SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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
|_| Solicitation Material Pursuant to Section 240.14a-11(c)or Section 240.14a-12
AVALON CORRECTIONAL SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per exchange Act Rules 14a-6(i) (1) and 0-11.
1) Title of each class of securities to which transaction applies.
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined.)
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee paid:
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|_|Fee paid previously with preliminary materials.
|_|Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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AVALON CORRECTIONAL SERVICES, INC.
13401 Railway Drive
Oklahoma City, OK 73114
Telephone: (405) 752-8802
______________
Dear Shareholders:
On behalf of your Board of Directors, I am pleased to invite you to attend
the 2001 annual meeting of shareholders of Avalon Correctional Services, Inc.
The notice of annual meeting, proxy statement and proxy card accompanying this
letter describe the business to be conducted at the meeting, including the
election of certain directors.
The Board of Directors has nominated Mr. Robert O. McDonald and Mr. Charles
W. Thomas, Ph.D., to serve three year terms on the Board of Directors. It is
important that your shares be represented and voted at the annual meeting. Even
if you are planning to attend the meeting in person, please fill in, sign, date
and mail the proxy card in the enclosed, postage-paid envelope as soon as
possible to ensure your votes are represented. In any case, the proxy is
revocable and will not affect your right to vote at the meeting if you do
attend. We look forward to seeing you at the meeting.
Sincerely,
/s/ Donald E. Smith
Donald E. Smith
Chairman, President and Chief Executive Officer
AVALON CORRECTIONAL SERVICES, INC.
13401 Railway Drive
Oklahoma City, OK 73114
Telephone: (405) 752-8802
______________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TIME: 10:00 a.m., local time, on Wednesday, May 23, 2001
PLACE: The Sheraton Four Points Hotel located at 6300 East
Terminal Drive, Oklahoma City, Oklahoma 73159
ITEMS OF BUSINESS 1. To elect two directors to serve for three year
terms and until the election and qualification
of each director's successor.
2. To ratify the appointment of Grant Thornton
L.L.P., independent certified public accountants,
as auditor to examine the financial statements of
the Company for the year ending December 31,
2001.
3. To consider and transact such other business as
may properly be brought before the Annual Meeting
or any adjournment thereof.
RECORD DAte: You are entitled to vote if you are are a
shareholder at the close of business on Wednesday,
April 11, 2001. A complete list of the shareholders
entitled to vote at the Annual Meeting will be
available for examination by shareholders, for any
purpose germane to the meeting, during ordinary
business hours, during a 10-day period receding the
date of the meeting, at the executive office Of the
Company, 13401 Railway Drive, Oklahoma City,
Oklahoma 73114.
FINANCIAL STATEMENTS: Included with this mailing is the Company's Annual
Report, Form 10-KSB for the period ending December
31, 2000. The Annual Report includes the Company's
audited financial statements and notes for the
calendar year 2000, and related Management's
Discussion and Analysis of Financial Condition and
Results of Operations.
VOTING BY PROXY: Shareholders are invited to attend the meeting in
person. Whether or not you plan on attending the
meeting in person, it is important that your shares
be represented and voted at the meeting in
accordance with your instructions. Therefore, you
are urged to fill in, sign, date and return the
accompanying proxy in the enclosed envelope. No
postage is required if mailed in the United States.
BY ORDER OF THE BOARD OR DIRECTORS,
/s/ Randall J. Wood
April 4, 2001 Randall J. Wood
Corporate Secretary
AVALON CORRECTIONAL SERVICES, INC.
________________
PROXY STATEMENT
________________
GENERAL INFORMATION
This Proxy Statement together with the Annual Report on Form 10-KSB are
being furnished to Shareholders by the Board of Directors of Avalon Correctional
Services, Inc. (The "Company") for the Annual Meeting of Shareholders to be held
at The Sheraton Four Points Hotel located at 6300 East Terminal Drive, Oklahoma
City, Oklahoma 73159 on May 23, 2001, at 10:00 a.m. local time. The Company's
Shareholders will consider and vote upon the proposals described herein and
referred to in the Notice of Annual Meeting accompanying this Proxy Statement.
The close of business on April 11, 2001, has been fixed as the record date
for the determination of the shareholders entitled to notice of, and to vote at,
the Annual Meeting. On March 31, 2001, there were outstanding and entitled to
vote 4,715,900 Shares of Common Stock. Each share is entitled to one vote on
each matter to be considered at the Annual Meeting. For a description of the
principal holders of such shares, see "Voting Securities and Principal Holders
Thereof" below.
The Company's principal executive office is located at 13401 Railway Drive,
Oklahoma City, Oklahoma 73114. The company's website is www.avaloncorrections.
com.
This Proxy Statement and accompanying proxy card shall be furnished to
Shareholders on or about April 18, 2001.
SOLICITATION OF PROXIES AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of one-third (1/3) of
the votes represented by the outstanding shares of the Company's common stock is
necessary to constitute a quorum at the Annual Meeting. Holders of shares are
entitled to one vote per share of common stock and are not allowed to cumulate
votes in the election of directors.
Subject to the rights of shareholders to revoke their proxies, the shares
represented by each proxy executed in the accompanying form of proxy will be
voted at the meeting in accordance with the instructions therein. Proxies on
which no voting instructions are indicated will be voted FOR the election of the
nominees for director and FOR the appointment of Grant Thornton, L.L.P. as
auditors and in the best judgment of proxy holders on any other matter that may
properly come before the Annual Meeting. If a broker indicates on a proxy that
it does not have discretionary authority to vote shares on a certain matter,
those shares will not be considered present and entitled to vote with respect to
that matter. If a shareholder indicates on a proxy card that such shareholder
abstains from voting with respect to a proposal, the shares will be considered
as present and entitled to vote with respect to that matter, and abstention will
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have the effect of a vote AGAINST the proposal. In accordance with Nevada law, a
shareholder entitled to vote for the election of directors can withhold
authority to vote for all nominees for directors or can withhold authority to
vote for certain nominees for directors.
Shareholders have the unconditional right to revoke their proxies at any
time prior to the voting of their proxies at the Annual Meeting by giving
written notice to the Secretary of the Company or by attending the Annual
Meeting and voting in person.
The expenses of the solicitation of the proxies for the meeting, including
the cost of preparing, assembling and mailing the notice, proxy, proxy statement
and return envelopes, the handling and tabulation of proxies received, and
charges of brokerage houses and other institutions, nominees or fiduciaries for
forwarding such documents to beneficial owners, will be paid by the Company. The
Company does not intend to solicit proxies other than the mailing of proxy
materials. All Proposals require the affirmative vote of a majority of shares
represented and voting at the Annual Meeting.
ELECTION OF DIRECTORS
(Proposal One)
The by-laws of the Company provide that the number of directors who shall
constitute the whole board shall be such number as may be fixed from time to
time by the Board of Directors and vacancies in the Board may be filled by the
Board of Directors until the next annual meeting of the Shareholders. The
by-laws further provide that the Board members are divided into three classes of
directors with the term of office of one class expiring each year. At present,
the Board of Directors consists of five members, Donald E. Smith, Charles W.
Thomas, Ph.D., Robert O. McDonald, Mark S. Cooley and James P. Wilson. During
2000 Jerry Sunderland retired from the Company and as a result resigned his
position as President and a Director of the Company. Dr. Charles W. Thomas was
selected by the Board of Directors to replace Mr. Sunderland on an interim
basis. One director class representing two positions on the Board of Directors
is to be voted on by the Shareholders.
In the 1999 annual meeting, Messrs. Smith and Wilson were elected to serve
three year terms. In the 2000 annual meeting, Mr. Cooley was elected to serve a
three year term. Board members Messrs. Smith, Cooley and Wilson are not being
voted on at this year's meeting because their terms extend beyond this year. Mr.
McDonald is nominated for re-election to a three year term to fill one of the
positions on the Board of Directors. Should Mr. McDonald become unable to serve,
proxies may be voted for another person designated by management or the Board.
Mr. McDonald has advised that he will serve if elected. Dr. Charles W. Thomas is
nominated for election to the seat vacated by Jerry Sunderland and which Dr.
Thomas presently holds on an interim basis by appointment. Should Dr. Thomas
become unable to serve, proxies may be voted for another person designated by
management or the Board. Dr. Thomas has advised that he will serve if elected.
The Board of Directors recommends a vote FOR the re-election of Robert O.
McDonald and the election of Charles W. Thomas, Ph.D. as Directors for terms
expiring at the 2004 Annual Meeting.
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Certain Information Regarding Nominees
The name of the nominee, his age as of the date of the Annual Meeting, the
date he first became a director, his principal occupation during at least the
past five years, certain other directorships held and certain other biographical
information is as set forth below.
Name of Nominee Age Current Position(s) Term nominated Director
to Serve Since
Robert O. McDonald 62 Director Three years 1995
Charles W. Thomas, Ph.D. 57 Director Three Years Dec. 2000
Robert O. McDonald was appointed as a Director of Avalon in October, 1994
and elected at the 1995 Annual Meeting. Mr. McDonald is Chairman of the Board of
Directors of Capital West Securities and its parent holding company, Affinity
Holding Corp. Mr. McDonald started his investment career in 1961 with Allen and
Company and left in 1967 to form McDonald Bennahum and Co., which later joined
with Ladenburg Thalmann and Co. where Mr. McDonald was a Senior Partner. Mr.
McDonald joined Planet Oil Mineral Corporation in 1971 and became president in
1973. From 1975 until 1993, Mr. McDonald was affiliated with Stifel Nicolaus &
Company and headed its municipal syndicated effort. Mr. McDonald received a
Bachelor's Degree in Finance from the University of Oklahoma in 1960. He also
served as an Officer in the United States Army and Army Reserve.
Charles W. Thomas, Ph.D. was appointed as a director-elect of Avalon in
December 2000, subject to shareholder approval at the 2001 annual shareholder
meeting. Dr. Thomas received his B.S. degree from McMurry University in 1966 and
his M.A. and Ph.D. degrees from the University of Kentucky in, respectively,
1969 and 1971. After serving on the faculty of Virginia Commonwealth University,
the College of William and Mary, and Bowling Green State University, he became a
Professor of Criminology at the University of Florida in 1980. He retired from
his academic position in 1999 but continues to publish the results of his
on-going research on the economic, legal, and public policy aspects of
privatization. From 1997-2000 Dr. Thomas was a member of the board of directors
of Prison Realty Trust. Dr. Thomas is now a private consultant who specializes
in issues of relevance to the private corrections industry.
3
Directors
The Company's current directors and director nominees are:
Name Age Position(s) with the Company
Donald E. Smith ....................48....Chief Executive Officer,
President, and Director
Robert O. McDonald .................62....Director
Mark S. Cooley ....................43....Director
James P. Wilson ....................42....Director
Charles W. Thomas, Ph.D.............57....Director
The following is a brief description of the business experience during the
past five years of each of the above-name persons (information concerning Robert
O. McDonald and Charles W. Thomas is set forth above):
Donald E. Smith is the founder of the Company's corrections operations and
has served as the Chief Executive Officer of Avalon and its subsidiaries since
their inception. Mr. Smith has owned, managed and developed a number of private
corporations since 1985 to provide private corrections, health care and other
related services. Mr. Smith received a Bachelor of Science degree in 1974 from
Northwestern State College. Mr. Smith was employed by Arthur Andersen & Co. for
seven years prior to founding the Company.
Mark S. Cooley was appointed as a Director of Avalon in January 1998 and
elected to a two year term in the 1998 annual meeting. Mr. Cooley was re-elected
in 2000 to an additional three year term. Mr. Cooley is a Principal of Cooley &
Company and Pro Trust Equity Partners. Mr. Cooley was with Citicorp and Chemical
Bank for twelve years in their Corporate Finance Divisions in New York and
Denver. Mr. Cooley received his Bachelors degree in Economics from DePauw
University and an MBA in Finance from Indiana University.
James P. Wilson was appointed as an interim Director of Avalon in September
1998, and elected by the shareholders at the 1999 annual meeting. Mr. Wilson is
a managing partner in the investment firm of Rice, Sangalis, Toole & Wilson.
Prior to founding Rice, Sangalis, Toole & Wilson, Mr. Wilson was a vice
president with First Texas Merchant Banking Group, and was also an audit manager
with Arthur Young & Co. Mr. Wilson received a BBA degree from Texas A&M
University, and is a Certified Public Accountant.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of March 31, 2001, information
concerning the beneficial ownership of the Company's shares by (i) each person
known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's shares, (ii) each director of the Company,
(iii) each of the executive officers of the Company and (iv) all directors and
executive officers as a group. To the best of the Company's knowledge, each of
the persons named in the table has sole voting and investment power with respect
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to all the shares beneficially owned by such person as set forth opposite such
person's name except as otherwise noted.
Amount and
Nature of
Beneficial
Ownership of
Common Percent Total Voting
Name & Address Stock of Class Percentage
- -------------- ------------ -------- ------------
Donald E. Smith (2) 1,942,429 (1) 24.81% 21.57%
13401 Railway Drive
Oklahoma City, OK
73114
RSTW Partners III(3) 1,622,448 20.73% 34.04%
5847 San Felipe
Suite 4350
Houston, TX 77057
Robert O. McDonald (2) 45,903 * *
3316 Preston Drive
Oklahoma City, OK
73120
Mark S. Cooley (2) 1,883 * *
385 Inverness Drive South
Suite 460
Englewood, CO 80112
Randall J. Wood (2) 12,953 * *
13401 Railway Drive
Oklahoma City, OK
73114
Tiffany Smith (2) 40,778 * *
13401 Railway Drive
Oklahoma City, OK
73114
Joilette Mousso 9,215 * *
13401 Railway Drive
Oklahoma City, OK
73114
Lloyd Lovely (2) 2,200 * *
13401 Railway Drive
Oklahoma City, OK
73114
5
Eric S. Gray (2) 6,878 * *
13401 Railway Drive
Oklahoma City, OK
73114
All executive officers and
directors as a group 3,684,687(1) 45.54% 55.61%
(9 persons) (2)
* Less than 1%.
(1) Includes 61,542 shares owned by Mr. Smith's children.
(2) Includes 83,015 shares to Mr. Smith, 45,903 shares to Mr. McDonald, 1,883
shares to Mr. Cooley, 12,953 shares to Mr. Wood, 40,778 shares to Ms. Smith,
1,500 shares to Mr. Lovely, 3,878 shares to Mr. Gray and 9,215 shares to Ms.
Mousso issuable within 60 days upon exercise of vested options granted pursuant
to the Company's Stock Option Plan.
(3) James P. Wilson is a managing partner of RSTW Partners III L.P. Mr. Wilson
disclaims any beneficial interest in the shares represented.
Note: Under the rules of the Securities and Exchange Commission, a person
is deemed to be a beneficial owner of a security if he has or shares the powers
to vote or direct the voting of such security or the power to dispose of or to
direct the disposition of such security. Accordingly, more than one person may
be deemed to be a beneficial owner of the same securities. A person is also
deemed to be a beneficial owner of any securities of which that person has
the right to acquire beneficial ownership within 60 days. Unless otherwise
indicated by footnote, the named individuals have sole voting and investment
power with respect to the shares held by them.
EXECUTIVE OFFICERS
The Company's current officers are:
Name Age Position(s) with the Company
Donald E. Smith ..............48..........Chief Executive Officer, Director
Mary Livers ..................47..........Chief Operating Officer
Randall J. Wood .............43..........Corporate Secretary and Counsel
Tiffany Smith ................33..........Vice President of Corporate
Communications, Asst. Corp.
Secretary
Lloyd Lovely ................51..........Vice President of Finance
Eric Gray ....................44..........Vice President and Counsel
Joliette Mousso ..............33..........Vice President
Marvin Wiebener ..............57..........Vice President
6
Officers of the Company -
The following is a brief description of the business experience during the
past five years of each of the above-name officers who are not Directors or
Director nominees:
Mary L. Livers joined Avalon in 2000 and serves as the Chief Operating
Officer of the Company. Mary L. Livers has more than 22 years of correctional
management expertise. Her wide-ranging responsibilities include supervision of
1700 beds and 500 staff, site development and fiscal management. Ms. Livers is
responsible for all correctional operations including contract negotiations and
compliance; start up of new corrections projects, human resources, employee
staff training programs and extensive quality assurance oversight. Ms. Livers
works with the Oklahoma Department of Corrections, Texas Department of Criminal
Justice, and Colorado Department of Corrections with innovative approaches to
management systems.
Randall J. Wood joined Avalon in 1995 and serves as Corporate Secretary,
Vice President and Corporate Counsel for the Company. Prior to joining the
Company in 1995, Mr. Wood's practice was focused primarily in the field of real
property and commercial litigation. Mr. Wood practiced with the firm of Stack &
Barnes, P.C. for ten years, and was with the firm of Hammons, Vaught & Conner
prior to joining the Company. Mr. Wood is a member of the Oklahoma Bar
Association and is authorized to practice in Oklahoma Federal Courts and the
Tenth Circuit Court of Appeals. Mr. Wood is responsible for the duties of the
Corporate Secretary, management of legal matters, and compliance with government
regulations for the Company and subsidiaries. Mr. Wood received his law degree
from the University of Oklahoma in 1983.
Tiffany Smith joined the Company in 1994. Ms. Smith serves as Vice
President of Corporate Communications and assistant Corporate Secretary for the
Company. She has developed Avalon's public relations, communications and
marketing department. She designs, writes and produces all marketing material on
Avalon including Avalon's proposals in response to requests for proposals,
Avalon's web site, investor packages, brochures, press releases, articles and
investor presentations. Ms. Smith also reviews and participates in preparing all
of the companies SEC filings including the annual and quarterly reports, and the
private placement memorandum, contract proposals, and marketing plans. She has
established a community corrections provider database to target acquisitions for
company growth. Ms. Smith is the primary contact for the Company's shareholders
and investors. Ms. Smith is the spouse of Donald Smith, Chief Executive Officer.
Lloyd Lovely joined the Company as Vice President of Finance in March 2000.
Mr. Lovely is a Certified Public Accountant and is primarily responsible for
financial reporting and corporate administration for the Company. Prior to
joining the company Mr. Lovely was Business Manager at the OU Health Sciences
Center, Department of Dermatology. Mr. Lovely was a Controller at Professional
Home Care, Inc. from 1995 to 1999 and a Controller at Lyntone Belts from 1984 to
1995. From 1977 to 1984 Mr. Lovely was Senior Director of General Accounting at
T.G. & Y. Stores Co., Inc. Mr. Lovely holds a Bachelor of Science Degree in
Accounting and a Masters Degree in Business Administration from Central State
University.
7
Eric Gray joined the Company as Corporate Counsel in June 1999. Mr. Gray
serves as Vice President and Corporate Counsel for the Company and is
responsible for various administrative functions. Mr. Gray's responsibilities
include pending litigation matters, contract review and State Law compliance
issues. Mr. Gray is also responsible for special projects, as well as issues
concerning the school contract for the Union City Juvenile Center. Mr. Gray
received a Bachelor's Degree in Political Science and Philosophy from the
University of Pittsburgh in 1978 and the Degree of Juris Doctor with Distinction
from Oklahoma City University in 1981.
Jolie Mousso joined Avalon in 1992 and serves as Vice President for
Colorado Operations. Ms. Mousso has been engaged in the corrections industry for
10 years with special skills in facility operations in community corrections.
Her responsibilities have ranged from day to day management including
supervision, administration, and quality assurance, formulating policies and
procedures, hiring, training and supervising staff. Ms. Mousso has held
positions in administration for the Company in Oklahoma and Colorado.
Marvin Wiebener joined Avalon in 2001 and serves as Executive Vice
President. Mr. Wiebener has over 25 years experience in the field of
corrections. Mr. Wiebener's area of expertise is in operating medium and maximum
secure juvenile and youthful offender programs. His career began in 1968 while
employed as a house parent in an institution for delinquent youth. He rose
through the ranks achieving administrative positions within the Oklahoma Office
of Juvenile Affairs. He served as superintendent of two of Oklahoma's
institutions that provided custody and treatment to incarcerated youth.
Information with Respect to Standing Committees of the Board and Meetings
Four meetings of the Board of Directors were held during the last fiscal
year, which were attended by all of the Directors. Attendance fees of $500.00
per meeting were paid to Messrs. McDonald and Cooley in connection with said
meetings. The Board also took action by unanimous written consents in lieu of
meetings on one occasion. Board members do not receive directors fees for
serving in such capacities, and board members also serving as officers do not
receive attendance fees for attendance at meetings.
The Company does not utilize a compensation or nominating committee.
However, the Board has appointed an audit committee consisting of Messrs. Smith,
McDonald and Cooley. Two of the members of the audit committee are outside board
members. The audit committee met three times during 2000. The Audit Committee is
responsible for the review and oversight of the Company's performance with
respect to its financial responsibilities and the integrity of the Company's
accounting and reporting practices.
Audit Committee Report
The Audit Committee assists the Board of Directors in its oversight of the
Company's systems of internal control, the Company's preparation of its
consolidated financial statements, the activities of the Company's internal
auditing functions, the conduct of the annual audit of the Company and the
relationship between the Company and its independent accountants. The Board of
Directors of the Company, in its business judgment, in May 2000 determined that
a majority of the members of the Committee are "independent," as required by the
applicable
8
listing standards of the NASDAQ. The Board of Directors (with the
assistance of the Committee) has the ultimate authority and responsibility to
select, evaluate, and, where appropriate, replace the independent accountants
(or to nominate the independent accountants to be proposed for shareholder
approval in any proxy statement). The Audit Committee operates pursuant to a
Charter adopted by the Board on May 24, 2000, a copy of which is attached to
this Proxy Statement as Appendix A.
Management of the Company is responsible for the preparation, presentation
and integrity of the Company's financial statements. Management is responsible
for maintaining appropriate accounting and financial reporting principles and
policies and internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. The independent
accountants are responsible for planning and carrying out proper annual audits
and quarterly reviews of the Company's financial statements. The independent
accountants express an opinion as to the conformity of the annual financial
statements with accounting principles generally accepted in the United States of
America and also provide a review report regarding the Company's interim
financial statements. In the performance of its oversight function, the Audit
Committee has reviewed and discussed the audited financial statements with
management and the independent accountants. The Audit Committee has also
discussed with the independent accountants the matters required to be discussed
by Statement on Auditing Standards No. 61, Communication with Audit Committees,
as currently in effect. The Audit Committee has also received the written
disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1. Independence Discussions with Audit
Committees, as currently in effect. The Audit Committee has considered whether
the provision of all non-audit services by the independent accountants to the
Company is compatible with maintaining the independent accountants' independence
and has discussed with them their independence.
Based upon the reports, review and discussions described in this Report,
and subject to the limitations on the role and responsibilities of the
Committee, the Committee recommended to the Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2000, to be filed with the Securities and
Exchange Commission.
The Audit Committee
Robert O. McDonald, Chairman
Donald E. Smith
9
Executive Compensation
The following table sets forth the compensation paid or accrued during each
of the years in the three years ended December 31, 2000, to the Company's Chief
Executive Officer, Donald E. Smith and the Company's President, Jerry
Sunderland:
Summary Compensation Table
.
Annual Compensation Long Term Compensation
Name and Year Salary Other Annual Securities All Other
Principal Position Compensation Underlying Compensation (1)
Options/SAR
Awards ( #)
Donald E. Smith, 2000 $60,000 $1,309 35,000 $225
Chief Executive 1999 $60,000 $1,309 (2) 66,530
Officer 1998 $60,000 $151 9,370
Jerry Sunderland 2000 $135,000 $252 (3) 35,000 $506
President 1999 $135,000 $252 42,790
1998 $105,865 $260 9,370
1. Company matching of 401(k) contributions. The Company also has a
Retirement Compensation Plan with its CEO.
2. Use of an automobile.
3. Company paid life insurance.
Employment Agreements
Employment Contracts. The Company has entered into a written employment
agreement with its Chief Executive Officer, Donald E. Smith. The contract was
initially for a three-year term and commenced in August, 1997, providing for a
first-year salary of $60,000 (subject to certain conditions) and subsequent-year
salaries to be determined by the Board of Directors of the Company. In September
of 1998, the Board of Directors authorized the amendment of the employment
agreement of Donald E. Smith to allow for an annual base salary of $85,000.
However, Donald E. Smith has not taken this increase pursuant to a previous
commitment regarding the sale of certain assets related to discontinued
operations. During the past year the Board of Directors extended the term of the
employment contract for an additional one year period. In 1998, the Company
initiated a retirement plan in which Donald E. Smith will participate. The
unfunded accrual for this Plan is $211,427. The employment agreement also
contains a provision for severance pay and disability payments, as well as a
non-compete agreement preventing him from engaging in a business deemed similar
to that of the Company for a period of one year from the cessation of his
employment. The Company's other officers and directors are employed by the
Company pursuant to verbal agreements.
10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The attention of the shareholders is directed to Financial Statement Note 8
on pages 22 and 23 and Financial Statement Note 14 on page 28 of the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000 (copies of
which were mailed together with the Proxy Statements), describing in detail
certain relationships and transactions involving the Company and certain
officers and directors of the Company. Such matters pertain to the execution of
employment agreements as described hereinabove, guarantee the Company's
financial obligations, and other related party transactions.
SECTION 16A FILINGS
Messrs. Smith, Cooley and McDonald as well as RSTW Partners III are
required to file pursuant to 16(a) of the Securities and Exchange Act of 1934, a
statement of any changes in ownership of the Company's securities within 10 days
after the end of any month in which a transaction took place and an annual
statement of ownership of the Company's securities within 45 days after the end
of the Company's fiscal year. All required filings for the annual statement of
ownership on Form 5 with the Securities and Exchange Commission were made in
2001.
PROPOSAL TO RATIFY THE
ENGAGEMENT OF AUDITORS
(Proposal Two)
The Company's Board of Directors has selected Grant Thornton, LLP, as the
Company's independent public accountants and auditors for the fiscal year ending
December 31, 2001 and will ask the Shareholders to ratify that selection at the
Annual Meeting. Grant Thornton LLP, served as the Company's independent
certified accountants and auditors for the fiscal years ended December 31, 1996,
1997, 1998 and 1999. A representative of Grant Thornton, LLP, is expected to
attend the Annual Meeting and will be provided an opportunity to make a
statement if desired, and/or to answer appropriate questions from Shareholders,
if any. We have been advised by Grant Thornton, LLP that neither the firm nor
any member of the firm has any financial interest, direct or indirect, in any
capacity in the Company or its subsidiaries.
Grant Thornton, LLP, billed the Company $40,000 for its audit of the
Company's annual financial statements and review of the Company's quarterly
financial statements.
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The Board recommends a vote FOR ratification and approval of the
appointment of Grant Thornton, LLP as the Company's independent public
accountants and auditors for fiscal year ended December 31, 2001.
SHAREHOLDER PROPOSALS
No Shareholder proposals have been submitted to the Company for
consideration at the Annual Meeting. Should a Shareholder wish to present a
proposal at the 2002 Annual Meeting of Shareholders, such proposal must be
received by the Company at its address shown on this Proxy Statement prior to
January 10, 2002. Any proposals received by that date will be reviewed by the
Board to determine whether it is a proper proposal to present to the 2002 Annual
Meeting.
VOTE REQUIRED
A one-third (1/3) of the Company's shares issued and outstanding as of
April 11, 2001 shall constitute a quorum at the Annual Meeting. The affirmative
vote of at least a majority of the shares represented at the Annual Meeting is
required for all proposals to come before the Meeting. The Company anticipates
that all proposals will be approved.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present a matter for action at the Annual Meeting other than as set
forth herein and in the Notice of Annual Meeting, nor has the Board been
informed that any other person intends to present any additional matter.
However, if any other matters are brought before the Meeting, the proxies served
in the enclosed form of proxy will vote in accordance with their judgment on
such matters.
12
ANNUAL REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS
Copies of the Company's Annual Report as filed with the Securities and
Exchange Commission on Form 10-KSB, including consolidated financial statements
for the year ended December 31, 2000, are enclosed together with the Proxy
Statement. Additional copies may be obtained, upon payment of the reasonable
expenses involved, by writing to the Company at its address set forth in the
Proxy Statement.
By Order of the Board of Directors
April 4, 2001 /s/ Randall J. Wood
Randall J. Wood, Secretary
YOUR COOPERATION IN GIVING THIS MATTER YOUR IMMEDIATE
ATTENTION AND RETURNING YOUR PROXY PROMPTLY IS APPRECIATED
APPENDIX A
Avalon Correctional Services, Inc.
Audit Committee Charter
Membership
The audit committee will be composed of not less than three members of the
Board of Directors of Avalon Correctional Services, Inc. They will be selected
by the Board, taking into account prior experience in matters to be considered
by the committee, probable availability at times required for consideration of
such matters, and their individual independence and objectivity.
The committee's membership will meet the requirements of the audit
committee policy of the NASDAQ. Accordingly, a majority of the members will be
Directors independent of management and free from relationships that, in the
opinion of the Board of Directors, would interfere with the exercise of
independent judgment as a committee member.
When considering relationships that might affect independence, including
possible affiliate status, the Board of Directors will give appropriate
consideration, in addition to its audit committee policy, to guidelines issued
by NASDAQ, which were provided to assist Boards of Directors in observing the
spirit of NASDAQ's policy.
Actions of the Committee
The committee's activities will include the following actions:
* Oversight of the financial statements and relations with the Company's
independent auditors.
_ Instruct the independent auditors that the Board of Directors is the
client in its capacity as the shareholders' representative.
_ Expect the independent auditors to meet with the Board of Directors
at least annually so the Board has a basis on which to recommend the
independent auditors' appointment to the shareholders or to ratify
its selection of the independent auditors.
__ Expect financial management and the independent auditors to analyze
significant financial report issues and practices on a timely basis.
__ Expect pre-filing review of the Company's Quarterly Financial
Statements filed on Form 10-Q or 10-QSB by the independent auditors.
__ Expect financial management and the independent auditors to discuss
with the audit committee:
* qualitative judgments about whether current or proposed
accounting principles and disclosures are appropriate, not
just acceptable.
* aggressiveness or conservatism of accounting principles and
financial estimates.
__ Expect the independent auditors to provide the audit committee with:
* independent judgments about the appropriateness of the
company's current or proposed accounting principles and
whether current or proposed financial disclosures are clear.
* views on whether the accounting principles chosen by
management are conservative, moderate, or aggressive as they
relate to income, asset, and liability recognition, and
whether these accounting principles are commonly used.
* reasons why accounting principles and disclosure practices
used for new transactions or events are appropriate.
* reasons for accepting or questioning significant estimates
made by management.
* views on how selected accounting principals and disclosure
practices affect shareholder and public attitudes about the
company.
* Preparation of Audit Committee Report on an annual basis, which includes
the following information:
__ confirmation that the audit committee has reviewed and discussed the
audited financial statements with management.
__ confirmation that the audit committee has discussed with the
independent auditors the matters required to be discussed by SAS 61.
__ confirmation that the audit committee has received the written
disclosures and the letter from the independent auditors required by
ISB Standard No. 1, and has discussed with the auditors the
auditors' independence.
__ confirmation that the audit committee, based upon the review and
discussions with the independent auditors, has recommended to the
Board of Directors that the financial statements be included in the
Company's annual report on Form 10-K or 10-KSB for the last fiscal
year for filing with the Securities and Exchange Commission.
* Actions taken on the Board's behalf that require Board notification but
not Board approval:
__ Review and approve the scope of the company's audit and that of its
subsidiaries as recommended by the independent auditors and the
Chief Executive Officer.
__ Answer questions raised by shareholders during an annual
shareholders' meeting on matters relating to the committee's
activities if asked to do so by the Board of Directors' chairperson.
__ Ask the president to have the internal audit staff study a
particular area of interest or concern to the audit committee.
* Matters requiring the committee's review and study before making a
recommendation for the Board of Directors' action:
__ Appointment of the independent auditors.
__ Implementation of major accounting policy changes.
__ SEC registration statements to be signed by the Board of Directors.
__ The auditor' reports and financial statements prior to publication
in the annual report.
* Matters requiring the committee's review and study before providing
summary information to the Board of Directors:
__ Accounting policy changes proposed or adopted by organizations such
as the Financial Accounting Standards Board (FASB), the Securities
and Exchange Commission (SEC), and the American Institute of
Certified Public Accountants (AICPA), or by comparable bodies
outside the U.S.
__ The independent auditors' assessment of the strengths and weaknesses
of the company's financial staff, systems, controls and other
factors that might be relevant to the integrity of the financial
statements
__ Quarterly financial statement review before publication.
__ Administration of the company's "conflict of interest" policy.
__ The performance of management and operating personnel under the
company's code of ethics.
__ Assist in the review of periodic SEC filings and the adequacy of
programs and procedures to assure compliance with SEC regulations
and regulations of NASDAQ.
AUDIT COMMITTEE CHARTER APPROVED AND ADOPTED THIS 24th DAY
OF MAY, 2000.
DIRECTORS:
s/ Donald E. Smith
Donald E. Smith
s/ Jerry M. Sunderland
Jerry M. Sunderland
s/ Robert O. McDonald
Robert O. McDonald
s/ Mark S. Cooley
Mark S. Cooley
s/ James P. Wilson
James P. Wilson
AVALON CORRECTIONAL SERVICES, INC.
This proxy is Solicited on Behalf of the Board of Directors
Donald E. Smith, Robert O. McDonald, Mark S. Cooley, James P. Wilson, and
Charles W. Thomas are and each of them is hereby, appointed and authorized to
represent the undersigned at the Annual Meeting of Shareholders of Avalon
Correctional Services, Inc., to be held at The Sheraton Four Points Hotel, 6300
East Terminal Drive, Oklahoma City, Oklahoma, at 10:00am local time, and at any
adjournments thereof, and to vote the number of shares of common stock that the
undersigned would be entitled to vote if personally represented, on all
proposals coming before the Meeting, in the manner specified and on any other
business that may properly come before the meeting.
Dated:__________________________, 2001
_____________________________________
_____________________________________
Signature
This proxy must be exactly as name appears on this Proxy Card. If shares
are held by joint tenants, both should sign. Attorneys, executors,
administrators, trustees, etc., should give full title as such. If the signer is
a corporation or other legal entity, please sign full entity name, by duly
authorized officer. If a partnership, please sign in full partnership name, by
authorized partner or person.
This Proxy, when properly executed, will be voted in the manner directed
hereon by the shareholder. If no direction is made, this Proxy will be voted FOR
the election of all nominees as directed and FOR all other proposals outlined in
the Notice of Annual Meeting of Shareholders.
Place an "X" in the space provided below to indicate your vote on each item:
1. ELECTION OF DIRECTORS:
NOMINEES: ROBERT O. McDONALD AND CHARLES W. THOMAS TO SERVE
A THREE YEAR TERM
[ ] VOTE FOR THE ELECTION OF NOMINEES UNLESS OTHERWISE
INSTRUCTED BELOW
(Instruction: to withhold authority to vote for an individual
nominee write that nominee's name in the space provided below.)
[ ] VOTE WITHHELD FOR NOMINEE(S):
----------------------------------------------
2. APPROVAL OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT
AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please sign and date this proxy Card on the reverse side and return promptly
using the enclosed postage paid envelope.