SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (A) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
Correctional Services 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 the transaction
applies:
(2) Aggregate number of securities to which the 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 determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with filed materials
<PAGE>
[ ] 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>
NOTICE OF 2000 ANNUAL
MEETING OF STOCKHOLDERS TO BE
HELD AT 8:30 A.M. ON OCTOBER 3, 2000
__________________________
To the Stockholders of CORRECTIONAL SERVICES CORPORATION:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders
(the "Meeting") of CORRECTIONAL SERVICES CORPORATION, (the "Company" or
"CSC") will be held on Tuesday October 3, 2000, at 8:30 a.m. at the
Sarasota Chamber of Commerce Board Room, 1819 Main Street, 2nd Floor,
Sarasota, Florida 34236 for the following purposes:
(1) To elect A Board of Seven (7) directors until the next annual
meeting of Stockholders;
(2) To ratify the appointment of Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending December 31,
2000; and
(3) To transact such other business as may properly come before the
Meeting, or any adjournments or postponements thereof.
Only holders of record of the Company's Common Stock at the close of
business on August 29, 2000, the Record Date for the Meeting, are entitled
to notice of and to vote at the Annual Meeting. A Proxy Statement
describing the matters to be considered and acted upon at the Meeting is
attached to this Notice.
ALL HOLDERS OF COMMON STOCK ARE URGED EITHER TO ATTEND THE MEETING IN
PERSON OR TO VOTE BY PROXY.
On behalf of the Board of Directors,
Sarasota, Florida /s/Ira M. Cotler, Secretary
August 29, 2000
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON
ARE REQUESTED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE PROXY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE. IF YOU ATTEND THE MEETING IN PERSON,
YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE>
CORRECTIONAL SERVICES CORPORATION
1819 MAIN STREET, SUITE 1000
SARASOTA, FLORIDA 34236
_______________________
PROXY STATEMENT
_______________________
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 8:30 A.M. ON OCTOBER 3, 2000
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the holders of the Common
Stock, par value $.01 per share (the "Common Stock"), of Correctional
Services Corporation, a Delaware Corporation, ("CSC" or "the Company") in
connection with the solicitation of proxies by the Company's Board of
Directors for use at the 2000 Annual Meeting of Stockholders (the
"Meeting") to be held at the Sarasota Chamber of Commerce Board Room, 1819
Main Street, 2nd Floor, Sarasota, Florida 34236 on Tuesday October 3rd,
2000 at 8:30 a.m. local time, and any adjournments or postponements
thereof. The cost of this solicitation will be borne by the Company.
The Proxy Statement and accompanying proxy card are being first mailed
to stockholders on or about Tuesday September 5, 2000.
ELIMINATING DUPLICATE MAILINGS
Pursuant to the rules of the Securities and Exchange Commission, the
Company is required to provide an Annual Report to every Stockholder who
receive this Proxy Statement, resulting in multiple deliveries to certain
Stockholders. Stockholders of record who have more than one account in
their name, or the same mailing address as another registered stockholder,
may authorize the Company to discontinue mailings of multiple Annual
Reports by marking the appropriate box on the proxy card(s) for which the
Annual Report is not desired. Eliminating duplicate mailings should not
only be a convenience to the stockholder, but will also save the Company
printing and mailing costs.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the meeting, the stockholders will be asked to consider and vote
upon the following proposals:
(1) the election of a Board of Seven (7) directors until the next
annual meeting of Stockholders;
(2) the ratification of the appointment of Grant Thornton LLP as the
Company's independent auditors for the fiscal year ending
December 31, 2000; and
(3) the transaction of such other business as may properly come
before the Meeting and any adjournment or postponement thereof.
Each of these proposals is more fully described in this proxy
statement.
<PAGE>
VOTING AT THE ANNUAL MEETING
Only holders of record of the Company's Common Stock at the close of
business on Tuesday August 29, 2000 (the "Record Date") are entitled to
notice of and to vote at the Meeting, each such holder of record being
entitled to one vote per share on each matter to be considered at the
Meeting. On the Record Date, there were 11,373,064 shares of Common Stock
issued and outstanding.
The presence, in person or by properly executed proxy, of the holders
of a majority of the outstanding shares of Common Stock entitled to vote at
the Meeting is necessary to constitute a quorum at the Meeting. All
abstentions and broker non-votes, if any, will be included as shares that
are present and entitled to vote for purposes of determining the presence
of a quorum.
A plurality vote of the shares of Common Stock present, in person or
represented by proxy, at the Meeting is required to elect the Board of
Seven (7) directors. The affirmative vote by holders of a majority of the
shares of common stock present in person or represented by proxy at the
meeting is required to ratify the reappointment of Grant Thornton LLP as
independent auditors of the Company for the fiscal year ending December 31,
2000.
In instances where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned proxies
("broker non-votes"), those shares will be disregarded and, therefore, will
have no effect on the outcome of the vote.
If the enclosed proxy card is properly executed and returned to the
Company prior to the vote at the Meeting, the shares represented thereby
will be voted in accordance with the instructions marked thereon, subject
to the following conditions:
Shares represented by a proxy marked "WITHHOLD AUTHORITY" to vote for
(i) all seven (7) Board nominees or (ii) any individual nominee(s) for
election as directors and not otherwise marked "FOR" the other nominees,
will not be counted in determining whether a plurality vote has been
received for the election of directions. In the absence of instructions,
shares represented by a proxy will be voted FOR all of the seven (7) Board
nominees.
Shares represented by a proxy that is marked "ABSTAIN" on any other
proposal will not be counted in determining whether the requisite vote has
been received for such proposal. In the absence of instructions, shares
represented by a proxy will be voted FOR all of the proposals set forth in
the Notice of Annual Meeting and at the discretion of the proxies on any
other matters that may properly come before the Meeting.
At any time prior to its exercise, a proxy may be revoked by the
stockholder granting it by delivering a written notice of revocation or a
duly executed proxy bearing a later date to the Secretary of the Company at
the address of the Company set forth on the first page of this Proxy
Statement or by attending the Meeting and voting in person.
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 September 22, 2000 until the date of the Meeting or any adjournment
thereof for examination by any stockholder for any purpose relevant to the
Meeting. This list will also be available at the Meeting.
Proxies may be solicited on behalf of the Board by mail, telephone,
telecopy or in person, and the solicitation costs will be paid by the
Company. Directors, officers and regular employees of the Company may
solicit proxies by such methods without additional compensation. Banks,
brokerage houses and other institutions, nominees and fiduciaries will be
requested to forward the soliciting materials to their principals and to
obtain authorizations for the execution of proxy cards and, upon request,
will be reimbursed by the Company for their reasonable expenses.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock on the Record Date by (i) each person known by the Company to own
beneficially more than five percent of such shares, (ii) each director and
nominee for election as director, (iii) each executive officer named in the
Summary Compensation Table under "Executive Compensation" of this Proxy
Statement, and (iv) all directors and executive officers as a group,
together with their respective percentage ownership of the outstanding
shares as of the Record Date:-
<TABLE>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<CAPTION> -----------------------------------------------
<S> <C> <C> <C>
ACQUIRABLE
NAME AND ADDRESS OF NUMBER OF SHARES WITHIN 60 PERCENT
BENEFICIAL OWNER DAYS** OUTSTANDING
------------------------------------------------------------------------------------
ESTHER HORN(1) 637,175 5.6%
JAMES F. SLATTERY(1)(2) 774,000 170,000 8.3
AARON SPEISMAN(1) 427,485 20,000 3.9
JENNIFER ANNA SPEISMAN 1992 TRUST(1) 83,438 - *
JOSHUA ISRAEL SPEISMAN 1992 TRUST(1) 83,438 - *
IRA M. COTLER(1)(3) 18,518 (2) 121,666 *** 1.2
RICHARD P. STALEY(1) 9,450 21,670 *
MICHAEL C. GARRETSON(1) - 90,000 *
STUART GERSON(1) 1,000 40,850 *
MELVIN T. STITH(1) - 25,850 *
SHIMMIE HORN(1) 14,312 22,500 *
BOBBIE L. HUSKEY - 15,800 *
GILDER, GAGNON, HOWE & CO.(4)(5) 1,680,346 - 14.7
</TABLE>
* Less than 1%
** Consists of shares issuable upon exercise of options unless otherwise
noted.
*** Includes 5,000 shares issuable upon exercise of warrants.
(1) Address is c/o Correctional Services Corporation, 1819 Main Street,
Suite 1000, Sarasota, Florida 34236.
(2) Previous disclosure of the number of shares owned by James F. Slattery
included in error vested but unexercised stock options.
(3) Includes 2,612 shares of CSC common stock owned by his wife as to which
he disclaims beneficial ownership.
(4) Address is 1775 Broadway, 26th Floor, New York, New York 10019. Based
on a Schedule 13G filed with the SEC by Gilder, Gagnon, Howe & Co.
("Gilder, Gagnon") on March 14, 2000, Gilder, Gagnon has shared power to
dispose or to direct the disposition of 2,043,351 shares and shared power
to vote or to direct the vote of 14,775 shares. The shares reported include
1,979,083 shares held had customer accounts as to which partners and/or
employees of Gilder, Gagnon had discretionary authority to dispose of or
direct the disposition. 49,493 shares held in the account of the profit-
sharing plan of Gilder, Gagnon.
<PAGE>
(5) The information regarding the beneficial ownership of common stock by
such person or entity is included herein in reliance on its report filed
with the SEC, except that the percentage of common stock beneficially
owned is based upon CSC's calculations made in reliance upon the number of
shares of common stock issued and outstanding as of April 30, 2000.
1. ELECTION OF DIRECTORS
Seven (7) directors are to be elected by a plurality of the votes cast
at the Annual Meeting, each to hold office until the next Annual Meeting of
Stockholders and until his/her respective successor is elected and
qualified. The following persons have been nominated for election as
Directors, all of whom are currently directors of the company.
- Stuart Gerson
- Shimmie Horn
- Bobbie Huskey
- James F. Slattery
- Aaron Speisman
- Richard P. Staley
- Melvin T. Stith
Management believes that each nominee will be able to serve. In the
event any nominee becomes unable to or unwilling to serve, proxies may be
voted for the election of such person or persons as the Board of
Directors may determine.
BIOGRAPHICAL INFORMATION
Each nominees' name, age, office with the Company, year first elected
a director and certain biographical information are set forth below.
<TABLE>
<CAPTION> Year First
----------
Elected as a
------------
Name Age Director Office
---- --- -------- ------
<S> <C> <C> <C>
James F. Slattery................50 1987 President, Chief
Executive Officer
and Chairman of the Board
Aaron Speisman...................52 1987 Executive Vice President
and Director
Richard P. Staley................68 1994 Senior Vice President
and Director
Stuart M. Gerson(1)(2)(3)(4)(5)..56 1994 Director
Shimmie Horn.....................27 1996 Director
Bobbie L. Huskey(4)(5)...........51 1999 Director
Melvin T. Stith(2)(3)(4)(5)......53 1994 Director
(1) Member of the Rights Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Stock Options Committee
(5) Member of the Strategic Alternatives Process Independent Committee
</TABLE>
<PAGE>
JAMES F. SLATTERY co-founded CSC in October 1987 and has been its
President, Chief Executive Officer and a director since CSC's inception and
Chairman since August 1994. Prior to co-founding CSC, 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 CSC in October 1987 and has been its
Executive Vice President and a director since CSC'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 a Director since May 1994. Since
1999, Mr. Staley has been the Company's Senior Vice President of Strategic
Planning. From 1988 to 1998 Mr. Staley was the Company's Senior Vice
President of Operations. Prior to joining the company, Mr. Staley was an
Evaluation and Compliance Director for Corrections Corporation of America
(84-87) and 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.
STUART M. GERSON was elected a director of CSC in June 1994. Since
March 1993, Mr. Gerson has been a member 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 CSC in June 1996. Mr. Horn is
President of Iroquois Properties Inc., a real estate holding company. 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 co-founder of CSC, and Esther
Horn, a principal stockholder of CSC.
BOBBIE L. HUSKEY was a director of Youth Services International, Inc.,
which was acquired by CSC in March 1999 at which time, Ms. Huskey became a
Director of the Company. Ms. Huskey has been president of Huskey &
Associates since 1984 and has 28 years in corrections, specializing in
juvenile justice planning, facilities and program development. She has led
more than 60 needs assessments and planning studies in 20 states. She has
hands-on experience in juvenile justice facilities, having worked with
delinquent girls in a treatment facility in Kentucky and has served in
executive leadership positions in corrections in Virginia, Indiana and
Chicago. She has held every elective office in the American Correctional
Association, including president, and was a member of the association's
executive committee for 12 years. Ms. Huskey has authored numerous articles
and appeared on national news programs discussing corrections and juvenile
justice issues. She has won national awards including the E.R. Cass Award
for outstanding achievement in the correctional field.
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.
_____________________
There were 4 meetings of the Board of Directors during 1999. There
were also 8 occasions on which the Board took action by unanimous written
consent.
All directors hold office until the next Annual Meeting of
Stockholders and until their successors have been duly elected and
qualified. CSC's officers are elected annually by the Board of Directors
and serve at the discretion of the Board.
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an audit committee, a compensation
committee, a rights committee, stock option committee and an independent
strategic alternatives process 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 Stuart M. Gerson and Melvin T.
Stith. The Audit Committee held one meeting during the year ended December
31, 1999 and acted once by unanimous consent. The functions of the Audit
Committee include the annual recommendation to the Board of Directors of
the appointment of CSC's independent public accountants, the discussion and
review of the scope and the fees of the prospective annual audit and review
of the results thereof with the independent public accountants, the review
and approval of non-audit services of the independent public accountants,
if any, the review of compliance with existing major accounting and
financial policies of CSC, the review of the adequacy of the financial
organization of CSC and the review of management's procedures and policies
relative to the adequacy of CSC's internal accounting controls.
Messrs. Stith and Gerson serve on the Compensation Committee. The
Compensation Committee acted one time by unanimous written consent during
the year ended December 31, 1999. The function of the Compensation
Committee is to determine the compensation of CSC's executives.
The Stock Option Committee administers CSC's stock option plans and
awards stock options. The Stock Option Committee is made up of Messrs.
Stith and Gerson and Bobbie Huskey. The Committee acted one time by
unanimous written consent during the year ended December 31, 1999.
On December 15, 1999 the Company announced that it had retained
Wasserstein Perella & Co. to assist the Company in exploring a broad range
of business alternatives and financial strategies to enhance shareholder
value. Shortly after the Company retained Wasserstein Perella & Co., the
Board formed an independent Committee to monitor the Strategic Alternatives
Process. This Committee is composed of Stuart Gerson, Bobbie Huskey and
Melvin Stith.
On January 11, 2000 a Rights Committee was created. Messrs. Slattery
and Gerson serve on this Committee. To date the Committee has acted once
by consent but has not yet held any meetings.
INDEMNIFICATION
CSC's by-laws provide that CSC shall indemnify each director and such
officers, employees and agents as the Board of Directors shall determine
from time to time to the fullest extent provided by the laws of the State
of Delaware.
CSC carries insurance providing indemnification, under certain
circumstances, to all of CSC's directors and officers for claims against
them by reason of, among other things, any act or failure to act in their
capacities as directors or officers.
CSC has also entered into Indemnity Agreements with all of its
directors and executive officers. The Indemnity Agreements provide that CSC
will pay any costs which an indemnitee actually and reasonably incurs
because of the claims made against the indemnitee by reason of the fact
that such indemnitee is or was a director or officer of CSC, except that
CSC is not obligated to make any payment which CSC is prohibited by law
from paying as indemnity, or where:
- 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;
- 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 Exchange Act of 1934, or similar state or common law provisions;
- a claim where the indemnitee was adjudged to be deliberately
dishonest;
<PAGE>
- a final determination is rendered that indemnification is not
lawful.
DIRECTOR'S COMPENSATION
Employee-directors of CSC 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 CSC
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 1999 Non-Employee Director Stock Option Plan and are reimbursed
for expenses incurred in attending meetings.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors and persons who own
more than ten percent of the Common Stock (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, 1999, the Company believes that the Reporting Persons complied with all
filing requirements applicable to them, with the exception of Messrs.
Staley and Slattery, directors of the Company. Based on such review, the
Company believes that Mr. Staley failed to timely file one Form 4s
comprising one transaction and Mr. Slattery failed to timely file two Form
4s comprising three transactions during 1999.
REQUIRED VOTE
A plurality vote of the shares of Common Stock present in person or
represented by proxy at the Meeting is required to elect the seven (7)
nominees as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE SEVEN
(7) NOMINEES FOR DIRECTORS.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by CSC
during the three fiscal years ended December 31, 1999, 1998 and 1997 to
CSC's Chief Executive Officer and to CSC's executive officers whose total
salary and bonus during 1999 exceeded $100,000 for that year (the "Named
Executives"):
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
ANNUAL COMPENSATION Compensation
Number of
Other Annual Securities All Other
Salary Bonus Compensation Underlying Compensation
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) OPTIONS (2)
<S> <C> <C> <C> <C> <C> <C>
James F. Slattery 1999 270,000 200,000 11,815 40,000 9,625
Chairman, Chief 1998 260,519 200,000 11,815 150,000 18,365
Executive Officer 1997 208,373 200,000 17,988 0 27,270
and President
Michael Garretson(3) 1999 194,307 0 12,000(3) 0 292
Executive Vice President 1998 128,814 75,000 12,000(3) 0 292
1997 118,834 75,000 12,000(3) 0 288
Ira Cotler 1999 191,077 82,827 6,000 25,000 67
Executive Vice President, 1998 141,431 75,000 6,000 0 67
Chief Financial Officer 1997 135,115 75,000 6,000 0 54
</TABLE>
(1) Consists of car lease payments.
(2) Consists of life insurance premiums.
(3) Also includes housing allowance.
STOCK OPTIONS
The following table sets forth information relating to options granted
to the only executive officers named in the Summary Compensation Table who
was granted options during CSC's fiscal year ended December 31, 1999:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
INDIVIDUAL GRANTS Value At Assumed
----------------------------------------------------------------------------- Annual Rates
of Stock Price
Appreciation For
Option Term
5% ($) 10% ($)
Percent Of
Total
Number Of Options Exercise
Securities Granted to Of
Underlying Employees Base
Options In Fiscal Price Expiration
NAME GRANTED YEAR ($/SB) DATE
<S> <C> <C> <C> <C> <C> <C>
James F. Slattery................. 40,000 8.5% $ 7.43 6/25/09 186,907 473,660
Ira Cotler........................ 25,000 5.3% $11.13 2/01/04 74,990 443,459
</TABLE>
These options become exercisable at the annual rate of 50% of the
underlying shares, commencing one year after the date of grant.
___________
<PAGE>
The following table sets forth the value of unexercised stock options
held by the Named Executives. No options were exercised by the Named
Executives in 1999:
OPTION VALUES AT DECEMBER 31, 1999
Number of Shares Underlying Value of In-The Money Options
Options at Year End at Year End
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
James F. Slattery 170,000/20,000 $0/$0
Mike Garretson 90,000/0 $0/$0
Ira Cotler 121,666/3334 $0/$0
*Values are calculated by subtracting the exercise price from the fair
market value of the stock at year end.
EMPLOYMENT AGREEMENTS
On September 29, 1999, CSC entered into an employment agreement with
its Chief Executive Officer, James F. Slattery. The Agreement which
replaced the existing employment agreement, between the Company and Mr.
Slattery dated February 17, 1998, has a term of three years with automatic
annual renewal provisions. Mr. Slattery's minimum annual compensation is
$270,000 until September 29, 2000, and thereafter the base compensation
will be adjusted through annual costs of living increases of at least 3.5%.
Mr. Slattery also receives use of an automobile, reimbursement of business
expenses, health insurance, related benefits and a bonus equal to 5% of
CSC's pre-tax profits in excess of $1,000,000, such bonus not to exceed
$200,000.
Also on September 29, 1999, CSC entered into a Change in Control
Agreement with James F. Slattery. This agreement provides for payments by
CSC of specified benefits in the event that the employment of Mr. Slattery
terminates under specified circumstances following a change in control of
CSC. For the purposes of this agreement, a change in control is deemed to
take place whenever:
(1) for any period of two consecutive years beginning on any date from
and after September 29, 1999, if the Board of Directors at any time during
or at the end of such period is not comprised so that a majority of
the directors are either (i) individuals who constitute the Board of
Directors at the beginning of such period or (ii) individuals who joined
the Board during such period who were elected or nominated for election
pursuant to a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved
(but not including, for purposes of (i) or (ii), a director designated
by a person who has entered into an agreement with the Company to effect
a transaction described in clause (B) of Subsection 1(b) of the Change in
Control Agreement relating to stockholder approval of a merger, share
exchange or consolidation of the Company);
(2) the stockholders of CSC approve a merger, share exchange or
consolidation of CSC with or into any other corporation wherein
immediately following such merger, the stockholders of CSC
prior to the transaction own less than 51% of the outstanding voting
stock of CSC (if it is the survivor of the transaction) or the surviving
entity; or
(3) the stockholders of CSC approve a plan of complete liquidation of
CSC or an agreement for the sale or disposition by CSC of all or
substantially all CSC's assets.
Benefits made available to Mr. Slattery under the terms of the Change
in Control Agreement in the event that his employment is terminated under
the above specified circumstances may include:
(4) Payment of his full base salary through the date of termination at
the rate in effect at the time notice of termination is given, plus all
other amounts and benefits to which Mr. Slattery is entitled under his
employment agreement or pursuant to any plan of CSC in which he is
participating at the time of termination,
<PAGE>
(5) A lump sum severance payment equal to the sum of (A) three times
Mr. Slattery's annual base salary and incentive bonus in effect immediately
prior to the occurrence of the change in control and (B) $1,000,000
as payment for Mr. Slattery's agreement to extend his agreement not
to compete under his employment agreement to four years following the date
of termination,
(6) Any deferred compensation allocated or credited to Mr. Slattery or
his account as of the date of termination,
(7) Certain additional payments to cover any excise tax imposed by
Section 4999 of the Internal Revenue Code,
(8) Maintenance of life, disability, accident and health insurance
benefits substantially similar to those that Mr. Slattery was receiving
immediately prior to the notice of termination, for the period beginning
on the date of termination and ending on the earlier of (A) the end of the
36th month after the date of termination or (B) the date Mr. Slattery
becomes eligible for such benefits under any plan offered by an employer
with which he is employed on a full-time basis, and
(9) All benefits payable to Mr. Slattery under any applicable
retirement, thrift, and incentive plans as well as any other plan or
agreement sponsored by CSC or any of its subsidiaries relating to
retirement benefits.
On December 5, 1998, CSC entered into a new three-year employment
agreement with Mr. Garretson, which provides for minimum annual
compensation of $200,000, annual salary increases, automobile allowances,
reimbursement of business expenses, health or disability insurance, and
related benefits. The agreement also entitles Mr. Garretson to an annual
bonus of $100,000 in the first year and $110,000, and $120,000 in the
second and third years respectively, provided that the CSC's total bed
count at each year-end exceeds certain amounts.
On May 3, 1999, CSC amended the employment agreement with its Chief
Financial Officer, Ira Cotler dated July 9, 1997. The amendment has a term
of three years with automatic annual renewal provisions. Mr. Cotler's
minimum annual compensation is $200,000 until February 26, 2000, $210,000
until February 26, 2001 and an amount to be renegotiated by the parties,
(but in no event less than $210,000) until February 26, 2002. Mr. Cotler
also receives automobile allowances and a bonus equal to four tenths of 1%
of CSC's earnings before interests, taxes, depreciation, amortization and
start-up, such bonus not to exceed $100,000. Mr. Cotler is entitled to
terminate his employment with CSC and to receive in a lump sum payment
three times his annual base salary plus a bonus at the bonus cap ($100,000
per annum or the pro rata amount) if he is required to relocate to a
location not within 50 miles of his present office, except for required
travel on CSC's business to an extent substantially consistent with his
present travel obligations.
On May 3, 1999, CSC entered into a Change in Control Agreement with
Mr. Cotler. This agreement provides for payments by CSC of specified
benefits in the event that the employment of Mr. Cotler terminates under
specified circumstances following a change in control of CSC. The
definition of a change in control in this agreement is substantially
similar to that set forth in Mr. Slattery's change in control agreement
previously described.
Benefits made available to Mr. Cotler under the terms of his change in
control agreement in the event that his employment is terminated under the
above specified circumstances may include:
(10) Payment of his full base salary through the date of termination at
the rate in effect at the time notice of termination is given, plus all
other amounts and benefits to which Mr. Cotler is entitled under his
employment agreement or pursuant to any plan of CSC in which he is
participating at the time of termination;
(11) A lump sum severance payment equal to the sum of (A) 2.99 times Mr.
Cotler's annual base salary in effect immediately prior to the occurrence
of the change in control and (B) $600,000 as payment for Mr. Cotler's
agreement to extend his agreement not to compete under his employment
agreement to three years following the date of termination,
<PAGE>
(12) Any deferred compensation allocated or credited to Mr.
Cotler or his account as of the date of termination,
(13) Certain additional payments to cover any excise tax imposed by
Section 4999 of the Internal Revenue Code,
(14) Maintenance of life, disability, accident and health insurance
benefits substantially similar to those that Mr. Cotler was receiving
immediately prior to the notice of termination, for the period
beginning on the date of termination and ending on the earlier of
(A) the end of the 36th month after the date of termination or (B) the date
Mr. Cotler becomes eligible for such benefits under any plan offered by
an employer with which he is employed on a full-time basis, and
(15) All benefits payable to Mr. Cotler under any applicable retirement,
thrift, and incentive plans as well as any other plan or agreement
sponsored by CSC or any of its subsidiaries relating to retirement
benefits.
REPORT OF COMPENSATION COMMITTEE
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION PHILOSOPHY. The Company's executive
compensation policy is based on principles designed to insure that an
appropriate relationship exists between executive pay and corporate
performance, while at the same time motivating and retaining executive
officers. The Compensation Committee of the Board of Directors (the
"Compensation Committee") is composed entirely of outside directors. The
Compensation Committee is responsible for setting and administering the
policies and programs that govern annual compensation.
EXECUTIVE COMPENSATION COMPONENTS. The key components of the
Company's compensation program are (i) base salary, (ii) annual bonus, and
(iii) long-term incentives by means of equity participation through stock
options. These components are administered with the goals of providing
total compensation that is competitive in the marketplace, rewarding
successful financial performance and aligning the interests of executive
officers with those of stockholders. The Compensation Committee reviews
each component of executive compensation on an annual basis.
BASE SALARY. Base salaries for executive officers are set near the
average levels believed by the Compensation Committee to be sufficient to
attract and retain qualified executive officers. Base salary adjustments
are provided to executive officers based upon an evaluation of each
executive's performance, as well as the performance of the Company as a
whole. While the Compensation Committee does not establish a specific
formula or target to determine base salaries, the Compensation Committee
does review detailed survey data from a number of independent sources and
services regarding the base salaries of executive officers in companies of
similar size and in similar industries. In this regard, the Compensation
Committee also considers the relative financial performance of these
companies, especially with regard to growth in earnings and return on
equity. The Compensation Committee also considers the success of the
executive officers in developing and executing the Company's strategic
plans, developing management employees and demonstrating leadership.
BONUS. The Compensation Committee believes that a significant
proportion of total cash compensation for executive officers should be
subject to the attainment of specific Company objectives, as well as the
attainment of specific individual objectives that are established annually
with each of the executive officers. This approach creates a direct
incentive for executive officers to achieve desired performance goals and
places a significant percentage of each officer's compensation at risk.
Consequently, through Employment Agreements with key executive officers,
the Company establishes potential bonuses for executive officers based upon
their ability to increase earnings and the achievement of specific
operational objectives.
Potential bonuses are based upon the Company's judgment regarding the
appropriate percentage of compensation which should be based on the
attainment of such results.
<PAGE>
EQUITY PARTICIPATION THROUGH STOCK OPTIONS. The Compensation
Committee believes that equity participation through stock options
(including performance-based options) is a key component of its executive
compensation program. The use of such awards provides a long-term link
between the results achieved for the Company's stockholders and the reward
provided to executive officers. Stock options are granted to executive
officers primarily based on the officer's actual and potential contribution
to the Company and the practices of other companies of similar size and in
similar industries. Option grants are designed to retain executive
officers and motivate them to enhance stockholder value by aligning the
financial interests of the executive officers with those of the Company's
stockholders. Stock options also provide an effective incentive for
management to create stockholder value over the long term since the full
benefit of the compensation package cannot be realized unless an
appreciation in the price of the Company's stock occurs over a number of
years.
Options to purchase a total of 40,000 shares of Company Common Stock
were granted to the Company's President and Chief Executive Officer in
1999, with an exercise price equal to the fair market value of the
underlying Company Common Stock on the date of grant. No performance-based
options were granted either to the President and Chief Executive Officer or
other executive officers in 1999.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Consistent with the
executive compensation policy and components described above, Mr. Slattery
received a base salary of $270,000 for 1999. Mr. Slattery's salary, as
increased in 1999, was not tied to specific performance criteria, but the
Compensation Committee determined such salary to be appropriate based upon
its survey of salaries paid to peers, attainment of non-financial corporate
objectives and other factors. Mr. Slattery also received a bonus in the
amount of $200,000 in 1999.
Members of the Compensation Committee
Stuart M. Gerson
Melvin Stith
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed of Stuart M. Gerson and Melvin
Stith. None of the current members of the Compensation Committee are
employees of the Company. The Company is unaware of any relationships
among its officers and directors that would require disclosure under this
caption.
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 Esther 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 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.
Ms. Horn and Mr. Slattery continue to receive their proportionate shares of
rents received by LMOC under the terms of this sublease during the month to
month tenancy.
<PAGE>
The initial term of the Company's sublease expired April 30, 1995, and
the first renewal term expired April 30, 2000. The Company has elected not
to exercise the second renewal option, but continues to occupy the building
on a month to month basis while paying $26,000 per month in rent. It is
anticipated that the Company will relinquish possession of the Le Marquis
property by the end of the 4th quarter 2000. The Company will incur no
further obligation in connection with the lease upon termination of its use
of the property.
Previously, residential and commercial tenants of this building paid
rent to LeMarquis Enterprise Corp. ("Enterprises"), a company owned 30% by
Ms. 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 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 expired on December 31,
1998. The lease established a monthly rental of $40,000 and contained three
five-year renewal options. The Company is currently in its first option
period, which runs from January 1, 1999 through December 31, 2003. The
monthly rental payment during the first option period 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. 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 Esther 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.
Stuart M. Gerson, a director of CSC, is a member of Epstein Becker &
Green, CSC's legal counsel, which has received fees for legal services
rendered to CSC during the last fiscal year.
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.
<PAGE>
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 1998 and 1999, Mr.
Banks earned approximately $300,000 and $272,000 respectively.
PERFORMANCE GRAPH
The following performance graph compares the cumulative total
stockholder return on the Common Stock to the cumulative total return of
the Russell 2000 Stock Index and the Company's peer group for the last four
fiscal years. The graph assumes that the value of the investment in the
Common Stock and each index was $100 at December 31, 1996 and that all
dividends were reinvested on a quarterly basis.
COMPARISON OF CUMULATIVE TOTAL RETURN
(GRAPHIC OMITTED)
TOTAL RETURN ANALYSIS
<TABLE>
<CAPTION>
12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Correctional Services Corporation $100.00 $72.61 $86.09 $30.43
Russell 2000 Stock Index $100.00 $120.52 $116.37 $139.20
Peer Group** $100.00 $159.87 $145.27 $64.60
</TABLE>
** The Company's peer group consists of the following companies: Wackenhut
Corrections Corporation, Cornell Corrections, Inc., Childrens Comprehensive
Service and Res-Care, Inc.
<PAGE>
PROPOSAL 2 - RATIFICATION OF REAPPOINTMENT 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, 2000. 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,
1999.
REQUIRED VOTE
Ratification of the reappointment of independent auditors requires the
affirmative vote by holders of a majority of the shares of Common Stock
present in person or represented by proxy at the Meeting. Unless marked to
the contrary, proxies received will be voted for ratification of the
reappointment of independent auditors.
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, 2000
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 year 2001 Annual Meeting of Stockholders, and
who wishes to have such proposal presented in the Company's proxy statement
for such Annual Meeting, must deliver such proposal in writing to the
Company at 1819 Main Street, Suite 1000, Sarasota, Florida 34236, on or
before December 31, 2000. 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.
September 5, 2000
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, 1999. SUCH REQUEST SHOULD BE ADDRESSED TO
IRA COTLER, CHIEF FINANCIAL OFFICER, CORRECTIONAL SERVICES CORPORATION,
1819 MAIN STREET, SUITE 1000, SARASOTA, FLORIDA 34236.
<ATTACHMENT>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
CORRECTIONAL SERVICES CORPORATION
October 3, 2000
Please Detach and Mail in the Envelope Provided
A [X] Please mark your votes as in this example.
---
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL MATTERS
LISTED BELOW, TO COME BEFORE THE ANNUAL MEETING.
<TABLE>
<CAPTION>
<C> <C> <C>
FOR all nominees Withhold
listed at right Authority to vote
(except as marked to for all nominees
the contrary below) listed at right Nominees:
1. To elect seven directors to James F. Slattery
serve until the next annual Aaron Speisman
meeting of stockholders. [ ] [ ] Richard P. Staley
Stuart M. Gerson
(Instruction: To withhold Shimmie Horn
authority to vote for an Bobbie L. Huskey
individual nominee, strike a line Melvin T. Stith
through such nominee's name in the
list at right.)
2. To ratify the reappointment
of Grant Thornton LLP as
independent auditors of the
Company for the year ending FOR AGAINST ABSTAIN
December 31, 2000. [ ] [ ] [ ]
3. Upon any and all such other
business as may properly come
before the meeting or any
adjournment thereof.
For multiple accounts only,
mark here to discontinue extra
annual report. [ ]
</TABLE>
SIGNATURE(S): DATE , 2000
------------------------------------------- ----------
Note: Executors, Administrators,
Trustees, etc. Should give
---------------------------------------------- full title.
<PAGE>
CORRECTIONAL SERVICES CORPORATION
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James F. Slattery and Ira M. Cotler and
each of them, proxies, each with the power of substitution, to vote the
shares of the undersigned at the Annual Meeting of Stockholders of
Correctional Services Corporation on October 3, 2000, and any adjournments
and postponements thereof, upon all matters as may properly come before the
Annual Meeting. Without otherwise limiting the foregoing general
authorization, the proxies are instructed to vote as indicated herein.
This proxy, which is solicited on behalf of the Board of Directors, will
be voted FOR the matters described in paragraphs (1) and (2) unless the
stockholder specifies otherwise, in which case it will be voted as specified.
Please complete, date and sign on the reverse side and mail in the enclosed
envelope.
