQ Composite Index for the last three fiscal years. The
graph assumes that the value of the investment in the Common Stock and each
index was $100 at January 2, 1995 and that all dividends were reinvested on a
quarterly basis.
COMPARISON OF CUMULATIVE TOTAL RETURN
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- --------
Russell 2000 Stock Index $100.00 $126.07 $144.68 $174.37
NASDAQ Composite Index $100.00 $141.29 $173.79 $213.31
Correctional Services Corporation $100.00 $115.15 $189.11 $137.39
2. APPOINTMENT OF AUDITORS
The Board of Directors recommends that the stockholders ratify the
appointment of Grant Thornton LLP, which served as the Company's independent
auditors for the last fiscal year, as independent auditors to audit the
Company's financial statements for the fiscal year ending December 31, 1998. A
representative of Grant Thornton is expected to be present at the Meeting and
will be given the opportunity to make a statement and to answer any questions
any stockholder may have with respect to the financial statements of the
Company for the year ended December 31, 1997.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE
APPOINTMENT OF GRANT THORNTON AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998
3. OTHER MATTERS
The Board of Directors has no knowledge of any other matters which may come
before the Meeting and does not intend to present any other matters. However,
if any other matters shall properly come before the Meeting or any adjournment
thereof, the persons names as proxies will have discretionary authority to vote
the shares of Common Stock represented by the accompanying proxy in accordance
with their best judgment.
Stockholder's Proposals
Any stockholder of the Company who wishes to present a proposal to be
considered at the Company's next annual meeting of stockholders, and who wishes
to have such proposal presented in the Company's proxy statement for such
Meeting, must deliver such proposal in writing to the Company at 1819 Main
Street, Suite 1000, Sarasota, Florida 34236, on or before January 29, 1999. In
order to curtail controversy as to the date on which the proposal was received
by the Company, it is suggested that proponents submit their proposals by
certified mail, return receipt requested.
By Order of the Board of Directors
Debra Dawn, Secretary
The Company will furnish without charge to each person whose proxy is being
solicited by this proxy statement, on the written request of such person, a copy
of the Company's Annual Report on Form 10-K, including the financial statement
and the financial statement schedules thereto, for its fiscal year ended
December 31, 1997. Such request should be addressed to Ira Cotler, Chief
Financial Officer, Correctional Services Corporation, 1819 Main Street,
Suite 1000, Sarasota, Florida 34236.
Dated: May 8, 1998
