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Proc-Type: 2001,MIC-CLEAR
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ACCESSION NUMBER: 0000890566-98-000288
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19980409
FILED AS OF DATE: 19980309
SROS: NASD
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CORNELL CORRECTIONS INC
CENTRAL INDEX KEY: 0001016152
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-FACILITIES SUPPORT MANAGEMENT SERVICES [8744]
IRS NUMBER: 760433642
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT:
SEC FILE NUMBER: 001-14472
FILM NUMBER: 98560258
BUSINESS ADDRESS:
STREET 1: 4801 WOODWAY
STREET 2: STE 400W
CITY: HOUSTON
STATE: TX
ZIP: 77056
BUSINESS PHONE: 7136230790
MAIL ADDRESS:
STREET 1: 4801 WOODWAY
STREET 2: STE 400W
CITY: HOUSTON
STATE: TX
ZIP: 77056
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities 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 the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
CORNELL CORRECTIONS, INC.
(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)(4) 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:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
CORNELL CORRECTIONS, INC.
4801 Woodway, Suite 100E
Houston, Texas 77056
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 9, 1998
To the Stockholders of
Cornell Corrections, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders (the
“Annual Meeting”) of Cornell Corrections, Inc. (the “Company”) will be held
at Fairchild Gateway Resource Center, 1st Floor, One Gateway Center, 420 Fort
Duquesne Boulevard, Pittsburgh, Pennsylvania 15222, at 10:00 a.m., Eastern time,
on Thursday, April 9, 1998, for the following purposes:
1. To elect six directors of the Company.
2. To approve an amendment to Article Fifth of the Company’s Restated
Certificate of Incorporation providing for the classification of the Board
of Directors into three classes, with members of each class serving
staggered three-year terms, as more fully set forth under “Proposal No.
2.”
3. To approve an amendment to Article Eighth of the Company’s
Restated Certificate of Incorporation providing that Article Fifth and
Article Eighth of the Restated Certificate of Incorporation may only be
amended by the affirmative vote of at least 66 2/3% of the shares entitled
to vote for the election of directors, as more fully set forth under
“Proposal No. 3.”
4. To approve an amendment to Article Eighth of the Company’s
Restated Certificate of Incorporation providing that stockholders may
adopt, amend or repeal the Bylaws only by the affirmative vote of at least
66 2/3% of the shares entitled to vote for the election of directors, as
more fully set forth under “Proposal No. 4.”
5. To approve an amended and restated 1996 Stock Option Plan, as more
fully set forth under “Proposal No. 5.”
6. To approve the appointment of Arthur Andersen LLP as independent
public accountants for the Company for 1998.
7. To transact such other business as may properly come before the
Annual Meeting, or any adjournment or adjournments thereof.
Stockholders of record at the close of business on March 2, 1998 will be
entitled to notice of and to vote at the Annual Meeting, or any adjournment or
adjournments thereof. You are cordially invited to attend the Annual Meeting in
person. Even if you plan to attend the Annual Meeting, however, you are
requested to mark, sign, date and mail promptly the enclosed proxy for which a
return envelope is provided.
By Order of the Board of Directors
Steven W. Logan, SECRETARY
Houston, Texas
March 9, 1998
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED
TO SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY. IF YOU ATTEND THE ANNUAL
MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
CORNELL CORRECTIONS, INC.
4801 Woodway, Suite 100E
Houston, Texas 77056
———————————
PROXY STATEMENT
———————————
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement and accompanying proxy card are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Cornell Corrections, Inc., a Delaware corporation (“Cornell” or the
“Company”), for use at the Annual Meeting of Stockholders to be held on
Thursday, April 9, 1998, at Fairchild Gateway Resource Center, 1st Floor, One
Gateway Center, 420 Fort Duquesne Boulevard, Pittsburgh, Pennsylvania 15222, at
10:00 a.m., Eastern time, or at any adjournment or adjournments thereof (such
meeting or adjournment(s) thereof referred to as the “Annual Meeting”). Copies
of the Proxy Statement and the accompanying proxy card are being mailed to
stockholders on or about March 9, 1998.
In addition to solicitation by mail, solicitation of proxies may be made by
personal interview, special letter, telephone or telecopy by regular employees
of the Company. Brokerage firms will be requested to forward proxy materials to
beneficial owners of shares registered in their names and will be reimbursed for
their reasonable expenses. The cost of solicitation of proxies will be paid by
the Company.
A proxy received by the Board of Directors of the Company may be revoked by
the stockholder giving the proxy at any time before it is exercised. A
stockholder may revoke a proxy by notification in writing to the Company at 4801
Woodway, Suite 100E, Houston, Texas 77056, Attention: Corporate Secretary. A
proxy may also be revoked by execution of a proxy bearing a later date or by
attendance at the Annual Meeting and voting by ballot. A proxy in the form
accompanying this Proxy Statement, when properly executed and returned, will be
voted in accordance with the instructions contained therein. A proxy received by
management which does not withhold authority to vote or on which no
specification has been indicated will be voted FOR the election as directors of
the nominees listed therein, FOR the other proposals set forth in this Proxy
Statement, and in the discretion of the persons named in the proxy in connection
with any other business that may properly come before the Annual Meeting. A
majority of the outstanding shares will constitute a quorum at the Annual
Meeting. Information regarding the vote required for approval of particular
matters is set forth in the discussion of those matters appearing elsewhere in
this Proxy Statement. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business.
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on March 2, 1998, as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting. At that date there were outstanding 9,406,904
shares of common stock, par value $0.001 per share (“Common Stock”), of the
Company and the holders thereof will be entitled to one vote for each share of
Common Stock held of record by them on that date for each proposal to be
presented at the Annual Meeting.
The following table sets forth information with respect to the shares of
Common Stock (the only outstanding class of voting securities of the Company)
owned of record and beneficially as of March 2, 1998, unless otherwise
specified, by (i) all persons known to possess voting or dispositive power over
more
1
than 5% of the Common Stock, (ii) each director and named executive officer, and
(iii) all directors and executive officers of the Company as a group:
AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNERSHIP(1) OF CLASS
———————– ———–
J. & W. Seligman & Co.
Incorporated(2)……………….. 531,845 5.7%
100 Park Avenue
New York, New York 10017
Alliance Capital Management L.P.
(3)………………………….. 521,900 5.5%
c/o The Equitable Companies
Incorporated
1290 Avenue of the Americas
New York, New York 10104
AMVESCAP PLC (4)………………… 500,600 5.3%
11 Devonshire Square
London EC2M 4YR
England
Charterhouse Equity Partners II,
L.P.(5)………………………. 486,044 5.1%
c/o Charterhouse Group
International, Inc.
535 Madison Avenue
New York, New York 10022
David M. Cornell(6)……………… 509,987 5.3%
Campbell A. Griffin, Jr………….. 7,500 *
Richard T. Henshaw III(7)………… — —
Peter A. Leidel…………………. 8,123 *
Arlene R. Lissner……………….. 325 *
Steven W. Logan…………………. 252,962 2.6%
William J. Schoeffield…………… 65,588 *
Tucker Taylor…………………… 10,000 *
Marvin W. Wiebe, Jr……………… 20,257 *
All directors and executive officers
as a group (9 persons)…………. 874,742 9.0%
– ————
* Less than 1.0%
(1) Pursuant to regulations of the Securities and Exchange Commission (the
“SEC”), securities must be listed as beneficially owned by a person who
directly or indirectly holds or shares the power to vote or dispose of the
securities, whether or not the person has any economic interest in the
securities. In addition, a person is deemed a beneficial owner if he has the
right to acquire beneficial ownership within 60 days, including upon
exercise of a stock option or conversion of a convertible security. Shares
of Common Stock listed include shares subject to stock options exercisable
within 60 days (126,124 for Mr. Cornell, 7,500 for Mr. Griffin, 143,624 for
Mr. Logan, 40,000 for Mr. Schoeffield, 7,500 for Mr. Taylor, 13,250 for Mr.
Wiebe, and 337,998 for all the above as a group).
(2) Based on a filing made with the SEC reflecting ownership of Common Stock as
of December 31, 1997. The filing indicates shared voting power for 410,200
shares of Common Stock and shared dispositive power for 531,845 shares of
Common Stock.
(3) Based on a joint filing made with the SEC reflecting ownership of Common
Stock as of December 31, 1997. The filing was made by the following: The
Equitable Companies Incorporated (the “Equitable Companies”), which is the
general partner of Alliance Capital Management L.P.; AXA-UAP, which
beneficially owns a majority interest in the Equitable Companies; and Alpha
Assurances Vie Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances
Vie Mutuelle, and AXA Courtage Assurance Mutuelle, as a group which
beneficially owns a majority interest in AXA-UAP. The filing indicates sole
voting power for 462,000 shares of Common Stock, shared voting power for
56,000 shares of Common Stock and sole dispositive power for 521,900 shares
of Common Stock.
(4) Based on a filing made with the SEC reflecting ownership of Common Stock as
of December 31, 1997. The filing indicates shared voting power for 500,600
shares of Common Stock and shared dispositive power for 500,600 shares of
Common Stock.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
2
(5) Based on a filing made with the SEC reflecting ownership of Common Stock as
of December 31, 1997. The filing indicates sole voting and dispositive power
for 486,044 shares of Common Stock, which includes 485,386 shares (147,400
of which would be received upon exercise of options) held by Charterhouse
Equity Partners II, L.P. (“CEP II”) and 658 shares held by a party related
to CEP II. The general partner of CEP II is CHUSA Equity Investors II, L.P.,
whose general partner is Charterhouse Equity II, Inc., a wholly owned
subsidiary of Charterhouse Group International, Inc. (“Charterhouse”).
(6) Based on a filing made with the SEC reflecting ownership of Common Stock as
of December 31, 1997. The filing indicates sole voting power for 509,987
shares of Common Stock and sole dispositive power for 421,322 shares of
Common Stock. Includes 88,665 shares over which Jane B. Cornell, the former
wife of David M. Cornell, has sole investment power and, pursuant to a
voting agreement, over which Mr. Cornell has sole voting power.
(7) Mr. Henshaw is a Managing Director of Charterhouse. He disclaims any
beneficial ownership of the shares beneficially owned by Charterhouse and
its affiliates.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), requires the Company’s directors and executive officers to
file with the SEC and the American Stock Exchange initial reports of ownership
and reports of changes in ownership of Common Stock. Based solely on a review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, the Company believes that all its directors
and executive officers during 1997 complied on a timely basis with all
applicable filing requirements under Section 16(a) of the Exchange Act, except
that Ms. Lissner, a director of the Company, did not timely file a Form 3 after
she became a director.
PROPOSAL NO. 1 — ELECTION OF DIRECTORS
GENERAL
Six directors are to be elected at the Annual Meeting. Each nominee is
currently a director of the Company. The persons named as proxy holders in the
accompanying proxy intend to vote each properly signed and submitted proxy FOR
the election as a director of each of the persons named as a nominee below under
“Nominees for Director,” unless authority to vote in the election of directors
is withheld on such proxy. If Proposal No. 2 to classify the Board of Directors
is adopted, the term of office for the nominees named below will expire at the
Annual Meeting in the years set forth opposite their names below. If Proposal
No. 2 to classify the Board of Directors is not adopted, the directors will be
elected to hold office until the next annual meeting of stockholders or until
their successors are elected and qualified. If, for any reason, at the time of
the election one or more of the nominees should be unable to serve, the proxy
will be voted for a substitute nominee or nominees selected by the Board of
Directors. In accordance with the Company’s Bylaws, the directors will be
elected by a plurality of votes cast at the Annual Meeting.
THE COMPANY RECOMMENDS VOTING “FOR” THE NOMINEES.
3
NOMINEES FOR DIRECTOR
The following table sets forth the name, age and principal position of each
nominee for director, and the expiration of each nominee’s term of office if
Proposal No. 2 to classify the Board of Directors is adopted:
EXPIRATION
NAME AGE POSITION OF TERM
– —————————— — —————————— ———-
David M. Cornell………….. 62 Director; Chairman of the 2001
Board, President and Chief
Executive Officer
Campbell A. Griffin, Jr……. 68 Director 1999
Richard T. Henshaw III…….. 58 Director 2000
Peter A. Leidel…………… 41 Director 2000
Arlene R. Lissner…………. 67 Director; President of Abraxas 2001
Group, Inc.
Tucker Taylor…………….. 58 Director 1999
DAVID M. CORNELL has been the Chairman and Chief Executive Officer of the
Company since its founding.
CAMPBELL A. GRIFFIN, JR. has been a director of the Company since October
1996. Mr. Griffin joined the law firm of Vinson & Elkins L.L.P. in 1957 and was
a partner from 1968 to 1992. He was a member of the Management Committee of
Vinson & Elkins L.L.P. from 1981 to 1990 and the Managing Partner of the Dallas
office from 1986 to 1989. From 1991 to 1993, Mr. Griffin served as an Adjunct
Professor of Administrative Science at William Marsh Rice University and, from
1993 to 1995, he was a Councilman for the City of Hunters Creek Village, Texas.
Mr. Griffin has been a director of various local organizations and is an
arbitrator for the American Arbitration Association, the New York Stock Exchange
and the National Association of Securities Dealers, and a member of the
American, Texas and Houston Bar Associations.
RICHARD T. HENSHAW III has been a director of the Company since March 1994.
Mr. Henshaw has been a Managing Director of Charterhouse, a private investment
firm specializing in leveraged buy-out acquisitions, since January 1997, and was
a Senior Vice President since 1991. Mr. Henshaw is also a director of American
Disposal Services, Inc., a solid waste services company.
PETER A. LEIDEL has been a director of the Company and its predecessor
since May 1991. Mr. Leidel is founder and Managing Director of Yorktown Partners
LLC, and a Partner of Ticonderoga Capital, both of which manage private
investment funds. In September 1997, Mr. Leidel resigned as Senior Vice
President of Dillon Read & Co, Inc. (a predecessor of SBC Warburg Dillon Read,
Inc.) where he worked since 1983 managing private investment funds. Mr. Leidel
is a director of Willbros Group, Inc. and five private companies.
ARLENE R. LISSNER has been a director of the Company since September 1997
when the Company acquired Abraxas, and is President of Abraxas Group, Inc., a
subsidiary of the Company. Ms. Lissner founded Abraxas in 1973, where she served
as President and Chief Executive Officer until 1977, at which time she left that
position to become Chairperson of the Board of Directors of Abraxas. Ms. Lissner
resumed her role as President and Chief Executive Officer of Abraxas from April
1996 through September 1997. Prior to founding Abraxas, Ms. Lissner directed a
variety of programs for the Illinois Department of Mental Health, Office of Drug
Abuse Programs.
TUCKER TAYLOR has been a director of the Company since October 1996. Mr.
Taylor, a consultant to the health care industry, joined Medical Care
International as Executive Vice President in 1992, and remained with
Columbia/HCA through 1997 following its acquisition of Medical Care
International. Prior thereto, he was a marketing and planning consultant. He
served as a Senior Vice President at Federal Express Corporation from 1974 until
1982. Mr. Taylor is also a director of SuperShuttle, a privately held ground
transportation company.
4
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and Compensation Committee.
The members of the Audit Committee and Compensation Committee indicated herein
are not employees of the Company. The Audit Committee, which is composed of
Tucker Taylor and Campbell A. Griffin, Jr., held five meetings during the last
fiscal year. The Audit Committee recommends the appointment of independent
public accountants to conduct audits of the Company’s financial statements,
reviews with the independent accountants the plan and results of the auditing
engagement, approves other professional services provided by the independent
accountants and evaluates the independence of the accountants. The Audit
Committee also reviews the adequacy of the Company’s system of internal
accounting controls.
The Compensation Committee, which is composed of Peter A. Leidel and
Richard T. Henshaw III, held four meetings during the last fiscal year. The
Compensation Committee approves, or in some cases recommends to the Board,
remuneration arrangements and compensation plans involving the Company’s
directors, executive officers and certain other employees whose compensation
exceeds specified levels. The Compensation Committee also acts on the granting
of stock options, including those under the Company’s 1996 Stock Option Plan
(the “1996 Plan”). The Board does not have a standing nominating committee or
other committee performing a similar function.
During 1997, the Board of Directors held ten meetings. During 1997, all
members of the Board of Directors attended at least 75% of the total of all
Board meetings and applicable committee meetings.
DIRECTOR COMPENSATION
Mr. Cornell, Mr. Henshaw, and Ms. Lissner do not receive compensation for
serving as directors. Mr. Griffin, Mr. Leidel and Mr. Taylor receive an annual
fee of $5,000, a fee of $1,000 for attendance at each Board of Directors meeting
and a fee of $500 for attendance at each committee meeting (unless held on the
same day as a Board of Directors meeting). Mr. Griffin and Mr. Taylor also were
granted by the Company in October 1996 non-qualified options to purchase 15,000
shares of Common Stock under the 1996 Plan and Mr. Leidel was granted by the
Company in February 1998 nonqualified options to purchase 15,000 shares of
Common Stock, subject to an increase in the number of shares available for grant
under the 1996 Plan being approved by stockholders as contemplated by Proposal
No. 5 herein. The options to Messrs. Griffin and Taylor vested 25% on the date
of the grant and the remainder vest ratably over three years with a term of 10
years and a per share exercise price equal to the market value of a share of
Common Stock at the date of grant. The option price for Mr. Leidel’s options
will be the closing price of the Company’s Common Stock on the American Stock
Exchange on the date stockholders approve the Amended and Restated 1996 Stock
Option Plan. All directors are reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board of Directors or committees thereof and for other
expenses incurred in their capacity as directors.
EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
The following table sets forth the names, ages and positions of the persons
who are not directors and who are executive officers and other key employees of
the Company:
5
STEVEN W. LOGAN has been Senior Vice President of the Company since
November 1997 and Chief Financial Officer, Treasurer and Secretary of the
Company since 1993. From 1984 to 1993, Mr. Logan served in various positions
with Arthur Andersen LLP, Houston, most recently as an Experienced Manager in
the Enterprise Group, a group specializing in emerging, high-growth companies
which Mr. Logan helped form in Houston in 1987. Mr. Logan is a Certified Public
Accountant.
WILLIAM J. SCHOEFFIELD, JR. has been Senior Vice President of the Company
since November 1997 and Chief Operating Officer of the Company since October
1996. Mr. Schoeffield had been Vice President — Eastern Regional Ground
Operations of Federal Express Corp. since 1990. Prior thereto, Mr. Schoeffield
was Vice President — Western Regional Ground Operations of Federal Express from
1988 to 1990 and had held numerous positions with Federal Express since 1976.
MARVIN H. WIEBE, JR. has been Senior Vice President of the Company since
November 1997 and Vice President of the Company since the Company acquired
Eclectic Communications, Inc. (“Eclectic”) in 1994. He was previously Vice
President — Administration and Finance, Vice President — Secure Detention and
Chief Financial Officer of Eclectic, where he was employed for 11 years. Prior
to joining Eclectic, Mr. Wiebe served as Executive Director and Business
Administrator of Turning Point of Central California, Inc., a non-profit
provider of correctional and substance abuse programs from 1975 to 1984. Mr.
Wiebe has served as President of the International Community Corrections
Association (“ICCA”) and as an auditor for the American Correctional
Association (“ACA”) Commission on Accreditation for Corrections and is a
member of the ICCA, the California Probation Parole & Correctional Association
and the ACA.
CHARLES J. HAUGH has served as Vice President, Secure Institutions since
November 1997, and prior to such date was the Company’s Managing Director of
Secure Institutions since May 1997. He previously served as Executive Director
of Facilities of the Company, since the Company acquired MidTex Detentions, Inc.
(“MidTex”) in July 1996, through May 1997. From 1988 to July 1996, Mr. Haugh
was Vice President of MidTex and Executive Director of Facilities of Big Spring
Correctional Center. Prior to joining MidTex, Mr. Haugh was involved in
consulting for correctional organizations as President of CJH Cortech, Inc. for
a year. From 1963 to 1988, Mr. Haugh served in numerous capacities for the
Federal Bureau of Prisons, including Special Assistant to Director Administrator
of Correctional Services Branch, Associate Warden, Chief Correctional Supervisor
and Correctional Officer. Mr. Haugh has been an auditor for the ACA and is on
the Board of Directors of various local organizations.
THOMAS R. JENKINS has served as Vice President, Juvenile since September
1997. From November 1995 through September 1997 he served as Vice
President — Operations of Abraxas. From 1973 through November 1995, Mr. Jenkins
served with the Department of Public Welfare, Commonwealth of Pennsylvania in
various capacities ranging from Director of various juvenile facilities to
Director of the Pennsylvania Child Welfare Services.
LAURA SHOL has served as Vice President, Pre-Release since November 1997,
and prior to such date was the Company’s Managing Director of Pre-Release
Centers from May 1997. She previously served as Director of Community
Corrections of the Company from June 1996 through May 1997, and was Senior
Regional Administrator of Eclectic from 1986 to June 1996. From 1982 to 1986,
Ms. Shol was a Facility Director for Eclectic. Prior to joining Eclectic, Ms.
Shol was a Program Director with the Salvation Army, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1997, the Company had notes receivable from Mr. Cornell and
Mr. Logan in the amounts of $405,924 and $257,000, respectively. Interest on the
notes is charged annually at a rate of 6.63% and the notes mature on July 8,
2000.
6
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is responsible for all
decisions regarding compensation for the Company’s executive officers. The
Compensation Committee is composed of Peter A. Leidel and Richard T. Henshaw
III, both independent non-employee directors.
The Company’s executive compensation program is focused on shareholder
value, the overall performance of the Company, success of the Company as
impacted by the executive’s performance and the performance of the individual
executive.
The Compensation Committee’s objective is to provide competitive levels of
compensation to the Company’s executive officers that are integrated with the
Company’s long-term performance goals, reward above-average corporate
performance, recognize individual initiative and achievements and assist the
Company in attracting and retaining qualified executives. The compensation
policies and programs utilized by the Compensation Committee and endorsed by the
Board of Directors generally consists of the following:
(i) Recommend executive officer total compensation in relation to
Company performance;
(ii) Provide a competitive compensation program in order to attract,
motivate, and retain qualified personnel;
(iii) Provide a management tool for focusing and directing the
energies of key executives toward achieving individual and corporate
objectives; and
(iv) Provide long-term incentive compensation in the form of annual
stock option awards and performance-based stock option awards to link
individual success to that of the Company.
The Company’s executive compensation consists of three key components: base
salary, annual incentive compensation in the form of cash bonuses, and stock
options, each of which is intended to complement the others and, taken together,
to satisfy the Company’s compensation objectives. The Compensation Committee’s
policies with respect to each of the three components are discussed below.
BASE SALARY. Each fiscal year the Compensation Committee, along with the
CEO, reviews and approves the annual salaries for the Company’s executive
officers. Many factors are included in determining base salaries, such as the
responsibilities borne by the executive officer, the scope of the position,
length of service with the Company and corporate and individual performance.
CASH BONUSES. The Compensation Committee provides annual incentives to the
Company’s executive officers in the form of cash bonuses. These bonuses are
discretionary and are based on (i) the relative success of the Company in
attaining certain financial objectives and the individual’s contribution to the
achievement of those financial objectives, and (ii) certain subjective factors
as established from time to time by the Compensation Committee.
STOCK OPTIONS. The primary objective of the stock option program is to
link the interests of the Company’s executive officers and other selected
employees to the stockholders through significant annual grants of stock options
and long-term performance based option grants made at the discretion of the
Compensation Committee. The Company’s existing 1996 Plan authorizes the issuance
of both incentive and non-qualified stock options to officers and key employees
of the Company. Subject to general limits prescribed by the 1996 Plan, the
Compensation Committee has the authority to determine the individuals to whom
stock options are awarded and the terms of the options and the number of shares
subject to each option. The size of any particular stock option award is based
upon position and the individual performance during the related evaluation
period.
CHIEF EXECUTIVE OFFICER’S COMPENSATION. The Compensation Committee’s basis
for compensation of the CEO is derived from the same considerations addressed
above. Mr. Cornell participates in the same
7
executive compensation plans available to the other executive officers. In
December 1997, the Compensation Committee increased the salary of Mr. Cornell by
15% to $230,000. The compensation levels established for Mr. Cornell were in
response to the Compensation Committee’s assessment of the Company’s net
earnings in 1997, record revenue growth and the Company’s success in acquiring
and integrating certain competitors as well as the Committee’s continued
recognition of Mr. Cornell’s leadership of the Company.
Peter A. Leidel, Chairman
Richard T. Henshaw III, Member
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board are Messrs. Henshaw
and Leidel, both of whom are non-employee directors. Mr. Leidel was formerly a
Senior Vice President of Dillon Read & Co., Inc. whose successor, SBC Warburg
Dillon Read, Inc., in 1997 performed investment banking services for the Company
for which it received customary fees.
EXECUTIVE COMPENSATION
The following table sets forth compensation information for the chief
executive officer and the four other executive officers (the “named executive
officers”) of the Company during the Company’s fiscal years 1997, 1996 and
1995.
SUMMARY COMPENSATION TABLE
– ————
(1) Amounts in 1997 for Messrs. Cornell, Logan, Schoeffield and Wiebe include
(i) the Company’s 401(k) matching contributions of $4,750, $4,750, $0 and
$6,798, respectively, and (ii) group term life insurance premiums of $702,
$274, $292, and $1,058, respectively.
(2) Mr. Schoeffield became Chief Operating Officer of the Company on October 16,
1996.
(3) Excludes $53,750, $56,750 and $59,750 representing Mr. Wiebe’s portion of an
annual fixed installment payment in 1997, 1996 and 1995, respectively,
relating to an acquisition by the Company in 1994.
(4) Ms. Lissner became President of Abraxas Group, Inc. on September 9, 1997.
8
The following table presents information regarding options granted to each
of the named executive officers in 1997.
OPTION GRANTS IN 1997
– ————
(1) The option grant to Mr. Wiebe was made on 1/22/97 and is exercisable in five
equal annual installments beginning December 31, 1998.
(2) The option grant to Ms. Lissner was made on 9/9/97 and is exercisable in
annual installments of 2,000, 2,000 and 6,000 shares beginning September 9,
1998.
The following table presents information regarding options exercised in
1997 and the value of options outstanding at December 31, 1997 for each of the
named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
– ————
(1) The excess, if any, of the market value of Common Stock at December 31, 1997
($20.75) over the option exercise price(s).
(2) All of these options become immediately exercisable upon a change in control
of the Company.
9
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return on the Common Stock to the cumulative total returns of the Russell 2000
Stock Index and the Company’s peer group since the date the Common Stock began
trading on the American Stock Exchange (October 3, 1996). The graph assumes that
the value of the investment in the Common Stock and each index was $100 as of
October 3, 1996 and that all dividends were reinvested on a quarterly basis.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
TOTAL RETURN ANALYSIS
10/3/96 12/31/96 12/31/97
——- ——– ——–
Cornell Corrections, Inc. …………… $ 100 $ 72 $ 170
Peer Group ………………………… $ 100 $ 98 $ 119
Russell 2000 ………………………. $ 100 $ 105 $ 127
– ————
(1) The Company’s 1997 Peer Group consists of the following companies:
Corrections Corporation of America, Wackenhut Corrections Corporation,
Correctional Services Corporation, Youth Services International, Inc., and
Children’s Comprehensive Services, Inc.
EMPLOYMENT AGREEMENTS
In September 1997, Abraxas Group, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company, and the Company entered into an
employment agreement with Arlene R. Lissner pursuant to which Ms. Lissner agreed
to serve as President of Abraxas Group, Inc. The Company granted to Ms. Lissner
an option to purchase 10,000 shares of the Company’s Common Stock, with an
exercise price equal to 50% of the fair market value of the Company’s Common
Stock on September 9, 1997. As compensation for her services, Abraxas Group,
Inc. agrees to pay Ms. Lissner an annual salary of $125,000 for a period of
three years. The Company is a party to the employment agreement solely to
guarantee the performance of Abraxas Group, Inc.’s obligations thereunder.
In September 1997, in connection with the acquisition of Abraxas, the
Company entered into a Covenant Not to Compete Agreement with Ms. Lissner,
pursuant to which she agreed for a period of 20 years not to: (i) engage in any
business in competition with any business operation of the Company or its
affiliates; (ii) request that any customer or supplier of the Company or any of
its affiliates curtail or cancel its business with the Company or any such
affiliate; or (iii) induce or attempt to influence any employee of
10
the Company or any of its affiliates to terminate his or her employment with the
Company or any such affiliate, or hire or retain the services of any such
employee. In consideration of Ms. Lissner’s agreements, the Company will pay Ms.
Lissner 10 annual installments of $60,000 each, which commenced on January 2,
1998. Such payments may be accelerated upon the mutual agreement of Ms. Lissner
and the Company.
PROPOSED AMENDMENTS
TO THE RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has voted unanimously to authorize certain
amendments to the Company’s Restated Certificate of Incorporation (the
“Certificate of Incorporation”) and to recommend such proposed amendments to
the stockholders for approval. The proposed amendments are: (i) to provide for
the classification of the Board of Directors into three classes, with members of
each class serving staggered three-year terms (Proposal No. 2); (ii) to provide
for a supermajority vote of stockholders to amend Article Fifth and Article
Eighth of the Certificate of Incorporation (Proposal No. 3); and (iii) to
provide for a supermajority vote of stockholders to amend the Bylaws (Proposal
No. 4).
The Board of Directors believes that companies can be and are acquired, and
changes in control of companies can and do occur, at prices below realistically
achievable levels when boards of directors do not have measures in place to
require a potential acquiror to negotiate or pay the highest price. While it is
possible for such measures to be misused to resist reasonable takeover actions
contrary to a board’s fiduciary obligations, the Board of Directors is aware of,
and committed to, its fiduciary obligations. These proposals are not in response
to any efforts of which the Company is aware to accumulate the Company’s Common
Stock or to obtain control of the Company.
Approval of each of the proposed amendments to the Certificate of
Incorporation requires the affirmative vote of a majority of the outstanding
shares of the Common Stock entitled to vote thereon. Under applicable Delaware
law, abstentions and broker non-votes will have the same effect as a vote
against the proposed amendments to the Certificate of Incorporation.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENTS TO THE
CERTIFICATE OF INCORPORATION ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS VOTING “FOR” APPROVAL OF EACH OF THE
PROPOSED AMENDMENTS.
PROPOSAL NO. 2 — PROPOSAL TO AMEND ARTICLE FIFTH OF THE CERTIFICATE
OF INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
CLASSIFIED BOARD
The Board of Directors of the Company has approved an amendment to Article
Fifth of the Certificate of Incorporation, as more specifically set forth in
Exhibit A to this Proxy Statement, providing for the classification of the Board
of Directors into three classes of directors with staggered terms of office, and
has directed that such amendment be submitted to the stockholders for approval.
This amendment provides for a Board of Directors consisting of not less
than three (3) nor more than thirteen (13) directors on a classified basis. This
amendment provides for the classification of directors into three classes as
nearly equal in number as possible whose terms of office expire at different
times in annual succession.
Initially, the Board of Directors will consist of six directors now holding
office with two directors in each class. The directors in Class I will serve
until the 1999 Annual Meeting, those in Class II until the 2000 Annual Meeting
and those in Class III until the 2001 Annual Meeting. At present, all of the
directors are elected at each Annual Meeting to serve for one year or until the
next election, whereas under the proposed amendment a minimum of one director
will be required to be elected each year, and directors will serve for terms of
three years with the exception that by approving this amendment the terms of the
present directors will expire variously in 1999, 2000 and 2001. If this proposal
is approved, Campbell Griffin and Tucker Taylor will serve in Class I, Richard
Henshaw and Peter Leidel will serve in Class II, and David Cornell and Arlene
Lissner will serve in Class III. Directors elected by the Board of Directors to
fill vacancies and
11
newly created directorships resulting from any increase in the authorized number
of directors will hold office until the next election of the class they have
been elected to fill, even though their terms may thereby extend beyond the next
annual meeting of stockholders.
Under Delaware law, unless the certificate of incorporation provides
otherwise, directors serving on a classified board of directors may be removed
only for cause. If this proposal is approved, the Company’s directors may be
removed from office only for cause by the affirmative vote of the holders of
66 2/3% of the shares entitled to vote in the election of directors. Presently,
all directors of the Company are elected annually and all directors may be
removed, with or without cause, by a majority vote of the shares of the Common
Stock entitled to vote in the election of directors. Cumulative voting is not
authorized by the Certificate of Incorporation.
In addition, Delaware law provides that, unless the certificate of
incorporation or bylaws provide otherwise, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority vote of the directors then in office or the sole
remaining director. Proposal No. 2 provides that such vacancies and newly
created directorships shall be filled only by a majority of the directors then
in office, even if less than a quorum of the Board of Directors, or the sole
remaining director. Presently, vacancies and newly created directorships may be
filled either by (i) a majority vote of the remaining directors of the Company
then in office or (ii) the affirmative vote of a majority of stockholders
entitled to vote in the election of directors.
Proposal No. 2 is designed to promote continuity and stability in the
Company’s management and policies and permit it to represent effectively the
interests of all stockholders and to respond prudently to circumstances created
by the demand or actions of a minority stockholder group. Absent the removal or
resignation of directors, two annual elections would be required to replace a
majority of the classified Board of Directors and effect a forced change in the
business and affairs of the Company. Proposal No. 2 may therefore discourage an
individual or entity from acquiring a significant position in the Company’s
Common Stock with the intention of obtaining immediate control of the Board of
Directors. The acquiror could, however, immediately effect a change in control
of the Board of Directors by garnering the necessary affirmative vote to amend
the Certificate of Incorporation of the Company to eliminate classification of
the Board.
Proposal No. 2 also makes it more difficult to change directors, even when
it may be considered advantageous or desirable. Stockholders may be precluded
from replacing a director by simply voting for an alternative candidate at an
annual election, in that each director will stand for election only once every
three years. Accordingly, a classified Board of Directors limits stockholder
participation in determining the management of the Company and modifies the
present ability of stockholders to replace Board members. In addition, director
removal from office only for cause by a 66 2/3% stockholder vote will prevent a
third party from gaining control of the Board of Directors by removing incumbent
directors without cause and filling the resulting vacancies with its own
nominees. Moreover, it may have the effect of delaying an ultimate change in
existing management which might be desired by a majority of the stockholders.
However, the Board of Directors believes that the benefits of the proposal
outweigh its possible disadvantages. It is the belief of the Board of Directors
that a director who is performing his or her duties in good faith and in the
best interests of the Company and its stockholders should be able to continue to
represent the interests of all the stockholders for the term for which he or she
was elected.
Proposal No. 2 is contingent upon stockholder approval of Proposal No. 3
and Proposal No. 4. If either Proposal No. 3 or Proposal No. 4 is not approved,
Proposal No. 2 shall be removed from consideration by stockholders, and shares
voted for Proposal No. 2 shall have no effect.
THE COMPANY RECOMMENDS VOTING “FOR” PROPOSAL NO. 2
12
PROPOSAL NO. 3 — AMENDMENT TO ARTICLE EIGHTH OF
THE CERTIFICATE OF INCORPORATION OF THE COMPANY
The Board of Directors of the Company has approved an amendment to Article
Eighth of the Certificate of Incorporation providing that Article Fifth and
Article Eighth of the Certificate of Incorporation may only be amended by the
affirmative vote of at least 66 2/3% of the shares entitled to vote in the
election of directors, and has directed that such amendment be submitted to the
stockholders for approval. If Proposal No. 3 is approved by a majority of the
outstanding shares of Common Stock, Section (1) of Article Eighth of the
Certificate of Incorporation shall be amended to read as follows:
EIGHTH (1) AMENDMENT OF THE RESTATED CERTIFICATE OF
INCORPORATION. Article Fifth and Article Eighth of the Restated
Certificate of Incorporation may be (and may only be) amended by the
affirmative vote of at least 66 2/3% of all outstanding shares of
stock of the Corporation entitled to vote in the election of
directors.
The Certificate of Incorporation does not currently address amendments to
the Certificate of Incorporation by the stockholders, and thus, pursuant to
Section 242 of the Delaware General Corporation Law, the Certificate of
Incorporation may be amended by a majority of shares of stock of the Company
entitled to vote in the election of directors. If Proposal No. 3 is approved by
the stockholders, Article Eighth of the Certificate of Incorporation will be
amended to provide that Article Fifth and Article Eighth of the Certificate of
Incorporation may be amended by the affirmative vote of at least 66 2/3% of the
shares entitled to vote in the election of directors. All other provisions of
the Certificate of Incorporation may be amended by a majority of shares of stock
of the Company entitled to vote in the election of directors.
Proposal No. 3 is designed to limit stockholders’ ability to change
particular provisions of the Company’s Certificate of Incorporation without
broad support from the Company’s other voting stockholders. The Board of
Directors believes that such an amendment will provide a degree of continuity
and that it is in the best interests of the Company. However, the increase in
the stockholder vote required to amend Article Fifth and Article Eighth of the
Certificate of Incorporation will make it more difficult for a significant
stockholder to make certain changes in the Certificate of Incorporation,
including changes designed to facilitate a business combination or the exercise
of control over the Company. The requirement for a supermajority vote would
apply to any stockholders’ amendment of Article Fifth and Article Eighth of the
Company’s Certificate of Incorporation at any time, whether or not related to a
business combination or the acquisition of control.
Proposal No. 3 is contingent upon stockholder approval of Proposal No. 2
and Proposal No. 4. If either Proposal No. 2 or Proposal No. 4 is not approved,
Proposal No. 3 shall be removed from consideration by stockholders, and shares
voted for Proposal No. 3 shall have no effect.
THE COMPANY RECOMMENDS VOTING “FOR” PROPOSAL NO. 3
PROPOSAL NO. 4 — AMENDMENT TO ARTICLE EIGHTH OF
THE CERTIFICATE OF INCORPORATION OF THE COMPANY
The Board of Directors of the Company has approved an amendment to Article
Eighth of the Certificate of Incorporation providing that stockholders may
adopt, amend or repeal the Bylaws only by the affirmative vote of at least
66 2/3% of the then outstanding voting stock of the Company, and has directed
that such amendment be submitted to the stockholders for approval. If Proposal
No. 4 is approved by a majority of the outstanding shares of Common Stock,
Section (2) of Article Eighth of the Certificate of Incorporation shall be
amended to read as follows:
EIGHTH (2) AMENDMENT OF THE BYLAWS OF CORPORATION. The Board
of Directors is expressly authorized to adopt, amend or repeal the
Bylaws, without any action on the part of the stockholders of the
Corporation, by a vote of the majority of the entire Board of
Directors that would be in office if no vacancy existed, whether or
not present at a meeting. The stockholders of the Corporation also
have the power to adopt, amend or repeal the Bylaws, at any annual or
13
special meeting, by the affirmative vote of at least 66 2/3% of all
outstanding shares of stock of the Corporation entitled to vote in the
election of directors.
Article Eighth of the Certificate of Incorporation currently provides that
the Bylaws may be adopted, amended or repealed by either (i) the affirmative
vote of at least a majority of the entire Board of Directors, whether or not
there are any vacancies in the previously authorized directorships, or (ii) a
majority of the shares of stock of the Company entitled to vote in the election
of directors. If Proposal No. 4 is approved by the stockholders, Article Eighth
of the Certificate of Incorporation will be amended to provide that stockholders
may adopt, amend or repeal the Bylaws only by the affirmative vote of at least
66 2/3% of the then outstanding voting stock of the Company.
Proposal No. 4 is designed to limit stockholders’ ability to change the
provisions of the Company’s Bylaws without broad support from the Company’s
other voting stockholders. The Board of Directors believes that such an
amendment will provide a degree of continuity and that it is in the best
interests of the Company. However, the increase in the stockholder vote required
to amend the Bylaws will make it more difficult for a significant stockholder to
make changes in the Bylaws, including changes designed to facilitate a business
combination or the exercise of control over the Company. The requirement for a
super-majority vote would apply to any stockholders’ amendment of the Company’s
Bylaws at any time, whether or not related to a business combination or the
acquisition of control.
The Board of Directors recently amended the Company’s Bylaws to provide for
(i) advance written notice of stockholder nomination of directors, (ii) advance
written notice of stockholder business at stockholder meetings, (iii) the
determination of the number and election of directors only in accordance with
the Company’s Certificate of Incorporation, (iv) the ability of the Board of
Directors to consider social, economic and other factors in evaluating any offer
of another party, and (v) the alteration, amendment and repeal of the Bylaws
only in accordance with the Company’s Certificate of Incorporation. The advance
written notice requirements referenced above will not apply until the first
stockholders’ meeting after the Annual Meeting.
Proposal No. 4 is contingent upon stockholder approval of Proposal No. 2
and Proposal No. 3. If either Proposal No. 2 or Proposal No. 3 is not approved,
Proposal No. 4 shall be removed from consideration by stockholders, and shares
voted for Proposal No. 4 shall have no effect.
THE COMPANY RECOMMENDS VOTING “FOR” PROPOSAL NO. 4
PROPOSAL NO. 5 — AMENDED AND RESTATED 1996 STOCK OPTION PLAN
The 1996 Plan was initially adopted in 1996, and an aggregate of 880,000
shares of Common Stock were reserved for issuance pursuant thereto. As of March
2, 1998, there were 3,192 shares of Common Stock available for issuance under
the 1996 Plan. Since the adoption of the 1996 Plan, the number of employees of
the Company eligible for grants of stock options has more than doubled. In the
opinion of the Board of Directors, it is appropriate to consider amending and
restating the 1996 Plan to increase such number of shares available for
issuance. In view of the foregoing, the Board of Directors of the Company has
approved an amended and restated 1996 Plan (the “Amended Plan”) which, among
other things, establishes the maximum number of shares of Common Stock that may
be subject to outstanding grants, determined immediately after the grant of any
stock option, at a number not exceeding the greater of 1,500,000 shares or
fifteen percent (15%) of the aggregate number of shares of Common Stock
outstanding. The Board of Directors has directed that such Amended Plan be
submitted to the stockholders for approval. The description of the Amended Plan
contained herein is qualified in its entirety by reference to the copy of the
Amended Plan attached as Exhibit B to this Proxy Statement
PURPOSE. The purpose of this Amended Plan is to enable the Company and
Designated Subsidiaries (as defined in the Amended Plan) to attract, retain and
motivate certain key employees, non-employee directors and consultants
(collectively, the “Participants”), who are important to the success and
growth of the business of the Company and Designated Subsidiaries and to create
a long-term mutuality of interest between such persons and the stockholders of
the Company by granting options to purchase Common
14
Stock. The Company believes that the possibility of participation in the Amended
Plan through receipt of incentive options (“Incentive Options”) or
nonqualified options (“Nonqualified Options”) (Incentive Options and
Nonqualified Options shall be collectively referred to herein as “Stock
Options”), will provide Participants an incentive to perform more effectively
and will assist the Company in obtaining and retaining people of outstanding
training and ability.
TERM. The Amended Plan was adopted effective February 23, 1998, subject to
approval by stockholders at the Annual Meeting. No Stock Option may be granted
under the Amended Plan after February 23, 2008.
ADMINISTRATION. The Amended Plan is administered by the Compensation
Committee (the “Committee”) of the Board of Directors, which is comprised of
at least two members who are outside directors (as defined in Section 162(m) of
the Code). All questions of interpretation and application of the Amended Plan
shall be determined by the Committee.
PARTICIPATION. All key employees of the Company and Designated
Subsidiaries are eligible to receive Stock Options under the Amended Plan.
Non-employee directors and consultants to the Company and Designated
Subsidiaries are eligible to receive Nonqualified Options under the Amended
Plan. The Committee shall determine from time to time the Participants of the
Company and Designated Subsidiaries who shall receive Stock Options under the
Amended Plan. During the lifetime of Participants, Stock Options shall be
exercisable only by Participants, and no Stock Options will be transferable
otherwise than by will or the laws of descent and distribution, pursuant to a
qualified domestic relations order, or if authorized by the Committee, pursuant
to intra-family transfers without payment of consideration.
SHARES OF STOCK AVAILABLE FOR GRANT. A total not exceeding the greater of
(i) 1,500,000 shares of Common Stock or (ii) fifteen percent (15%) of the
aggregate number of shares of Common Stock outstanding are available for
issuance under the Amended Plan. The maximum number of shares of Common Stock
with respect to which Stock Options may be granted to any Participant during any
calendar year may not exceed 250,000. The shares may be treasury shares or
authorized but unissued shares. In the event a Stock Option expires unexercised,
is terminated, or is canceled or forfeited, the shares of Common Stock allocable
to the unexercised portion of that Stock Option may again be subject to a Stock
Option under the Amended Plan.
The Amended Plan provides that the number of shares subject thereto and
shares covered by Stock Options outstanding are subject to equitable adjustment,
as determined by the Committee, in the event of stock dividends, stock splits,
or other capital readjustments before delivery by the Company of all shares
subject to the Amended Plan.
COMPENSATION DEDUCTION LIMITATION. Section 162(m) of the Code generally
limits to $1 million per year per employee the tax deduction available to
publicly traded companies for certain compensation paid to named executive
officers. There is an exception (Section 162(m)(4)(C)) from this deduction
limitation, for certain “performance-based compensation,” if specified
requirements are satisfied, including: (i) the establishment by the Committee of
performance goals which must be met for the additional compensation to be
earned, (ii) the approval of the material terms for the performance goals by the
stockholders after adequate disclosure, and (iii) the certification by the
Committee that the performance goals have been met. The Amended Plan is designed
to satisfy these statutory requirements for Incentive Options and Nonqualified
Options. Therefore, if this Amended Plan is approved by stockholders, for all
grants intended to satisfy Section 162(m) of the Code, the Company anticipates
being entitled to deduct an amount equal to the ordinary income reportable by
each optionee on exercise of a Nonqualified Option and the Early Disposition (as
defined below) of shares of Common Stock acquired by exercise of an Incentive
Option.
STOCK OPTIONS. The Committee may designate a Stock Option as an Incentive
Option or as a Nonqualified Option. The terms of each Stock Option shall be set
out in a written Option Agreement which incorporates the terms of the Amended
Plan.
The purchase price per share of Common Stock (the “Purchase Price”) of a
Nonqualified Option may not be less than the par value of a share of Common
Stock of the Company, and the Nonqualified Option
15
may not be exercisable after 10 years from the date of grant. The Purchase Price
of an Incentive Option may not be less than 100% of the fair market value of the
Common Stock on the date of grant, and the Incentive Option may not be
exercisable after 10 years from the date of grant. In the case of an Incentive
Option issued to a 10% Shareholder (as defined in the Amended Plan) of the
Company (i) the Purchase Price may not be less than 110% of the fair market
value of the Common Stock on the date of grant, and (ii) the period over which
the Incentive Option is exercisable may not exceed five years. On March 4, 1998,
the last reported sales price of the Common Stock was $22.875 per share.
Stock Options may be exercised by written notice of exercise and payment of
the Stock Option price in cash, by check, in previously owned shares of Common
Stock valued at fair market value on the date of exercise, in a cashless
transaction involving a broker, or such other terms and conditions as may be
acceptable to the Committee. Special rules apply which limit the time of
exercise of a Stock Option following an employee’s termination of employment or
in the event of a “Extraordinary Transaction” (as defined in the Amended
Plan). The Committee may impose restrictions on the exercise of any Stock
Option.
AMENDMENT OF AMENDED PLAN. The Committee may amend, terminate or suspend
the Amended Plan at any time, provided that no amendment shall be made without
stockholder approval if it would (i) increase the aggregate number of shares of
Common Stock that may be issued under the Amended Plan, (ii) decrease the
minimum Purchase Price of any Stock Option, (iii) increase the individual
limitation set forth in Article VI(A) of the Amended Plan, (iv) extend the
maximum option period, or (v) effect any other change that would require
stockholder approval under Section 162(m) of the Code.
CHANGE IN CONTROL. Upon the consummation of a Extraordinary Transaction,
all outstanding Stock Options shall be terminated, provided that notice of such
Extraordinary Transaction shall be given to each Participant. The Stock Options
shall become fully vested and each Participant shall have the right to exercise
such Stock Options in full during a period of at least 20 days preceding the
Extraordinary Transaction.
FEDERAL TAX CONSEQUENCES. The grant of Incentive Options to an employee
does not result in any income tax consequences. The exercise of an Incentive
Option generally does not result in any income tax consequences to an employee
if (i) the Incentive Option is exercised by the employee during his employment
with the Company or a Designated Subsidiary, or within a specified period after
termination of employment, and (ii) the employee does not dispose of shares
acquired pursuant to the exercise of an Incentive Option before the expiration
of two years from the date of grant of the Incentive Option or one year after
exercise and the transfer of the shares to him, whichever is later (the
“Waiting Period”). However, the excess of the fair market value of the shares
of Common Stock as of the date of exercise over the Amended Plan price is a tax
preference item for purposes of determining an employee’s alternative minimum
tax in the year of exercise, if applicable.
An employee who disposes of his Incentive Option shares prior to the
expiration of the Waiting Period (an “Early Disposition”) generally will
recognize ordinary income in the year of sale in an amount equal to the excess,
if any, of (a) the lesser of (i) the fair market value of the shares as of the
date of exercise or (ii) the amount realized on the sale, over (b) the Incentive
Option price. Any additional amount realized on an Early Disposition should be
treated as capital gain to the employee, short or long term, depending on the
employee’s holding period for the shares. If the shares are sold for less than
the option price, the employee will not recognize any ordinary income but will
recognize a capital loss, short or long term, depending on the holding period.
As a result of changes made by the Taxpayer Relief Act of 1997 increasing
the required holding period for assets afforded long-term capital gains tax
treatment and reducing the tax rates on long-term capital gains, if an employee
sells shares acquired pursuant to the exercise of an Incentive Option after July
28, 1997, the employee will generally recognize a long-term capital gain or loss
on the sale if the shares were held for more than eighteen (18) months. Under
those circumstances, if the employee recognizes a long-term capital gain on the
sale, his or her long-term capital gain will be taxed at a maximum rate of 20%.
If the employee sells the shares after the Waiting Period but before the
expiration of 18 months after the issuance of the shares pursuant to the
exercise of an Incentive Option, the employee will pay tax on any
16
mid-term capital gain recognized at a maximum rate of 28%. After December 31,
2000, the sale by an employee of shares acquired pursuant to the exercise of an
Incentive Option which are held for more than five years will be taxed at a
maximum rate of 18%.
The Company will not be entitled to a deduction as a result of the grant of
an Incentive Option, the exercise of an Incentive Option, or the sale of
Incentive Option shares after the Waiting Period. If an employee disposes of
Incentive Option shares in an Early Disposition, the Company would be entitled
to deduct the amount of ordinary income recognized by the employee.
The grant of Nonqualified Options under the Amended Plan will not result in
the recognition of any taxable income by a Participant. A Participant will
recognize ordinary income on the date of exercise of the Nonqualified Option
equal to the excess, if any, of (i) the fair market value of the shares acquired
as of the exercise date, over (ii) the exercise price. The tax basis of these
shares for purposes of a subsequent sale includes the Nonqualified Option price
paid and the ordinary income reported on exercise of the Nonqualifed Option. The
income reportable on exercise of a Nonqualified Option is subject to federal
income and employment tax withholding. Generally, the Company will be entitled
to a deduction in the amount reportable as income by the Participant on the
exercise of a Nonqualified Option.
PROPOSED STOCK OPTION GRANTS. The Committee has granted Incentive Options
to purchase an aggregate of 354,334 shares to Messrs. Cornell, Logan,
Schoeffield and Wiebe. The grant of such Incentive Options is subject to
stockholder approval of the Amended Plan. The grant date of such Incentive
Options will be the date stockholders approve the Amended Plan, and the exercise
price of such Incentive Options will be the closing price of the Company’s
Common Stock on the American Stock Exchange on the grant date. The Incentive
Options will not vest until September 5, 2005; however, early vesting can occur
on the attainment of certain performance objectives. An amount equal to 25% of
the Incentive Options vests upon the Company achieving revenues of $200 million
over any period of 12 consecutive months; 25% upon the Company achieving
earnings per share of $1.00 in any period of 12 consecutive months; 25% upon the
Company achieving an average stock price of $25.00 per share for any 90
consecutive trading days; and 25% upon the Company achieving a 12% return on
equity over any period of 12 consecutive months.
The following table sets forth the number of Stock Option grants described
above, subject to stockholder approval of the Amended Plan, to each of the
following under the Amended Plan.
NEW PLAN BENEFITS
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
NAME AND POSITION NUMBER OF UNITS
– ————————————- —————
David M. Cornell………………… 160,000
Chairman of the Board, President
and Chief Executive Officer
Steven W. Logan…………………. 100,000
Senior Vice President, Chief
Financial Officer, Treasurer
and Secretary
William J. Schoeffield, Jr……….. 60,667
Senior Vice President and Chief
Operating Officer
Marvin H. Wiebe, Jr……………… 33,667
Vice President
Arlene R. Lissner……………….. 0
Director; President of Abraxas
Group, Inc.
Executive Group…………………. 354,334
Non-Executive Director Group……… 15,000
Non-Executive Officer Employee
Group………………………… 0
17
STOCKHOLDER APPROVAL REQUIREMENT. The approval of the Amended Plan
requires the affirmative vote of a majority of the shares of Common Stock voted
on the matter. Accordingly, abstentions and broker non-votes applicable to
shares at the Annual Meeting will not be included in the tabulation of votes
cast on this proposal.
THE COMPANY RECOMMENDS VOTING “FOR” PROPOSAL NO. 5.
PROPOSAL NO. 6 — APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
approved and recommends the appointment of Arthur Andersen LLP as independent
public accountants to conduct an audit of the Company’s financial statements for
the year 1998. This firm has acted as independent public accountants for the
Company since 1992.
Members of Arthur Andersen LLP will attend the Annual Meeting and will be
available to respond to questions which may be asked by stockholders. Such
members will also have an opportunity to make a statement at the Annual Meeting
if they desire to do so.
The Board of Directors recommends that stockholders approve the appointment
of Arthur Andersen LLP as the Company’s independent public accountants. In
accordance with the Company’s Bylaws, approval of the appointment of independent
public accountants will require the affirmative vote of a majority of the shares
of Common Stock voted on the matter. Accordingly, abstentions and broker non-
votes applicable to shares present at the Annual Meeting will not be included in
the tabulation of votes cast on this proposal.
THE COMPANY RECOMMENDS VOTING “FOR” PROPOSAL NO. 6
OTHER MATTERS
The Board of Directors knows of no other matters than those described above
which are likely to come before the Annual Meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgment on such
matters.
18
PROPOSALS AND NOMINATIONS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock of the Company intended to be
presented at the annual meeting of stockholders of the Company to be held in
1999 must be received by the Company, addressed to the Secretary of the Company,
4801 Woodway, Suite 100E, Houston, Texas 77056, no later than November 9, 1998,
to be included in the proxy statement relating to that meeting.
By Order of the Board of Directors
Steven W. Logan,
SECRETARY
March 9, 1998
THE COMPANY WILL FURNISH WITHOUT CHARGE ADDITIONAL COPIES OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 TO INTERESTED
SECURITY HOLDERS ON REQUEST. THE COMPANY WILL FURNISH TO ANY SUCH PERSON ANY
EXHIBITS DESCRIBED IN THE LIST ACCOMPANYING SUCH REPORT UPON PAYMENT OF
REASONABLE FEES RELATING TO THE COMPANY’S FURNISHING SUCH EXHIBITS. REQUESTS FOR
COPIES SHOULD BE DIRECTED TO THE SECRETARY AT THE COMPANY’S ADDRESS PREVIOUSLY
SET FORTH.
19
EXHIBIT A
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
PROVIDING FOR A CLASSIFIED BOARD OF DIRECTORS
The Fifth Article of the Certificate of Incorporation of the Company shall
be amended by replacing the current Fifth Article with the following provisions:
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for defining
and regulating the powers of the Corporation and its directors and stockholders
and are in furtherance and not in limitation of the powers conferred upon the
Corporation by statute:
(1) NUMBER AND ELECTION OF DIRECTORS. The powers of the Corporation shall
be exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. Subject to such rights of holders of shares of one or more
outstanding series of Preferred Stock to elect one or more directors of the
Corporation under circumstances as shall be provided by or established pursuant
to the Restated Certificate of Incorporation, the number of directors of the
Corporation that shall constitute the Board of Directors shall not be less than
three (3) nor more than thirteen (13) and shall be specified from time to time
by resolution adopted by the affirmative vote of a majority of the directors in
office at the time of adoption of such resolution. Initially, the number of
directors will be six (6). Election of Directors of the Corporation need not be
by written ballot unless the Bylaws of the Corporation shall so provide.
(2) CLASSES AND TERMS OF DIRECTORS. The Board of Directors shall be
divided into 3 classes: Class I, Class II and Class III. The terms of office of
the directors initially classified shall be as follows: that of Class I shall
expire at the next annual meeting of stockholders in 1999, Class II at the
second succeeding annual meeting of stockholders in 2000, and Class III at the
third succeeding annual meeting of the stockholders in 2001. At each succeeding
annual meeting of stockholders, successors to the class of directors whose terms
expire at that annual meeting shall be elected for three-year terms. If the
number of directors changes, any increase or decrease shall be apportioned among
the classes so as to maintain the number of directors in each class as nearly
equal as possible, and any additional director of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for a term
that shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
A director shall hold office until the annual meeting for the year in which his
or her term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal for cause from office.
(3) VACANCIES. Except as otherwise required by law, or by any provisions
established pursuant to the Restated Certificate of Incorporation with respect
to the rights of holders of shares of one or more outstanding series of
Preferred Stock, newly created directorships resulting from any increase in the
authorized number of directors of the Corporation and any vacancies on the Board
of Directors resulting from death, resignation, retirement, disqualification or
removal for cause from office of a director of the Corporation shall be filled
only by the affirmative vote of at least a majority of the remaining directors
of the Corporation then in office, even if such remaining directors constitute
less than a quorum of the Board of Directors, or by the sole remaining director.
(4) REMOVAL. Any director may be removed from office only for cause and
only by the affirmative vote of not less than 66 2/3% of the outstanding shares
of stock of the Corporation entitled to vote in the election of directors, given
at a meeting of the stockholders for that purpose.
A-1
EXHIBIT B
CORNELL CORRECTIONS, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
I. PURPOSES OF THE PLAN
The purposes of this Amended and Restated 1996 Stock Option Plan (the
“Plan”) are to enable Cornell Corrections, Inc. (the “Company”) and
Designated Subsidiaries (as defined herein) to attract, retain and motivate
certain key employees, directors and consultants who are important to the
success and growth of the business of the Company and Designated Subsidiaries
and to create a long-term mutuality of interest between such persons and the
stockholders of the Company by granting the options to purchase Common Stock (as
defined herein).
II. DEFINITIONS
In addition to the terms defined elsewhere herein, for purposes of this
Plan, the following terms will have the following meanings when used herein with
initial capital letters:
(A) “Board” means the Board of Directors of the Company.
(B) “Cause” means, with respect to a Participant’s Termination of
Employment, (i) in the case where there is no employment or consulting
agreement between the Company and the Participant, or where there is an
employment or consulting agreement, but such agreement does not define
cause (or words of like import), commission of a felony, a crime involving
moral turpitude, embezzlement, misappropriation of property of the Company
or a Subsidiary, any other act involving dishonesty or fraud with respect
to the Company or a Subsidiary, a material breach of a directive which is
not cured within a specified time after written notice of such breach, or
repeated failure after written notice to follow the directives of an
appropriate officer or the Board, or (ii) in the case where there is an
employment or consulting agreement between the Company or a Subsidiary and
the Participant, termination that is or would be deemed to be for cause (or
words of like import) as defined under such employment or consulting
agreement.
(C) “Code” means the Internal Revenue Code of 1986, as amended.
(D) “Committee” means a committee of the Board appointed from time
to time by the Board consisting of two (2) or more non-employee directors,
each of whom shall be an “outside director” as defined in Section 162(m)
of the Code to the extent then required, except that if and to the extent
that no Committee exists which has the authority to administer the Plan,
the functions of the Committee shall be exercised by the Board.
(E) “Common Stock” means the common stock of the Company, par value
$.001 per share, and any common stock resulting from any reclassification
of the Common Stock.
(F) “Company” means Cornell Corrections, Inc., a Delaware
corporation.
(G) “Designated Subsidiary” means any Subsidiary which has been
designated from time to time by the Board. An entity shall be deemed a
Designated Subsidiary only for such periods as the requisite ownership
relationship is maintained.
(H) “Director” means any non-employee director of the Company or a
Designated Subsidiary.
(I) “Disability” means a permanent and total disability, rendering
a Participant unable to perform the duties performed by the Participant for
the Company or Designated Subsidiaries by reason of physical or mental
disability for a period of more than an aggregate of one hundred eighty
(180) days in any twelve (12) month period. A Disability shall only be
deemed to occur at the time of the determination by the Committee of the
Disability.
B-1
(J) “Eligible Consultants” means the consultants of the Company
and Designated Subsidiaries who are eligible to participate in the Plan
(including, but not limited, to employees of entities providing consulting
services), as determined by the Committee in its sole discretion.
(K) “Exchange Act” means the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
(L) “Fair Market Value” means, for purposes of this Plan, unless
otherwise required by any applicable provision of the Code or any
regulations issued thereunder, as of any date, the last sales prices
reported for the Common Stock on the applicable date, (i) as reported by
the principal national securities exchange in the United States on which it
is then traded, or (ii) if not traded on any such national securities
exchange, as quoted on an automated quotation system sponsored by the
National Association of Securities Dealers, or if the sale of the Common
Stock shall not have been reported or quoted on such date, on the first day
prior thereto on which the Common Stock was reported or quoted. If the
Common Stock is not readily tradable on a national securities exchange or
any system sponsored by the National Association of Securities Dealers, its
Fair Market Value shall be set by the Committee based upon its assessment
of the cash price that would be paid between a fully informed buyer and
seller under no compulsion to buy or sell (without giving effect to any
discount for a minority interest or any restrictions on transferability or
any lack of liquidity of the stock).
(M) “Incentive Stock Option” means any Option awarded under this
Plan intended to be and designated as an “Incentive Stock Option” within
the meaning of Section 422 of the Code.
(N) “Key Employee” means any person who is an officer or other
valuable employee of the Company or a Designated Subsidiary, as determined
by the Committee in its sole discretion. A Key Employee may, but need not,
be an officer of the Company or a Designated Subsidiary.
(O) “Non-Qualified Stock Option” means any Option awarded under
this Plan that is not an Incentive Stock Option.
(P) “Option” means the right to purchase one Share at a prescribed
purchase price on the terms specified in the Plan.
(Q) “Participant” means a Key Employee, Director or Eligible
Consultant who is granted Options under the Plan which Options have not
expired; PROVIDED, HOWEVER, that any Director or Eligible Consultant shall
be a Participant for purposes of the Plan solely with respect to grants of
Non-Qualified Stock Options and shall be ineligible for Incentive Stock
Options.
(R) “Person” means any individual or entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of
such Person as the context may require.
(S) “Retirement” means a Termination of Employment without cause
from the Company and/or a Subsidiary by a Participant who is at least age
65 or, with the consent of the Committee, such earlier date before age 65
but after age 55.
(T) “Securities Act” means the Securities Act of 1933, as amended,
and all rules and regulations promulgated thereunder.
(U) “Share” means a share of Common Stock.
(V) “Subsidiary” means any corporation that is defined as a
subsidiary corporation in Section 424(f) of the Code.
(W) “Ten Percent Shareholder” means a person owning Common Stock of
the Company possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company as defined in Section
422 of the Code.
(X) “Termination of Employment” with respect to a Key Employee
means that individual is no longer actively employed by the Company or a
Subsidiary on a full-time basis, irrespective of whether or not such
employee is receiving salary continuance pay, is continuing to participate
in other employee benefit programs or is otherwise receiving severance type
payments. In the event an entity
B-2
shall cease to be a Subsidiary, there shall be deemed a Termination of
Employment of any individual who is not otherwise an employee of the
Company or another Subsidiary at the time the entity ceases to be a
Subsidiary. A Termination of Employment shall not include a leave of
absence approved for purposes of the Plan by the Committee. For purposes of
this Plan, a full-time employee is a person who is scheduled to work at
least thirty (30) hours per week. With respect to a Director, a Termination
of Employment shall occur when the individual ceases to be a director of
the Company or any Subsidiary. With respect to an Eligible Consultant, a
Termination of Employment shall occur upon the termination of the
consulting contract or the termination of the performance of consulting
services, as determined by the Committee in its sole discretion.
(Y) “Withholding Election” means the election set forth in Article XV.
III. EFFECTIVE DATE
The 1996 Stock Option Plan became effective as of May 15, 1996. The Plan,
as amended and restated, shall become effective as of February 23, 1998 (the
“Effective Date”), subject to approval by the stockholders. Grants of Options
by the Committee under the Plan may be made as of or after the Effective Date of
the Plan, including retroactively. No Options may be exercised prior to the
approval of the Plan by the holders of a majority of the Common Stock (at the
time of approval).
IV. ADMINISTRATION
(A) DUTIES OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee. The Committee shall have full authority to
interpret the Plan and to decide any questions and settle all controversies and
disputes that may arise in connection with the Plan; to establish, amend and
rescind rules for carrying out the Plan; to administer the Plan, subject to its
provisions; to select Participants in, and grant Options under, the Plan; to
determine the terms, vesting requirements, exercise price and form of exercise
payment for each Option granted under the Plan; to determine the consideration
to be received by the Company in exchange for the grant of the Options; to
determine whether and to what extent Incentive Stock Options and Non-Qualified
Stock Options, or any combination thereof, are to be granted hereunder to one or
more Key Employees and whether and to what extent Non-Qualified Stock Options
are to be granted hereunder to one or more Eligible Consultants or Directors; to
prescribe the form or forms of instruments evidencing Options and any other
instruments required under the Plan (which need not be uniform) and to change
such forms from time to time; to determine whether, to what extent and under
what circumstances to permit reloads, such that to the extent that Options are
settled with Common Stock, that Non-Qualified Stock Options may be granted for
the same number of shares of the same or different types, based on such terms as
the Committee may determine, in its sole discretion; and to make all other
determinations and to take all such steps in connection with the Plan and the
Options as the Committee, in its sole discretion, deems necessary or desirable.
The Committee shall not be bound to any standards of uniformity or similarity of
action, interpretation or conduct in the discharge of its duties hereunder,
regardless of the apparent similarity of the matters coming before it. Anything
in the Plan to the contrary notwithstanding, no term of this Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as to
disqualify the Plan under Section 422 of the Code, or, without the consent of
the Participants affected, to disqualify any Incentive Stock Option under such
Section 422.
(B) ADVISORS. The Committee may employ such legal counsel, consultants
and agents as it may deem desirable for the administration of the Plan, and may
rely upon any advice or opinion received from any such counsel or consultant and
any computation received from any such consultant or agent. Expenses incurred by
the Committee in the engagement of such counsel, consultant or agent shall be
paid by the Company.
(C) INDEMNIFICATION. To the maximum extent permitted by applicable law,
no officer of the Company or member or former member of the Committee or of the
Board shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under it. To the maximum extent
permitted by applicable law or the Certificate of Incorporation or Bylaws of the
Company and to the
B-3
extent not covered by insurance, each officer and member or former member of the
Committee or of the Board shall be indemnified and held harmless by the Company
against any cost or expense (including reasonable fees of counsel reasonably
acceptable to the Company) or liability (including any sum paid in settlement of
a claim with the approval of the Company), and advanced amounts necessary to pay
the foregoing at the earliest time and to the fullest extent permitted, arising
out of any act or omission to act in connection with the Plan, except to the
extent arising out of such officer’s, member’s or former member’s own fraud or
bad faith. Such indemnification shall be in addition to any rights of
indemnification the officers, members or former members may have as directors
under applicable law or under the Certificate of Incorporation or Bylaws of the
Company or Designated Subsidiary. Notwithstanding anything else herein, this
indemnification will not apply to the actions or determinations made by an
individual with regard to Options granted to him or her under this Plan.
(D) MEETINGS OF THE COMMITTEE. The Committee shall adopt such rules and
regulations as it shall deem appropriate concerning the holding of its meetings
and the transaction of its business. Any member of the Committee may be removed
from the Committee at any time either with or without cause by resolution
adopted by the Board, and any vacancy on the Committee may at any time be filled
by resolution adopted by the Board. All determinations by the Committee shall be
made by the affirmative vote of a majority of its members. Any such
determination may be made at a meeting duly called and held at which a majority
of the members of the Committee are in attendance in person or through
telephonic communication. Any determination set forth in writing and signed by
all the members of the Committee shall be as fully effective as if it had been
made by a majority vote of the members at a meeting duly called and held.
(E) DETERMINATIONS. Each determination, interpretation or other action
made or taken pursuant to the provisions of this Plan by the Committee shall be
final, conclusive and binding for all purposes and upon all persons, including,
without limitation, the Participants, the Company and Subsidiaries, directors,
officers and other employees of the Company and Subsidiaries, and the respective
heirs, executors, administrators, personal representatives and other successors
in interest of each of the foregoing.
V. SHARES; ADJUSTMENT UPON CERTAIN EVENTS
(A) SHARES TO BE DELIVERED; FRACTIONAL SHARES. Shares to be issued under
the Plan shall be made available, at the sole discretion of the Board, either
from authorized but unissued Shares or from issued Shares reacquired by the
Company and held in treasury. No fractional Shares will be issued or transferred
upon the exercise of any Option. In lieu thereof, the Company shall pay a cash
adjustment equal to the same fraction of the Fair Market Value of one Share on
the date of exercise.
(B) NUMBER OF SHARES. Subject to adjustment as provided in this Article
V, the maximum aggregate number of Shares that may be issued and sold under the
Plan shall not exceed the greater of (a) 1,500,000 Shares or (b) 15% of the
number of Shares issued and outstanding immediately after the grant of any
Option. If Options are for any reason canceled or forfeited, or expire or
terminate unexercised, the Shares covered by such Options shall again be
available for the grant of Options, subject to the foregoing limit.
(C) ADJUSTMENTS; RECAPITALIZATION, ETC. The existence of the Plan and the
Options granted hereunder shall not affect in any way the right or power of the
Board or the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
Common Stock, the dissolution or liquidation of the Company or Designated
Subsidiaries, any sale or transfer of all or part of its assets or business or
any other corporate act or proceeding. The Committee may make or provide for
such adjustments in the maximum number of Shares specified in Article V(B), in
the number of Shares covered by outstanding Options granted hereunder and/or in
the Purchase Price (as hereinafter defined) applicable to such Options or such
other adjustments in the number and kind of securities received upon the
exercise of Options, as the Committee in its sole discretion may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants or to otherwise recognize the effect that otherwise would result
from any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, merger, consolidation,
spin-off, reorganization, partial or complete liquidation, issuance of rights
B-4
or warrants to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. Except as herein expressly
provided, the issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor or upon conversion of shares or other securities, and in any
case whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number and class of shares
and/or other securities or property subject to Options theretofore granted or
the Purchase Price.
(D) EXTRAORDINARY TRANSACTIONS. (i) In the event the Company shall,
pursuant to action by its Board of Directors, at any time propose to merge with
or into, consolidate with, or sell or otherwise transfer all or substantially
all of its assets to another entity or in the event of the acquisition of all or
substantially all of the Company’s outstanding Common Stock by a single person
or entity and/or group of entities acting in concert (each, an “Extraordinary
Transaction”), the Company shall cause written notice of the proposed
Extraordinary Transaction to be given to the Participant not less than thirty
(30) days prior to the anticipated effective date of the proposed Extraordinary
Transaction (the “Extraordinary Transaction Effective Date”).
(ii) On a date which the Company shall specify in such notice (the “Early
Vesting Date”), which date shall not be less than twenty (20) days prior to the
Extraordinary Transaction Effective Date, the Options shall become fully vested,
except as otherwise expressly provided in any Option agreement with respect to
the Options granted thereunder.
(iii) If the Extraordinary Transaction is consummated, the Options, to the
extent not previously exercised prior to the Extraordinary Transaction Effective
Date, shall terminate on the Extraordinary Transaction Effective Date. If the
Extraordinary Transaction is abandoned or otherwise not consummated then, to the
extent that the portion of the Options not exercised prior to such abandonment
or termination shall have vested solely by operation of Article V(D)(ii) and the
relevant Option agreements, such vesting shall be annulled and be of no further
force or effect, and the vesting provisions set forth in the relevant Option
agreements shall be reinstituted, as of the date of such abandonment or
termination.
VI. AWARDS AND TERMS OF OPTIONS
(A) GRANT. The Committee may grant Non-Qualified Stock Options or
Incentive Stock Options, or any combination thereof to Key Employees, and
Non-Qualified Stock Options to Directors and Eligible Consultants, provided that
the maximum number of Shares with respect to which Options may be granted to any
Participant during any calendar year may not exceed Two Hundred Fifty Thousand
(250,000), subject to adjustment as provided in Article V(C). To the extent that
the maximum number of Shares with respect to which Options may be granted are
not granted in a particular calendar year to a Participant (beginning with the
year in which the Participant receives his or her first grant of Options
hereunder), such ungranted Options for any year shall increase the maximum
number of Shares with respect to which Options may be granted to such
Participant in subsequent calendar years during the term of the Plan until used.
Notwithstanding the foregoing, in order to comply with Section 162(m) of the
Code, the Committee shall take into account that (1) if an Option is canceled,
the canceled Option continues to be counted against the maximum number of shares
for which Options may be granted to the Key Employee, Director or Eligible
Consultant under the Plan and (2) for purposes of Section 162(m) of the Code, if
after the grant of an Option, the Committee or the Board reduces the exercise
price or Purchase Price (as defined below), the transaction is treated as a
cancellation of the Option and a grant of a new Option, and in such case, both
the Option that is deemed to be canceled and the Option that is deemed to be
granted reduce the maximum number of shares for which Options may be granted to
the Key Employee, Director or Eligible Consultant under the Plan. To the extent
that any Option does not qualify as an Incentive Stock Option (whether because
of its provisions or the time or manner of its exercise or otherwise), such
Option or the portion thereof which does not qualify, shall constitute a
separate Non-Qualified Stock Option. Each Option shall be evidenced by an Option
agreement (the “Option Agreement”) in such form as the Committee shall approve
from time to time.
(B) EXERCISE PRICE. The purchase price per Share (the “Purchase Price”)
deliverable upon the exercise of a Non-Qualified Stock Option shall be
determined by the Committee and set forth in a
B-5
Participant’s Option Agreement, provided that the Purchase Price shall not be
less than the par value of a Share. Notwithstanding the foregoing, to the extent
the Committee grants an Incentive Stock Option or grants an option which is
intended to be “performance based” for purposes of Section 162(m) of the Code,
the Purchase Price deliverable upon the exercise of any such option shall be
determined by the Committee and set forth in a Participant’s Option Agreement
but shall be not less than 100% of the Fair Market Value of a Share at the time
of grant; PROVIDED, HOWEVER, if an Incentive Stock Option is granted to a Ten
Percent Shareholder, the Purchase Price shall be not less than 110% of the Fair
Market Value of a Share.
(C) NUMBER OF SHARES. The Option Agreement shall specify the number of
Options granted to the Participant, as determined by the Committee in its sole
discretion.
(D) EXERCISABILITY. At the time of grant, the Committee shall specify
when and on what terms (including any vesting requirements) the Options granted
shall be exercisable. In the case of Options not immediately exercisable in
full, the Committee may at any time accelerate the time at which all or any part
of the Options may be exercised and may waive any other conditions to exercise.
No Option shall be exercisable after the expiration of ten (10) years from the
date of grant; PROVIDED, HOWEVER, the term of an Incentive Stock Option granted
to a Ten Percent Shareholder may not exceed five (5) years. Each Option shall be
subject to earlier termination as provided in Article VII below.
(E) EXERCISE OF OPTIONS.
(i)) A Participant may elect to exercise one or more Options then
exercisable by giving written notice to the Company of such election and of
the number of Options such Participant has elected to exercise, accompanied
by payment in full of the aggregate Purchase Price for the number of Shares
for which the Options are being exercised.
(ii) Shares purchased pursuant to the exercise of Options shall be
paid for at the time of exercise as follows:
(a) in cash or by check, bank draft or money order payable to the
order of the Company;
(b) in the form of shares of Common Stock owned by the Participant
(and for which the Participant has good title free and clear of any
liens and encumbrances);
(c) by agreeing to surrender then exercisable Options equivalent
in value;
(d) if the Shares are traded on a national securities exchange,
through the delivery of irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the aggregate Purchase Price
plus all required tax withholding by payment through a cash or margin
arrangement with a broker;
(e) in Shares otherwise issuable upon exercise of the Option; or
(f) on such other terms and conditions as may be acceptable to the
Committee (which may include payment in full or in part by the transfer
of Shares which have been owned by the Participant for at least 6 (six)
months or the surrender of Options owned by the Participant) and in
accordance with applicable law.
(iii) Upon receipt of payment, the Company shall deliver to the
Participant as soon as practicable a certificate or certificates for the
Shares then purchased. No Shares shall be issued until payment, as provided
herein, has been made or provided for.
(F) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the aggregate
Fair Market Value (determined as of the time of grant) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
the Participant during any calendar year under the Plan and/or any other stock
option plan of the Company or any subsidiary or parent corporation (within the
meaning of Section 424 of the Code) exceeds $100,000, such Options shall be
treated as Options which are not Incentive Stock Options.
To the extent permitted under Section 422 of the Code, or the applicable
regulations thereunder or any applicable Internal Revenue Service pronouncement,
if (i) a Participant’s employment with the Company or
B-6
Designated Subsidiary is terminated by reason of death, Disability, Retirement
or termination without Cause, and (ii) the portion of any Incentive Stock Option
that would be exercisable during the post-termination period specified under
Article VII but for the $100,000 limitation currently contained in Section
422(d) of the Code is greater than the portion of such Option that is
immediately exercisable as an “incentive stock option” during such
post-termination period under Section 422, such excess shall be treated as a
Non-Qualified Stock Option. If the exercise of an Incentive Stock Option is
accelerated for any reason, any portion of such Option that is not exercisable
as an Incentive Stock Option by reason of the $100,000 limitation contained in
Section 422(d) of the Code shall be treated as a Non-Qualified Stock Option.
Should any of the foregoing provisions not be necessary in order for the
Stock Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend the Plan accordingly, without
the necessity of obtaining the approval of the stockholders of the Company,
except as otherwise required by law.
(G) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms of
the Plan, as the Committee shall deem appropriate including, without limitation,
provisions permitting the use of shares of Common Stock to exercise and settle
an Option (“Stock Swaps”) or permitting “reloads” such that in the case of
Stock Swaps, the same number of Non-Qualified Stock Options is granted as the
number of shares of Common Stock swapped (“Reloads”). With respect to Stock
Swaps, shares of Common Stock shall be valued at Fair Market Value on the date
of exercise and shall have the same remaining time period as the shares of
Common Stock that were swapped. With respect to Reloads, the exercise price of
the new Non-Qualified Stock Option shall be the Fair Market Value on the date
granted and the term of the Non-Qualified Stock Option shall be the same as the
remaining term of the Options that are exercised.
VII. EFFECT OF TERMINATION OF EMPLOYMENT
(A) DEATH, DISABILITY, RETIREMENT, ETC. Except as otherwise provided in
the Participant’s Option Agreement, upon Termination of Employment, all
outstanding Options then exercisable and not exercised by the Participant prior
to such Termination of Employment (and any Options not previously exercisable
but made exercisable by the Committee at or after the Termination of Employment)
shall remain exercisable by the Participant to the extent not exercised for the
following time periods, or, if earlier, the prior expiration of the Option in
accordance with the terms of the Plan and grant:
(i) In the event of the Participant’s death, Retirement or
Disability, such Options shall remain exercisable by the Participant (or by
the Participant’s estate or by the person given authority to exercise such
Options by the Participant’s will or by operation of law) for a period of
one year from the date of the Participant’s death, Retirement or
Disability, provided that the Committee, in its sole discretion, may at any
time extend such time period.
(ii) In the event of the Participant’s Termination of Employment
without Cause, such Options shall remain exercisable for ninety (90) days
from the date of the Participant’s Termination of Employment, provided that
the Committee, in its sole discretion, may at any time extend such time
period.
Unless the Committee otherwise determines, there shall be no effect on the
exercisability of Options held by a Participant if (i) the Participant’s
employment, directorship or consultancy is transferred from the Company to a
Designated Subsidiary, from a Designated Subsidiary to the Company or from one
Designated Subsidiary to another or (ii) the Participant is a Key Employee who
becomes an Eligible Consultant or an Eligible Consultant who becomes a Key
Employee.
(B) CAUSE. Upon the Termination of Employment of a Participant for Cause,
or if the Company or a Designated Subsidiary obtains or discovers information
after Termination of Employment that such Participant had engaged in conduct
that would have justified a Termination of Employment for Cause during the
Participant’s employment, directorship or consultancy, all outstanding Options
of such Participant shall, unless the Committee in its sole discretion
determines otherwise, terminate and be null and void.
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(C) CANCELLATION OF OPTIONS. Except as otherwise provided in Article
V(D), no Options that were not exercisable during the period of employment shall
thereafter become exercisable upon a Termination of Employment for any reason or
no reason whatsoever, and such options shall terminate and become null and void
upon a Termination of Employment, unless the Committee determines in its sole
discretion that such Options shall be exercisable.
VIII. NONTRANSFERABILITY OF OPTIONS
Except as set forth below, no Option shall be transferable by the
Participant otherwise than by will or under applicable laws of descent and
distribution or pursuant to a qualified domestic relations order, and during the
lifetime of the Participant may be exercised only by the Participant or his or
her guardian or legal representative, as defined in the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder. The Committee may grant Options that are transferable, without
payment of consideration, to immediate family members of the Participant or to
trusts or partnerships for such family members; the Committee may also amend
outstanding Options to provide for such transferability. In addition, except as
provided in the immediately preceding two sentences, no Option shall be
assigned, negotiated, pledged or hypothecated in any way (whether by operation
of law or otherwise), and no Option shall be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, negotiate, pledge or
hypothecate any Option, or in the event of any levy upon any Option by reason of
any execution, attachment or similar process contrary to the provisions hereof,
such Option shall immediately terminate and become null and void.
IX. RIGHTS AS A STOCKHOLDER
A Participant (or a permitted transferee of an Option) shall have no rights
as a stockholder with respect to any Shares covered by such Participant’s Option
until such Participant (or permitted transferee) shall have become the holder of
record of such Shares, and no adjustments shall be made for dividends in cash or
other property or distributions or other rights in respect to any such Shares,
except as otherwise specifically provided in the Plan.
X. TERMINATION, AMENDMENT AND MODIFICATION
The Plan shall terminate at the close of business on the tenth anniversary
of the Effective Date (the “Termination Date”), unless terminated sooner as
hereinafter provided, and no Option shall be granted under the Plan on or after
that date. The termination of the Plan shall not terminate any outstanding
Options that by their terms continue beyond the Termination Date. At any time
prior to the Termination Date, the Committee may amend or terminate the Plan or
suspend the Plan in whole or in part.
The Committee may at any time, and from time to time, amend, in whole or in
part, any or all of the provisions of the Plan (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirements
referred to in Article XII), or suspend or terminate it entirely, retroactively
or otherwise; PROVIDED, HOWEVER, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with respect to
Options granted prior to such amendment, suspension or termination, may not be
materially impaired without the consent of such Participant and; PROVIDED,
FURTHER, without the approval of the stockholders of the Company entitled to
vote, no amendment may be made (except by operation of Article V(C) with respect
to clauses (i), (ii) and (iii) below), which would (i) increase the aggregate
number of shares of Common Stock that may be issued under the Plan; (ii)
decrease the minimum Purchase Price of any Option; (iii) increase the individual
limitation set forth in Article VI(A) of the Plan; (iv) extend the maximum
option period; or (v) effect any other change that would require stockholder
approval under Section 162(m) of the Code.
The Committee may amend the terms of any Option granted, prospectively or
retroactively, but, subject to Article VI above or as otherwise provided herein,
no such amendment or other action by the Committee shall materially impair the
rights of any Participant without the Participant’s consent. No modification of
an Option shall adversely affect the status of an Incentive Stock Option as an
incentive stock option under Section 422 of the Code. Notwithstanding the
foregoing, however, no such amendment
B-8
may, without the approval of the stockholders of the Company, effect any change
that would require stockholder approval under applicable law.
XI. USE OF PROCEEDS
The proceeds of the sale of Shares subject to Options under the Plan are to
be added to the general funds of the Company and used for its general corporate
purposes as the Board shall determine.
XII. GENERAL PROVISIONS
(A) RIGHT TO TERMINATE EMPLOYMENT OR CONSULTING ARRANGEMENTS. Neither the
adoption of the Plan nor the grant of Options shall impose any obligation on the
Company or Designated Subsidiaries to continue the employment of any
Participant, the directorship of any Director or the consulting arrangement with
any Eligible Consultant, nor shall it impose any obligation on the part of any
Participant to remain in the employ of the Company or Designated Subsidiaries or
to remain as a director or consultant of the Company or its Designated
Subsidiaries.
(B) PURCHASE FOR INVESTMENT. If the Board or the Committee determines
that the law so requires, the holder of an Option granted hereunder shall, upon
any exercise or conversion thereof, execute and deliver to the Company a written
statement, in form satisfactory to the Company, representing and warranting that
such Participant is purchasing or accepting the Shares then acquired for such
Participant’s own account and not with a view to the resale or distribution
thereof, that any subsequent offer for sale or sale of any such Shares shall be
made either pursuant to (i) a Registration Statement on an appropriate form
under the Securities Act, which Registration Statement shall have become
effective and shall be current with respect to the Shares being offered and
sold, or (ii) a specific exemption from the registration requirements of the
Securities Act, and that in claiming such exemption the holder will, prior to
any offer for sale or sale of such Shares, obtain a favorable written opinion,
satisfactory in form and substance to the Company, from counsel acceptable to
the Company as to the availability of such exception.
(C) TRUSTS, ETC. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option
thereunder) shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Company and any Participant or the executor,
administrator or other personal representative or designated beneficiary of such
Participant, or any other persons. Any reserves that may be established by the
Company in connection with the Plan shall continue to be part of the general
funds of the Company, and no individual or entity other than the Company shall
have any interest in such funds until paid to a Participant. If and to the
extent that any Participant or such Participant’s executor, administrator or
other personal representative, as the case may be, acquires a right to receive
any payment from the Company pursuant to the Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company.
(D) NOTICES. Any notice to the Company required by or in respect of this
Plan will be addressed to the Company, Cornell Corrections, Inc., 4801 Woodway,
Suite 100E, Houston, TX 77056, Attention: Chief Financial Officer, or such other
place of business as shall become the Company’s principal executive offices from
time to time. Each Participant shall be responsible for furnishing the Company
with the current and proper address for the mailing to such Participant of
notices and the delivery to such Participant of agreements, Shares and payments.
Any such notice to the Participant will, if the Company has received notice that
the Participant is then deceased, be given to the Participant’s personal
representative if such representative has previously informed the Company of his
status and address (and has provided such reasonable substantiating information
as the Company may request) by written notice under this Section. Any notice
required by or in respect of this Plan will be deemed to have been duly given
when delivered in person or when dispatched by telegram or one (1) business day
after having been dispatched by a nationally recognized overnight courier
service or three (3) business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid. The
Company assumes no responsibility or obligation to deliver any item mailed to
such address that is returned as undeliverable to the addressee and any further
mailings will be suspended until the Participant furnishes the proper address.
B-9
(E) SEVERABILITY OF PROVISIONS. If any provisions of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions of the Plan, and the Plan shall be construed and
enforced as if such provisions had not been included.
(F) PAYMENT TO MINORS ETC. Any benefit payable to or for the benefit of a
minor, an incompetent person or other person incapable of receipt thereof shall
be deemed paid when paid to such person’s guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Committee, the Company and their employees, agents and
representatives with respect thereto.
(G) HEADINGS AND CAPTIONS. The headings and captions herein are provided
for reference and convenience only. They shall not be considered part of the
Plan and shall not be employed in the construction of the Plan.
(H) CONTROLLING LAW. The Plan shall be construed and enforced according
to the laws of the State of Delaware.
(I) OTHER BENEFITS. No payment under this Plan shall be considered
compensation for purposes of computing benefits under any retirement plan of the
Company or a Designated Subsidiary nor affect any benefits under any other
benefit plan now or subsequently in effect under which the availability of
benefits is related to the level of compensation.
(J) COSTS. The Company shall bear all expenses included in administering
this Plan, including expenses of issuing Common Stock pursuant to any Options
hereunder.
(K) SECTION 162(M) DEDUCTION LIMITATION. The Committee at any time may in
its sole discretion limit the number of Options that can be exercised in any
taxable year of the Company, to the extent necessary to prevent the application
of Section 162(m) of the Code (or any similar or successor provision), provided
that the Committee may not postpone the earliest date on which Options can be
exercised beyond the last day of the stated term of such Options.
(L) SECTION 16(B) OF THE EXCHANGE ACT. All elections and transactions
under the Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with all exemptive conditions
under Rule 16b-3. The Committee may establish and adopt written administrative
guidelines, designed to facilitate compliance with Section 16(b) of the Exchange
Act, as it may deem necessary or proper for the administration and operation of
the Plan and the transaction of business thereunder.
XIII. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
(A) STOCK CERTIFICATES. Upon any exercise of an Option and payment of the
exercise price as provided in such Option, a certificate or certificates for the
Shares as to which such Option has been exercised shall be issued by the Company
in the name of the person or persons exercising such Option and shall be
delivered to or upon the order of such person or persons.
(B) LEGENDS. Certificates for Shares issued upon exercise of an Option
shall bear such legend or legends as the Committee, in its sole discretion,
determines to be necessary or appropriate to prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act
or to implement the provisions of any agreements between the Company and the
Participant with respect to such Shares.
(C) PAYMENT OF EXPENSES. The Company shall pay all issue or transfer
taxes with respect to the issuance or transfer of Shares, as well as all fees
and expenses necessarily incurred by the Company in connection with such
issuance or transfer and with the administration of the Plan.
XIV. LISTING OF SHARES AND RELATED MATTERS
If at any time the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of, or in connection with, the grant of
Options or the award or sale of Shares under the Plan, no Option grant shall be
effective and no Shares will be delivered, as the case may be, unless and until
such
B-10
listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board.
XV. WITHHOLDING TAXES
The Company shall have the right to require prior to the issuance or
delivery of any shares of Common Stock payment by the Participant of any
federal, state or local taxes required by law to be withheld.
The Committee may permit any such withholding obligation to be satisfied by
reducing the number of shares of Common Stock otherwise deliverable. A person
required to file reports under Section 16(a) of the Exchange Act with respect to
securities of the Company may elect to have a sufficient number of shares of
Common Stock withheld to fulfill such tax obligations (hereinafter a
“Withholding Election”) only if the election complies with such conditions as
are necessary to prevent the withholding of such shares from being subject to
Section 16(b) of the Exchange Act. To the extent necessary under then current
law, such conditions shall include the following: (x) the Withholding Election
shall be subject to the approval of the Committee and (y) the Withholding
Election is made (i) during the period beginning on the third business day
following the date of release for publication of the quarterly or annual summary
statements of sales and earnings of the Company and ending on the twelfth
business day following such date or is made in advance but takes effect during
such period, (ii) six (6) months before the stock award becomes taxable or (iii)
during any other period in which a Withholding Election may be made under the
provisions of Rule 16b-3 promulgated pursuant to the Exchange Act. Any fraction
of a share of Common Stock required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the Participant.
B-11
FRONT SIDE OF PROXY
BACK SIDE OF PROXY
PROXY CORNELL CORRECTIONS, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Cornell Corrections, Inc. (the
“Company”) hereby appoint David M. Cornell and Steven W. Logan
each of them, attorneys-in-fact and proxies of the undersigned, with full power
of substitution, to vote in respect of the undersigned’s shares of the Company’s
Common Stock at the Annual Meeting of Stockholders of the Company to be held at
Fairchild Gateway Resource Center, 1st Floor, One Gateway Center, 420 Fort
Duquesne Boulevard, Pittsburgh, Pennsylvania 15222, at 10:00 a.m., Eastern time,
on Thursday, April 9, 1998, and at any adjournment(s) thereof, the number of
shares the undersigned would be entitled to vote if personally present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE NOMINEES SET FORTH
BELOW AND “FOR” EACH OF PROPOSALS 2, 3, 4, 5, 6 AND 7 BELOW.
1. ELECTION OF DIRECTORS
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to votefor the
(except as marked to nominees listed below
the contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE’S NAME IN THE LIST BELOW.)
David M. Cornell Peter A. Leidel
Campbell A. Griffin, Jr. Arlene R. Lissner
Richard T. Henshaw III Tucker Taylor
2. TO AMEND ARTICLE FIFTH OF THE COMPANY’S FOR AGAINST ABSTAIN
RESTATED CERTIFICATE OF INCORPORATION TO [ ] [ ] [ ]
PROVIDE FOR THE CLASSIFICATION OF THE
BOARD OF DIRECTORS INTO THREE CLASSES,
WITH MEMBERS OF EACH CLASS SERVING
STAGGERED THREE YEAR TERMS
3. TO AMEND ARTICLE EIGHTH OF THE COMPANY’S FOR AGAINST ABSTAIN
RESTATED CERTIFICATE OF INCORPORATION TO [ ] [ ] [ ]
PROVIDE THAT ARTICLE FIFTH AND ARTICLE
EIGHTH OF THE RESTATED CERTIFICATE OF
INCORPORATION MAY ONLY BE AMENDED BY A
SUPER-MAJORITY VOTE OF THE STOCKHOLDERS
4. TO AMEND ARTICLE EIGHTH OF THE COMPANY’S FOR AGAINST ABSTAIN
RESTATED CERTIFICATE OF INCORPORATION TO [ ] [ ] [ ]
PROVIDE THAT STOCKHOLDERS MAY ADOPT,
AMEND, OR REPEAL THE BYLAWS ONLY BY A
SUPER-MAJORITY VOTE OF THE STOCKHOLDERS
5. TO AMEND AND RESTATE THE 1996 STOCK FOR AGAINST ABSTAIN
OPTION PLAN TO INCREASE THE NUMBER OF [ ] [ ] [ ]
SHARES AVAILABLE FOR GRANT THEREUNDER
6. TO RATIFY THE APPOINTMENT OF ARTHUR FOR AGAINST ABSTAIN
ANDERSEN LLP AS THE COMPANY’S [ ] [ ] [ ]
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1998
7. IN THEIR DISCRETION, THE PROXIES ARE FOR AGAINST ABSTAIN
AUTHORIZED TO VOTE UPON SUCH MATTERS AS [ ] [ ] [ ]
MAY PROPERLY COME BEFORE THE ANNUAL
MEETING
BACK SIDE OF PROXY
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder(s).
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” THE DIRECTOR NOMINEES
SET FORTH ON THE REVERSE SIDE AND EACH OF PROPOSALS 2, 3, 4, 5, 6 AND 7. All
prior proxies are hereby revoked. ___________________________________
___________________________________
Signature(s)
Dated _____________________ , 1998
(PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS HEREON. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, ETC., GIVE FULL
TITLE AS SUCH. FOR JOINT ACCOUNTS,
EACH JOINT OWNER SHOULD SIGN.)
– ——————————————————————————–
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE PROXY CARD USING THE
ENCLOSED ENVELOPE.
– ——————————————————————————–
—–END PRIVACY-ENHANCED MESSAGE—–