HOUSTON, May 9, 2005 (PRIMEZONE) -- Cornell Companies, Inc. (NYSE:CRN), a leading provider of privatized adult and juvenile correctional, treatment and educational services, announced today that its proposal to restructure the board of directors has been rejected by dissident shareholder, Pirate Capital LLC ("Pirate"), and that Pirate has informed Cornell that any further negotiations will cease.
Under the terms of the proposal put forward by Cornell Companies on May 7, 2005, Cornell would have increased the size of the Board to nine members, and proposed for election at the upcoming shareholders meeting seven nominees chosen by Pirate, and two nominees selected by, and chosen from among, the current members of the board of directors of Cornell. In addition, Pirate would have agreed to cease any and all efforts with respect to its previously announced proxy solicitation as well as agree for two years to not engage in a going private transaction without satisfying certain procedural safeguards. Also under the terms of the proposal, Cornell would have agreed to reimburse Pirate for up to $750,000 for its actual expenses incurred in connection with its previously announced proxy solicitation.
On behalf of the entire board of directors, James Hyman, Cornell's chairman and chief executive officer, stated, "The Cornell Board negotiated in good faith with Pirate and put forward a reasonable proposal to address shareholder concerns with respect to Cornell's current board. The Board regrets that Pirate has chosen to reject this proposal that the Board believes would have satisfied shareholder concerns while enabling continuity of Board knowledge and avoiding the expense and distraction of a contentious proxy contest."
The proposed letter of agreement is included with this release as Exhibit A.
About Cornell Companies
Cornell Companies, Inc. is a leading private provider of corrections, treatment and educational services outsourced by federal, state and local governmental agencies. Cornell provides a diversified portfolio of services for adults and juveniles, including incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment, and grades 3-12 alternative education in an environment of dignity and respect, emphasizing community safety and rehabilitation in support of public policy. The Company (http://www.cornellcompanies.com) has 83 facilities in 17 states and the District of Columbia, which includes two facilities under development or construction. Cornell has a total service capacity of 18,498, including capacity for 1,514 individuals that will be available upon completion of the facilities under development or construction.
Proxy Materials
The Company has not yet set a date for its 2005 Annual Meeting of Shareholders, and you are not being asked to give any proxies or take any other action with respect to the meeting at this time. The Company will be filing a proxy statement concerning the solicitation of proxies by the Board of Directors in connection with the election of directors and other issues to be decided at the 2005 Annual Meeting of Shareholders. As required by the Securities and Exchange Commission ("SEC"), you are urged to read the proxy statement when it becomes available because it will contain important information. After it is filed with the SEC, you will be able to obtain the proxy statement free of charge at the SEC's website (www.sec.gov). A proxy statement will also be made available for free to any shareholder of the Company who makes a request to the Vice President-Shareholder Relations, at (713) 623-0790 or 1700 West Loop South, Suite 1500, Houston, Texas 77027.
Information Concerning Participants
Under the rules of the SEC, this press release may be deemed to be a solicitation by the Company. Under applicable SEC rules, the following individuals, all of whom are directors of the Company, may be deemed to be participants in the solicitation of proxies on behalf of the Company: James E. Hyman (Chairman of the Board of Directors and Chief Executive Officer of the Company), Anthony R. Chase (Chairman and Chief Executive Officer of ChaseCom Limited Partnership, a communications company), Dr. Isabella C.M. Cunningham (Sharpe Centennial Professor in Communication at the University of Texas), Harry J. Phillips, Jr. (President of Timberlake Interests, Inc and Philips Investments, Inc.), D. Stephen Slack (President and Chief Executive Officer of South Bay Resources, L.L.C., an energy exploration company), Tucker Taylor (President of CBCA, Inc., a company that administers health benefits for self-insured employers), Robert F. Vagt (President of Davidson College), and Marcus A. Watts (partner in the law firm of Locke Liddell & Sapp LLP).
At April 8, 2005, each of the directors may be deemed to be the owner of the number of shares of the Company's common stock listed after his or her name: Hyman -- 0; Chase -- 6,986; Cunningham -- 0, Phillips --90,000; Slack -- 22,584;Taylor -- 26,233; Vagt -- 3,000; and Watts -- 18,576.
The company logo can be found at: http://www.primezone.com/newsroom/prs/?pkgid=1468
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current plans and actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include, among others, (1) the outcome of, and costs associated with, a pending proxy contest with a dissident shareholder, (2) the outcomes of pending putative class action shareholder and derivative lawsuits, and related insurance coverage, (3) Cornell's ability to win new contracts and to execute its growth strategy, (4) risks associated with acquisitions and the integration thereof (including the ability to achieve administrative and operating cost savings and anticipated synergies), (5) the timing and costs of the opening of new programs and facilities or the expansions of existing facilities, (6) Cornell's ability to negotiate contracts at those facilities for which it currently does not have an operating contract, (7) significant charges to expense of deferred costs associated with financing and other projects in development if management determines that one or more of such projects is unlikely to be successfully concluded, (8) results from alternative deployment or sale of facilities such as the New Morgan Academy or the inability to do so, (9) Cornell's ability to complete the construction of the Moshannon Valley Correctional Center as anticipated, (10) changes in governmental policy and/or funding to discontinue or not renew existing arrangements, to eliminate or discourage the privatization of correctional, detention and pre-release services in the United States, or to eliminate rate increase, (11) the availability of financing on terms that are favorable to Cornell, and (12) fluctuations in operating results because of occupancy levels and/or mix, competition (including competition from two competitors that are substantially larger than Cornell), increases in cost of operations, fluctuations in interest rates and risks of operations.
Exhibit A
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PROPOSED LETTER OF AGREEMENT
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May __, 2005
Pirate Capital LLC
200 Connecticut Avenue, 4th Floor
Norwalk, Connecticut 06854
Attention: ___________
Gentlemen:
Reference is made to the ongoing proxy solicitation (the "Proxy Solicitation") by Pirate Capital LLC, Jolly Roger Fund LP, Jolly Roger Fund Ltd. and Mint Master Fund Ltd. (collectively, "Pirate Capital") to elect seven (7) nominees to the board of directors of Cornell Companies, Inc. ("Cornell"). With respect to the Proxy Solicitation and certain related matters, Pirate Capital and Cornell hereby agree as follows.
Definitions
1. For purposes of this letter agreement, the terms below
are defined as follows:
"Common Stock" shall mean common stock of Cornell.
"Continuing Directors" shall mean two (2) directors
selected by, and from among, the current members of the board of
directors of Cornell.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Pirate Group" shall mean Pirate Capital, any person or
entity that is acting as a group with Pirate Capital for purpose of
acquiring, holding, or disposing of securities of Cornell (as
contemplated by Section 13(d)(3) of the Exchange Act) and any
affiliate (as such term is defined in Rule 13e-3(a)(1) promulgated
under the Exchange Act) of Pirate Capital or such person or entity.
"Rule 13e-3 transaction" shall have the meaning ascribed to such
term in Rule 13e-3(a)(3) promulgated under the Exchange Act.
Agreements of Pirate Capital
2. Requirements for a Rule 13e-3 Transaction. Pirate
Capital agrees that it will not, and it will cause all members of
the Pirate Group not to, engage, prior to July 31, 2007, as a
participant in a Rule 13e-3 transaction unless at least one of the
following conditions are met: (i) if all the Continuing Directors
are then serving as directors of Cornell, such Rule 13e-3
transaction has been unanimously approved by Cornell's Board of
Directors or (ii) if such transaction involves the vote of the
stockholders of Cornell, such transaction is approved by holders
of a majority of the Common Stock not beneficially owned by the
Pirate Group or (iii) if such transaction involves a tender offer
by Cornell or a member of the Pirate Group, holders of a majority
of the outstanding Common Stock (excluding for such purpose Common
Stock beneficially owned by the Pirate Group) tender their Common
Stock into such tender and do not withdraw such stock.
3. Cessation of Proxy Solicitation. Upon execution of this
letter agreement, Pirate Capital agrees to cease any and all efforts
with respect to the Proxy Solicitation. At Cornell's 2005 Annual
Meeting of Stockholders (including any adjournment thereof), Pirate
Capital agrees to vote all of the shares of Common Stock, with
respect to which it has voting power, for the election of all
nominees identified in Section 6 of this letter agreement, to the
extent permitted by applicable law.
Agreements of Cornell
4. 2005 Annual Meeting of Stockholders. Cornell agrees to
use reasonable efforts to hold its 2005 Annual Meeting of
Stockholders no later than July 16, 2005.
5. Board Nominees. Cornell agrees to nominate for election
at its 2005 Annual Meeting of Stockholders nine (9) nominees, seven
(7) of whom shall be Leon Clements, Richard Crane, Todd Goodwin,
Sally Walker, Alfred Jay Moran, Jr., Zachary R. George and Thomas R.
Hudson Jr. and two (2) of whom shall be the Continuing Directors.
6. Proxy Solicitation Materials. Cornell agrees that its
Proxy Statement and all other solicitation materials to be delivered
to stockholders in connection with the 2005 Annual Meeting of
Stockholders shall be prepared in accordance with, and in
furtherance of, this letter agreement.
7. Reimbursement of Expenses. Cornell agrees to reimburse
Pirate Capital for up to $750,000 in reasonable expenses in
connection with the Proxy Solicitation, upon presentation by Pirate
Capital to Cornell of invoices or other satisfactory documentation.
Agreements of Both Parties
8. Amendment of Letter Agreement. Prior to Cornell's 2005
Annual Meeting of Stockholders, this letter agreement may be amended
only by written instrument executed on behalf of Cornell and Pirate
Capital LLC. After Cornell's 2005 Annual Meeting of Stockholders,
this letter agreement shall not be amended unless such amendment is
approved by either (i) if all the Continuing Directors are then
serving as directors of Cornell, such amendment is unanimously
approved by Cornell's Board of Directors or (ii) such amendment is
approved by holders of a majority of the Common Stock not
beneficially owned by the Pirate Group.
9. Counterparts. This letter agreement may be executed in
two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
10. Entire Agreement. This letter agreement constitutes the
entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and
understandings, both written and oral, among the parties or any of
them with respect to the subject matter hereof.
Please confirm your agreement with the terms of this letter agreement by executing the same in the space provided below. Such agreement shall be effective as of the date of your acceptance.
Very truly yours,
CORNELL COMPANIES, INC.
By:__________________________________
James E. Hyman
Chief Executive Officer and Chairman of the Board
Agreed and Accepted as of May __, 2005:
PIRATE CAPITAL LLC
By:__________________________________
Name:_______________________________
Title:________________________________