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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of April 18, 1998
between
CORRECTIONS CORPORATION OF AMERICA
and
CCA PRISON REALTY TRUST
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TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER...............................................................................................1
SECTION 1.01. THE MERGER................................................................................1
SECTION 1.02. CLOSING...................................................................................1
SECTION 1.03. EFFECTIVE TIME............................................................................2
SECTION 1.04. EFFECTS OF THE MERGER.....................................................................2
SECTION 1.05. CONSTITUENT DOCUMENTS.....................................................................2
SECTION 1.06. TRUSTEES..................................................................................2
SECTION 1.07. OFFICERS..................................................................................2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES................................................3
SECTION 2.01. EFFECT ON CAPITAL STOCK...................................................................3
SECTION 2.02. EXCHANGE OF CERTIFICATES..................................................................3
SECTION 2.03. SERIES B CONVERTIBLE PREFERRED STOCK.......................................................4
SECTION 2.04. STOCK OPTIONS.............................................................................4
SECTION 2.05. EMPLOYEE STOCK OWNERSHIP PLAN.............................................................5
SECTION 2.06. WARRANTS TO PURCHASE COMPANY COMMON STOCK.................................................5
SECTION 2.07. NOTES CONVERTIBLE INTO COMPANY COMMON STOCK...............................................5
SECTION 2.08. ADJUSTMENTS...............................................................................6
SECTION 2.09. FRACTIONAL SHARES.........................................................................6
SECTION 2.10. LOST CERTIFICATES.........................................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES...........................................................................6
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................6
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PRISON REALTY..........................................20
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS...............................................................32
SECTION 4.01. COVENANTS OF THE COMPANY.................................................................32
SECTION 4.02. COVENANTS OF PRISON REALTY...............................................................35
SECTION 4.03. NO SOLICITATION..........................................................................36
ARTICLE V
ADDITIONAL AGREEMENTS...................................................................................38
SECTION 5.01. PREPARATION OF THE JOINT PROXY STATEMENT/PROSPECTUS......................................38
SECTION 5.02. ACCESS TO INFORMATION....................................................................38
SECTION 5.03. SHAREHOLDERS MEETING.....................................................................39
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SECTION 5.04. REASONABLE BEST EFFORTS..................................................................39
SECTION 5.05. BENEFITS MATTERS.........................................................................39
SECTION 5.06. STOCK-BASED COMPENSATION.................................................................39
SECTION 5.07. FEES AND EXPENSES........................................................................40
SECTION 5.08. INDEMNIFICATION, EXCULPATION AND INSURANCE...............................................41
SECTION 5.09. TRANSFER TAXES...........................................................................42
SECTION 5.10. RESIGNATION OF DIRECTORS.................................................................42
SECTION 5.11. STOCK EXCHANGE LISTING...................................................................42
SECTION 5.12. TAX-FREE REORGANIZATION..................................................................42
SECTION 5.13. RULE 145 AFFILIATES......................................................................42
ARTICLE VI
CONDITIONS PRECEDENT....................................................................................43
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER...............................43
SECTION 6.02. CONDITIONS TO OBLIGATION OF PRISON REALTY TO EFFECT THE MERGER...........................44
SECTION 6.03. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.............................45
SECTION 6.04. FRUSTRATION OF CLOSING CONDITIONS........................................................46
ARTICLE VII
TERMINATION AND AMENDMENT...............................................................................46
SECTION 7.01. TERMINATION..............................................................................46
SECTION 7.02. EFFECT OF TERMINATION....................................................................47
SECTION 7.03. AMENDMENT................................................................................48
SECTION 7.04. EXTENSION; WAIVER........................................................................48
SECTION 7.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER................................48
ARTICLE VIII
GENERAL PROVISIONS......................................................................................48
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES............................................48
SECTION 8.02. NOTICES..................................................................................48
SECTION 8.03. DEFINITIONS; INTERPRETATION..............................................................49
SECTION 8.04. COUNTERPARTS.............................................................................51
SECTION 8.05. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP......................51
SECTION 8.06. GOVERNING LAW............................................................................51
SECTION 8.07. PUBLICITY................................................................................51
SECTION 8.08. ASSIGNMENT...............................................................................51
SECTION 8.09. ENFORCEMENT..............................................................................51
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AGREEMENT AND PLAN OF MERGER dated as of April 18, 1998 (this
"Agreement"), between CORRECTIONS CORPORATION OF AMERICA, a Tennessee
corporation (the "Company"), and CCA PRISON REALTY TRUST, a Maryland real estate
investment trust ("Prison Realty").
WHEREAS the Board of Directors of the Company and the Board of Trustees
of Prison Realty have approved the merger of the Company with and into Prison
Realty (the "Merger"), upon the terms and subject to the conditions set forth in
this Agreement, whereby each issued and outstanding share of common stock, $1.00
par value per share, of the Company (the "Company Common Stock") not owned by
Prison Realty or by the Company will be converted into the right to receive the
Merger Consideration (as hereinafter defined);
WHEREAS the Merger requires the approval of this Agreement by the
affirmative vote (the "Company Shareholder Approval") of the holders of a
majority of the outstanding shares of Company Common Stock and Series B
Convertible Preferred Stock (as hereinafter defined) (together, the "Company
Capital Stock") and the affirmative vote of the holders of a majority of the
outstanding shares of Prison Realty's common shares, $0.01 par value per share
(the "Prison Realty Common Shares") (the "Prison Realty Shareholder Approval");
and
WHEREAS Prison Realty and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement
is intended to be and is adopted as a plan of reorganization.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Tennessee Business
Corporation Act (the "TBCA") and the Corporations and Associations Article of
the Annotated Code of Maryland (the "Maryland REIT Law" or "MRL"), the Company
shall be merged with and into Prison Realty at the Effective Time (as defined in
Section 1.03). Following the Merger, the separate corporate existence of the
Company shall cease and Prison Realty shall continue as the Surviving Entity
(the "Surviving Entity") and shall succeed to and assume all the rights and
obligations of the Company in accordance with the TBCA and the MRL.
SECTION 1.02. CLOSING. Unless this Agreement shall have been terminated
and the transactions contemplated herein abandoned pursuant to Section 7.01, and
subject to the satisfaction
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or waiver of the conditions set forth in Article VI, the closing of the Merger
(the "Closing") will take place at 10:00 a.m. on a date to be specified by the
parties, which shall be no later than the second business day following the
satisfaction or waiver of all the conditions set forth in Article VI which by
their terms are capable of being satisfied prior to the Closing (the "Closing
Date"), at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.A., unless another time, date
or place is agreed to by the parties hereto.
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, articles of merger and
all other appropriate documents (in any such case, the "Articles of Merger")
shall be duly prepared, executed, acknowledged and filed by the parties in
accordance with the relevant provisions of the TBCA and the MRL with the
Secretary of State of the State of Tennessee (the "Tennessee Secretary of
State") and the Maryland State Department of Assessments and Taxation (the
"Maryland Department"). The Merger shall become effective upon the filing of the
Articles of Merger with the Tennessee Secretary of State and the Maryland
Department or at such time thereafter as is provided in the Articles of Merger
(the time the Merger becomes effective being hereinafter referred to as the
"Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section ▇▇-▇▇-▇▇▇ of the TBCA and Section 8-501.1(n) of the MRL.
SECTION 1.05. CONSTITUENT DOCUMENTS.
(a) The declaration of trust of Prison Realty as in effect
immediately prior to the Effective Time shall be the governing document
of the Surviving Entity (with such amendments as may be set forth in
the Articles of Merger or an amendment hereto) until thereafter changed
or amended as provided therein or by applicable law.
(b) The bylaws of Prison Realty as in effect immediately prior
to the Effective Time shall be the bylaws of the Surviving Entity until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. TRUSTEES. The trustees of Prison Realty immediately prior
to the Effective Time shall be the trustees of the Surviving Entity, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be, and Prison Realty agrees that,
if the Board of Directors of the Company shall so request, it will cause
▇▇▇▇-▇▇▇▇▇▇ Cuny to be elected to its Board of Trustees immediately after the
Effective Time.
SECTION 1.07. OFFICERS. The officers of Prison Realty immediately prior
to the Effective Time shall be the officers of the Surviving Entity, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be, except that Doctor ▇. ▇▇▇▇▇▇,
▇▇. shall become Chairman and Chief Executive Officer of Prison Realty.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Company or Prison
Realty or the holders of Company Capital Stock or any Prison Realty Common
Shares:
(a) Cancellation of Certain Stock. Each share of Company
Common Stock that is owned by Prison Realty or by the Company (other
than those held in connection with the Company Stock Plans (as defined
in Section 3.01(b)) shall automatically be canceled and retired and
shall cease to exist and no consideration shall be delivered in
exchange therefor.
(b) Conversion of Company Common Stock. Each issued and
outstanding share of Company Common Stock (other than shares to be
canceled in accordance with Section 2.01(a)) shall be converted into
the right to receive from the Surviving Entity following the Merger
0.875 Prison Realty Common Shares (the "Merger Consideration") and
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto except the right to receive the
Merger Consideration, without interest thereon.
(c) Prison Realty Capital Shares. Each capital share of Prison
Realty issued and outstanding immediately prior to the effective time
shall remain outstanding.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) Paying Agent. Prior to the
Effective Time, Prison Realty shall appoint a bank or trust company that is
reasonably satisfactory to the Company to act as exchange agent (the "Exchange
Agent") for the purpose of exchanging certificates representing Company Common
Stock (the "Certificates" and each a "Certificate") for the Merger
Consideration. Prison Realty will make available to the Exchange Agent, as
needed, the Merger Consideration to be paid in respect of shares of Company
Common Stock. Promptly after the Effective Time, Prison Realty will send, or
will cause the Exchange Agent to send, to each holder of shares of Company
Common Stock at the Effective Time (other than the Company or Prison Realty or
any of its Subsidiaries (as defined in Section 8.03)) a letter of transmittal
for use in such exchange (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the Certificates to the Exchange Agent) and instructions for use in effecting
the surrender of the Certificates for payment therefor.
(a) Each holder of shares of Company Common Stock that have
been converted into the right to receive the Merger Consideration will
be entitled to receive, upon surrender to the Exchange Agent of a
Certificate, together with a properly completed letter of transmittal,
the Merger Consideration in respect of each share of Company Common
Stock represented by such Certificate. Until so surrendered, each such
Certificate shall, after the
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Effective Time, represent for all purposes only the right to receive
such Merger Consideration.
(b) If any portion of the Merger Consideration is to be paid
to a person (as defined in Section 8.03) other than the person in whose
name the Certificate is registered, it shall be a condition to such
payment that the Certificate so surrendered shall be properly endorsed
or otherwise be in proper form for transfer and that the person
requesting such payment shall pay to the Exchange Agent any transfer or
other taxes required as a result of such payment to a person other than
the registered holder of such Certificate or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is
not payable.
(c) After the Effective Time, there shall be no further
registration of transfers of shares of Company Common Stock. If, after
the Effective Time, Certificates are presented to the Surviving Entity,
they shall be canceled and promptly exchanged for the consideration
provided for, and in accordance with the procedures set forth in this
Article.
(d) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 2.03(a) that remains unclaimed
by the holders of shares of Company Common Stock six months after the
Effective Time shall be returned to Prison Realty upon demand, and any
such holder who has not exchanged shares of Company Common Stock for
the Merger Consideration in accordance with this Section prior to that
time shall thereafter look only to Prison Realty for payment of the
Merger Consideration in respect of such shares of Company Common Stock.
Notwithstanding the foregoing, Prison Realty shall not be liable to any
holder of shares of Company Common Stock for any amount paid to a
public official pursuant to applicable abandoned property laws.
(e) No dividends, interest or other distributions with respect
to securities of Prison Realty constituting part of the Merger
Consideration shall be paid to the holder of any unsurrendered
Certificates until such Certificates are surrendered as provided in
this Section. Upon such surrender, there shall be paid, without
interest, to the person in whose name the securities of Prison Realty
have been registered, all dividends, interest and other distributions
payable in respect of such securities on a date subsequent to, and in
respect of a record date after, the Effective Time.
SECTION 2.03. SERIES B CONVERTIBLE PREFERRED STOCK. Immediately prior
to the Effective Time, the Company shall cause all issued and outstanding shares
of its Series B Convertible Preferred Stock, $1.00 par value per share (the
"Series B Convertible Preferred Stock") to be converted to shares of Company
Common Stock pursuant to Section 1.E.1. of the Articles of Amendment to the
Company's Charter dated October 2, 1997.
SECTION 2.04. STOCK OPTIONS. At the Effective Time, each option to
purchase shares of Company Common Stock granted pursuant to the Company Stock
Plans (as hereinafter defined) (a "Company Option") shall become a Canceled
Option pursuant to Section 5.06 hereof.
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SECTION 2.05. EMPLOYEE STOCK OWNERSHIP PLAN. As of the Effective Time,
benefits under the Company's Employee Stock Ownership Plan (the "ESOP") shall
cease to accrue, but the ESOP shall not be terminated. As soon as practicable
after the Effective Time, the ESOP will be merged into one or more successor
plans sponsored by those companies that will acquire from Prison Realty the
governmental contracts presently held by the Company. The rights of participants
in the ESOP with respect to any offering period then underway under the ESOP
shall be determined by treating the last business day prior to the Effective
Time as the last day of such offering period and by making such other pro-rata
adjustments as may be necessary to reflect the reduced offering period but
otherwise treating such offering period as a fully effective and completed
offering period for all purposes of the ESOP. Prior to the Effective Time, the
Company shall take all actions (including, if appropriate, amending the terms of
the Company's ESOP) that are necessary to give effect to the transactions
contemplated by this Section.
SECTION 2.06. WARRANTS TO PURCHASE COMPANY COMMON STOCK. At the
Effective Time, each warrant to purchase shares of Company Common Stock
outstanding (the "Company Warrants") whether or not exercisable, shall be deemed
to constitute a warrant to acquire, on substantially the same terms and
conditions as were applicable to the original warrant to which it relates (a
"Substitute Warrant"), the same number of shares of Prison Realty Common Shares
as the holder of such warrant would have been entitled to receive pursuant to
the Merger had such holder exercised such warrant in full immediately prior to
the Effective Time, at a price per share of Prison Realty Common Shares computed
in compliance with the terms of such Company Warrant; provided, however, that
the number of shares of Prison Realty Common Shares that may be purchased upon
exercise of such Substitute Warrant shall not include any fractional share.
Prior to the Effective Time, the Company will use its best efforts to obtain
such consents, if any, as may be necessary to give effect to the transactions
contemplated by this Section. In addition, prior to the Effective Time, the
Company will use its best efforts to make any amendments to the terms of the
Company Warrants that are necessary to give effect to the transactions
contemplated by this Section. Except as contemplated by this Section, the
Company will not, after the date hereof, without the written consent of Prison
Realty, amend any outstanding warrants to purchase shares of Company Common
Stock.
SECTION 2.07. NOTES CONVERTIBLE INTO COMPANY COMMON STOCK. Except as
otherwise agreed by the Company and the holder of any outstanding note of the
Company convertible into shares of Company Common Stock (a "Company Note"), at
the Effective Time, each Company Note shall be deemed to constitute a note
convertible into, on substantially the same terms and conditions as were
applicable to the original note to which it relates (a "Substitute Convertible
Note"), the same number of Prison Realty Common Shares as the holder of such
note would have been entitled to receive pursuant to the Merger had such holder
converted such note in full immediately prior to the Effective Time; provided,
however, that the number of Prison Realty Common Shares that may be purchased
upon conversion of such Substitute Convertible Note shall not include any
fractional share. Prior to the Effective Time, the Company will use its best
efforts to obtain such consents, if any, as may be necessary to give effect to
the transactions contemplated by this Section. In addition, prior to the
Effective Time, the Company will use its best efforts to make any amendments to
the
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terms of the Company Notes that are necessary to give effect to the transactions
contemplated by this Section. Except as contemplated by this Section, the
Company will not, after the date hereof, without the written consent of Prison
Realty, amend any outstanding Company Notes.
SECTION 2.08. ADJUSTMENTS. If at any time during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
capital shares of Prison Realty shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the Merger Consideration shall be adjusted appropriately.
SECTION 2.09. FRACTIONAL SHARES. No fractional shares of Prison Realty
Common Shares shall be issued in the Merger, but in lieu thereof each holder of
shares of Company Common Stock otherwise entitled to receive as a result of the
Merger a fractional share of Prison Realty Common Shares will be entitled to
receive a cash payment representing such holder's proportionate interest in the
net proceeds resulting from the sale (after deduction of all expenses resulting
from such sale) on the New York Stock Exchange ("NYSE") through one or more of
its member firms of the fractional shares of Prison Realty Common Shares all
holders of shares of Company Common Stock would otherwise be entitled to receive
as a result of the Merger.
SECTION 2.10. LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Entity, the posting by such person of a bond, in such
reasonable amount as the Surviving Entity may direct, as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration to be paid in respect of the shares of Company Common Stock
represented by such Certificates as contemplated by this Article.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth in the Company SEC Documents (as defined in Section 3.01(d)) filed
with the Securities and Exchange Commission (the "SEC") and publicly available
prior to the date hereof (the "Company Filed SEC Documents") or on the
Disclosure Schedule delivered by the Company to Prison Realty prior to the
execution of this Agreement (the "Company Disclosure Schedule"), which Company
Disclosure Schedule constitutes a part hereof and is true and correct in all
material respects, the Company represents and warrants to Prison Realty as
follows:
(a) Organization and Authority. The Company is a corporation
duly incorporated and validly existing and in good standing under the
laws of the State of Tennessee with full corporate power and authority
to own its properties and conduct its business as now
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conducted and is duly qualified or authorized to do business and is in
good standing in all jurisdictions where the failure to so qualify
could have a material adverse effect (as defined in Section 8.03(a)).
The Company does not have a direct or indirect ownership interest in
any subsidiary corporation, joint venture, partnership or other entity,
except for those entities listed on the Company Disclosure Schedule,
each of which is duly formed and in good standing under the laws of its
jurisdiction of formation, with full power and authority to own its
properties and conduct its business as now conducted, and is duly
qualified or authorized to do business and is in good standing in all
jurisdictions where the failure to so qualify could have a material
adverse effect upon the conduct of business or the ownership or leasing
of property by it in such jurisdiction. Each Subsidiary holds all
licenses, certificates, permits, franchises and authorizations from
governmental authorities necessary for the conduct of its business.
Except as set forth in the Company Disclosure Schedule, the Company
owns all the outstanding capital stock or ownership interests of each
Subsidiary free and clear of any Liens (as hereinafter defined) and
there are no rights to subscribe for or purchase any shares of capital
stock or ownership interests of any Subsidiary. The Company has made
available to Prison Realty complete and correct copies of its charter
and bylaws and the charter and bylaws (or other organizational
documents) of each of its Subsidiaries, in each case as amended to the
date of this Agreement.
(b) Capital Structure. The authorized capital stock of the
Company consists of 150,000,000 shares of Company Common Stock and
1,000,000 shares of preferred stock, $1.00 par value per share, of the
Company, of which 400,000 shares have been designated Series B
Convertible Preferred Stock. At the close of business on April 17,
1998, (A) 80,215,073 shares of Company Common Stock were outstanding,
(B) 733,553 shares of Series B Convertible Preferred Stock were
outstanding, (C) options to acquire 3,468,097 shares of Company Common
Stock from the Company pursuant to the Company's equity incentive plans
listed on the Company Disclosure Schedule (the "Company Stock Plans")
were outstanding, (D) Company Warrants to acquire 4,400,000 shares of
Company Common Stock from the Company were outstanding, (E) the Company
Notes convertible into 6,364,225 shares of Company Common Stock were
outstanding; and (F) the Securities Purchase Agreement between the
Company and Sodexho Alliance, S.A., a French corporation ("Sodexho")
dated as of June 23, 1994, granting Sodexho the right to purchase notes
convertible into shares of Company Common Stock were outstanding. Other
than as set forth above, at the close of business on April 17, 1998,
there were outstanding no shares of Company Capital Stock or options,
warrants or other rights to acquire Company Capital Stock from the
Company. Since April 17, 1998, (x) there have been no issuances by the
Company of shares of Company Capital Stock other than issuances of
shares of Company Common Stock pursuant to the exercise of Company
Options outstanding as of April 17, 1998 and (y) there have been no
issuances by the Company of options, warrants or other rights to
acquire capital stock from the Company except as expressly permitted by
this Agreement. No bonds, debentures, notes or other indebtedness
having the right to vote (or convertible into or exchangeable for
securities having the right to vote) on any matters on which
shareholders of the Company may vote are issued or outstanding, except
the Company
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Notes. All outstanding shares of Company Common Stock are, and any
shares of Company Common Stock which may be issued upon the exercise of
Company Options or Company Warrants or conversion of the Company Notes
when issued will be, duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims,
liens, encumbrances, pledges or security interests (collectively,
"Liens") and not subject to preemptive rights, except pursuant to that
certain Stockholders Agreement dated as of June 23, 1994 by and among
the Company, Sodexho, and certain shareholders of the Company (the
"Sodexho Stockholders Agreement"). Other than as set forth above, and
except for this Agreement, the Company Stock Plans, the Company
Options, the Company Warrants and the Company Notes, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements or undertakings of any kind to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound obligating the Company or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other equity or voting securities
of the Company or of any Subsidiary of the Company or obligating the
Company or any of its Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment,
agreement or undertaking. There are no outstanding obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
Subsidiaries and, to the knowledge of the executive officers of the
Company, as of the date hereof, no irrevocable proxies have been
granted with respect to shares of Company Common Stock or equity of
Subsidiaries of the Company.
(c) Authorization. The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to
obtaining the Company Shareholder Approval with respect to the Merger,
to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to obtaining the
Company Shareholder Approval with respect to the Merger. This Agreement
has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance,
fraudulent transfer and other similar laws from time to time in effect.
The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict
with, or result in any breach or violation of, or default (with or
without notice or lapse of time or both) under, or result in the
termination of, or accelerate the performance required by, or give rise
to a right of termination, cancellation or acceleration of any
obligation under, or the creation of a Lien pursuant to, (i) any
provision of the charter (or similar organizational documents) or
bylaws of the Company or any of its Subsidiaries or (ii) subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in the following
sentence, any loan or credit agreement, note, mortgage, indenture,
lease, Company Benefit Plan (as defined in Section 3.01(m)) or other
agreement, obligation, instrument,
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permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company
or any of its Subsidiaries or their respective properties or assets, in
any case under this clause (ii) which would, individually or in the
aggregate, have a material adverse effect on the Company. No consent,
approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality (a "Governmental Entity") is
required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby, the failure of which to be obtained or made would,
individually or in the aggregate, have a material adverse effect on the
Company or would prevent or materially delay the consummation of the
transactions contemplated hereby, except for (A) the filing with the
SEC of (i) a proxy statement relating to the consideration of the
Company Shareholder Approval at a meeting of the shareholders of the
Company (the "Company Shareholders Meeting") duly called and convened
to consider the approval of this Agreement (such proxy statement, which
shall also relate to the consideration of the Prison Realty Shareholder
Approval at a meeting of the shareholders of Prison Realty (the "Prison
Realty Shareholders Meeting") duly called and convened to consider the
approval of this Agreement and a prospectus with regard to the issuance
of Prison Realty Common Shares in the Merger, as amended or
supplemented from time to time, the "Joint Proxy Statement/Prospectus")
and (ii) such reports under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), as may be required in connection with this Agreement
and the Merger and the other transactions contemplated hereby, (B) the
filing of the Articles of Merger with the Tennessee Secretary of State
and the Maryland Department and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do
business, (C) filings required pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), (D) filings
necessary to satisfy the applicable requirements of state securities or
"blue sky" laws, (E) those required under the rules and regulations of
the NYSE and (F) those required pursuant to the Company's leases,
management agreements and related agreements with Governmental
Entities, which are set forth on the Company Disclosure Schedule
(collectively, the "Required Filings").
(d) SEC Documents; Financial Statements. The Company has filed
and made available to Prison Realty a true and complete copy of each
report, schedule, registration statement and definitive proxy statement
required to be filed by the Company with the SEC since January 1, 1995
(the "Company SEC Documents"). As of their respective dates, the
Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act") or the
Exchange Act, as the case may be, applicable to such Company SEC
Documents. None of the Company SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
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13
they were made, not misleading. The financial statements of the Company
included in the Company SEC Documents comply as to form in all material
respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis ("GAAP") during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC, or for
normal year-end adjustments) and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
Except as set forth in the Company Filed SEC Documents (including any
item accounted for in the financial statements contained in the Company
Filed SEC Documents or set forth in the notes thereto), as of December
31, 1997, neither the Company nor any of its Subsidiaries had, and
since such date neither the Company nor any of its Subsidiaries has
incurred, any claims, liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, individually or in
the aggregate, would have a material adverse effect on the Company
(other than claims, liabilities or obligations contemplated by this
Agreement or expressly permitted to be incurred pursuant to this
Agreement).
(e) Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by
reference in (i) the Joint Proxy Statement/Prospectus will, at the date
it is first mailed to shareholders of the Company or Prison Realty or
at the time of the Company Shareholders Meeting or the Prison Realty
Shareholders Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that
in each case no representation or warranty is made by the Company with
respect to statements made or incorporated by reference therein based
on information supplied by Prison Realty specifically for inclusion or
incorporation by reference therein. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act,
except that in each case no representation or warranty is made by the
Company with respect to statements made or incorporated by reference
therein based on information supplied by Prison Realty for inclusion or
incorporation by reference therein.
(f) Absence of Certain Changes or Events. Subsequent to
December 31, 1997, neither the Company nor any Subsidiary has sustained
any material loss or interference with its business or properties from
fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, which is not disclosed; and
subsequent to the respective dates as of which information is given in
the Company Filed SEC Documents, (i) neither the Company nor any
Subsidiary has incurred any material liabilities or obligations, direct
or contingent, or entered into any transactions not in the ordinary
course of business consistent with past practice, and
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14
(ii) there has not been any issuance of options, warrants or rights to
purchase interests in, or the capital shares of, the Company, or any
adverse change, or any development involving a prospective adverse
change, in the general affairs, management, business, prospects,
financial position, net worth or results of operations of the Company
or any Subsidiary.
(g) Compliance with Laws; Litigation. Except as described in
the Company Disclosure Schedule or the Company Filed SEC Documents,
there is not pending, or to the knowledge of the Company threatened,
any legal or governmental action, suit, proceeding, inquiry or
investigation, to which the Company or any Subsidiary or any of their
respective officers, directors or trustees is a party, or to which the
property of the Company or any Subsidiary is subject, before or brought
by any Governmental Entity, wherein an unfavorable decision, ruling or
finding could prevent or materially hinder the consummation of this
Agreement or result in a material adverse effect on the Company. Each
of the Company and each Subsidiary has at all times operated and
currently operates its business in conformity in all material respects
with all applicable statutes, common laws, ordinances, decrees, orders,
rules and regulations of Governmental Entities. Each of the Company and
each Subsidiary has all licenses, approvals or consents to operate its
businesses in all locations in which such businesses are currently
being operated, and the Company is not aware of any existing or
imminent matter which may materially adversely impact its operations or
business prospects other than as specifically disclosed in the Company
Filed SEC Documents or the Company Disclosure Schedule. None of the
Company or any Subsidiary have failed to file with the applicable
regulatory authorities any material statements, reports, information or
forms required by all applicable laws, regulations or orders; all such
filings or submissions were in material compliance with applicable laws
when filed, and no material deficiencies have been asserted by any
regulatory commission, agency or authority with respect to such filings
or submissions. None of the Company or any Subsidiary have failed to
maintain in full force and effect any material licenses, registrations
or permits necessary or proper for the conduct of its business, or
received any notification that any revocation or limitation thereof is
threatened or pending, and there is not to the knowledge of the Company
pending any change under any law, regulation, license or permit which
would materially adversely affect the business, operations, property or
business prospects of the Company. None of the Company or any
Subsidiary have received any notice of violation of or been threatened
with a charge of violating or are under investigation with respect to a
possible violation of any provision of any law, regulation or order.
(h) Taxes.
(i) (A) The Company and its Subsidiaries have filed,
or have caused to be filed on their behalf, all tax returns
required to be filed by them (collectively, the "Company
Returns"), and as of the time of filing, all the Company
Returns were complete and accurate except to the extent that
any failure to file or any inaccuracies in any filed Company
Returns would not have a material adverse effect on the
Company, (B) the Company and its Subsidiaries have paid or the
Company has made
11
15
adequate reserves in its financial statements included in the
Company Filed SEC Documents (other than reserves for deferred
income taxes established to reflect differences between book
basis and tax basis of assets and liabilities) for all taxes
payable by the Company and its Subsidiaries except to the
extent that any failure to pay or reserve would not have a
material adverse effect on the Company, (C) the Company and
its Subsidiaries have made or the Company will make provision
in its financial statements for all taxes payable for any
periods that end before the Effective Time for which no
Company Returns have yet been filed and for any periods that
begin before the Effective Time and end after the Effective
Time to the extent such taxes are attributable to the portion
of any such period ending at the Effective Time except to the
extent that any failure to make such provision would not have
a material adverse effect on the Company, (D) neither the
Company nor any Subsidiary has requested any extension of time
within which to file or send any Company Return, which Company
Return has not since been filed or sent, except to the extent
that any such request for an extension would not have a
material adverse effect on the Company, (E) no deficiency for
any taxes has been proposed, asserted or assessed in writing
against the Company or any of its Subsidiaries except to the
extent that any such deficiency would not have a material
adverse effect on the Company, (F) no claim for unpaid taxes
has become a Lien of any kind against the property of the
Company or any of its Subsidiaries or is being asserted
against the Company or any of its Subsidiaries except to the
extent that any such Lien would not have, individually or in
the aggregate, a material adverse effect on the Company, (G)
neither the Company nor any of its Subsidiaries is a party to
or is otherwise bound by (or has any assets bound by) any tax
sharing agreement, tax indemnity obligation or similar
agreement or arrangement, and (H) each of the Company and its
Subsidiaries has duly and timely withheld from employee
salaries, wages and other compensation and paid over to the
appropriate tax authorities all taxes required to be so
withheld and paid over for all periods for which the statutory
period of limitations for the assessment of tax has not yet
expired except to the extent that any failure to so withhold
and pay over would not have a material adverse effect on the
Company.
(ii) For the purpose of this Agreement, the term (A)
"tax" (including, with correlative meaning, the terms "taxes"
and "taxable") shall include, except where the context
otherwise requires, all Federal, state, local, provincial and
foreign income, profits, franchise, gross receipts, payroll,
sales, use, property, withholding, excise, occupancy and other
taxes of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts
and (B) "tax return" shall mean all Federal, state, local,
provincial and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any
amended tax return relating to taxes.
(i) Certain Agreements. Neither the Company nor any of its
Subsidiaries is in default under any material agreement, commitment,
lease or other instrument to which it or
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16
any of its properties is subject, and there has not occurred any event
that, with the giving of notice or the lapse of time or both, would
constitute such a default by the Company or any of its Subsidiaries or,
to the knowledge of the executive officers of the Company, a default
thereunder by any other party thereto, except in all cases where such
defaults, individually or in the aggregate, would not have a material
adverse effect on the Company. Neither the Company nor any of its
Subsidiaries is a party to any contract (other than leases) containing
any covenant restricting its ability to conduct its business as
currently conducted except for any such covenants that would not,
individually or in the aggregate, have a material adverse effect on the
Company. Neither the Company nor any of its Subsidiaries is in breach
in any material respect under its charter, bylaws or other
organizational documents.
(j) Properties.
(i) Company Owned Real Property. The Company Filed
SEC Documents describe all material real property owned by the
Company or any of its Subsidiaries (collectively, the "Company
Owned Real Property"). Except as disclosed therein, or in the
title insurance policies relating to the Company Owned Real
Property or in the Company Disclosure Schedule, each of the
Company and its Subsidiaries has good, valid and marketable
title to the Company Owned Real Property free of all Liens, in
each case except, individually or in the aggregate, as would
not have a material adverse effect on the Company. Except as
set forth in Section 3.01(j)(i) of the Company Disclosure
Schedule and as contemplated with respect to the properties
designated the "Option Facilities" in the Company Filed SEC
Documents, there are no outstanding contracts for the sale of
any of the Company Owned Real Property, except those contracts
relating to property the value in respect of which does not
exceed $5,000,000 individually or $15,000,000 in the
aggregate.
(ii) Company Leased Real Property. The Company Filed
SEC Documents describe all leases and subleases (the "Company
Real Property Leases") of the Company with respect to all
material real property which is leased or subleased by the
Company or its Subsidiaries (the "Company Leased Real
Property"; the Company Owned Real Property and the Company
Leased Real Property are collectively defined as the "Company
Real Property"). Except as disclosed in the Company Filed SEC
Documents or in the title insurance policies relating to the
Company Leased Real Property, pursuant to the Company Real
Property Leases, the Company and its Subsidiaries hold good
and valid leasehold title to the Company Leased Real Property,
in each case in accordance with the provisions of the
applicable Company Real Property Lease and free of all Liens,
in each case except, individually or in the aggregate, as
would not have a material adverse effect on the Company. Each
of the Company Real Property Leases is enforceable against the
Company and, to the knowledge of the Company, against the
other party thereto, in
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17
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles and except
for such failures to be enforceable as would not, individually
or in the aggregate, have a material adverse effect on the
Company. Other than as disclosed in the title insurance
policies relating to the Company Leased Real Property or such
exceptions which would not have a material adverse effect on
the Company, all Company Real Property Leases are in full
force and effect and grant in all respects the leasehold
estates or rights of occupancy or use they purport to grant.
(iii) Improvements Under Construction. With respect
to those Improvements being constructed as set forth in the
Company Disclosure Schedule, to the knowledge of the Company,
(a) the budget for the construction of the Improvements fairly
and accurately reflects the Company's good faith estimate of
the costs and expenses shown thereon reasonably necessary to
develop and construct the Improvements in accordance with the
plans and specifications therefor, and the Company has
strictly adhered to said budget and has permitted no
deviations from said budget or the plans and specifications
for the Improvements; (b) the plans and specifications for the
Improvements have been approved by all applicable Governmental
Entities having jurisdiction over the Company Real Property,
the development and construction of the Improvements and the
use and occupancy thereof for its intended purposes, and/or
any utility services to the Company Real Property; (c) all
utility services necessary for the development and
construction of the Improvements and the use and occupancy
thereof for its intended purposes are available through public
or private easements or rights-of-way at the boundaries of the
Company Real Property, including, without limitation, sanitary
sewer, electricity, gas, water, telephone, and storm water
drainage; (d) all roads necessary for ingress and egress to
the Company Real Property, and for the full utilization of the
Company Real Property for its intended purposes, have either
been completed pursuant to public or private easements, or the
necessary rights-of-way therefore have been dedicated to
public use and accepted by the appropriate Governmental
Entity; (e) all building permits, curb cuts, sewer and water
taps, and other permits, licenses, approvals, authorizations
and consents required for the development and construction of
the Improvements have been obtained; (f) the plans and
specifications for the Improvements, the development and
construction of the Improvements pursuant thereto, and the use
and occupancy of the Improvements for its intended purposes
comply and will comply with all applicable zoning ordinances,
building regulations, restrictive covenants and governmental
laws, rules, regulations and ordinances, and comply and will
comply with all applicable requirements, standards and
regulations of appropriate supervising boards of fire
underwriters and similar agencies, authorities or boards; (g)
the Company has: (i) diligently pursued the development,
construction and installation of the Improvements; and (ii)
performed such duties as may be necessary to complete the
development, construction and installation of the
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Improvements in accordance with the plans and specifications
and without liens, claims or assessments, actual or
contingent, asserted against the Company Real Property for any
material, labor or other items furnished in connection
therewith, and all in full compliance with all construction,
use, building, zoning and other similar laws, ordinances,
rules, regulations, codes and restrictions of any applicable
Governmental Entities or authorities or otherwise applicable
thereto; (h) the Company has complied with all laws,
ordinances, rules, regulations, judgments, orders,
injunctions, writs and decrees of any government or political
subdivision or agency thereof, or any court or similar entity
established by any of them, applicable to the construction of
the Improvements, and has paid when due all taxes and
assessments upon the Improvements or Company Real Property,
and all claims for labor or materials, rents, and other
obligations that, if unpaid, will or might become a Lien
against the Improvements or the Company Real Property; (i) the
Company has maintained, in sufficient amount, and in
satisfactory form and substance, and with satisfactory
insurers: (i) builder's risk insurance, all-risk nonreporting
completed value form, insuring the Improvements against fire,
theft, extended coverage, vandalism, and such other hazards in
full force and effect at all times until the completion of
construction of all of the Improvements; and (ii) such other
insurance, in such amounts and for such terms, as may from
time to time be reasonably required insuring against such
other casualties or losses which at the time are commonly
insured against in the case of premises similarly situated;
and (j) the Improvements have been constructed in accordance
with the plans and specifications therefor, and in compliance
with all laws, ordinances, rules and regulations applicable
thereto, and in a good and workmanlike manner. For the
purposes of this Agreement "Improvements" shall mean all
buildings, improvements, structures and fixtures now or on the
Closing Date located on the Company Real Property, including,
without limitation, landscaping, parking lots and structures,
roads, drainage and all above ground and underground utility
structures, equipment systems and other so-called
"infrastructure" improvements.
(k) Environmental Matters.
(i) To the knowledge of the Company, the Company
Real Property and the Improvements thereon (the "Company
Facilities") are presently operated in compliance in all
material respects with all Environmental Laws (as defined
below).
(ii) There are no Environmental Laws requiring any
material remediation, clean up, repairs, constructions or
capital expenditures (other than normal maintenance) with
respect to the Company Facilities.
(iii) There are no (A) notices of any violation or
alleged violation of any Environmental Laws relating to the
Company Facilities or their uses that have been
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19
received by the Company, or (B) writs, injunctions, decrees,
orders or judgments outstanding, or any actions, suits,
claims, proceedings or investigations pending, or to the
knowledge of the Company threatened, relating to the
ownership, use, maintenance or operation of the Company
Facilities.
(iv) All material permits and licenses required under
any Environmental Laws in respect of the operations of the
Company Facilities have been obtained, and the Company
Facilities and the Company are in compliance, in all material
respects, with the terms and conditions of such permits and
licenses.
(v) "Environmental Laws" mean all applicable
statutes, regulations, rules, ordinances, codes, licenses,
permits, orders, demands, approvals, authorizations and
similar items of all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the
United States, states and political subdivisions thereof and
all applicable judicial, administrative and regulatory
decrees, judgments and orders relating to the protection of
human health, the environment, or worker or public health and
safety as in effect as of the date hereof, including but not
limited to those pertaining to reporting, licensing,
permitting, investigation and remediation of emissions,
discharges, releases or threatened releases of "Hazardous
Materials," substances, pollutants, contaminants or hazardous
or toxic substances, materials or wastes whether solid, liquid
or gaseous in nature, into the air, surface water, ground
water or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of substances, pollutants, contaminants or hazardous
or toxic substances, materials or wastes, whether solid,
liquid or gaseous in nature, including by way of illustration
and not by way of limitation, (x) the Comprehensive
Environmental Response, Compensation and Liability Act (42
U.S.C. ▇▇.▇▇. 960111 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss.ss.69011 et seq.), the Clean Air
Act (42 U.S.C. ▇▇.▇▇. 7401 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ▇▇.▇▇. 1251), the Safe
Drinking Water Act (42 U.S.C. ▇▇.▇▇. 300f et seq.), the Toxic
Substances Control Act (15 U.S.C. ▇▇.▇▇. 2601 et seq.), the
Endangered Species Act (16 U.S.C. ▇▇.▇▇. 1531 et seq.), the
Emergency Planning and Community Right-to-Know Act of 1986 (42
U.S.C. ▇▇.▇▇. 11001 et seq.) and (y) analogous state and local
provisions.
(vi) "Hazardous Material" means any chemical
substance:
(A) the presence of which requires
investigation or remediation under any federal, state
or local statute, regulation, ordinance, order,
action or policy, administrative request or civil
complaint under any of the foregoing or under common
law; or
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(B) which is defined as a "hazardous waste"
or "hazardous substance" under any federal, state or
local statute, regulation or ordinance or amendments
thereto as in effect as of the date hereof, or as
hereafter amended, including, without limitation, the
Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Section 9601 et seq.)
and or the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.); or
(C) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is regulated by
any governmental authority, agency, department,
commission, board, agency or instrumentality of the
United States, or any state or any political
subdivision thereof having or asserting jurisdiction
over any of the Company Facilities; or
(D) the presence of which on any of the
Company Facilities causes a nuisance upon such
facilities or to adjacent properties or poses a
hazard to the health or safety of persons on or about
any of the Company Facilities; or
(E) the presence of which on adjacent
properties constitutes a trespass by any owner or
operator of the Company Facilities; or
(F) which contains gasoline, diesel fuel or
other petroleum hydrocarbons, polychlorinated
biphenyls (PCBs) or asbestos or asbestos-containing
materials or urea formaldehyde foam insulation, or
lead-based paint, solder or other building materials;
or
(G) radon gas.
(l) Labor Matters. As of the date hereof, (i) to the knowledge
of the Company there are no representation or certification
proceedings, or petitions seeking a representation proceeding pending
or threatened to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority and (ii) to
the knowledge of the Company there are no organizing activities or
strikes involving the Company or any of its Subsidiaries with respect
to any group of employees of the Company or any of its Subsidiaries, in
each case that would be expected, individually or in the aggregate, to
have a material adverse effect on the Company.
(m) Benefit Plans.
(i) All "employee benefit plans" (as defined in
Section 3(3) of ERISA) and all other compensation, bonus,
pension, profit sharing, deferred compensation, stock
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ownership, stock purchase, stock option, phantom stock,
retirement, employment, change-in-control, welfare, collective
bargaining, severance, disability, death benefit,
hospitalization and medical plans, agreements, arrangements or
understandings that are maintained or contributed to (or
previously contributed to) for the benefit of any current or
former employee, officer or director of the Company or any of
its Subsidiaries and with respect to which the Company or any
of its Subsidiaries would reasonably be expected to have
direct or contingent liability are defined as the "Company
Benefit Plans". The Company has heretofore delivered or made
available to Prison Realty true and complete copies of all
Company Benefit Plans and, with respect to each Company
Benefit Plan, true and complete copies of the following
documents: the most recent actuarial report, if any; the most
recent annual report, if any; any related trust agreement,
annuity contract or other funding instrument, if any; the most
recent determination letter, if any; and the most recent
summary plan description, if any.
(ii) Except as disclosed in Section 3.01(m) of the
Company Disclosure Schedule: (A) none of the Company Benefit
Plans is a "multiemployer plan" within the meaning of Section
3(37) of ERISA or is otherwise subject to Title IV of ERISA;
(B) none of the Company Benefit Plans promises or provides
retiree medical or life insurance benefits to any person; (C)
neither the Company nor any of its Subsidiaries has any
obligation to adopt or has taken any corporate action to
adopt, any new Company Benefit Plan or, except as required by
law, to amend any existing Company Benefit Plan; (D) each
Company Benefit Plan has been administered in compliance with
its terms and the applicable provisions of ERISA, the Code and
all other applicable laws, rules and regulations except for
any failures to so administer any Company Benefit Plan as
would not have a material adverse effect on the Company; (E)
each Company Benefit Plan that is intended to be qualified
within the meaning of Section 401(a) of the Code is, to the
Company's knowledge, so qualified; (F) neither the Company nor
any entity required to be treated as a single employer with
the Company under Section 414 of the Code has any unsatisfied
liability under Title IV of ERISA that would have a material
adverse effect on the Company, (G) other than funding
obligations and benefits claims payable in the ordinary
course, to the Company's knowledge, no event has occurred and
no circumstance exists with respect to any Company Benefit
Plan that could give rise to any liability that would have a
material adverse effect on the Company, whether directly or by
reason of its affiliation with any entity required to be
treated as a single employer with the Company under Section
414 of the Code; (H) as of the date hereof there are no
pending or, to the knowledge of the executive officers of the
Company, threatened investigations, claims or lawsuits in
respect of any Company Benefit Plan that would have a material
adverse effect on the Company; (I) no amount payable pursuant
to a Company Benefit Plan or any other plan, contract or
arrangement of the Company would be considered an "excess
parachute payment" under Section 280G of the Code; and (J)
except as provided in Section 5.06(a) of this Agreement, no
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22
Company Benefit Plan exists that could result in the payment
to any current or former employee, officer or director of the
Company of any money or other property or accelerate or
provide any other rights or benefits as a result of the
transactions contemplated by this Agreement which would
constitute an excess parachute payment within the meaning of
Section 280G of the Code.
(n) Material Contracts. There are no contracts or other
documents required by the Securities Act to be described in or to be
filed as exhibits to the Company Filed SEC Documents which have not
been described or filed as required. All such contracts to which the
Company or any of its Subsidiaries is a party have been duly
authorized, executed and delivered by the Company or any of its
Subsidiaries, constitute valid and binding agreements of the Company or
such Subsidiary and are enforceable against the Company or such
Subsidiary in accordance with the terms thereof. Each of the Company
and each Subsidiary has performed all material obligations required to
be performed by it, and is neither in default in any material respect
nor has it received notice of any default or dispute under, any such
contract or other material instrument to which it is a party or by
which its property is bound or affected. To the best knowledge of the
Company, no other party under any such contract or other material
instrument to which it is a party is in default in any material respect
thereunder.
(o) Accounting. The Company's system of internal accounting
controls is sufficient to meet the broad objectives of internal
accounting controls insofar as those objectives pertain to the
prevention or detection of errors or irregularities in amounts that
would be material in relation to the Company's financial statements.
(p) Vote Required. The Company Shareholder Approval is the
only vote of the holders of any class or series of the Company's
securities necessary to approve this Agreement and the transactions
contemplated hereby (assuming for purposes of this representation the
accuracy of the representations contained in Section 3.02(w)).
(q) Board Recommendation. On the date hereof, the Board of
Directors of the Company, at a meeting duly called and held, by the
unanimous vote of the directors present at such meeting and voting
(with Doctor ▇. ▇▇▇▇▇▇ and ▇▇▇▇-▇▇▇▇▇▇ Cuny abstaining) , (i)
determined that this Agreement and the Merger and the other
transactions contemplated hereby are fair to and in the best interests
of the shareholders of the Company, (ii) adopted this Agreement and
approved the Merger and (iii) resolved to recommend that the holders of
shares of Company Capital Stock approve this Agreement.
(r) Tennessee Business Combination Act. Assuming the accuracy
of the representation and warranty of Prison Realty contained in
Section 3.02(v), the approval of the Merger by the Board of Directors
of the Company referred to in Section 3.01(q) constitutes approval of
the Merger for purposes of the TBCA and represents all the actions
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23
necessary to ensure that Sections ▇▇-▇▇▇-▇▇▇ et seq. of the TBCA do not
apply to the Merger.
(s) Brokers. No broker, investment banker, financial advisor
or other person, other than ▇▇▇▇▇▇▇▇ Inc., the fees and expenses of
which will be paid by the Company, are entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company. The Company's
arrangement with ▇▇▇▇▇▇▇▇ Inc. has been disclosed to Prison Realty
prior to the date hereof.
(t) Opinion of Financial Advisor. The Company has received the
opinion of ▇▇▇▇▇▇▇▇ Inc., dated as of the date hereof, to the effect
that the consideration to be received by holders of Company Common
Stock in the Merger is fair to such holders from a financial point of
view (the "▇▇▇▇▇▇▇▇ Opinion").
(u) Share Ownership. The Company does not, directly or
indirectly, own any Prison Realty Common Shares other than Common
Shares, if any, held in Company Benefit Plans.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PRISON REALTY. Except
as set forth in the Prison Realty SEC Documents (as defined in Section 3.02(d))
filed and publicly available prior to the date hereof (the "Prison Realty Filed
SEC Documents") or on the Disclosure Schedule delivered by Prison Realty to the
Company prior to the execution of this Agreement (the "Prison Realty Disclosure
Schedule"), which Prison Realty Disclosure Schedule constitutes a part hereof
and is true and correct in all material respects, Prison Realty represents and
warrants to the Company as follows:
(a) Organization and Authority. Prison Realty is duly formed
and validly existing and in good standing under the laws of the State
of Maryland with full power and authority to own its properties and
conduct its business as now conducted and is duly qualified or
authorized to do business and is in good standing in all jurisdictions
where the failure to so qualify could have a material adverse effect on
Prison Realty (as defined in Section 8.03(a)). Prison Realty does not
have a direct or indirect ownership interest in any subsidiary
corporation, joint venture, partnership or other entity, except those
entities set forth in the Prison Realty Disclosure Schedule, each of
which is duly incorporated and in good standing under the laws of its
jurisdiction of organization, with corporate power and authority to own
its properties and conduct its business as now conducted, and is duly
qualified or authorized to do business and is in good standing in all
jurisdictions where the failure to so qualify could have a material
adverse effect upon the conduct of business or the ownership or leasing
of property by Prison Realty in such jurisdiction. Each Subsidiary of
Prison Realty holds all licenses, certificates, permits, franchises and
authorizations from governmental authorities necessary for the conduct
of its business. Except as set forth in the Prison Realty Disclosure
Schedule, Prison Realty owns all the outstanding capital stock or
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ownership interests of each Subsidiary free and clear of any Liens, and
there are no rights to subscribe for or purchase any shares of capital
stock or ownership interests of the Subsidiary. Prison Realty has made
available to the Company complete and correct copies of its declaration
of trust and bylaws and the charter and bylaws (or other organizational
documents) of each Subsidiary, in each case as amended to the date of
this Agreement.
(b) Capital Structure. The authorized capital stock of Prison
Realty consists of 90,000,000 Prison Realty Common Shares and
10,000,000 preferred shares, $0.01 par value per share, of which
4,600,000 are designated 8.0% Series A Cumulative Preferred Shares of
Prison Realty ("Prison Realty Series A Preferred Shares", and together
with the Prison Realty Common Shares, the "Prison Realty Capital
Shares"). At the close of business on April 17, 1998, (A) 21,576,000
Prison Realty Common Shares were outstanding, (B) 4,300,000 Prison
Realty Series A Preferred Shares were outstanding, (C) options to
acquire 1,113,000 Prison Realty Common Shares from the Company (the
"Prison Realty Options") pursuant to the 1997 Employee Share Incentive
Plan and, the Non-Employee Trustees' Share Option Plan (the "Prison
Realty Equity Plans") were outstanding. Other than as set forth above,
at the close of business on April 17, 1998, there were outstanding no
Prison Realty Capital Shares or options, warrants or other rights to
acquire Prison Realty Capital Shares from Prison Realty. Since April
17, 1998, (x) there have been no issuances by Prison Realty of Prison
Realty Capital Shares other than issuances of Prison Realty Common
Shares pursuant to the exercise of Prison Realty Options outstanding as
of April 17, 1998 and (y) there have been no issuances by Prison Realty
of options, warrants or other rights to acquire capital shares from
Prison Realty except as expressly permitted by this Agreement. No
bonds, debentures, notes or other indebtedness having the right to vote
(or convertible into or exchangeable for securities having the right to
vote) on any matters on which shareholders of Prison Realty may vote
are issued or outstanding. All outstanding Prison Realty Capital Shares
are, and any Prison Realty Common Shares which may be issued upon the
exercise of Prison Realty Options when issued will be, duly authorized,
validly issued, fully paid and nonassessable, and will be delivered
free and clear of Liens and not subject to preemptive rights. Other
than as set forth above, and except for this Agreement, the Prison
Realty Equity Plans and the Prison Realty Options, and the Employee
Savings and Stock Ownership Plan, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements or
undertakings of any kind to which Prison Realty or any Subsidiary of
Prison Realty is a party or by which Prison Realty or any Subsidiary of
Prison Realty is bound obligating Prison Realty or any Subsidiary of
Prison Realty to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity
or voting securities of Prison Realty or of any Subsidiary of Prison
Realty or obligating Prison Realty or any Subsidiary of Prison Realty
to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement or undertaking. There are
no outstanding obligations of Prison Realty or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any capital shares of Prison
Realty or any of its Subsidiaries and, to the knowledge of the
executive officers of Prison Realty, as of the date hereof, no
irrevocable proxies have
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been granted with respect to Prison Realty Capital Shares or equity of
Subsidiaries of Prison Realty.
(c) Authorization. Prison Realty has all requisite power and
authority to enter into this Agreement and, subject to obtaining the
Prison Realty Shareholder Approval with respect to the Merger, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action
on the part of Prison Realty, subject to obtaining Prison Realty
Shareholder Approval with respect to the Merger. This Agreement has
been duly executed and delivered by Prison Realty and constitutes a
valid and binding obligation of Prison Realty, enforceable against
Prison Realty in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, fraudulent transfer and other similar laws from time to
time in effect. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any breach or violation of, or default
(with or without notice or lapse of time or both) under, or result in
the termination of, or accelerate the performance required by, or give
rise to a right of termination, cancellation or acceleration of any
obligation under, or the creation of a Lien pursuant to, (i) any
provision of the declaration of trust (or similar organizational
documents) or bylaws of Prison Realty or any Subsidiary of Prison
Realty or (ii) subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings
referred to in the following sentence, any loan or credit agreement,
note, mortgage, indenture, lease, Prison Realty Benefit Plan (as
defined in Section 3.02(n)) or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Prison Realty
or any Subsidiary of Prison Realty or their respective properties or
assets, in any case under this clause (ii) which would, individually or
in the aggregate, have a material adverse effect on Prison Realty. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or
with respect to Prison Realty or any Subsidiary of Prison Realty in
connection with the execution and delivery of this Agreement by Prison
Realty or the consummation by Prison Realty of the transactions
contemplated hereby, the failure of which to be obtained or made would,
individually or in the aggregate, have a material adverse effect on
Prison Realty or would prevent or materially delay the consummation of
the transactions contemplated hereby, except for (A) the filing with
the SEC of (i) the Joint Proxy Statement/Prospectus; (ii) the
Registration Statement (as hereinafter defined), and (iii) such reports
under the Exchange Act as may be required in connection with this
Agreement and the Merger and the other transactions contemplated
hereby, (B) the filing of the Articles of Merger with the Maryland
Department and the Tennessee Secretary of State and appropriate
documents with the relevant authorities of other states in which Prison
Realty is qualified to do business, (C) filings required pursuant to
the HSR Act, (D) filings necessary to satisfy the applicable
requirements of state securities or "blue sky" laws, (E) those required
under the rules and regulations of the NYSE and those required pursuant
to the Company's agreements with Governmental Entities relating to the
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Prison Realty Facilities (as hereinafter defined), each of which is
listed on the Prison Realty Disclosure Schedule (collectively, the
"Prison Realty Required Filings").
(d) SEC Documents; Financial Statements. Prison Realty has
filed and made available to the Company a true and complete copy of
each report, schedule, registration statement and definitive proxy
statement required to be filed by Prison Realty with the SEC since
April 24, 1997 (the "Prison Realty SEC Documents"). As of their
respective dates, the Prison Realty SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, applicable to such Prison Realty SEC
Documents. None of the Prison Realty SEC Documents when filed contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Prison Realty
included in the Prison Realty SEC Documents comply as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC, or for
normal year-end adjustments) and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
Except as set forth in the Prison Realty Filed SEC Documents (including
any item accounted for in the financial statements contained in the
Prison Realty Filed SEC Documents or set forth in the notes thereto),
as of December 31, 1997, neither Prison Realty nor any of its
Subsidiaries had, and since such date neither Prison Realty nor any of
such Subsidiaries has incurred, any claims, liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, would have a material adverse
effect on Prison Realty (other than claims, liabilities or obligations
contemplated by this Agreement or expressly permitted to be incurred
pursuant to this Agreement).
(e) Information Supplied. None of the information supplied or
to be supplied by Prison Realty for inclusion or incorporation by
reference in (i) the Joint Proxy Statement/Prospectus will, at the date
it is first mailed to shareholders of Prison Realty or the Company or
at the time of the Prison Realty Shareholders Meeting or the Company
Shareholders meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that
in each case no representation or warranty is made by Prison Realty
with respect to statements made or incorporated by reference therein
based on information supplied by the Company specifically for inclusion
or incorporation by reference therein. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act,
except that in each case no representation or warranty is made by
Prison Realty with respect to statements made or incorporated by
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reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference therein.
(f) Registration Statement. The registration statement of
Prison Realty to be filed with the SEC with respect to the offering of
Prison Realty Common Shares in connection with the Merger (the
"Registration Statement") and any amendments or supplements thereto
will, when filed, comply as to form in all material respects with the
applicable requirements of the Securities Act. At the time the
Registration Statement or any amendment or supplement thereto becomes
effective and at the Effective Time, the Registration Statement, as
amended or supplemented, if applicable, shall not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
contained therein not misleading. The foregoing representations and
warranties will not apply to statements or omissions included in the
Registration Statement or any amendment or supplement thereto based
upon information furnished to Prison Realty by the Company for use
therein.
(g) Absence of Certain Changes or Events. Subsequent to
December 31, 1997, neither Prison Realty nor any Subsidiary has
sustained any material loss or interference with its business or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, which is not disclosed; and
subsequent to the respective dates as of which information is given in
the Prison Realty Filed SEC Documents, (i) neither Prison Realty nor
any Subsidiary has incurred any material liabilities or obligations,
direct or contingent, or entered into any transactions not in the
ordinary course of business consistent with past practice, and (ii)
there has not been any issuance of options, warrants or rights to
purchase interests in, or the capital shares of, Prison Realty, or any
adverse change, or any development involving a prospective adverse
change, in the general affairs, management, business, prospects,
financial position, net worth or results of operations of Prison Realty
or any Subsidiary.
(h) Compliance with Laws; Litigation. Except as described in
the Prison Realty Disclosure Schedule or the Prison Realty Filed SEC
Documents, there is not pending, or to the knowledge of Prison Realty
threatened, any legal or governmental action, suit, proceeding, inquiry
or investigation, to which Prison Realty or each Subsidiary or any of
their respective officers, directors or trustees is a party, or to
which the property of Prison Realty or each Subsidiary is subject,
before or brought by any Governmental Entity, wherein an unfavorable
decision, ruling or finding could prevent or materially hinder the
consummation of this Agreement or result in a material adverse effect
on Prison Realty. Each of Prison Realty and each Subsidiary has at all
times operated and currently operates its business in conformity in all
material respects with all applicable statutes, common laws,
ordinances, decrees, orders, rules and regulations of Governmental
Entities. Each of Prison Realty and each Subsidiary has all licenses,
approvals or consents to operate its businesses in all locations in
which such businesses are currently being operated, and Prison Realty
is
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not aware of any existing or imminent matter which may materially
adversely impact its operations or business prospects other than as
specifically disclosed in the Prison Realty Filed SEC Documents or the
Prison Realty Disclosure Schedule. Prison Realty and each Subsidiary
have not failed to file with the applicable regulatory authorities any
material statements, reports, information or forms required by all
applicable laws, regulations or orders; all such filings or submissions
were in material compliance with applicable laws when filed, and no
material deficiencies have been asserted by any regulatory commission,
agency or authority with respect to such filings or submissions. Prison
Realty and each Subsidiary have not failed to maintain in full force
and effect any material licenses, registrations or permits necessary or
proper for the conduct of its business, or received any notification
that any revocation or limitation thereof is threatened or pending, and
there is not to the knowledge of Prison Realty pending any change under
any law, regulation, license or permit which would materially adversely
affect the business, operations, property or business prospects of
Prison Realty. Prison Realty and each Subsidiary have not received any
notice of violation of or been threatened with a charge of violating
and are not under investigation with respect to a possible violation of
any provision of any law, regulation or order.
(i) Taxes. (A) Prison Realty is organized in conformity with
the requirements for qualification as a real estate investment trust
("REIT") under Sections 856 through 860 of the Code, has duly elected
to be taxed as a REIT commencing with the taxable year ending December
31, 1997, and such election has not been terminated or revoked, (B)
Prison Realty is operated in such a manner that it continues to qualify
as a REIT and is taxed as a REIT, (C) each Subsidiary constitutes a
"qualified REIT subsidiary" within the meaning of Section 856(i) of the
Code, (D) Prison Realty has not received any net income from prohibited
transactions within the meaning of Section 852(b)(6)(B) of the Code,
(E) Prison Realty and each Subsidiary have filed, or have caused to be
filed on their behalf, all tax returns required to be filed by them
(collectively, "Prison Realty Returns"), and as of the time of filing,
all the Prison Realty Returns were complete and accurate except to the
extent that any failure to file or any inaccuracies in any filed Prison
Realty Returns would not have a material adverse effect on Prison
Realty, (F) Prison Realty and each Subsidiary have paid or Prison
Realty has made adequate reserves in its financial statements included
in the Prison Realty Filed SEC Documents (other than reserves for
deferred income taxes established to reflect differences between book
basis and tax basis of assets and liabilities) for all taxes payable by
Prison Realty and each Subsidiary except to the extent that any failure
to pay or reserve would not have a material adverse effect on Prison
Realty, (G) Prison Realty and each Subsidiary have made or Prison
Realty will make provision in its financial statements for all taxes
payable for any periods that end before the Effective Time for which no
Prison Realty Returns have yet been filed and for any periods that
begin before the Effective Time and end after the Effective Time to the
extent such taxes are attributable to the portion of any such period
ending at the Effective Time except to the extent that any failure to
make such provision would not have a material adverse effect on Prison
Realty, (H) neither Prison Realty nor any Subsidiary has requested any
extension of time within which to file or send
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any Prison Realty Return, which Prison Realty Return has not since been
filed or sent, except to the extent that any such request for an
extension would not have a material adverse effect on Prison Realty,
(I) no deficiency for any taxes has been proposed, asserted or assessed
in writing against Prison Realty or any Subsidiary except to the extent
that any such deficiency would not have a material adverse effect on
Prison Realty, (J) no claim for unpaid taxes has become a Lien of any
kind against the property of Prison Realty or any Subsidiary or is
being asserted against Prison Realty or any Subsidiaries except to the
extent that any such Lien would not have, individually or in the
aggregate, a material adverse effect on Prison Realty, (K) neither
Prison Realty nor any Subsidiary is a party to or is otherwise bound by
(or has any assets bound by) any tax sharing agreement, tax indemnity
obligation or similar agreement or arrangement, (L) each of Prison
Realty and each Subsidiary has duly and timely withheld from employee
salaries, wages and other compensation and paid over to the appropriate
tax authorities all taxes required to be so withheld and paid over for
all periods for which the statutory period of limitations for the
assessment of tax has not yet expired except to the extent that any
failure to so withhold and pay over would not have a material adverse
effect on Prison Realty, and (M) after the Effective Time, Prison
Realty will be operated in such a manner that it will continue to
qualify as a REIT.
(j) Certain Agreements. Neither Prison Realty nor any
Subsidiary is in default under any material agreement, commitment,
lease or other instrument to which it or any of its properties is
subject, and there has not occurred any event that, with the giving of
notice or the lapse of time or both, would constitute such a default by
Prison Realty or any Subsidiary or, to the knowledge of the executive
officers of Prison Realty, a default thereunder by any other party
thereto, except in all cases where such defaults, individually or in
the aggregate, would not have a material adverse effect on Prison
Realty. Neither Prison Realty nor any Subsidiary is a party to any
contract (other than leases) containing any covenant restricting its
ability to conduct its business as currently conducted except for any
such covenants that would not, individually or in the aggregate, have a
material adverse effect on Prison Realty. Neither Prison Realty nor any
Subsidiary is in breach in any material respect under its declaration
of trust, charter, bylaws or other organizational documents.
(k) Properties.
(i) Prison Realty Owned Real Property. The Prison
Realty Filed SEC Documents describe all material real property
owned by Prison Realty or any Subsidiary (collectively, the
"Prison Realty Owned Real Property"). Except as disclosed
therein, in the title insurance policies relating to the
Prison Realty Owned Real Property or in the Prison Realty
Disclosure Schedule, each of Prison Realty and each Subsidiary
has good, valid and marketable title to the Prison Realty
Owned Real Property free of all Liens, in each case except,
individually or in the aggregate, as would not have a material
adverse effect on Prison Realty. Except as set forth in
Section 3.02(k)(i) of the Prison Realty Disclosure Schedule,
there are no outstanding
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contracts for the sale of any of the Prison Realty Owned Real
Property, except those contracts relating to property the
value in respect of which does not exceed $5,000,000
individually or $15,000,000 in the aggregate.
(ii) Prison Realty Leased Real Property. The Prison
Realty Filed SEC Documents describe all leases and subleases
(the "Prison Realty Real Property Leases") with respect to all
material real property which is leased or subleased by the
Company or its Subsidiaries (the "Prison Realty Leased Real
Property"; the Prison Realty Owned Real Property and the
Prison Realty Leased Real Property are collectively defined
as, the "Prison Realty Real Property"). Except as disclosed in
the Prison Realty Filed SEC Documents, or in the title
insurance policies relating to the Prison Realty Leased Real
Property, copies of which have been provided to the Company,
pursuant to the Prison Realty Real Property Leases, Prison
Realty and its Subsidiaries hold good and valid leasehold
title to the Prison Realty Leased Real Property, in each case
in accordance with the provisions of the applicable Prison
Realty Real Property Lease and free of all Liens, in each case
except, individually or in the aggregate, as would not have a
material adverse effect on Prison Realty. Each of the Prison
Realty Real Property Leases is enforceable against Prison
Realty and, to the knowledge of Prison Realty, against the
other party thereto, in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating
to or affecting creditor's rights and to general equity
principles and except for such failures to be enforceable as
would not, individually or in the aggregate, have a material
adverse effect on Prison Realty. Other than as disclosed in
the title insurance policies relating to the Prison Realty
Leased Real Property or such exceptions which would not have a
material adverse effect on Prison Realty, all Prison Realty
Real Property Leases are in full force and effect and grant in
all respects the leasehold estates or rights of occupancy or
use they purport to grant.
(iii) Improvements Under Construction. With respect
to those Improvements being constructed as set forth in the
Prison Realty Disclosure Schedule, to the knowledge of Prison
Realty, (a) the budget for the construction of the
Improvements fairly and accurately reflects Prison Realty's
good faith estimate of the costs and expenses shown thereon
reasonably necessary to develop and construct the Improvements
in accordance with the plans and specifications therefor, and
Prison Realty has strictly adhered to said budget and has
permitted no deviations from said budget or the plans and
specifications for the Improvements; (b) the plans and
specifications for the Improvements have been approved by all
applicable Governmental Entities having jurisdiction over the
Prison Realty Real Property, the development and construction
of the Improvements and the use and occupancy thereof for its
intended purposes, and/or any utility services to the Prison
Realty Real Property; (c) all utility services necessary for
the development and construction of the Improvements and the
use and occupancy thereof for its intended purposes are
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available through public or private easements or rights-of-way
at the boundaries of the Prison Realty Real Property,
including, without limitation, sanitary sewer, electricity,
gas, water, telephone, and storm water drainage; (d) all roads
necessary for ingress and egress to the Prison Realty Real
Property, and for the full utilization of the Prison Realty
Real Property for its intended purposes, have either been
completed pursuant to public or private easements, or the
necessary rights-of-way therefore have been dedicated to
public use and accepted by the appropriate Governmental
Entity; (e) all building permits, curb cuts, sewer and water
taps, and other permits, licenses, approvals, authorizations
and consents required for the development and construction of
the Improvements have been obtained; (f) the plans and
specifications for the Improvements, the development and
construction of the Improvements pursuant thereto, and the use
and occupancy of the Improvements for its intended purposes
comply and will comply with all applicable zoning ordinances,
building regulations, restrictive covenants and governmental
laws, rules, regulations and ordinances, and comply and will
comply with all applicable requirements, standards and
regulations of appropriate supervising boards of fire
underwriters and similar agencies, authorities or boards; (g)
Prison Realty has: (i) diligently pursued the development,
construction and installation of the Improvements; and (ii)
performed such duties as may be necessary to complete the
development, construction and installation of the Improvements
in accordance with the plans and specifications and without
liens, claims or assessments, actual or contingent, asserted
against the Prison Realty Real Property for any material,
labor or other items furnished in connection therewith, and
all in full compliance with all construction, use, building,
zoning and other similar laws, ordinances, rules, regulations,
codes and restrictions of any applicable Governmental Entities
or authorities or otherwise applicable thereto; (h) Prison
Realty has complied with all laws, ordinances, rules,
regulations, judgments, orders, injunctions, writs and decrees
of any government or political subdivision or agency thereof,
or any court or similar entity established by any of them,
applicable to the construction of the Improvements, and has
paid when due all taxes and assessments upon the Improvements
or Prison Realty Real Property, and all claims for labor or
materials, rents, and other obligations that, if unpaid, will
or might become a Lien against the Improvements or the Prison
Realty Real Property; (i) Prison Realty has maintained, in
sufficient amount, and in satisfactory form and substance, and
with satisfactory insurers: (i) builder's risk insurance,
all-risk nonreporting completed value form, insuring the
Improvements against fire, theft, extended coverage,
vandalism, and such other hazards in full force and effect at
all times until the completion of construction of all of the
Improvements; and (ii) such other insurance, in such amounts
and for such terms, as may from time to time be reasonably
required insuring against such other casualties or losses
which at the time are commonly insured against in the case of
premises similarly situated; and (j) the Improvements have
been constructed in accordance with the plans and
specifications therefor, and in compliance with all laws,
ordinances, rules and regulations applicable thereto, and in a
good and workmanlike manner. For the purposes of this
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Agreement "Improvements" shall mean all buildings,
improvements, structures and fixtures now or on the Closing
Date located on Prison Realty Real Property, including,
without limitation, landscaping, parking lots and structures,
roads, drainage and all above ground and underground utility
structures, equipment systems and other so-called
"infrastructure" improvements.
(l) Environmental Matters.
(i) To the knowledge of Prison Realty, the Prison
Realty Real Property and the Improvements thereon (the "Prison
Realty Facilities") are presently operated in compliance in
all material respects with all Environmental Laws.
(ii) There are no Environmental Laws requiring any
material remediation, clean up, repairs, constructions or
capital expenditures (other than normal maintenance) with
respect to the Prison Realty Facilities.
(iii) There are no (A) notices of any violation or
alleged violation of any Environmental Laws relating to the
Prison Realty Facilities or their uses that have been received
by Prison Realty, or (B) writs, injunctions, decrees, orders
or judgments outstanding, or any actions, suits, claims,
proceedings or investigations pending, or to the knowledge of
Prison Realty threatened, relating to the ownership, use,
maintenance or operation of the Prison Realty Facilities.
(iv) All material permits and licenses required
under any Environmental Laws in respect of the operations of
the Prison Realty Facilities have been obtained, and the
Prison Realty Facilities are in compliance, in all material
respects, with the terms and conditions of such permits and
licenses.
(m) Labor Matters. As of the date hereof, (i) to the knowledge
of Prison Realty there are no representation or certification
proceedings, or petitions seeking a representation proceeding pending
or threatened to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority and (ii) to
the knowledge of Prison Realty there are no organizing activities or
strikes involving Prison Realty or any of its Subsidiaries with respect
to any group of employees of Prison Realty or its Subsidiaries, in each
case that would be expected, individually or in the aggregate, to have
a material adverse effect on Prison Realty.
(n) Benefit Plans.
(i) All "employee benefit plans" (as defined in
Section 3(3) of ERISA) and all other compensation, bonus,
pension, profit sharing, deferred compensation, stock
ownership, stock purchase, stock option, phantom stock,
retirement, employment, change-in-control, welfare, collective
bargaining, severance, disability, death benefit,
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hospitalization and medical plans, agreements, arrangements or
understandings that are maintained or contributed to (or
previously contributed to) for the benefit of any current or
former employee, officer or director of Prison Realty or any
of its Subsidiaries and with respect to which the Company or
any of its Subsidiaries would reasonably be expected to have
direct or contingent liability are defined herein as the
"Prison Realty Benefit Plans". Prison Realty has heretofore
delivered or made available to the Company true and complete
copies of all Prison Realty Benefit Plans and, with respect to
each Prison Realty Benefit Plan, true and complete copies of
the following documents: the most recent actuarial report, if
any; the most recent annual report, if any; any related trust
agreement, annuity contract or other funding instrument, if
any; the most recent determination letter, if any; and the
most recent summary plan description, if any.
(ii) Except as disclosed in Section 3.02(n) of the
Prison Realty Disclosure Schedule: (A) none of the Prison
Realty Benefit Plans is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA or is otherwise subject to
Title IV of ERISA; (B) none of the Prison Realty Benefit Plans
promises or provides retiree medical or life insurance
benefits to any person; (C) neither Prison Realty nor any of
its Subsidiaries has any obligation to adopt or has taken any
corporate action to adopt, any new Prison Realty Benefit Plan
or, except as required by law, to amend any existing Prison
Realty Benefit Plan; (D) each Prison Realty Benefit Plan has
been administered in compliance with its terms and the
applicable provisions of ERISA, the Code and all other
applicable laws, rules and regulations except for any failures
to so administer any Prison Realty Benefit Plan as would not
have a material adverse effect on Prison Realty; (E) each
Prison Realty Benefit Plan that is intended to be qualified
within the meaning of Section 401(a) of the Code is so
qualified and has received a favorable determination letter as
to its qualification and, to Prison Realty's knowledge,
nothing has occurred that would be reasonably likely to cause
the loss of such qualification; (F) neither Prison Realty nor
any entity required to be treated as a single employer with
Prison Realty under Section 414 of the Code has any
unsatisfied liability under Title IV of ERISA that would have
a material adverse effect on Prison Realty, (G) other than
funding obligations and benefits claims payable in the
ordinary course, to the knowledge of Prison Realty, no event
has occurred and no circumstance exists with respect to any
Prison Realty Benefit Plan that could give rise to any
liability that would have a material adverse effect on Prison
Realty, whether directly or by reason of its affiliation with
any entity required to be treated as a single employer with
Prison Realty under Section 414 of the Code; (H) as of the
date hereof there are no pending or, to the knowledge of the
executive officers of Prison Realty, threatened
investigations, claims or lawsuits in respect of any Prison
Realty Benefit Plan that would have a material adverse effect
on Prison Realty; (I) no amount payable pursuant to a Prison
Realty Benefit Plan or any other plan, contract or arrangement
of Prison Realty would be considered an "excess parachute
payment" under Section 280G of the Code; (J) no Prison Realty
Benefit
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Plan exists that could result in the payment to any current or
former employee, officer or director of Prison Realty of any
money or other property or accelerate or provide any other
rights or benefits as a result of the transactions
contemplated by this Agreement whether or not such payment
would constitute an excess parachute payment within the
meaning of Section 280G of the Code; and (K) none of the
assets of Prison Realty or its Subsidiaries constitute "plan
assets" under ERISA.
(o) Material Contracts. There are no contracts or other
documents required by the Securities Act to be described in or to be
filed as exhibits to the Prison Realty Filed SEC Documents which have
not been described or filed as required. All such contracts to which
Prison Realty or any Subsidiary is a party have been duly authorized,
executed and delivered by Prison Realty or any Subsidiary, constitute
valid and binding agreements of Prison Realty or any Subsidiary and are
enforceable against Prison Realty or any Subsidiary in accordance with
the terms thereof. Each of Prison Realty and each Subsidiary has
performed all material obligations required to be performed by it, and
is neither in default in any material respect nor has it received
notice of any default or dispute under, any such contract or other
material instrument to which it is a party or by which its property is
bound or affected. To the best knowledge of Prison Realty, no other
party under any such contract or other material instrument to which it
is a party is in default in any material respect thereunder.
(p) Accounting. Prison Realty's system of internal accounting
controls is sufficient to meet the broad objectives of internal
accounting controls insofar as those objectives pertain to the
prevention or detection of errors or irregularities in amounts that
would be material in relation to Prison Realty's financial statements.
(q) Vote Required. Assuming the accuracy of the representation
and warranty of the Company contained in Section 3.01(u), the Prison
Realty Shareholder Approval is the only vote of the holders of any
class or series of Prison Realty's securities necessary to approve this
Agreement and the transactions contemplated hereby.
(r) Board Recommendation. On the date hereof, the Board of
Trustees of Prison Realty, at a meeting duly called and held, by the
unanimous vote of all Trustees except Doctor ▇. ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, each of whom abstained, which included the vote of all the
Independent Trustees (as defined in Prison Realty's declaration of
trust) present at such meeting, except ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, who
abstained, (i) determined that this Agreement and the Merger and the
other transactions contemplated hereby are fair to and in the best
interests of the shareholders of Prison Realty, (ii) adopted this
Agreement and approved the Merger and (iii) resolved to recommend that
the holders of Prison Realty Common Shares approve this Agreement.
(s) Maryland Law on Business Combinations. Assuming the
accuracy of the representation and warranty of the Company contained in
Section 3.01(u), the approval of the Merger by the Board of Trustees of
Prison Realty referred to in Section 3.02(r) constitutes approval of
the Merger for purposes of the MRL and represents all the actions
necessary to ensure that Section 3-602 of the MRL does not apply to the
Merger.
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(t) Brokers. No broker, investment banker, financial advisor
or other person, other than ▇.▇. ▇▇▇▇▇▇▇▇ & Co., L.L.C. ("Bradford"),
the fees and expenses of which will be paid by Prison Realty, is
entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of Prison Realty. Prison Realty's arrangement with Bradford has
been disclosed to the Company prior to the date hereof.
(u) Opinion of Financial Advisor. Prison Realty has received
the opinion of Bradford, dated as of the date hereof, to the effect
that the Merger Consideration to be paid by Prison Realty is fair to
Prison Realty and the holders of its Common Shares from a financial
point of view (the "Bradford Opinion").
(v) Stock Ownership. Prison Realty does not, directly or
indirectly, own any shares of Company Capital Stock other than shares,
if any, held in Prison Realty Benefit Plans.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. COVENANTS OF THE COMPANY. During the period from the date
of this Agreement until the Effective Time, the Company agrees as to itself and
its Subsidiaries that (except as expressly contemplated, required or permitted
by this Agreement or as set forth in the Company Disclosure Schedule):
(a) Ordinary Course. The Company and its Subsidiaries shall
carry on their respective businesses only in the usual, regular and
ordinary course consistent with past practice in all material respects
and use their reasonable best efforts to preserve intact their present
business organizations, maintain their rights and franchises, keep
available the services of their current officers and employees and
preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their goodwill and
ongoing businesses shall not be impaired at the Effective Time. The
Company shall not, nor shall it permit any of its Subsidiaries to,
enter into any new line of business, or incur or commit to any capital
expenditures, or any obligations or liabilities in connection with any
capital expenditures, other than capital expenditures and obligations
or liabilities incurred or committed to in the ordinary course of
business.
(b) Dividends; Changes in Stock. The Company shall not, nor
shall it permit any of its Subsidiaries to, nor shall it propose to,
(i) declare, set aside or pay any dividends on or make other
distributions in respect of any capital stock, (ii) adjust, split,
combine or reclassify any capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of
or in substitution for capital stock or (iii) subject to Section 5.06
hereof, repurchase, redeem or otherwise acquire, or permit any
Subsidiary to purchase
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or otherwise acquire, any shares of capital stock or any debt
securities, warrants or options, in each case issued by the Company or
any of its Subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall
it permit any of its Subsidiaries to, issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of
its or any of its Subsidiaries' capital stock of any class or any
securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any of the foregoing, or any other
securities or equity equivalents (including stock appreciation rights),
or enter into any agreement with respect to any of the foregoing, other
than the issuance of Company Common Stock (i) upon the exercise of
Company Options or Company Warrants that are outstanding on the date of
this Agreement, (ii) consistent with past practice under the Company
Benefit Plans, (iii) upon the conversion of the Series B Convertible
Preferred Stock or the Company Notes, or (iv) pursuant to Sodexho's
participation rights, if any, pursuant to Section 9 of the Sodexho
Stockholders Agreement for participation in issuances permitted
hereunder.
(d) Governing Documents. The Company shall not amend or
propose to amend, nor shall it permit any of its Subsidiaries to amend,
the charter (or similar constitutive documents) or bylaws of the
Company or any of its Subsidiaries.
(e) No Acquisitions. The Company shall not, nor shall it
permit any of its Subsidiaries to, merge or consolidate with, or
purchase an equity interest in or a substantial portion of the assets
of, any corporation, partnership, association or other business
organization or any division or business thereof, except any
transaction with U.S. Corrections Corporation or its affiliates or
transactions pursuant to its International Joint Venture Agreement with
Sodexho.
(f) No Dispositions. The Company shall not, nor shall it
permit any of its Subsidiaries to, sell, lease, mortgage, encumber or
otherwise dispose of, any material assets (including capital stock of
any Subsidiaries), except the sale to Prison Realty of properties that
are described as "Option Facilities" in the Prison Realty SEC
Documents.
(g) Indebtedness. The Company shall not, nor shall it permit
any of its Subsidiaries to, incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt securities
or warrants or rights to acquire any debt securities of the Company or
any of its Subsidiaries or guarantee any debt securities of others or
enter into any "keepwell" or similar arrangement, other than revolving
credit borrowings or borrowings to fund capital expenditures
contemplated by Section 4.01(a), in each case under the Company's
existing credit agreement.
(h) Other Actions. The Company shall not, nor shall it permit
any of its Subsidiaries to, take any action that would result in any of
the representations and warranties of the Company set forth in this
Agreement that are qualified as to materiality being untrue,
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any of such representations and warranties that are not so qualified
being untrue in any material respect or any of the conditions to the
Merger set forth in Article VI not being satisfied.
(i) Advice of Changes; Filings. The Company shall advise
Prison Realty of any change or event which would cause or constitute a
material breach of any of the representations or warranties of the
Company contained herein. The Company shall file all reports required
to be filed by it with the SEC or the NYSE between the date of this
Agreement and the Effective Time and shall deliver to Prison Realty
copies of all such reports promptly after the same are filed.
(j) Accounting Methods. The Company shall not change its
fiscal year or its methods, principles or practices of accounting in
effect at December 31, 1997, except as required by changes in GAAP, or
alter or change in any material respect its practices and policies
relating to the payment of accrued liabilities or accounts payable.
(k) Compensation; Benefit Plans. Neither the Company nor any
of its Subsidiaries will (i) enter into, adopt, amend or terminate any
Company Benefit Plan or any other employee benefit plan or any
agreement, arrangement, plan or policy between such party and one or
more of its directors, officers or employees, except for any such
actions taken in the ordinary course of business consistent with past
practice, (ii) increase in any manner the compensation or fringe
benefits of any of its directors, officers or employees or provide any
other benefit not required by any plan and arrangement as in effect as
of the date hereof, except for normal salary compensation increases,
benefit changes or cash bonus awards made in the ordinary course of
business consistent with past practice or (iii) create or amend any
Company Stock Plan or grant any equity based award pursuant to any
Company Stock Plan or otherwise.
(l) Discharges or Waivers of Claims. The Company shall not,
nor shall it permit any of its Subsidiaries to, (i) except as set forth
in clause (iii) below, pay, discharge or satisfy any claims (including
claims of shareholders), liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), except for the
payment, discharge or satisfaction of liabilities or obligations in the
ordinary course of business consistent with past practice or in
accordance with their terms as in effect on the date hereof, (ii)
waive, release, grant, or transfer any rights of material value or
modify or change in any material respect any existing license, lease,
contract or other document, other than in the ordinary course of
business consistent with past practice, (iii) settle or compromise any
litigation (whether or not commenced prior to the date of this
Agreement) other than settlements or compromises of litigation where
the amount paid (after giving effect to insurance proceeds actually
received) in settlement or compromise does not exceed $1,000,000,
provided that the aggregate amount paid in connection with the
settlement or compromise of all such litigation matters shall not
exceed $5,000,000.
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(m) Leases and Lease Commitments. The Company shall not, nor
shall it permit any of its Subsidiaries to, enter into or commit to
enter into, or assume, any operating or capital lease, other than (i)
any such lease contemplated by the Company Capital Budget or the
Company's operating budget, a copy of which has been provided to Prison
Realty prior to the date hereof or (ii) any such operating lease which
is not material to the Company and its Subsidiaries, taken as a whole.
(n) Liquidation Plan, Etc. The Company shall not, nor shall it
permit any of its Subsidiaries to, adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, consolidation, recapitalization or
bankruptcy reorganization.
(o) Affiliate Transactions. The Company shall not, nor shall
it permit any of its Subsidiaries to, engage in any transaction with,
or enter into any agreement, arrangement, or understanding with,
directly or indirectly, any of the Company's affiliates, including,
without limitation, any transactions, agreements, arrangements or
understandings with any affiliate or other person covered under Item
404 of SEC Regulation S-K that would be required to be disclosed under
such Item 404 other than such transactions of the same general nature,
scope and magnitude as are disclosed in the Company Filed SEC
Documents.
(p) Tax Matters. The Company and its Subsidiaries shall not
make any material income tax election, amend any material tax return or
settle or compromise any material tax liability.
(q) No General Authorization, Etc. The Company shall not, nor
shall it permit any of its Subsidiaries to, authorize any of, or commit
or agree to take any of, the foregoing actions.
SECTION 4.02. COVENANTS OF PRISON REALTY. During the period from the
date of this Agreement until the Effective Time, Prison Realty agrees that:
(a) Ordinary Course. Prison Realty and its Subsidiaries shall
carry on their respective businesses only in the usual, regular and
ordinary course consistent with past practice in all material respects
and use their reasonable best efforts to preserve intact their present
business organizations, maintain their rights and franchises, keep
available the services of their current officers and employees and
preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their goodwill and
ongoing businesses shall not be impaired at the Effective Time.
(b) Distributions. Prison Realty shall not make any
distributions other than at its current rate, provided that the rate
may be increased by the greater of ten percent or up to the minimum
amounts as may be required to comply with Section 857(a) of the Code.
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(c) Prison Realty shall conduct its operations in a manner so
as to continue to qualify as a REIT under the Code.
(d) Other Actions. Prison Realty shall not take any action
that would result in any of its representations and warranties set
forth in this Agreement that are qualified as to materiality being
untrue, any of such representations and warranties that are not so
qualified being untrue in any material respect or any of the conditions
to the Merger set forth in Article VI not being satisfied.
(e) Structure of Transactions. Prison Realty shall advise the
Company from time to time of the proposed structure of Prison Realty
and its subsidiaries and affiliated entities at and after the Effective
Time for purposes of the Company's evaluation of the Merger and
description of the Merger and related transactions in the Joint Proxy
Statement/Prospectus.
(f) Advice of Changes; Filings. Prison Realty shall advise the
Company of any change or event which would cause or constitute a
material breach of any of its representations or warranties contained
herein. Prison Realty shall file all reports required to be filed by it
with the SEC or the NYSE between the date of this Agreement and the
Effective Time and shall deliver to the Company copies of all such
reports promptly after the same are filed.
SECTION 4.03. NO SOLICITATION.
(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any officer, director
or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, directly
or indirectly, (i) solicit, initiate, encourage or knowingly facilitate
the submission of any takeover proposal or (ii) enter into or
participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, any takeover proposal;
provided, however, that prior to the receipt of the Company Shareholder
Approval the Company may, in response to a bona fide takeover proposal
that constitutes a superior proposal (as defined in Section 4.03(b))
and that was made after the date hereof (and not solicited by the
Company after the date hereof) by any person, and subject to compliance
with Section 4.03(c), (A) furnish information with respect to the
Company and its Subsidiaries to such person and its representatives
pursuant to a customary confidentiality agreement and discuss such
information with such person and its representatives and (B)
participate in negotiations regarding such takeover proposal. For
purposes of this Agreement (except as set forth in Section 5.07(b)),
the term "takeover proposal" means any inquiry, proposal or offer from
any person relating to any direct or indirect acquisition or purchase
of 20% or more of the assets (based on the fair market value thereof)
of the Company and its Subsidiaries, taken as a whole, other than the
transactions contemplated by this Agreement, or of 20% or more of any
class of equity securities of the Company or any of its Subsidiaries or
any tender offer or exchange offer (including by the Company or any of
its Subsidiaries) that if consummated
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would result in any person beneficially owning 20% or more of any class
of equity securities of the Company or any of its Subsidiaries, or any
merger, consolidation, business combination, sale of substantially all
assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries other than
the transactions contemplated by this Agreement.
(b) Except as set forth in this Section 4.03, the Board of
Directors of the Company shall not (i) withdraw or modify, or publicly
propose to withdraw or modify, in a manner adverse to Prison Realty,
the approval or recommendation by such Board of Directors of the Merger
or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any takeover proposal or (iii) cause or agree to
cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or similar agreement related to any
takeover proposal. Notwithstanding the foregoing, if the Board of
Directors of the Company receives a superior proposal, such Board of
Directors may, prior to the receipt of the Company Shareholder Approval
and subject to compliance with Section 5.07(b), withdraw or modify its
approval or recommendation of the Merger and this Agreement, approve or
recommend a superior proposal or terminate this Agreement, but in each
case only at a time that is at least five business days after receipt
by Prison Realty of written notice advising it that the Board of
Directors of the Company has resolved to accept a superior proposal if
it continues to be a superior proposal at the end of such five business
day period. For purposes of this Agreement, the term "superior
proposal" means any bona fide takeover proposal (which, for purposes of
Section 4.03(a) only, may be subject to a due diligence condition),
which proposal was not solicited by the Company after the date hereof,
made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of
the shares of Company Common Stock then outstanding or all or
substantially all the assets of the Company and its Subsidiaries and
otherwise on terms which the Board of Directors of the Company
determines in good faith (after consultation with a financial advisor
of nationally recognized reputation) to be more favorable to the
Company's shareholders than the Merger and for which financing, to the
extent required, is then committed or which, in the good faith judgment
of such Board of Directors, is reasonably capable of being financed by
such third party.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) above, the Company promptly shall advise Prison
Realty orally and in writing of any request for information or of any
takeover proposal, the material terms and conditions of such request or
takeover proposal and the identity of the person making any such
request or takeover proposal and any determination by the Board of
Directors of the Company that a takeover proposal is or may be a
superior proposal. The Company will keep Prison Realty informed as to
the status and material details (including amendments or proposed
amendments) of any such request or takeover proposal.
(d) Nothing contained in this Section 4.03 shall prohibit the
Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a)
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promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if, in the good faith judgment of the Board of
Directors of the Company after consultation with outside counsel,
failure to do so would be inconsistent with its obligations under
applicable law.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF THE JOINT PROXY STATEMENT/PROSPECTUS. As
soon as practicable following the date of this Agreement, Prison Realty and the
Company shall prepare and file with the SEC the Joint Proxy Statement/
Prospectus. Each party hereto will cooperate with the other party in connection
with the preparation of the Joint Proxy Statement/Prospectus, including
furnishing all information as may be required to be disclosed therein. Each of
the Company and Prison Realty will use its reasonable best efforts to cause the
Joint Proxy Statement/Prospectus to be mailed to its shareholders as promptly as
practicable after the date hereof. No filing of, or amendment or supplement to,
the Joint Proxy Statement/Prospectus will be made by the Company or Prison
Realty without providing the other party and its Board of Directors or Trustees
the opportunity to review and comment thereon and to approve the same, provided
that such approvals shall not be unreasonably withheld. Each of the Company and
Prison Realty will advise the other party, promptly after it receives notice
thereof, of any request by the SEC for amendment of the Joint Proxy
Statement/Prospectus or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the Effective Time
any information relating to the Company or Prison Realty, or any of their
respective affiliates, officers, trustees or directors, should be discovered by
the Company or Prison Realty which should be set forth in an amendment or
supplement to the Joint Proxy Statement/Prospectus, so that the Joint Proxy
Statement/Prospectus would not include any misstatement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the shareholders of the Company and Prison Realty.
SECTION 5.02. ACCESS TO INFORMATION. Each party shall, and shall cause
each of its Subsidiaries to, afford to the other party hereto and to its
officers, employees, accountants, counsel and other representatives (including
environmental consultants), reasonable access, during normal business hours
during the period prior to the Effective Time, to their respective properties,
books, records and personnel and, during such period, each party hereto shall,
and shall cause each of its Subsidiaries to, furnish promptly to the other party
hereto (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of Federal or state securities laws and (b) such other information concerning
its business, properties and personnel as the other party may reasonably
request. With respect to
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matters disclosed in the Company Disclosure Schedule or the Prison Realty
Disclosure Schedule, respectively, each party agrees to supplement from time to
time the information set forth therein.
SECTION 5.03. SHAREHOLDERS MEETING. Each party hereto shall, as
promptly as practicable after the date hereof, (a) duly call, give notice of,
convene and hold a Shareholders Meeting for the purpose of obtaining the Company
Shareholder Approval or the Prison Realty Shareholder Approval, as the case may
be, and (b) subject in the case of the Company to Section 4.03, through its
Board of Directors, recommend to its shareholders that they grant the Company
Shareholder Approval or the Prison Realty Shareholder Approval, as the case may
be.
SECTION 5.04. REASONABLE BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each of the Company and Prison Realty shall, and
shall cause its Subsidiaries to, use all reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of any necessary consent, authorization,
order or approval of, or any exemption by, any Governmental Entity and/or any
other public or private third party which is required to be obtained by such
party or any of its Subsidiaries in connection with the Merger and the other
transactions contemplated by this Agreement (provided that the Company shall not
pay or agree to pay any material amount to obtain a consent without the prior
approval of Prison Realty, which approval shall not be unreasonably withheld or
delayed), and the making or obtaining of all necessary filings and registrations
with respect thereto, (ii) the defending of any lawsuits or other legal
proceedings challenging this Agreement, and (iii) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement.
SECTION 5.05. BENEFITS MATTERS. Except as otherwise provided herein,
following the Effective Time, the Surviving Entity shall honor, or cause to be
honored, all obligations under employment agreements, Company Benefit Plans and
all other employee benefit plans, programs, policies and arrangements of the
Company in accordance with the terms thereof. Nothing herein shall be construed
to prohibit Prison Realty or the Surviving Entity from amending or terminating
such agreements, programs, policies and arrangements in accordance with the
terms thereof and with applicable law.
SECTION 5.06. STOCK-BASED COMPENSATION.
(a) As soon as practicable following the date of this
Agreement, the Board of Directors of the Company (or, if appropriate,
any committee administering the Company Stock Plans) shall adopt such
resolutions or take other actions with respect to all outstanding
options granted pursuant to the Company Stock Plans so that unless
otherwise required by the terms of the applicable Company Stock Plan
(and then in such case, to the extent agreed by the applicable holder
of a Company Option) (i) all options granted under the Company
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Stock Plans prior to January 1, 1996 shall vest in full immediately
prior to the Effective Time of the Merger, but such accelerated vesting
shall be conditioned upon the option holder's election to exercise such
Company Option immediately prior to the Effective Time, so that shares
of the Company's Common Stock acquired shall be converted into the
Merger Consideration at the Effective Time; and (ii) all options
granted under the Company's Stock Plans on or after January 1, 1996
shall, at the election of the option holder, either (a) vest in full,
conditioned upon exercise as in (i) above, or (b) be converted into an
option to purchase shares of Prison Realty (a "Rollover Option") with
the same conditions, including vesting and continued employment, as the
Company Option to which it relates. The obligation of Prison Realty
pursuant to this Section 5.06(a) to issue Prison Realty Common Shares
or options to purchase such shares shall be subject to Prison Realty's
determination that it will be in compliance with applicable REIT
statutes and regulations. In the event that Prison Realty determines
that the treatment of options in this Section 5.06 (a) will not so
comply, Prison Realty may cause any or all Rollover Options to be
cashed out in exchange for a cash payment equal to the following: the
product of (x) the excess of the Merger Consideration per share (valued
at the closing price of one Prison Realty Common Share on the NYSE on
the date that is five days prior to the Closing Date) over the exercise
price per share of the Company Common Stock subject to the Rollover
Option and (y) the number of shares of Company Common Stock subject to
such Rollover Option. All amounts payable pursuant to this paragraph
shall be subject to any required withholding of taxes and shall be paid
without interest.
(b) Immediately prior to the Effective Time, all shares of
deferred stock under the Company's Amended and Restated 1989 Stock
Bonus Plan shall vest in full.
(c) Prison Realty shall obtain the agreement of each holder of
Prison Realty Options that the Merger and the consummation of the
transactions contemplated hereby do not constitute a change in control
under the Prison Realty Equity Plans or otherwise affect the vesting or
other terms of the Prison Realty Options.
SECTION 5.07. FEES AND EXPENSES.
(a) Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such costs or expenses, except as provided in Section 5.07.
(b) In the event that (i) this Agreement is terminated by
Prison Realty pursuant to Section 7.01(c), (ii) this Agreement is
terminated by the Company pursuant to Section 7.01(d) or (iii)(x) any
person shall have made a bona fide takeover proposal with respect to
the Company after the date hereof and thereafter this Agreement is
terminated by the Company pursuant to Section 7.01(b)(iii) or by either
party pursuant to Section 7.01(b)(iv) and (y) within 12 months after
such termination a takeover agreement (as defined below) is executed by
the Company or a takeover transaction (as defined below) is
consummated, then
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the Company shall reimburse Prison Realty for the documented
out-of-pocket fees and expenses reasonably incurred thereby in
connection with this Agreement and the transactions contemplated hereby
(including those which may be incurred in connection with enforcing the
terms of this Section 5.07) in an aggregate amount not in excess of
$7,000,000 (the "Expenses"). The Company shall pay reimbursement
amounts to Prison Realty promptly (and in any event within ten business
days) following a termination referred to in clause (i) or (ii) or
promptly (and in any event within ten business days) after the first to
occur of the execution of a takeover agreement or the consummation of a
takeover transaction referred to in clause (iii) above. For purposes of
this Section 5.07(b), the term "takeover transaction" shall mean any
transaction if a proposal to consummate such transaction would
constitute a takeover proposal, the term "takeover agreement" shall
mean any letter of intent, agreement in principle, acquisition
agreement or similar agreement to consummate a takeover transaction and
the term "takeover proposal" shall have the meaning assigned to such
term in Section 4.03 except that (1) references to "20%" in the
definition of such term contained in Section 4.03 shall be deemed to be
references to "50%" and (2) the term "takeover proposal" shall only be
deemed to refer to a transaction involving the Company, or with respect
to assets (including the shares of any Subsidiaries), the Company and
its Subsidiaries taken as a whole. Notwithstanding the immediately
preceding sentence, if any bona fide takeover proposal (as defined in
this Section 5.07(b) but without regard to clause (1) above) made by a
person with respect to the Company is made after the date hereof and
the Company accepts such proposal or any other takeover proposal (as
defined in this Section 5.07(b) but without regard to clause (1) above)
made by such person after the termination of this Agreement, then such
accepted proposal shall constitute a "takeover proposal" for purposes
of Section 5.07(b)(iii).
SECTION 5.08. INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) Prison Realty and the Company agree that all rights to
indemnification and exculpation from liability for acts or omissions
occurring at or prior to the Effective Time and rights to advancement
of expenses relating thereto now existing in favor of the current or
former directors or officers of the Company and its Subsidiaries (such
persons, "Indemnified Persons") as provided in their respective charter
(or similar constitutive documents) or bylaws and any existing
indemnification agreements or arrangements of the Company shall survive
the Merger and shall not be amended, repealed or otherwise modified in
any manner that would in any manner adversely affect the rights
thereunder of any such Indemnified Persons. The parties hereto agree
that the Surviving Entity shall maintain, for a period of six years
from the Effective Time, the Company's current directors' and officers'
insurance and indemnification policy to the extent that it provides
coverage for events occurring at or prior to the Effective Time (the
"D&O Insurance") for all Indemnified Persons; provided, however, that
the Surviving Entity may, in lieu of maintaining such existing D&O
Insurance as provided above, cause comparable coverage to be provided
under any policy issued by an insurer substantially comparable to the
insurer with respect to the existing D&O Insurance, so long as the
terms thereof are no less advantageous to the
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Indemnified Parties than the existing D&O Insurance. If the existing
D&O Insurance expires, is terminated or canceled during such six-year
period, the Surviving Entity will use its reasonable best efforts to
cause to be obtained as much D&O Insurance as can be obtained for the
remainder of such period for an annualized premium not in excess of the
Maximum Premium, on terms and conditions no less advantageous in any
material respect than the existing D&O Insurance.
(b) The parties hereto agree that the provisions of this
Section 5.08 are (i) intended to be for the benefit of, and shall be
enforceable by, each Indemnified Person and each Indemnified Person's
heirs and representatives and (ii) in addition to, and not in
substitution for, any other rights to indemnification or contribution
that any such person may have by contract or otherwise.
(c) The parties hereto agree that in the event that the
Surviving Entity or any of its successors or assigns (i) consolidates
with or merges into any other person and is not the continuing or
Surviving Entity or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, proper provision
will be made by such person so that the successors and assigns of the
Surviving Entity assume the obligations of the parties hereto and the
Surviving Entity set forth in this Section 5.08.
SECTION 5.09. TRANSFER TAXES. All state, local, foreign or provincial
sales, use, real property transfer, stock transfer or similar taxes (including
any interest or penalties with respect thereto, but not including any
shareholder-level taxes based upon net income) attributable to the Merger shall
be timely paid by the Company.
SECTION 5.10. RESIGNATION OF DIRECTORS. Prior to the Effective Time,
the Company shall deliver to Prison Realty evidence satisfactory to Prison
Realty of the resignation of all directors of the Company, effective at the
Effective Time.
SECTION 5.11. STOCK EXCHANGE LISTING. Prison Realty shall use its
reasonable best efforts to cause the Prison Realty Common Shares to be issued in
connection with the Merger to be listed on the NYSE, subject to official notice
of issuance.
SECTION 5.12. TAX-FREE REORGANIZATION. Prior to the Effective Time,
each party shall use its reasonable best efforts to cause the Merger to qualify
as a reorganization qualifying under the provisions of Section 368(a)(1)(A) of
the Code.
SECTION 5.13. RULE 145 AFFILIATES. Within 45 days following the date of
this Agreement, the Company shall deliver to Prison Realty a letter identifying
all known persons who may be deemed affiliates of the Company under Rule 145 of
the Securities Act. The Company shall use its reasonable best efforts to obtain
prior to the Effective Time a written agreement from each person who may be so
deemed, substantially in the form of Exhibit A hereto.
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ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. The Company Shareholder Approval and
the Prison Realty Shareholder Approval shall have been obtained.
(b) HSR Act. Any waiting period applicable to the Merger under
the HSR Act shall have expired or been terminated.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
or decree issued by any Governmental Entity of competent jurisdiction
enjoining or otherwise preventing the consummation of the Merger shall
be in effect; provided, however, that each of the parties shall use
reasonable best efforts to prevent the entry of any such injunction or
other order or decree and to cause any such injunction or other order
or decree that may be entered to be vacated or otherwise rendered of no
effect.
(d) Prison Realty shall have obtained the opinions of either
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.A., or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP that upon, and
after, the Effective Time of the Merger and the consummation of the
transactions contemplated hereby, Prison Realty will be in compliance
with the requirements for qualification as a REIT under the Code, and
the proposed method of operation of Prison Realty as described in the
Joint Proxy Statement/Prospectus will enable Prison Realty to meet the
requirements for taxation as a real estate investment trust under the
Code beginning with the year ending December 31, 1998.
(e) The Prison Realty Common Shares to be issued in the Merger
shall have been approved for listing on the NYSE, subject to official
notice of issuance, if applicable.
(f) The Registration Statement shall be satisfactory in all
material respects to the Company and Prison Realty and shall have been
declared effective, and no stop order suspending the effectiveness of
the Registration Statement shall be in effect and no proceedings for
such purpose shall be pending before or threatened by the SEC.
(g) Prison Realty shall have obtained financing sufficient to
fund the operations of its business as described in the Joint Proxy
Statement/Prospectus after the Effective Time of the Merger and the
consummation of the transactions contemplated hereby.
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SECTION 6.02. CONDITIONS TO OBLIGATION OF PRISON REALTY TO EFFECT THE
MERGER. The obligation of Prison Realty to effect the Merger is subject to the
satisfaction of the following conditions unless waived by Prison Realty:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (i) to the extent
qualified by material adverse effect shall be true and correct, and
(ii) to the extent not qualified by material adverse effect shall be
true and correct, except that this clause (ii) shall be deemed
satisfied so long as any failures of such representations and
warranties to be true and correct do not individually or in the
aggregate have a material adverse effect on the Company, in each of
cases (i) and (ii), as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, and Prison Realty shall have
received a certificate to such effect signed on behalf of the Company
by its Chief Executive Officer and its Chief Financial Officer.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all material obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and Prison Realty shall have received a certificate to
such effect signed on behalf of the Company by its Chief Executive
Officer and Chief Financial Officer.
(c) Consents, etc. Prison Realty shall have received evidence,
in form and substance reasonably satisfactory to it, that such
consents, approvals, authorizations, qualifications and orders of
Governmental Entities and other third parties as are necessary in
connection with the transactions contemplated hereby have been
obtained, other than those the failure of which to be obtained,
individually or in the aggregate, would not have a material adverse
effect on the Company.
(d) No Litigation. There shall not be pending any suit, action
or proceeding brought by any Governmental Entity seeking to prohibit or
limit in any material respect the ownership or operation by the
Company, Prison Realty or any of (C)their respective affiliates of a
substantial portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, or to require any such person to
dispose of or hold separate any material portion of the business or
assets of the Company and its Subsidiaries, taken as a whole, as a
result of the Merger or any of the other transactions contemplated by
this Agreement or seeking to impose limitations on the ability of
Prison Realty, or any of its affiliates to acquire or hold, or exercise
full rights of ownership of, any shares of Company Common Stock,
including, without limitation, the right to vote the Company Common
Stock on all matters properly presented to the shareholders of the
Company or seeking to prohibit Prison Realty, or any of its affiliates
from effectively controlling in any material respect a substantial
portion of the business or operations of the Company or its
Subsidiaries, in each case after giving effect to any actions required
to be taken pursuant to Section 5.04.
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(e) Prison Realty shall have received a bring-down of the
Bradford opinion on each of the date of mailing of the Joint Proxy
Statement/Prospectus to the Shareholders of the Company and on the date
of Closing (each, a "Bradford Bring-down Opinion").
SECTION 6.03. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is subject to the
satisfaction of the following conditions unless waived by the Company:
(a) Representations and Warranties. The representations and
warranties of Prison Realty set forth in this Agreement (i) to the
extent qualified by material adverse effect shall be true and correct,
and (ii) to the extent not qualified by material adverse effect shall
be true and correct, except that this clause (ii) shall be deemed
satisfied so long as any failures of such representations and
warranties to be true and correct do not individually or in the
aggregate have a material adverse effect on Prison Realty, in each of
cases (i) and (ii), as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, and the Company shall have
received a certificate to such effect signed on behalf of Prison Realty
by the Chief Executive Officer and Chief Financial Officer.
(b) Performance of Obligations of Prison Realty. Prison Realty
shall have performed in all material respects all material obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate to such
effect signed on behalf of Prison Realty by the Chief Executive Officer
and Chief Financial Officer.
(c) Consents, etc. The Company shall have received evidence,
in form and substance reasonably satisfactory to it, that such
consents, approvals, authorizations, qualifications and orders of
Governmental Entities and other third parties as are necessary in
connection with the transactions contemplated hereby have been
obtained, other than those the failure of which to be obtained,
individually or in the aggregate, would not have a material adverse
effect on Prison Realty.
(d) Tax Opinion. The Company shall have received the opinion
of Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP with respect to the
status of the Merger as a tax-free reorganization pursuant to Section
368(a)(1)(A) of the Code.
(e) The Company shall have received a bring-down of the
▇▇▇▇▇▇▇▇ Opinion on each of the date of mailing of the Joint Proxy
Statement/Prospectus to the shareholders of the Company and on the date
of Closing (each, a "▇▇▇▇▇▇▇▇ Bring-down Opinion").
(f) Prison Realty shall have entered into a definitive credit
agreement and other financing arrangements sufficient, in the
reasonable judgment of the Company's Board of Directors, to fund the
operations of the Surviving Entity as described in the Joint Proxy
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Statement/Prospectus and shall have provided such agreements to the
Company no later than ten days prior to the date the Joint Proxy
Statement/Prospectus is mailed to the Company's shareholders.
(g) Prison Realty and each holder of Prison Realty Options
shall have agreed that the Merger and the consummation of the
transactions contemplated hereby shall not constitute a change in
control under the Prison Realty Equity Plans or otherwise affect the
vesting or other terms of the Prison Realty Options.
SECTION 6.04. FRUSTRATION OF CLOSING CONDITIONS. Neither Prison Realty
nor the Company may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use all reasonable best efforts to consummate
the Merger and the other transactions contemplated by this Agreement.
ARTICLE VII
TERMINATION AND AMENDMENT
SECTION 7.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Prison Realty
Shareholder Approval and the Company Shareholder Approval are received:
(a) by mutual written consent of Prison Realty and the
Company;
(b) by Prison Realty or the Company upon written notice to the
other party:
(i) if any Governmental Entity of competent
jurisdiction shall have issued a permanent injunction or other
order or decree enjoining or otherwise preventing the
consummation of the Merger and such injunction or other order
or decree shall have become final and nonappealable; provided
that the party seeking to terminate this Agreement pursuant to
this clause (i) shall have used its reasonable best efforts to
prevent or contest the imposition of, or seek the lifting or
stay of, such injunction, order or decree;
(ii) unless the party seeking to terminate this
Agreement is in material breach of its obligations hereunder,
if the Company or Prison Realty breaches or fails to perform
any of its representations, warranties, covenants or other
agreements hereunder, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in
Section 6.02(a) or 6.02(b) in the case of such a breach or
failure to perform on the part of the Company or 6.03(a) or
6.03(b) in the case of such a breach or failure to perform on
the part of Prison Realty and (B) is incapable of being cured
by the party so breaching or failing to perform or is not
cured within 30 days
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after the terminating party gives written notice of such
breach to the other party and such a cure is not effected
during such period;
(iii) if the Merger shall not have been consummated
on or before March 31, 1999, unless the failure to consummate
the Merger is the result of a material breach of this
Agreement by the party seeking to terminate this Agreement;
(iv) if, upon a vote at a duly held Company
Shareholders Meeting or any adjournment thereof, the Company
Shareholder Approval shall not have been obtained; or
(v) if, upon a vote at a duly held Prison Realty
Shareholders Meeting or any adjournment thereof, the Prison
Realty Shareholder Approval shall not have been obtained;
(c) by Prison Realty upon written notice to the Company:
(i) if the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner
adverse to Prison Realty its approval or recommendation of the
Merger or this Agreement, approved or recommended any takeover
proposal or resolved to do any of the foregoing; or
(ii) if the Company shall have entered into any
agreement (other than a confidentiality agreement in
accordance with Section 4.03(a)) with respect to a superior
proposal or shall have resolved to do so; or
(d) by the Company
(i) pursuant to Section 4.03(b) prior to the
receipt of the Company Shareholder Approval; or
(ii) upon written notice to Prison Realty if the
Board of Trustees of Prison Realty or any committee thereof
shall have withdrawn or modified in a manner adverse to the
company its approval or recommendation of the merger or this
Agreement or resolved to do so;
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Prison Realty as provided in Section
7.01, this Agreement shall forthwith become void and have no effect, and, except
to the extent that such termination results from the wilful and material breach
by a party of any of its representations, warranties, covenants or agreements
set forth in this Agreement, there shall be no liability or obligation on the
part of Prison Realty or the Company, except with respect to Section 3.01(t),
Section 3.02(v), Section 5.07, this Section 7.02 and Article VIII, which
provisions shall survive such termination.
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SECTION 7.03. AMENDMENT. This Agreement may be amended by the parties
hereto at any time before or after the Company Shareholder Approval or the
Prison Realty Shareholder Approval is received, provided that after receipt of
the Company Shareholder Approval or the Prison Realty Shareholder Approval , no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
SECTION 7.04. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) subject to
the proviso of Section 7.03, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
SECTION 7.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR
WAIVER. A termination of this Agreement pursuant to Section 7.01, an amendment
of this Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require, in the case of the
Company or Prison Realty, action by its Board of Directors or Board of Trustees,
respectively, or the duly authorized committee of such Board to the extent
permitted by law.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.02. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or sent by overnight or same-day courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
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(a) if to the Company, to:
Corrections Corporation of America
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Doctor ▇. ▇▇▇▇▇▇, Chairman, President and Chief
Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: F. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇; and
(b) if to Prison Realty, to:
CCA Prison Realty Trust
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, PA
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 8.03. DEFINITIONS; INTERPRETATION.
(a) As used in this Agreement:
(i) unless otherwise expressly provided herein, an "affiliate"
of any person means another person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under
common control with, such first person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract or otherwise;
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(ii) "business day" means any day on which banks are
not required or authorized to close in the City of New York;
(iii) "material adverse effect" means, when used in
connection with the Company, any change, effect, event,
occurrence or development that is, or is reasonably likely to
be, materially adverse to the business, results of operations
or financial condition of the Company and its Subsidiaries,
taken as a whole, other than any change, effect, event or
occurrence relating to or arising out of (A) the economy or
securities markets in general, (B) this Agreement or the
transactions contemplated hereby or the announcement thereof
or (C) private corrections industry in general, and not
specifically relating to the Company or its Subsidiaries;
"material adverse effect" means, when used in connection with
Prison Realty, any change, effect, event, occurrence or
development that is, or is reasonably likely to be, materially
adverse to the business, results of operations or financial
condition of the Prison Realty and its Subsidiaries, taken as
a whole, other than any change, effect, event or occurrence
relating to or arising out of (A) the economy or securities
markets in general, (B) this Agreement or the transactions
contemplated hereby or the announcement thereof or (C) private
corrections industry in general, and not specifically relating
to Prison Realty or its Subsidiaries;
(iv) "person" means an individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other
entity; and
(v) a "Subsidiary" of any person means another
person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are not such
voting interests, more than 50% of the equity interests of
which) is owned directly or indirectly by such first person.
(b) When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an Article,
Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The
words "hereof", "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. The term "or"
when used in this Agreement is not exclusive. All terms defined in this
Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms.
Any agreement, instrument or statute defined or referred to
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herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to
a person are also to its permitted successors and assigns.
SECTION 8.04. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other party.
SECTION 8.05. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement (a) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, and (b) other than Section
5.08 of this Agreement, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
SECTION 8.06. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee, without regard
to any principles of conflicts of law of such State.
SECTION 8.07. PUBLICITY. Except as otherwise permitted by this
Agreement or required by law or the rules of the NYSE, so long as this Agreement
is in effect, neither the Company nor Prison Realty shall, or shall permit any
of its affiliates to, issue or cause the publication of any press release or
other public announcement or statement with respect to this Agreement or the
transactions contemplated hereby without first obtaining the consent of the
other parties hereto. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall be
in the form heretofore agreed to by the parties.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties, and any such assignment that is not
so consented to shall be null and void; provided that, if necessary or advisable
under applicable provisions of corporate or tax law, Prison Realty may assign
its rights hereunder to any of its Subsidiaries or affiliates to cause the
Company to merge with a Subsidiary or affiliate of Prison Realty, but no such
assignment shall relieve Prison Realty of its obligations hereunder including
the obligations to deliver the Merger Consideration. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 8.09. ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their
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specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Tennessee or in any
Tennessee state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Tennessee or any Tennessee state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
THE FOLLOWING PAGE IS THE SIGNATURE PAGE
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IN WITNESS WHEREOF, the Company and Prison Realty have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first above written.
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor ▇. ▇▇▇▇▇▇
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Name: Doctor ▇. ▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
CCA PRISON REALTY TRUST
By: /s/ D. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III
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Name: D. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III
Title: President
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