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EXHIBIT 10.4
FORM OF WAIVER AND AMENDMENT
THIS WAIVER AND AMENDMENT (this "Agreement") is made as of
June 30, 2000 between PRISON REALTY TRUST, INC., f/k/a Prison Realty
Corporation, a Maryland corporation (the "Company"), and MDP VENTURES IV LLC, a
New York limited liability company ("MDP").
PRELIMINARY STATEMENTS
A. The Company and MDP have entered into that certain Note Purchase
Agreement (the "Note Agreement"), dated as of December 31, 1998, pursuant to
which the Company issued to MDP and its affiliated purchasers the Company's
$40,000,000 9.5% Convertible Subordinated Notes Due December 31, 2008 (the
"Notes"). Capitalized terms used and not otherwise defined herein have the
meanings given to them in the Note Agreement.
B. The Company has informed MDP that the Company has violated certain
of the covenants contained in the Note Agreement, as more particularly described
in Section 2 below (the "Existing Covenant Defaults").
C. The Company has requested that MDP (1) waive the Existing Covenant
Defaults; (2) acknowledge certain transactions that the Company desires to
consummate; and (3) agree to certain amendments to the Note Agreement, as more
particularly described below.
D. Subject to the terms and conditions set forth below, MDP is willing
to agree to certain waivers, acknowledgments and amendments, as more
particularly described below.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
a. "Amendment Effective Date" means the date on which all of the
conditions precedent to the effectiveness of this Agreement have been satisfied.
b. "C Corporation" has the meaning attributed thereto in the Code.
c. "Change in Tax Status" means the Company's election not to be
taxed as a REIT, but rather as a C Corporation, commencing with its taxable year
ending December 31, 2000 and thereafter, all in connection with the Management
Opco Merger.
d. "Credit Agreement" means that certain amended and restated credit
agreement, dated August 4, 1999, executed between the Company; certain of its
Subsidiaries; certain lenders; Lehman Commercial Paper Inc., as administrative
agent; Societe Generale, as
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documentation agent; Lehman Brothers Inc., as advisor, book manager and lead
arranger; The Bank of Nova Scotia, as syndication agent; and Southtrust Bank, as
co-agent.
e. "Credit Agreement Amendment" means that certain waiver and
amendment to the Credit agreement, dated June 9, 2000, executed between the
Company, certain of its Subsidiaries, certain lenders and Lehman Commercial
Paper Inc.
f. "Credit Agreement Defaults" means the Company's failure to comply
with certain terms of the Credit Agreement as a result of the PMI Defaults and
the Existing Covenant Defaults.
g. "Disqualified Stock" means any capital stock of the Company or
its Subsidiaries that the Company or its Subsidiaries is or, upon the passage of
time or the occurrence of any event (in each case prior to December 31, 2006),
may become obligated to redeem, purchase, retire, defease or otherwise make any
payment in respect of, in consideration other than capital stock (other than
Disqualified Stock).
h. "Fee Agreements" means (i) that certain agreement, dated
September 14, 1999, between the Company and Merrill Lynch & Co. and (ii) that
certain amended and restated agreement, dated March 3, 2000, as amended on May
1, 2000, between the Company and Wasserstein Perella & Co., Inc.
i. "Management Opco" means Corrections Corporation of America
(formerly Correctional Management Services Corporation (and not CCA)), a
Tennessee corporation.
j. "Management Opco Merger" means the legal and valid merger of
Management Opco with and into Management Sub, with Management Sub as the
surviving entity, for consideration in the merger consisting only of the
Company's common or preferred stock (other than Disqualified Stock), as more
particularly described in the Proxy.
k. "Management Opco Merger Date" means the earlier of (i) September
15, 2000, and (ii) the date that is five (5) Business Days after the date on
which all consents and authorizations necessary to validly and legally
consummate the Management Opco Merger have been obtained.
l. "Management Sub" means the wholly-owned subsidiary of the Company
formed in connection with the Management Opco Merger.
m. "Master Lease" means that certain Master Agreement to Lease,
dated January 1, 1999, between the Company and Management Opco.
n. "Pacific Life Agreement" means that certain securities purchase
agreement, dated as of April 5, 2000, and executed as of April 16, 2000, among
the Company, Management Opco, Service Company A and Service Company B, on the
one hand, and Pacific Life Insurance Company, on the other hand.
o. "PMI" means PMI Mezzanine Fund, L.P.
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p. "PMI Defaults" means (i) the Company's failure to comply with
certain financial covenants under the terms of the PMI Note Purchase Agreement
related to: (a) the Company's debt service coverage ratio and (b) the Company's
interest coverage ratio; and (ii) the Existing Covenant Defaults, to the extent
that the same are not cured or waived in accordance with Section 7.1(iii) of the
PMI Note Purchase Agreement.
q. "PMI Note Purchase Agreement" means that certain note purchase
agreement, dated as of December 31, 1998, between the Company and PMI, relating
to the Company's 7.5% Convertible Subordinated Note due February 28, 2005.
r. "Potential Claims" means the potential claims against the Company
under the Pacific Life Agreement, the Securities Purchase Agreement and the Fee
Agreements.
s. "Proxy" means the Company's Amendment No. 1 to Proxy Statement,
to be filed with the United States Securities and Exchange Commission (the
"SEC") that, if approved by the Company's common shareholders, would permit,
among other things, the Change in Tax Status and the Management Opco Merger, a
draft of which is attached to this Agreement as Exhibit A.
t. "Rent Deferral" means (i) the deferral (with interest) of cash
lease payments due to the Company under the Master Lease in December 1999 until
February 14, 2000 ($12,945,205) and April 7, 2000 ($11,946,692), and (ii) the
deferral (with interest) of cash lease payments due to the Company under the
Master Lease for the months of January 2000 through and including September 2000
until September 30, 2000, except for payments of (A) $4,000,000 within five (5)
Business Days of May 5, 2000, (B) $2,000,000 within five (5) Business Days of
June 16, 2000, (C) $12,000,000 within five (5) Business Days of July 5, 2000,
(D) $8,000,000 within five (5) Business Days of August 5, 2000, and (E)
$5,000,000 within five (5) Business Days of September 5, 2000.
u. "Rights Offering" means an offering made in accordance with all
applicable federal and state laws by the Company to its then-current common
shareholders through the distribution of rights to purchase shares of common
stock of the Company (based on each shareholder's then-current pro rata share of
the Company's common stock), which, if consummated, would result in net cash
proceeds to the Company of at least $50,000,000.
v. "Securities Purchase Agreement" means that certain securities
purchase agreement, dated as of December 26, 1999, by and between the Company
and Prison Acquisition Company L.L.C.
w. "Service Company Mergers" means the merger of Service Company A
(i.e., Prison Management Services, Inc., a Tennessee corporation) and Service
Company B (i.e., Juvenile and Jail Facility Management Services, Inc., a
Tennessee corporation) with and into the applicable Service Company Subs for
aggregate consideration of not more than $10,600,000 (plus up to $2,000,000 to
be paid to certain wardens and other employees of Service Company A and Service
Company B), in each case in the form of the Company's common or preferred stock
(other than Disqualified Stock) only.
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x. "Service Company Subs" means the two wholly-owned subsidiaries of
the Company created in connection with the Service Company Mergers.
2. WAIVER. Upon the terms and subject to the conditions set forth in
this Agreement and in reliance on the representations and warranties of the
Company set forth in this Agreement, MDP hereby waives the following Existing
Covenant Defaults:
a. Change in Tax Status. In connection with the Management Opco
Merger and the Change in Tax Status, the Company's failure to maintain its
status as a REIT, pursuant to Sections 4.8 and 7.14 of the Note Agreement.
b. Lease Enforcement. The Company's failure to issue a notice of
default or take other action in connection with Management Opco's defaults under
the Master Lease, pursuant to Section 7.15 of the Note Agreement, to the extent
that such failure or the Company's agreement to the Rent Deferral is deemed to
be in violation of that Section.
c. Conduct of Business. In connection with the Management Opco
Merger and the Change in Tax Status, the Company's conduct of business other
than financing, owning and developing prisons and other correctional facilities,
in contravention of Section 8.4 of the Note Agreement.
d. Financial Covenants. The Company's failure to comply with the
covenant set forth in Section 8.5 of the Note Agreement.
e. Change of Control. The Company's failure to deliver a Repurchase
Right Notice, pursuant to Section 10.1 of the Note Agreement, to the extent that
a "Change of Control" may have arisen by virtue of (i) the Company's execution
and delivery of the Pacific Life Agreement or (ii) the Company's execution and
delivery of the Securities Purchase Agreement.
f. PMI Defaults. The PMI Defaults, but only to the extent that the
same are cured or waived in accordance with Section 11.1(g) of the Note
Agreement.
3. ACKNOWLEDGMENT. Upon the terms and subject to the conditions set
forth in this Agreement and in reliance on the representations and warranties of
the Company set forth in this Agreement, MDP hereby acknowledges the following
transactions and agrees that neither the consummation of, or the failure to
consummate, any of these transactions shall constitute or otherwise cause a
default or Termination Event under the Note Agreement:
a. the Management Opco Merger;
b. the Change in Tax Status;
c. the Service Company Mergers;
d. the Rights Offering; and
e. any and all transactions necessary to consummate, or contemplated
by, the Rights Offering, the Proxy or the Credit Agreement Amendment.
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4. AMENDMENTS TO NOTE AGREEMENT. Upon the terms and subject to the
conditions set forth in this Agreement and in reliance on the representations
and warranties of the Company set forth in this Agreement, the Company and MDP
hereby agree to the following amendments to the Note Agreement:
a. Section 1 of the Note Agreement is hereby amended by adding the
following new Section 1.2:
"1.2 Change in Interest Rate. (a) The Company has duly authorized
the issuance of certain replacement Notes, in substantially the form
attached to the Waiver and Amendment as Exhibit B (the "Replacement
Notes"). The Replacement Notes shall be issued in the aggregate
principal amount of $40,000,000 and in exchange for the Notes issued
pursuant to Section 1.1 of this Agreement on December 31, 1998 and
January 29, 1999. The Company shall issue the Replacement Notes
within ten (10) Business Days after the Amendment Effective Date in
the amounts and to the holders of the Notes identified by MDP on the
schedule attached to the Waiver and Amendment as Exhibit C. The
Replacement Notes shall (i) be dated the date of issuance; (ii) bear
interest (computed on the basis of a 360-day year of twelve 30-day
months) from the date of issuance until the earlier of (A) Maturity,
(B) the date such Replacement Notes are repaid in full or (C) the
occurrence of a Termination Event after June 30, 2000 at the rate of
10% per annum payable semi-annually, in arrears, on each Interest
Payment Date commencing on December 31, 2000; (iii) bear interest
(computed as provided in clause (ii) above) from the earlier of (A)
Maturity or (B) the occurrence of a Termination Event after June 30,
2000 until the date such Replacement Notes are repaid in full at the
Default Rate and (iv) mature (at which time all principal and
interest payable hereunder shall be immediately due and payable) on
the Maturity Date. The Replacement Notes shall be convertible into
shares of the Company's Common Stock as provided in Section 13 of
this Agreement and shall be redeemable as provided in Section 12 of
this Agreement. Contingent Interest is payable on the Replacement
Notes as set forth in Section 2.5 of this Agreement. All references
to the "Notes" in this Agreement that do not conflict with the terms
of this Section shall include reference to the Replacement Notes.
(b) The Company and MDP acknowledge that the payment of interest on
the Notes at a rate above 9.5% per annum (i.e., the difference
between 9.5% per annum and 10% per annum, the "Additional
Interest"), pursuant to Section 1.2(a) hereof, is subject to the
approval of the Required Lenders (as such term is defined in the
Credit Agreement), pursuant to Section 3.1 of the Credit Agreement,
as amended by the Credit Agreement Amendment. The Company will use
its reasonable best efforts to obtain such approval. To the extent
that such approval is not obtained, the Company will issue
additional convertible notes on a pro rata basis to the holders of
the Notes identified by MDP at the time of the issuance in an
aggregate amount equal to the Additional Interest (the "Additional
Interest PIK Notes"). Any Additional Interest PIK Notes shall (i) be
issued on the applicable Interest Payment Date; (ii) accrue interest
in accordance with Section 1.2(a) above; and (iii) mature on the PIK
Maturity Date. The Additional Interest
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PIK Notes shall be convertible into shares of the Company's Common
Stock as provided in Section 13 of this Agreement and shall be
redeemable as provided in Section 12 of this Agreement. Contingent
Interest is not payable on the Additional Interest PIK Notes under
Section 2.5 of this Agreement."
b. Section 1 of the Note Agreement is hereby amended by adding the
following new Section 1.3:
"1.3 Authorization of PIK Notes. The Company has duly authorized the
issuance of additional convertible notes in the aggregate principal
amount of $1,114,461, in substantially the form attached to the
Waiver and Amendment as Exhibit D (the "PIK Notes"), which amount
represents any and all interest due and owing on the Notes at the
Default Rate for the period prior to the date of the Waiver and
Amendment through and including June 30, 2000. The Company shall
issue the PIK Notes within ten (10) Business Days after the
Amendment Effective Date in the amounts and to the holders of the
Notes identified by MDP on the schedule attached to the Waiver and
Amendment as Exhibit C. The PIK Notes shall accrue interest at the
same rate as the Replacement Notes under, and shall be payable in
accordance with, Section 1.2(a) of this Agreement. The PIK Notes
shall be convertible into shares of the Company's Common Stock as
provided in Section 13 of this Agreement and shall be redeemable as
provided in Section 12 of this Agreement. Contingent Interest is not
payable on the PIK Notes under Section 2.5 of this Agreement. The
maturity date of the PIK Notes is December 31, 2003 (the "PIK
Maturity Date"). All references to the "Notes" and to "Maturity" or
"Maturity Date" in this Agreement that do not conflict with the
terms of this Section shall include reference to the PIK Notes and
the PIK Maturity Date, respectively."
c. Section 2.5 of the Note Agreement is hereby deleted in its
entirety and replaced with the following new Section 2.5:
"2.5 Contingent Interest. Upon each of (x) December 31, 2003 and (y)
repayment of the Notes (whether at Maturity, as a result of the
occurrence of a Repurchase Right Event, optional prepayment, a
Termination Event or otherwise) (each a "Contingent Interest Payment
Date") Investor shall receive contingent interest ("Contingent
Interest"), payable in cash, in an amount that would be sufficient
to permit Investor to receive an IRR of 15.5% on the principal
amount of the Notes (computed without regard to the payment of any
interest that accrued at the Default Rate); provided, however, (i)
Investor shall not be entitled to receive Contingent Interest in
respect of the principal amount of any Notes that are converted into
Common Stock pursuant to Section 13 on or before such Contingent
Interest Payment Date and (ii) Investor shall not be entitled to
receive any Contingent Interest in the event that (I) the Target
Price Condition is satisfied on or before December 31, 2003 and (II)
no Termination Event or Potential Termination Event has occurred
after June 30, 2000 and before December 31, 2003."
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d. Section 7.2 of the Note Agreement is hereby amended by adding to
the beginning thereof the clause: "Except as may be necessary in order to
consummate, and as contemplated by, the Management Opco Merger and the Service
Company Mergers,".
e. Section 7.7 of the Note Agreement is hereby amended by adding to
the beginning thereof the clause: "Except for the Potential Claims,".
f. Section 7.9 of the Note Agreement is hereby amended by adding to
the end thereof the following sentence: "Investor acknowledges that, to the
extent asserted against the Company, the Company in good faith contests the
validity of the Potential Claims."
g. Section 7.14 of the Note Agreement is hereby deleted in its
entirety and replaced by the notation: "[Intentionally Omitted]".
h. Section 7.15 of the Note Agreement is hereby amended by adding to
the end thereof the following sentence: "Investor acknowledges that the Company
is in compliance with this Section in connection with the Rent Deferral."
i. Section 8.2 of the Note Agreement is hereby amended by replacing
"; or (iv)" of the second sentence in that Section with "; (iv)" and by adding
the following at the end of that sentence: "; or (v) any transaction consummated
in connection with the Management Opco Merger and the Service Company Mergers."
j. Section 8.4 of the Note Agreement is hereby deleted in its
entirety and replaced with the following new Section 8.4:
"8.4 Conduct of Business. (a) Except as may be necessary in order to
consummate, and as contemplated by, the Management Opco Merger and
the Service Company Mergers, the Company shall not, and shall not
permit any of its Subsidiaries to, engage, to any substantial
extent, in any business other than the financing, ownership and
development of prisons and other correctional facilities and other
businesses or activities substantially similar or related thereto.
(b) After consummation of the Management Opco Merger, the business
of the Company and its Subsidiaries may include, in addition to
those activities listed in clause (a) above, the operation and
management of correctional, justice and detention facilities."
k. Section 8.5 of the Note Agreement is hereby deleted in its
entirety and replaced with the following new Section 8.5:
"8.5 Financial Covenants. For purposes of this Section 8.5 only, all
capitalized terms used in this Section shall have the meaning given
to them in the Credit Agreement, as in effect as of the Amendment
Effective Date. Such definitions shall (a) incorporate any defined
terms contained therein; (b) be deemed to incorporate any amendments
or modifications to such defined terms in the Credit Agreement, as
of the effective date of the applicable amendments or modifications;
and (c) to the extent that the Credit Agreement is terminated as
between the parties thereto, have the meaning given to them
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in the Credit Agreement, as of the date immediately preceding the
applicable termination date. Upon and after consummation of the
Management Opco Merger, the following financial covenants shall
apply:
(i) Total Indebtedness to Total Capitalization. At
all times the ratio of Total Indebtedness to Total
Capitalization shall be equal to or less than .60:1.00.
(ii) Post Merger Interest Coverage Ratio. The Post
Merger Interest Coverage Ratio, as of the last day of each
fiscal quarter of the Consolidated Parties, shall be equal to
or greater than the ratio set forth below for such fiscal
quarter.
<TABLE>
<CAPTION>
-------------------------------------------------
Fiscal Quarter Ratio
-------------------------------------------------
<S> <C>
Q3 - 2000: .75:1.00
-------------------------------------------------
Q4 - 2000: 1.00:1.00
-------------------------------------------------
Q1 - 2001: 1.20:1.00
-------------------------------------------------
Q2 - 2001: 1.20:1.00
-------------------------------------------------
Q3 - 2001: 1.40:1.00
-------------------------------------------------
Q4 - 2001 and thereafter 1.40:1.00
-------------------------------------------------
</TABLE>
(iii) Fixed Charge Coverage. The Fixed Charge
Coverage Ratio, as of the last day of each fiscal quarter of the
Consolidated Parties, shall be equal to or greater than the ratio set
forth below for such fiscal quarter:
<TABLE>
<CAPTION>
-------------------------------------------------
Fiscal Quarter Ratio
-------------------------------------------------
<S> <C>
Q3 - 2000 0.50:1.00
-------------------------------------------------
Q4 - 2000 1.00:1.00
-------------------------------------------------
Q1 - 2001 1.00:1.00
-------------------------------------------------
Q2 - 2001 1.00:1.00
-------------------------------------------------
Q3 - 2001 1.00:1.00
-------------------------------------------------
Q4 - 2001 and thereafter 1.00:1.00
-------------------------------------------------
</TABLE>
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(iv) Pro Forma Adjustments and Setting of Future
Financial Covenants. To the extent that the Management Opco Merger is
consummated on a date in a fiscal quarter of the Consolidated Parties
other than the final day of such fiscal quarter, the financial
covenants contained in (ii) through (iii) above shall be calculated as
if the Management Opco Merger had occurred on the first of day of such
fiscal quarter. Further, at any time on and after September 30, 2001
that the financial covenants set forth in the Credit Agreement are
reset or otherwise renegotiated, but no less frequently than annually,
the Company and MDP agree to establish reset covenant levels for the
covenants contained in (ii) through (iii) above (at a level equal to 25
basis points lower than the comparable financial covenant in the Credit
Agreement in the case of the Post Merger Interest Coverage Ratio, and
25 basis points lower than the comparable financial covenant in the
Credit Agreement in the case of the Fixed Charge Coverage Ratio) in
each case, for the period covered by the reset or otherwise
renegotiated Credit Agreement financial covenants."
l. Section 10.1(a) of the Note Agreement is hereby amended by adding
to the beginning thereof the clause: "Subject to the waivers contained in the
Waiver and Amendment and excluding any and all transactions consummated in
connection with, or contemplated by, the Rights Offering, the Proxy or the
Credit Agreement Amendment,".
m. Section 11.1 of the Note Agreement is hereby amended by adding to
the beginning thereof the clause: "Subject to the waivers contained in the
Waiver and Amendment,".
n. Section 11.1(g) of the Note Agreement is hereby amended by adding
to the beginning thereof the clause: "Except in connection with the Potential
Claims,".
o. Section 11.1(h) of the Note Agreement is hereby amended by adding
to the beginning thereof the clause: "except in connection with the Potential
Claims,".
p. Section 11.1(i) of the Note Agreement is hereby amended by adding
to the beginning thereof the clause: "provided that the representations and
warranties contained in Section 4 of this Agreement are, by their terms, made
specifically and apply only as of the Closing Date,".
q. Section 13.1(b) of the Note Agreement is hereby deleted in its
entirety and replaced with the following new Section 13.1(b):
"(b) The initial Conversion Rate is such number of shares of Common
Stock per $1,000 principal amount of Notes as is determined by
dividing (i) 1,000 by (ii) 125% of the average High and Low Sale
Prices of the Common Stock for the 20 trading days immediately
following the earlier to occur of (I) closing of the Management Opco
Merger and (II) October 31, 2000, all subject to adjustment in
accordance with Sections 13.6 through 13.15 hereof (the "Conversion
Rate")."
r. Section 13.12 of the Note Agreement is hereby amended by
replacing "; or (d)" with "; (d)" and by adding to the end of that Section the
following clause: "; or (f) a distribution, dividend, issuance, grant of rights
or other action that otherwise would cause an
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adjustment in the Conversion Rate under the foregoing Sections, to the extent
that the distribution, dividend, issuance, grant of rights or other action is
made or taken in connection with the transactions contemplated by the Rights
Offering, the Proxy or the Credit Agreement Amendment, including the
distribution of the Series B preferred stock and the conversion of such shares
into common stock."
s. Section 13.14(a) of the Note Agreement is hereby amended by
adding to the beginning thereof the clause: "Except with respect to any and all
transactions consummated in connection with, or contemplated by, the Rights
Offering, the Proxy or the Credit Agreement Amendment,".
t. Section 15.17 of the Note Agreement is hereby amended by adding
the following definitions in proper alphabetical order:
""Additional Interest PIK Notes" is defined in
Section 1.2(b)."
""Amendment Effective Date" means the date on which
all of the conditions precedent to the effectiveness of the Waiver and
Amendment have been satisfied."
""C Corporation" has the meaning attributed thereto
in the Code."
""Change in Tax Status" means the Company's election
not to be taxed as a REIT, but rather as a C Corporation, commencing
with its taxable year ending December 31, 2000 and thereafter, all in
connection with the Management Opco Merger."
""Credit Agreement" means that certain amended and
restated credit agreement, dated August 4, 1999, executed between the
Company; certain of its Subsidiaries; certain lenders; Lehman
Commercial Paper Inc., as administrative agent; Societe Generale, as
documentation agent; Lehman Brothers Inc., as advisor, book manager and
lead arranger; The Bank of Nova Scotia, as syndication agent; and
Southtrust Bank, as co-agent."
""Credit Agreement Amendment" means that certain
waiver and amendment, dated June 9, 2000, executed between the Company,
certain of its Subsidiaries, certain lenders and Lehman Commercial
Paper Inc."
""Credit Agreement Defaults" means the Company's
failure to comply with certain terms of the Credit Agreement as a
result of the PMI Defaults and the Existing Covenant Defaults."
""Disqualified Stock" means any capital stock of the
Company or its Subsidiaries that the Company or its Subsidiaries is or,
upon the passage of time or the occurrence of any event (in each case
prior to December 31, 2006), may become obligated to redeem, purchase,
retire, defease or otherwise make any payment in respect of, in
consideration other than capital stock (other than Disqualified
Stock)."
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""Fee Agreements" means (i) that certain agreement,
dated September 14, 1999, between the Company and Merrill Lynch & Co.
and (ii) that certain amended and restated agreement, dated March 3,
2000, as amended on May 1, 2000, between the Company and Wasserstein
Perella & Co., Inc."
""Management Opco" means Corrections Corporation of
America (formerly Correctional Management Services Corporation (and not
CCA)), a Tennessee corporation."
""Management Opco Merger" means the legal and valid
merger of Management Opco with and into Management Sub, with Management
Sub as the surviving entity, for consideration in the merger consisting
only of the Company's common or preferred stock (other than
Disqualified Stock), as more particularly described in the Proxy."
""Management Opco Merger Date" means the earlier of
(i) September 15, 2000, and (ii) the date that is five (5) Business
Days after the date on which all consents and authorizations necessary
to validly and legally consummate the Management Opco Merger have been
obtained."
""Management Sub" means the wholly-owned subsidiary
of the Company formed in connection with the Management Opco Merger."
""Master Lease" means that certain Master Agreement
to Lease, dated January 1, 1999, between the Company and Management
Opco."
""Pacific Life Agreement" means that certain
securities purchase agreement, dated as of April 5, 2000, and executed
as of April 16, 2000, among the Company, Management Opco, Service
Company A and Service Company B, on the one hand, and Pacific Life
Insurance Company, on the other hand."
""PIK Maturity" is defined in Section 1.3."
""PIK Notes" is defined in Section 1.3."
""PMI" means PMI Mezzanine Fund, L.P."
""PMI Defaults" means (i) the Company's failure to
comply with certain financial covenants under the terms of the PMI Note
Purchase Agreement related to: (a) the Company's debt service coverage
ratio and (b) the Company's interest coverage ratio; and (ii) the
Existing Covenant Defaults, to the extent that the same are not cured
or waived in accordance with Section 7.1(iii) of the PMI Note Purchase
Agreement."
""PMI Note Purchase Agreement" means that certain
note purchase agreement, dated as of December 31, 1998, between the
Company and PMI, relating to the Company's 7.5% Convertible
Subordinated Note due February 28, 2005."
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""Potential Claims" means the potential claims
against the Company under the Pacific Life Agreement, the Securities
Purchase Agreement and the Fee Agreements."
""Proxy" means the Company's Amendment No. 1 to Proxy
Statement, to be filed with the United States Securities and Exchange
Commission (the "SEC") that, if approved by the Company's common
shareholders, would permit, among other things, the Change in Tax
Status and the Management Opco Merger, a draft of which is attached to
the Waiver and Amendment as Exhibit A."
""Rent Deferral" means (i) the deferral (with
interest) of cash lease payments due to the Company under the Master
Lease in December 1999 until February 14, 2000 ($12,945,205) and April
7, 2000 ($11,946,692), and (ii) the deferral (with interest) of cash
lease payments due to the Company under the Master Lease for the months
of January 2000 through and including September 2000 until September
30, 2000, except for payments of (A) $4,000,000 within five (5)
Business Days of May 5, 2000, (B) $2,000,000 within five (5) Business
Days of June 16, 2000, (C) $12,000,000 within five (5) Business Days of
July 5, 2000, (D) $8,000,000 within five (5) Business Days of August 5,
2000, and (E) $5,000,000 within five (5) Business Days of September 5,
2000.
""Replacement Notes" is defined in Section 1.2(a)."
""Rights Offering" means an offering made in
accordance with all applicable federal and state laws by the Company to
its then-current common shareholders through the distribution of rights
to purchase shares of common stock of the Company (based on each
shareholder's then-current pro rata share of the Company's common
stock), which, if consummated, would result in net cash proceeds to the
Company of at least $50,000,000."
""Securities Purchase Agreement" means that certain
securities purchase agreement, dated as of December 26, 1999, by and
between the Company and Prison Acquisition Company L.L.C."
""Service Company Mergers" means the merger of
Service Company A (i.e., Prison Management Services, Inc., a Tennessee
corporation) and Service Company B (i.e., Juvenile and Jail Facility
Management Services, Inc., a Tennessee corporation) with and into the
applicable Service Company Subs for aggregate consideration of not more
than $10,600,000 (plus up to $2,000,000 to be paid to certain wardens
and other employees of Service Company A and Service Company B), in
each case in the form of the Company's common or preferred stock (other
than Disqualified Stock) only."
""Service Company Subs" means the two wholly-owned
subsidiaries of the Company created in connection with the Service
Company Mergers."
""Waiver and Amendment" means that certain Waiver and
Amendment, dated as of June 30, 2000, among the Company and Investor."
12
<PAGE> 13
u. Section 15.17 of the Note Agreement is hereby further amended by
modifying the beginning of the definition of "Change in Control" to read:
""Change of Control" of the Company means, subject to the waivers contained in
the Waiver and Amendment and excluding any and all transactions consummated in
connection with, or contemplated by, the Rights Offering, the Proxy or the
Credit Agreement Amendment, if any of the following occur (or in the case of an
proposal made by any Person to the Company, if any of the following could occur
as a result thereof):". The remainder of the definition of "Change of Control"
shall remain the same.
v. Section 15.17 of the Note Agreement is hereby further amended by
adding to the end of the definition of "Material Adverse Effect" the following
clause: "; provided, however, that neither the consummation of, nor the failure
to consummate, the Rights Offering or any of the transactions contemplated by
the Rights Offering, the Proxy or the Credit Agreement Amendment shall
constitute or otherwise cause a Material Adverse Effect."
w. Section 15.17 of the Note Agreement is hereby further amended by
deleting in its entirety the definition of "Potential Termination Event" and
replacing it with the following new definition:
""Potential Termination Event" means, subject to the waivers
contained in the Waiver and Amendment, any event that with the
giving of notice or the passage of time would constitute a
Termination Event."
x. Section 15.17 of the Note Agreement is hereby further amended by
deleting in its entirety the definition of "Target Price Condition" and
replacing it with the following new definition:
""Target Price Condition" means the occurrence of both of the
following events (i) during any consecutive 20 trading day period
commencing with the trading day immediately following January 1,
2001, and ending with and including the trading day immediately
preceding January 1, 2004, the average High and Low Sale Prices of
the Common Stock exceeds the product of (x) 1.75 and (y) $1,000
divided by the Conversion Rate then in effect (the "Target Rate");
provided, however that in no event shall the Target Rate be less
than $10.00, subject to adjustment in accordance with Sections 13.6
through 13.15 hereof; and (ii) throughout the period referred to in
clause (i), the Company shall have continuously maintained under the
Securities Act an effective registration statement (not subject to
any blackout restrictions) that would permit, without restriction,
the resale of all the Registrable Securities that may be resold upon
the conversion of the Notes on the national exchange where the
Common Stock is listed for trading."
5. WAIVER FEE. To the extent that this Agreement is executed and
delivered by the parties on or before June 30, 2000, the Company shall pay to
MDP a waiver fee in the amount of $250,000 (the "Waiver Fee").
6. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement is
conditioned on the satisfaction of the following conditions precedent:
13
<PAGE> 14
a. the Company and MDP, respectively, shall have received a
counterpart of this Agreement duly executed and delivered by the other, and the
same shall be in full force and effect;
b. to the extent due and owing under Section 5 of this Agreement,
the Company shall have paid to MDP the Waiver Fee;
c. the Company shall have paid to MDP the interest accrued on the
Notes and due under the Note Agreement on June 30, 2000;
d. each of the representations and warranties in Section 7 below
shall be true and correct in all material respects as of the Amendment Effective
Date; and
e. after giving effect to the waivers set forth in Section 2, the
acknowledgment set forth in Section 3 and the amendments set forth in Section 4
of this Agreement, no defaults or Termination Events shall have occurred and be
continuing under the Note Agreement.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to MDP, as of the Amendment Effective Date, as follows:
a. Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and under the Note Agreement (as modified hereby).
b. Enforceability. This Agreement has been duly executed and
delivered by the Company and, after giving effect to this Agreement, the Note
Agreement is the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, and is in full force and
effect.
c. No Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
performance of and compliance with the terms and provisions hereof by the
Company will, at the time of such performance, (i) contravene the terms of the
charter or bylaws of the Company, or result in a breach or constitute a default
under any material lease, instrument, contract or other agreement to which the
Company is a party or by which it or its properties or assets may be bound or
affected; (ii) violate any provision, law, rule regulation, order, judgment,
decree or the like binding on or affecting the Company or any of its properties
or assets; (iii) require the approval or consent of, or any filing with, any
governmental authority or agency; or (iv) result in, or require, the creation or
imposition of any Lien upon or with respect to any of the properties, assets or
revenues of the Company.
d. No Default. After giving effect to the waivers set forth in
Section 2, the acknowledgment set forth in Section 3 and the amendments set
forth in Section 4 of this Agreement, no default or Termination Event shall have
occurred and be continuing under the Note Agreement.
8. REPRESENTATIONS AND WARRANTIES OF MDP. MDP hereby represents and
warrants to the Company, as of the Amendment Effective Date, as follows:
14
<PAGE> 15
a. Authority. MDP has the requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
under the Note Agreement (as modified hereby).
b. Enforceability. This Agreement has been duly executed and
delivered by MDP and, after giving effect to this Agreement, the Note Agreement
is the legal, valid and binding obligation of MDP, enforceable against MDP in
accordance with its terms, and is in full force and effect.
9. INTEGRATION. This Agreement shall be deemed incorporated into and
made a part of the Note Agreement. This Agreement and the Note Agreement shall
be construed as integrated and complementary of each other, and, except as
otherwise specifically provided in this Agreement, as augmenting and not
restricting MDP's rights and remedies under the Note Agreement. If, after
applying the foregoing an inconsistency still exists, the provisions of this
Agreement shall constitute an amendment to the Note Agreement and shall control.
10. REFERENCE TO AND EFFECT ON NOTE AGREEMENT.
a. Upon and after the Amendment Effective Date, each reference in
the Note Agreement to "this Agreement", "hereunder", "hereof' or words of like
import referring to the Note Agreement, and each reference in any Related
Documents to the Note Agreement, "the Note Purchase Agreement", "thereunder",
"thereof' or words of like import referring to the Note Agreement, shall mean
and be a reference to the Note Agreement as modified by this Agreement.
b. Except as specifically modified above, the Note Agreement and any
Related Documents are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed.
c. The execution, delivery and effectiveness of this Agreement shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of MDP, nor, except as expressly provided herein, constitute a
waiver or amendment of any provision of the Note Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same agreement. Delivery of
an executed counterpart of a signature page to this Agreement by facsimile shall
be effective as delivery of a manually executed counterpart of this Agreement.
12. SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
15
<PAGE> 16
13. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
14. ACKNOWLEDGMENT OF DEBT. The Company hereby acknowledges and
confirms that, as of the Amendment Effective Date, (a) the aggregate amount of
outstanding indebtedness under the Notes is approximately $41,114,461, plus
interest; and (b) it holds no defenses, claims, counterclaims or rights of
recoupment or set-off with respect to such indebtedness.
15. FORBEARANCE OF CLAIMS. In consideration of the foregoing, MDP
hereby agrees that it will not (a) commence any litigation, proceeding or action
or (b) assert or pursue any claims against the Company or its officers,
directors, shareholders, employees, affiliates, attorneys, representatives,
other agents, predecessors, successors, or assigns relating in any way to the
Note Agreement or the Notes or the indebtedness evidenced thereby for so long as
no default or Termination Event is existing under the Note Agreement, as amended
by this Agreement or any subsequent agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be executed by their respective officers thereunto duly authorized, as
of the date first written above.
PRISON REALTY TRUST, INC.,
a Maryland corporation
By:
----------------------------------------
Name:
Title:
MDP VENTURES IV LLC,
a New York limited liability company
By: MDP Ventures II LLC, its sole member
By: Millennium Development Partners II
LLC, its managing member
By:
--------------------------------
Name:
Title:
16
<PAGE> 17
EXHIBITS TO WAIVER AND AMENDMENT
Exhibit A: Proxy
Exhibit B: Replacement Note
Exhibit C: Schedule of Holders
Exhibit D: PIK Note
17
<PAGE> 18
EXHIBIT A
---------
[Intentionally omitted]
<PAGE> 19
EXHIBIT B
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, NEITHER THIS NOTE, THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE, NOR ANY INTEREST OR PARTICIPATION HEREIN
OR THEREIN MAY BE TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
PRISON REALTY TRUST, INC.
AMENDED AND RESTATED
10% CONVERTIBLE SUBORDINATED NOTE
DUE 2008
No. __
$___________ June 30, 2000
FOR VALUE RECEIVED, the undersigned, PRISON REALTY TRUST, INC.,
formerly know as Prison Realty Corporation (herein called the "Company"), a
corporation organized and existing under the laws of the State of Maryland,
hereby promises to pay to the order of _____________________, or its registered
assigns (the "Holder"), the principal sum of _______________________ DOLLARS
($__________) on the Maturity Date (as defined in the Note Agreement referred to
below).
This Note is issued pursuant to that certain Note Purchase Agreement
made as of December 31, 1998 (as amended by that certain Waiver and Amendment,
dated as of June 30, 2000, and as it may be subsequently amended or supplemented
from time to time, the "Note Agreement") between and among the Company, as
issuer, and the Investor named therein, and is entitled to the benefits thereof.
Capitalized terms used but not defined herein shall have the meaning given to
them in the Note Agreement. This Note is issued in substitution for that certain
$_________ Note, dated ____________ (the "Old Note"). Upon the issuance of this
Note, the Old Note shall be canceled and of no further force or effect.
The Company also promises to pay interest (computed on the basis of a
360-day year of twelve 30-day months): (a) from the date hereof until the
earlier of (i) the Maturity Date, (ii) the date this Note and all amounts
payable in connection herewith have been paid to the Holder and (iii) the
occurrence of a Termination Event after June 30, 2000 on the unpaid balance
hereof at the rate of 10% per annum, payable semi-annually in arrears, on the
last day of each June and December, commencing December 31, 2000, and on the
Maturity Date (each such date an "Interest Payment Date"); and (b) from the
earlier of (i) the Maturity Date or (ii) the occurrence of a Termination Event
after June 30, 2000 until the date this Note and all amounts payable in
connection herewith have been paid to the Holder, at the rate of 20% per annum
payable on demand. In addition, the Company promises to pay Contingent Interest
(as defined in the Note Agreement) to the Holder as set forth in Section 2.5 of
the Note Agreement.
<PAGE> 20
Payments of principal of, premium, if any, and interest (including,
without limitation, Contingent Interest) on this Note are to be made in lawful
money of the United States of America. Payments shall be made to the Holder at
such place and by such means as provided in the Note Agreement.
This Note is one of a series of convertible notes issued pursuant to
the Note Agreement. As provided in the Note Agreement, this Note: (i) is subject
to redemption prior to Maturity, as provided in Section 12.1 of the Note
Agreement; and (ii) is convertible into shares of the Company's Common Stock, as
provided in Section 13 of the Note Agreement.
This Note is a registered Note and, as provided in the Note Agreement,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
(for a like principal amount) or Notes (in authorized denominations) will be
issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company many treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
If this Note is collected by or through an attorney at law or
otherwise, then the Company shall be obligated to pay, in addition to the
principal balance hereof and any premium and accrued interest hereon, reasonable
attorney's fees and all out-of-pocket costs of the Holder in connection with the
collection or enforcement of this Note.
The Company hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
This Note shall be governed by the laws of the State of New York.
PRISON REALTY TRUST, INC.
By:
----------------------------------
Name:
---------------------------
Title:
---------------------------
<PAGE> 21
EXHIBIT C
---------
[Intentionally omitted]
<PAGE> 22
EXHIBIT D
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, NEITHER THIS NOTE, THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE, NOR ANY INTEREST OR PARTICIPATION HEREIN
OR THEREIN MAY BE TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
PRISON REALTY TRUST, INC.
10% CONVERTIBLE SUBORDINATED PIK NOTE
DUE 2003
No. __
$___________ June 30, 2000
FOR VALUE RECEIVED, the undersigned, PRISON REALTY TRUST, INC.,
formerly know as Prison Realty Corporation (herein called the "Company"), a
corporation organized and existing under the laws of the State of Maryland,
hereby promises to pay to the order of_____________________, or its registered
assigns (the "Holder"), the principal sum of _______________________ DOLLARS
($__________) on the PIK Maturity Date (as defined in the Note Agreement
referred to below).
This Note is issued pursuant to that certain Note Purchase Agreement
made as of December 31, 1998 (as amended by that certain Waiver and Amendment,
dated as of June 30, 2000, and as it may be subsequently amended or supplemented
from time to time, the "Note Agreement") between and among the Company, as
issuer, and the Investor named therein, and is entitled to the benefits thereof.
Capitalized terms used but not defined herein shall have the meaning given to
them in the Note Agreement.
The Company also promises to pay interest (computed on the basis of a
360-day year of twelve 30-day months): (a) from the date hereof until the
earlier of (i) the PIK Maturity Date, (ii) the date this Note and all amounts
payable in connection herewith have been paid to the Holder and (iii) the
occurrence of a Termination Event after June 30, 2000 on the unpaid balance
hereof at the rate of 10% per annum, payable semi-annually in arrears, on the
last day of each June and December, commencing December 31, 2000, and on the PIK
Maturity Date (each such date an "Interest Payment Date"); and (b) from the
earlier of (i) the PIK Maturity Date or (ii) the occurrence of a Termination
Event after June 30, 2000 until the date this Note and all amounts payable in
connection herewith have been paid to the Holder, at the rate of 20% per annum
payable on demand.
Payments of principal of, premium, if any, and interest (including,
without limitation, Contingent Interest) on this Note are to be made in lawful
money of the United States of America. Payments shall be made to the Holder at
such place and by such means as provided in the Note Agreement.
<PAGE> 23
This Note is one of a series of convertible notes issued pursuant to
the Note Agreement. As provided in the Note Agreement, this Note: (i) is subject
to redemption prior to the PIK Maturity Date, as provided in Section 12.1 of the
Note Agreement; and (ii) is convertible into shares of the Company's Common
Stock, as provided in Section 13 of the Note Agreement.
This Note is a registered Note and, as provided in the Note Agreement,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
(for a like principal amount) or Notes (in authorized denominations) will be
issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company many treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
If this Note is collected by or through an attorney at law or
otherwise, then the Company shall be obligated to pay, in addition to the
principal balance hereof and any premium and accrued interest hereon, reasonable
attorney's fees and all out-of-pocket costs of the Holder in connection with the
collection or enforcement of this Note.
The Company hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
This Note shall be governed by the laws of the State of New York.
PRISON REALTY TRUST, INC.
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
