<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 25, 1995
Corrections Corporation of America
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-13560 62-1156308
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
102 Woodmont Boulevard
Nashville, Tennessee 37205
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 292-3100
-----------------------------
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On April 25, 1995, Corrections Corporation of America (the
"Company") entered into a Share Exchange Agreement (the "Agreement") by and
among the Company, Concept Incorporated, a Delaware corporation ("Concept"),
and all 12 of Concept's stockholders (the "Concept Stockholders"). The share
exchange (the "Share Exchange") contemplated by the Agreement was consummated
on the same day. Under the terms of the Agreement, the Company acquired from
the Concept Stockholders all of the issued and outstanding shares of Concept
Common Stock, $10.00 par value per share (the "Concept Shares"). In
consideration of the transfer of the Concept Shares, the Company paid the
Concept Stockholders 1,362,496 shares of the Company's Common Stock, $1.00 par
value per share (the "CCA Shares"). Ninety percent (90%) or 1,226,246 of the
CCA Shares were distributed, pro rata, to the Concept Stockholders at the
Closing. The remaining ten percent (10%) or 136,250 of the CCA Shares were
delivered to First Union National Bank of Tennessee, Escrow Agent, to be held
in a post-closing escrow.
At the Closing, the Company received letters from Arthur Andersen LLP
and KPMG Peat Marwick dated as of April 25, 1995, to the effect that the Share
Exchange may be treated by the Company as a "pooling of interests" for
accounting purposes.
The CCA Shares issued to the 12 Concept Stockholders in the Share
Exchange were not registered under applicable securities laws, and accordingly
must be held by the Concept Stockholders for the requisite holding period.
Section 4.5 of the Agreement provides the Company has agreed to use its best
efforts to register up to 420,000 of the CCA Shares under the Securities Act of
1933, as amended, on Securities and Exchange Commission Form S-3 in an
underwritten public offering, and to register or qualify such shares under
applicable state laws, all within 120 days after the closing date.
Notwithstanding the foregoing, the Company will not be obligated to effect such
a registration with respect to any CCA Shares which the Concept Stockholders
are able to place privately at a price of not less than $30.50 within 120 days
of the closing date. In connection therewith, the Company agreed to use its
reasonable efforts to assist the Concept Stockholders in locating such a
private purchaser for the CCA Shares. Except as provided above, the Concept
Stockholders do not have any registration rights (demand, piggyback or other)
under the Agreement with respect to the CCA Shares.
Concept and the Concept Stockholders made numerous representations and
warranties to the Company in the Agreement. Those representations and
warranties include, but are not limited to, compliance with applicable laws,
financial statements, no undisclosed liability, tax matters, environmental
matters and capitalization. The Concept Stockholders agreed, jointly and
severally, to indemnify the Company from any loss it may suffer as a result of
a breach of any of the representations and warranties.
Concept is engaged in the management of prisons and other correction
and detention facilities under contract with governmental agencies. Its
principal operations are located in Louisville, Kentucky with an additional
office in Texas.
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
1. Audited balance sheet of Concept Incorporated as of December
31, 1994, and the related statements of income, stockholders'
investment and cash flows for the year then ended, and
unaudited balance sheet as of March 31, 1995, and the related
statements of income, stockholders' investment and cash flows
for the three months ended March 31, 1995.
2. It is impracticable to provide the required pro forma balance
sheet and income statement information with respect to the
acquired operations at this time. Such information will be
filed within 60 days.
3. Share Exchange Agreement by and among Corrections Corporation
of America, Concept Incorporated and the Stockholders of
Concept Incorporated, dated April 25, 1995.
4. Press Release dated April 26, 1995.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Darrell K. Massengale
--------------------------------
Name: Darrell K. Massengale
Title: Vice President, Finance;
Secretary/Treasurer
Date: May 10, 1995
<PAGE> 5
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CORRECTIONS CORPORATION OF AMERICA
EXHIBITS
TO CURRENT REPORT ON
FORM 8-K DATED MAY 10, 1995
Commission File Number 1-13560
<PAGE> 6
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
1. Audited balance sheet of Concept Incorporated as of December 31, 1994, and the related 7
statements of income, stockholders' investment and cash flows for the year then ended,
and unaudited balance sheet as of March 31, 1995, and the related statements of income,
stockholders' investment and cash flows for the three months ended March 31, 1995.
2. Share Exchange Agreement by and among Corrections Corporation of America, Concept 28
Incorporated and the Stockholders of Concept Incorporated, dated April 25, 1995.
3. Press Release dated April 26, 1995. 83
</TABLE>
<PAGE> 1
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1994
With Independent Auditors' Report Thereon
<PAGE> 2
CONCEPT INCORPORATED AND SUBSIDIARIES
Table of Contents
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Independent Auditors' Report 1
Consolidated Balance Sheet 2-3
Consolidated Statement of Income 4
Consolidated Statement of Shareholders' Equity 5
Consolidated Statement of Cash Flows 6-7
Notes to Consolidated Financial Statements 8-14
</TABLE>
<PAGE> 3
Independent Auditors' Report
The Board of Directors and Shareholders
Concept Incorporated:
We have audited the accompanying consolidated balance sheet of Concept
Incorporated and subsidiaries as of December 31, 1994, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Concept
Incorporated and subsidiaries as of December 31, 1994, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Louisville, Kentucky
February 17, 1995, Except as to
note 15, which is as of April 25, 1995
1
<PAGE> 4
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1994
<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets:
Cash $ 234,273
Accounts receivable - trade 2,021,137
Accounts receivable - partnership 1,287,841
Prepaid expenses 272,517
Inventories 158,140
Deferred income taxes 153,169
----------
Total current assets 4,127,077
Property, plant and equipment:
Land 184,956
Buildings and improvements 3,966,151
Equipment and automobiles 711,820
----------
4,862,927
Less accumulated depreciation and amortization 507,115
4,355,812
Other assets:
Investment in partnership --
Facility start-up costs, net of accumulated amortization
of $198,299 1,145,668
Organization costs, net of accumulated amortization
of $88,177 31,500
----------
1,177,168
$9,660,057
</TABLE>
(Continued)
2
<PAGE> 5
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheet, Continued
December 31, 1994
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
<S> <C>
Current liabilities:
Line of credit $ 785,150
Accounts payable 2,178,484
Accrued expenses 1,141,119
Deferred revenue 197,640
Income taxes payable 3,030
Long-term debt and capital lease obligations - current 460,727
Notes payable and advances - shareholders 60,000
-----------
Total current liabilities 4,826,150
Long-term debt and capital lease obligations - non-current 854,317
Investment in partnership 479,517
Deferred compensation 87,908
Notes payable - shareholders 40,000
Deferred income taxes 993
-----------
Total liabilities 6,288,885
Shareholders' equity:
Class A common stock ($10 par value, 30,000 shares
authorized, issued 20,882 shares) 208,820
Additional paid-in capital 1,335,991
Retained earnings 2,112,797
Less shareholder notes receivable (286,436)
-----------
Total shareholders' equity 3,371,172
Commitments and contingencies
$ 9,660,057
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Income
Year Ended December 31, 1994
<TABLE>
<S> <C>
Operating revenues:
Contract revenues $ 21,489,274
Other revenues 1,847,470
------------
Total operating revenues 23,336,744
Facility operating expenses 19,858,079
Contribution from operations 3,478,665
General and administrative expenses 1,928,021
Net operating income 1,550,644
Other income (expenses):
Interest income 53,135
Interest expense (154,540)
Loss on disposition of assets (35,373)
Loss on write-off of option (384,000)
Equity in net earnings of unconsolidated partnership 200,591
------------
Total other income (expenses) (320,187)
Income before income taxes 1,230,457
Income taxes 466,650
------------
Net income $ 763,807
============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
Year Ended December 31, 1994
<TABLE>
<CAPTION>
Additional Shareholder Total
Class A Class B Paid-in Retained Notes Shareholders'
Shares Amount Shares Amount Capital Earnings Receivable Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 15,508 155,080 9,896 98,960 529,165 1,348,990 -- 2,132,195
Conversion of Class B
common stock to Class A 1,881 18,810 (9,896) (98,960) 80,150 -- -- --
Issuance of Class A common
stock for cash and notes 3,493 34,930 -- -- 726,676 -- (286,436) 475,170
Net income -- -- -- -- -- 763,807 -- 763,807
------ -------- ------ -------- ---------- ---------- --------- ----------
Balance at
December 31, 1994 20,882 $208,820 -- $ -- $1,335,991 $2,112,797 $(286,436) $3,371,172
====== ======== ====== ======== ========== ========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 8
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Year Ended December 31, 1994
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 763,807
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 301,032
Other amortization, net 52,747
Deferred income taxes (209,969)
Loss on disposition of assets 35,373
Equity in net earnings of unconsolidated partnership (200,591)
(Increase) decrease in:
Accounts receivable - trade (344,680)
Accounts receivable - partnership (1,287,841)
Income tax receivable --
Prepaid expenses (15,643)
Inventories (65,523)
Increase (decrease) in:
Accounts payable 1,179,306
Accrued expenses 522,799
Deferred revenue 197,640
Income taxes payable (510,317)
Deferred compensation 87,908
-----------
Net cash provided by operating activities 506,048
-----------
Cash flows from investing activities:
Purchase of property, plant and
equipment (1,424,376)
Facility start-up costs (1,343,967)
Proceeds from disposition of property,
plant and equipment 3,400
Investment in partnership, net 355,193
Net cash used in investing activities (2,409,750)
-----------
Cash flows from financing activities:
Proceeds from line of credit, net 785,150
Proceeds from issuance of long-term debt --
Principal payments on long-term debt and
capital lease obligations (205,405)
Proceeds from issuance of common stock 475,170
Net cash used in financing activities 1,054,915
-----------
Net decrease in cash (848,787)
Cash - beginning of year 1,083,060
-----------
Cash - end of year $ 234,273
===========
</TABLE>
(Continued)
6
<PAGE> 9
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Cash Flows, Continued
Year Ended December 31, 1994
<TABLE>
<S> <C>
Noncash investing and financing activities:
Assets acquired under capital lease
obligations $ 184,419
===========
Investment in option $ (384,000)
===========
Claims settlement $ 384,000
===========
Supplemental disclosures:
Cash paid during the year for:
Interest $ 129,256
===========
Income taxes $ 1,113,558
===========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 10
CONCEPT INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994
1. Summary of Significant Accounting Policies
Nature of Business
Concept Incorporated (the Company) operates six secure prison facilities
under contract with federal, state and municipal governmental agencies.
Three facilities are used for pre-parole transfers, one is an intermediate
sanction facility, one is a metropolitan jail and one houses medium
security inmates. Two facilities are owned, three are leased and one is
owned by a partnership in which the Company has a 50% ownership interest.
Four management contracts expire in August 1995, one expires in January
1996, and one expires in February 1998. Contract revenues from contracts
which expire in 1995 amounted to approximately $18.4 million in 1994.
Management believes these contracts will be renewed. Two additional state
contracts were awarded to the Company in 1994, with scheduled facility
openings in May and September of 1995.
Principles of Consolidation
The consolidated financial statements include the accounts of Concept
Incorporated and its wholly owned subsidiaries, Mineral Wells R.E. Holding
Corp. and Concept Incorporated of Overton, Texas. Intercompany
transactions and balances have been eliminated.
The Company owns, directly and indirectly, 49.9999% of United-Concept,
Limited Partnership (UCLP), including 49.95% of United-Concept, Inc., the
managing general partner of UCLP. This investment is recorded in the
Company's consolidated financial statements on the equity method.
Contract Accounting
Revenues and expenses related to contracts for facilities in operation are
accounted for using the accrual method of accounting. From the date a
contract is awarded until the facility is in operation, revenue and direct
expenses related to the facility which would otherwise be recognized on
the accrual basis are deferred and the net amount is amortized on the
straight-line method over the initial contract term. Such deferred amounts
do not include indirect expenses or overhead.
Contract bidding costs and corporate general and administrative expenses
not directly associated with particular facilities are expensed as
incurred.
Inventories
Inventories consist of food, inmate clothing, commissary goods and office
supplies. Carrying value of inventories is based on cost determined by the
first-in, first-out method, which approximates market value.
(Continued)
8
<PAGE> 11
CONCEPT INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (Continued)
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Renewals and
betterments that extend the useful lives of the assets or increase their
value are capitalized, while repairs and maintenance expenditures are
charged to operations. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets, which is forty years
for buildings and improvements and three to ten years for equipment and
automobiles. Assets under capital leases are amortized on the
straight-line method over the shorter of the term of the related lease or
the estimated useful life of the assets.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and
reporting for income taxes. The difference between the financial statement
and tax bases of assets and liabilities are computed for those differences
that have future tax consequences using the currently enacted tax laws and
tax rates that apply to the periods in which they are expected to affect
taxable income. Valuation allowances are established, if necessary, to
reduce the deferred tax asset to the amount that will more likely than not
be realized. Income tax expense is the current tax payable or refundable
for the period plus or minus the net change in the deferred tax assets and
liabilities.
2. Cash
The Company maintains two operating checking accounts and an
interest-bearing checking account with a single bank, as well as a demand
money market account with a financial institution. Operating funds are
moved back and forth among these accounts depending on availability of
funds. Because one of the accounts automatically sweeps either between the
interest-bearing account or the Company's line of credit with the same
bank, it generally shows as overdrawn on the Company's books. At December
31, 1994, after netting the three operating accounts, a credit balance of
$209,228 was reclassified to accounts payable.
3. Investment in Partnership
The investment in partnership of ($479,517) at December 31, 1994, which is
presented as a deferred credit in the accompanying consolidated balance
sheet, represents the Company's contributions to capital, advances, and
50% share of cumulative net income of UCLP accounted for on the equity
method, net of the $1,500,000 in payments discussed below.
Mineral Wells R.E. Holding Corp. (MWREHC), a wholly-owned subsidiary of
the Company, owns 49.5% of UCLP as a limited partner and .2% of UCLP as a
general partner. The Company directly owns .2% of UCLP as a general
partner. The Company also owns 50% of the common stock of United-Concept,
Inc., which owns .2% of UCLP as the managing general partner.
(Continued)
9
<PAGE> 12
CONCEPT INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
3. Investments in Partnership (Continued)
United-Concept, Inc. has issued and outstanding 1,000 shares of common
stock (of which the Company and the Company's partner in UCLP each own 500
shares) and one share of voting preferred stock, which is held by The
First National Bank of Chicago under an indenture agreement related to the
financing of the Eloy facility. Each share of stock, common and preferred,
has one vote. The preferred stock does not participate in income
distribution by United-Concept, Inc., and has a $10 liquidation value. The
by-laws of United-Concept, Inc. require 100% shareholder approval of
significant corporate actions, and also require an independent director.
Thus, the Company is entitled to 50% of the income of UCLP, but
mathematically owns less than 50% of its capital and controls less than
50% of voting decisions. The independent director effectively has veto
power over the actions of UCLP's managing general partner, United-Concept,
Inc.
UCLP has a contract with the Federal Bureau of Prisons (BOP) to operate
the Eloy Detention Center at Eloy, Arizona. UCLP owns the facility,
including furniture, fixtures and equipment and a waste water treatment
plant. UCLP is the primary obligor on the debt incurred to finance the
facility, which is secured by the Eloy facility real and personal
property, the Eloy contract receivables, $269,000 of the Company's
contract receivables from its Mineral Wells facility, and the Mineral
Wells real estate. The Company and the other UCLP partners have jointly
and severally guaranteed the UCLP debt, which totaled $29,860,073 at
December 31, 1994.
On November 16, 1993, the Company entered into an Operating Agreement with
UCLP, under which the Company operates the Eloy facility. The Company is
responsible for all operating expenses of the facility, including taxes,
insurance and maintenance. The Company's compensation under the agreement
is equal to the monthly contractual revenue less the monthly debt service
payment. The Operating Agreement expires sixty (60) days after maturity,
as defined, or upon thirty (30) days written notice from UCLP to the
Company.
Concurrent with the closing of the financing on the Eloy Detention Center
in November 1993, the Company received payments totaling $448,000 from its
partner in UCLP and $252,000 from an affiliate of its partner in UCLP,
under terms of a Funding Agreement entered into by and between the Company
and companies related to its partner in UCLP. These payments were recorded
as deferred revenue during 1993, and subsequently credited to the
Company's investment in UCLP during 1994. In addition, $800,000 of loan
proceeds to UCLP were paid to the Company during 1994 which were credited
to the Company's investment in UCLP. Of these payments, $1,100,000 is
being amortized over the life of the debt on the Eloy facility due to the
Company's guarantee of such debt. Such amortization amounted to $156,419
in 1994.
(Continued)
10
<PAGE> 13
CONCEPT INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
3. Investments in Partnership (Continued)
Condensed financial information of UCLP is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Year ended December 31
Net revenue $ 1,886
Net income 401
========
At December 31
Current assets $ 2,560
Non-current assets 29,397
--------
Total assets $ 31,957
========
Current liabilities $ 5,789
Non-current liabilities 25,965
Partners' capital 203
--------
Total liabilities and partners' capital $ 31,957
========
</TABLE>
4. Investment in Option
The Company and its partners in UCLP have entered into an agreement under
which the Company can purchase its partners' interests in UCLP, including
United-Concept, Inc., for $5,250,000 on or before September 30, 1995. As
compensation to its partners to enter the option agreement, the Company
waived all of its claims under the Funding Agreement for lost revenues due
to reduced prisoner population during the opening of the Eloy facility.
The amount of these claims was agreed by the parties to be $384,000, which
has been recorded by the Company as other revenues, representing its
investment in the option agreement. The Company does not have sufficient
capital at this time to exercise the option and, accordingly, has written
off the amount of the option as of December 31, 1994.
5. Line of Credit
In 1994, the Company obtained a line of credit from a bank in the amount
of $1,500,000, secured by accounts receivable and a first mortgage on real
estate located in Bridgeport, Texas, having a net book value of $685,058
as of December 31, 1994. Portions of the line are also guaranteed up to
$800,000 by shareholders/employees of the Company. Balances outstanding on
the line bear interest at the prime rate of the bank, which was 8.5% at
December 31, 1994. The line is activated when checks presented to the bank
for payment exceed the balance of the operating account, and reduced when
receivables are collected and deposited in the bank. The balance due on
the line was $785,150 at December 31, 1994. The line expires December 2,
1995.
6. Deferred Revenue
In 1994, the Company received advance commission payments, against which
commissions earned are being offset. The remaining balance at December 31,
1994 was $197,640.
(Continued)
11
<PAGE> 14
CONCEPT INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
7. Long-Term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations consist of the following:
<TABLE>
<S> <C>
Notes payable to United-Concept, Limited Partnership, bearing interest at
10% per annum, of which 3% per year is reimbursed to the Company by a
partner, payable in monthly installments of principal and interest of
$19,000, due January 2000, secured by land, buildings and improvements $ 891,735
Note payable to a vendor, bearing interest at prime plus 1.75% (10.25% as
of December 31, 1994), payable in quarterly installments of principal and
interest of $18,723, due in December 1997, classified as currently payable
due to a debt covenant violation 224,683
Various obligations under capitalized leases with a related party expiring
through 1997. The net book value of the related equipment is approximately
$44,630 at December 31, 1994 196,663
Notes payable to banks at interest rates ranging from 9.75% to 13%, with
monthly installments of principal and interest, with varying due dates
through April 1995, secured by automobiles 1,963
-----------
1,315,044
Less current portion 460,727
$ 854,317
</TABLE>
Scheduled repayments of long-term debt and capital lease obligations are
as follows for the years ended December 31:
<TABLE>
<CAPTION>
Capital leases Long-term debt
<S> <C> <C>
1995 $ 115,448 $ 372,015
1996 85,338 160,592
1997 38,150 177,408
1998 -- 195,985
1999 -- 212,381
----------- ----------
238,936 $1,118,381
===========
Less amount representing interest (42,273)
-----------
Present value of minimum lease payments 196,663
Less current portion 88,712
-----------
Long-term portion of capital lease
obligations $ 107,951
===========
</TABLE>
(Continued)
12
<PAGE> 15
CONCEPT INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
8. Notes Payable and Advances - Shareholders
Included in current liabilities is a cash advance from a shareholder with
no specified repayment terms. The balance was $50,000 at December 31,
1994.
The Company is obligated under unsecured notes payable to shareholders
totaling $50,000 and bearing interest at 9%. The notes are payable in
annual principal amounts of $10,000, plus interest, beginning January 1995
through January 1999.
9. Income Taxes
The provision for income taxes is comprised of:
<TABLE>
<S> <C>
Current:
Federal $ 561,921
State 114,698
---------
676,619
Deferred:
Federal (179,820)
State (30,149)
(209,969)
Total $ 466,650
=========
</TABLE>
The effective tax rate of 37.9% in 1994 represents the combined statutory
federal and state tax rates, because there were no significant permanent
differences.
The temporary differences that give rise to the deferred tax assets and
deferred tax liabilities primarily relate to facility start-up costs,
payments from UCLP, UCLP partners and affiliates, vacation accruals and
commission payments paid in advance.
10. Common Stock
In 1994, shareholders received .19 share of Class A common stock for each
share of Class B common stock they held, and all of the Class B common
stock previously issued and outstanding was retired. The Class B stock
option plan, under which no options had been granted, was canceled. There
are currently no stock option plans in effect for any of the Company's
common stock.
On July 27, 1994, the Company sold 2,949 shares of Class A common stock
for cash of $29,490 and notes receivable of $332,116 to officers of the
Company. The notes receivable, which were originally due on August 31,
1994, were renewed for one year and bear interest at 5.83%. At December
31, 1994 the outstanding balance of these notes is $286,436. The shares
are subject to a buy-sell agreement which gives the Company a right of
first refusal to buy back shares at book value, as of the buyback date.
All of the Class A common stock is subject to a voting trust agreement,
which gives the majority shareholder the right to vote all outstanding
shares.
(Continued)
13
<PAGE> 16
CONCEPT INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
11. Operating Leases
The Company leases real property and equipment under noncancelable
operating leases with terms of two (2) to five (5) years. The future
minimum rentals under the leases at December 31, 1994, are as follows:
<TABLE>
<S> <C>
1995 $ 592,888
1996 184,519
1997 167,442
1998 49,226
1999 8,603
----------
$1,002,678
</TABLE>
12. Related Party Transactions
The Company legal fees to a law firm of which one of the partners is also
a shareholder and director of the Company. Legal fees paid to the law
firm, amounted to $20,420 in 1994.
A corporation owned by a stockholder provides professional services to the
Company. These professional services and related costs amounted to
$126,756 in 1994. At December 31, 1994 accounts payable due the
corporation were $0.
The Company leases certain automobiles and equipment from a corporation of
which one of the stockholders is also a stockholder of the Company. Total
lease payments to this related party in 1994 were $91,008. Capital lease
obligations under these leases were $196,663 as of December 31, 1994.
13. Economic Dependency
The Company receives a significant portion of its contract revenues from
the Texas Board of Pardons and Paroles (Texas Board). Such revenues
amounted to $18.4 million and $15.4 million in 1994 or 79% of operating
revenues. At December 31, 1994 accounts receivable balances due the
Company from the Texas Board are $1,560,448.
14. Contingencies
In the normal course of business, the Company has become subject to
certain claims and litigation. In the opinion of management, the outcome
of such matters will not have a material effect on the consolidated
financial position or results of operations of the Company.
15. Subsequent Event
Effective April 25, 1995, all of the outstanding common shares of the
Company were exchanged for 1,362,496 shares of common stock of Corrections
Corporation of America (CCA), and the Company became a wholly-owned
subsidiary of CCA.
14
<PAGE> 17
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Financial Statements
March 31, 1995
(Unaudited)
May 8, 1995
<PAGE> 18
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheet
March 31, 1995
(Unaudited)
<TABLE>
<S> <C>
Assets
- ------
Current assets:
Cash 20,043
Accounts receivable - trade 1,812,190
Accounts receivable - partnership 1,580,349
Prepaid expenses 371,828
Inventories 162,951
Deferred and refundable income taxes 469,916
------------
Total current assets 4,417,277
Property, plant and equipment:
Land 206,281
Buildings and improvements 4,220,924
Equipment and automobiles 830,753
------------
5,257,958
Less accumulated depreciation 622,750
------------
Net Property, plant and equipment 4,635,208
Other assets:
Investment in partnership 823,859
Facility start-up costs, net 103,168
------------
Net other assets 927,027
------------
Total assets 9,979,512
============
</TABLE>
<PAGE> 19
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheet, Continued
March 31, 1995
(Unaudited)
<TABLE>
<S> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Line of Credit 1,046,189
Accounts payable 2,440,882
Accrued expenses 1,111,118
Deferred revenue 1,211,638
Long-term debt and capital lease obligations - current 220,999
Notes payable and advances - shareholders 60,000
------------
Total current liabilities 6,090,826
Long-term debt and capital lease obligations - non-current 936,161
Deferred compensation 100,467
Notes payable - shareholders 30,000
------------
Total liabilities 7,157,454
Shareholders' equity:
Common stock 208,820
Additional paid-in capital 1,335,991
Retained earnings 1,558,683
Less shareholders notes receivable (281,436)
------------
Total shareholders' equity 2,822,058
------------
Total liabilities and shareholders' equity 9,979,512
============
</TABLE>
<PAGE> 20
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income (Loss) and Retained Earnings
Three Months Ended March 31, 1995
(Unaudited)
<TABLE>
<S> <C>
Operating revenues:
Contract revenues 5,936,599
Other revenues 448,118
-----------
Total operating revenues 6,384,717
Facility operating expenses 7,103,710
-----------
Contribution (loss) from operations (718,993)
General and administrative expenses 429,111
-----------
Net operating income (loss) (1,148,104)
Other income (expense):
Interest income 2,973
Interest expense (58,612)
Gain on disposition of assets 4,509
Equity in net income of unconsolidated partnership 359,667
-----------
Total other income (expense) 308,537
Income (loss) before taxes (839,567)
Income tax expense (benefit) (285,453)
----------
Net income (loss) (554,114)
Retained earnings at December 31, 1994 2,112,797
----------
Retained earnings at March 31, 1995 1,558,683
===========
</TABLE>
<PAGE> 21
CONCEPT INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Cash Flow
Three Months Ended March 31, 1995
(Unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities (554,114)
Net Income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 224,749
Deferred income taxes and taxes payable (320,770)
Gain on disposition of assets (4,509)
Equity in earnings of unconsolidated partnership (359,667)
(Increase) decrease in:
Accounts receivable - trade 208,947
Accounts receivable - partnership (292,508)
Prepaid expenses (99,311)
Inventories (4,811)
Increase (decrease) in:
Accounts payable 262,398
Accrued expenses (30,001)
Deferred revenue 1,013,998
Deferred compensation 12,559
-------------
Net cash provided by operating activities 56,960
Cash flows from investing activities:
Purchase of property, plant and equipment (369,217)
Investment in partnership, net (128)
-------------
Net cash used in investing activities (369,345)
Cash flows from financing activities:
Proceeds from line of credit, net 261,039
Principal payments on long-term debt and
capital lease obligations (162,884)
-------------
Net cash provided by financing activities 98,155
=============
Net increase (decrease) in cash (214,230)
Cash - beginning of period 234,273
=============
Cash - end of period 20,043
=============
</TABLE>
<PAGE> 1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT is made the 25th day of April, 1995, by
and among Corrections Corporation of America, a Delaware corporation having its
principal place of business in Nashville, Tennessee ("CCA"), Concept
Incorporated, a Delaware corporation having its principal place of business in
Louisville, Kentucky ("Concept"), and the undersigned Stockholders of Concept
(individually a "Stockholder" and collectively, the "Stockholders").
R E C I T A L S:
WHEREAS, the Stockholders own, or will own as of the Closing, all of
the issued and outstanding shares of Common Stock, $10.00 par value per share,
of Concept (the "Shares") which constitute all of the issued and outstanding
shares of Concept's capital stock;
WHEREAS, Concept desires that the Shares be transferred and conveyed
to CCA, and CCA desires to acquire the same from the Stockholders, pursuant to
a share exchange (the "Share Exchange"), subject to the terms and conditions
set forth herein;
WHEREAS, the respective Boards of Directors of Concept and CCA deem it
advisable and in the best interest of each such corporation to effect the Share
Exchange;
WHEREAS, the parties hereto desire to consummate all transactions
contemplated under this Agreement, including, without limitation, the Share
Exchange, all in accordance with the terms of this Agreement (collectively, the
"Related Transactions"); and
WHEREAS, for federal income tax purposes, it is intended that the
Share Exchange shall qualify as a tax-free reorganization within the meaning of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"), and for financial accounting purposes shall be accounted for as a
"pooling of interests".
NOW, THEREFORE, in consideration of the sum of $10.00 paid to Concept
and other good and valuable consideration, the receipt of which is hereby
acknowledged, and the mutual terms, covenants, agreements and conditions
contained in this Agreement and for the purpose of stating the method, terms,
and conditions of the exchange provided for herein, the mode of carrying the
same into effect, the manner and basis of exchanging the Shares, and such other
provisions relating to the exchange as the parties deem necessary or desirable,
the parties agree, subject to the terms and conditions hereinafter set forth,
as follows:
ARTICLE 1
SHARE EXCHANGE; RELATED MATTERS
1.1 Exchange of Shares. Subject to all of the terms and
conditions of this Agreement, at the closing provided for in Section 1.4 (the
"Closing"), the Stockholders will convey, assign, transfer and deliver to CCA,
and CCA will acquire all of the Shares free and clear of all claims,
<PAGE> 2
liens, suits, proceedings, calls, proxies, charges, options, security interests
and encumbrances of any kind. Except as herein specifically set forth to the
contrary, the identity, existence, certificate of authority, purposes, powers,
objects, franchises, privileges, rights and immunities of Concept shall
continue unaffected and unimpaired by the Share Exchange. The Share Exchange
shall occur through a voluntary exchange by the Stockholders. After the
Effective Time (as hereinafter defined) of the Share Exchange, each issued
Share will automatically be deemed transferred to CCA and will thereafter
represent to the Stockholders only the right to receive the Exchange
Consideration as provided in Section 1.3.
1.2 Effect of Share Exchange. As a result of the Share Exchange,
CCA will indirectly control, as the sole stockholder of Concept, all assets
owned by Concept (collectively, the "Assets"), including, without limitation,
all assets, whether real or personal, tangible or intangible, reflected on
Concept's balance sheet of March 31, 1995, exclusive of assets disposed of and
replaced since that date in the ordinary course of business.
1.3 Exchange Consideration and Exchange Shares. (a) At the
Effective Time, each Share issued and outstanding immediately prior to the
Effective Time, shall be exchanged for [65.2473] shares of common stock, $1.00
par value, of CCA (the "CCA Common Stock") (the "Exchange Consideration" or the
"Exchange Shares"). In no event shall the number of shares of CCA Common Stock
to be delivered at the Closing exceed one million three hundred sixty-two
thousand four hundred ninety-six (1,362,496) or be less than one million two
hundred eighty-eight thousand five hundred sixty-two (1,288,562) shares of CCA
Common Stock.
(b) Ninety percent (90%) of the aggregate Exchange Shares
shall be available to the Stockholders at the Closing upon receipt of stock
certificates duly endorsed for transfer. A certificate evidencing the shares
of CCA Common Stock constituting the remaining ten percent (10%) (the "Escrow
Shares") of the aggregate Exchange Shares shall be delivered to First Union
Bank of Tennessee as Escrow Agent (the "Escrow Agent") to be held by the Escrow
Agent in accordance with the terms and conditions of the Escrow Agreement
attached hereto as Exhibit A (the "Escrow Agreement").
(c) No fractional shares of CCA Common Stock will be
issued and no cash will be paid in lieu of fractional Shares.
1.4 Closing. The closing of the transactions contemplated by this
Agreement will take place at the offices of Stokes & Bartholomew, P.A., on
April 25, 1995, unless the parties hereto mutually agree upon another place or
time (the "Closing Date" or the "Effective Time"). The Share Exchange and the
Related Transactions will be effective upon consummation of the Closing.
1.5 Surrender and Exchange of Stock Certificates and Related
Items. After the Effective Time, each holder of any outstanding certificate or
certificates therefore representing Shares, upon surrender thereto to CCA,
shall be entitled to receive in exchange therefor, a certificate or
certificates (as may be specified by such stockholder) representing the number
of
2
<PAGE> 3
whole shares of CCA Common Stock for which such holder's Shares were exchanged.
No interest will be paid or accrued on any portion of the Exchange
Consideration. If the Exchange Consideration is to be issued to a person other
than a person in whose name the surrendered certificate for Shares is
registered, it shall be a condition of issuance that the surrendered share
certificate shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such issuance shall pay to CCA any required
transfer or other taxes or establish to the satisfaction of CCA that such tax
has been paid or is not applicable.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CONCEPT AND THE STOCKHOLDERS
Concept and the Stockholders, jointly and severally, hereby represent
and warrant to CCA, which representations and warranties will be true and
correct on the date hereof, and on the Closing as if then restated by them, as
follows:
2.1 Organization and Qualification. Concept is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own its properties and
assets and carry on its business as presently conducted. The copies of the
Certificate of Incorporation and Bylaws of Concept, as amended to date, which
are attached hereto as part of Schedule 2.1, are complete and correct and are
in full force and effect at the date hereof. Concept is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of any other state of the United States in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary except for those jurisdictions
where the failure to so qualify will not have a material adverse effect on
Concept.
2.2 Authority. Concept has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated herein. The execution and delivery of this Agreement
has been duly and validly authorized by Concept's Board of Directors and no
other corporate proceedings on the part of Concept are necessary to authorize
the execution and delivery of this Agreement. This Agreement has been duly and
validly executed and delivered by Concept and constitutes the legal, valid and
binding agreement of Concept enforceable against Concept in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity
regarding the availability of remedies.
2.3 Capitalization. (a) The authorized capital stock of Concept
consists solely of 80,000 shares of Common Stock, $10.00 par value per share,
of which 20,882 shares (the "Shares") are issued and outstanding on the date of
this Agreement. All of the Shares are owned of record by the Stockholders as
set forth on Schedule 2.3 hereto. All of the Shares have been duly authorized,
validly issued and are fully paid and non-assessable. Except for the Shares,
3
<PAGE> 4
there are no shares of capital stock or other equity securities of Concept
issued or outstanding. The issuance and sale of all of the Shares issued and
outstanding have been in full compliance with all applicable federal and state
securities laws. Concept is not a party to or bound by any subscriptions,
options, warrants, calls, rights, contracts, commitments, understandings,
restrictions or arrangements relating to the issuance, sale, transfer or voting
of any of its securities, including any rights of conversion or exchange under
any outstanding securities or other instruments. Except as set forth on
Schedule 2.3(a) hereto, there are no voting trusts, voting agreements or other
agreements or understandings with respect to the Shares to which any
Stockholder is a party or otherwise bound. There are no agreements or
understandings, oral or written, explicit or implied, which grant to any single
individual or entity (i) a majority equity interest in Concept, or (ii) the
power to elect or direct the election of a majority of the members of the board
of directors of Concept.
(b) Each Stockholder severally, but not jointly, represents
and warrants that (i) such Stockholder is the record and beneficial owner of
the number of Shares set forth beside his name on Schedule 2.3 attached hereto,
free and clear of all liens, claims, charges, restrictions, security interests,
equities, proxies, pledges or encumbrances of any kind; (ii) such Stockholder
has the full right, power, authority and capacity to sell and transfer the
respective Shares owned by such Stockholder; (iii) by virtue of the transfer of
the Shares to CCA at the Closing, CCA will obtain full title to such Shares,
free and clear of all liens, claims, charges, restrictions, security interests,
equities, proxies, pledges or encumbrances of any kind. To the best knowledge
of each Stockholder, each other Stockholder is the record and beneficial owner
of the number of Shares set forth beside each such other Stockholder's name on
Schedule 2.3, free and clear of all liens, claims, charges, restrictions,
security interests, equities, proxies, pledges or encumbrances of any kind, and
each other Stockholder has full right, power, authority and capacity to sell
and transfer the respective Shares owned by such Stockholder. This Agreement
constitutes a legal, valid and binding agreement of Concept. The Stockholders
severally but not jointly represent that the Agreement constitutes a legal,
valid and binding obligation of each Stockholder and is enforceable against
each in accordance with its terms. As of the Closing Date and upon receipt of
the Exchange Consideration, each Stockholder represents that he or it has no
claims of any kind (whether absolute, accrued, contingent or otherwise) against
Concept.
2.4 Subsidiaries and Ventures. Schedule 2.4A hereto is a complete
list of each corporation, partnership, joint venture or other business
organization (the "Subsidiary" or, with respect to all such organizations, the
"Subsidiaries") in which Concept or any Subsidiary owns, directly or
indirectly, any capital stock or other equity interest, or with respect to
which Concept or any Subsidiary, alone or in combination with others, is in a
control position, which list shows the jurisdiction of incorporation or other
organization and the percentage of stock or other equity interest of each
Subsidiary owned by Concept. Each Subsidiary which is a corporation is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to transact business as
a foreign corporation and is in good standing in the jurisdictions listed in
Schedule 2.4, which are the only jurisdictions where the properties owned or
leased or the business transacted by it makes such licensing or qualification
to do business as a foreign corporation necessary, except for those
jurisdictions where the failure
4
<PAGE> 5
to so qualify will not have a material adverse effect on Concept. Each
Subsidiary which is not a corporation is duly organized and validly existing
under the laws of the jurisdiction of its organization. Each Subsidiary has
the corporate power and authority and possesses all governmental and other
permits, licenses and other authorizations to own or lease its properties and
carry on its business as now conducted. The outstanding capital stock of each
Subsidiary which is a corporation is validly issued, fully paid and
nonassessable. Except as set forth on Schedule 2.4B, Concept and the
Subsidiaries have good and valid title to the equity interests in the
Subsidiaries shown as owned by each of them on Schedule 2.4, free and clear of
all liens, claims, charges, restrictions, security interests, equities,
proxies, pledges or encumbrances of any kind. Except where otherwise indicated
herein or unless the context otherwise requires, any reference to Concept
herein shall include Concept and all of its Subsidiaries.
2.5 Consents and Approvals of Governmental Authorities. Other
than those listed on Schedule 2.6, no consent, approval, waiver or
authorization of, notice to or declaration or filing with any nation or
government, any state or other political subdivision thereof, any entity,
authority or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, without
limitation, any Federal, State or local governmental or regulatory authority,
agency, department, board, commission or instrumentality, and court, tribunal
or arbitrator and any self-regulatory organization ("Governmental Authority"),
including filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended and the rules and regulations promulgated thereunder, on the
part of Concept is required in connection with the execution or delivery of
this Agreement or the consummation of the Share Exchange, other than those
consents that, if they were not obtained or made, do not or would not
materially and adversely affect the ability of Concept to perform its
obligations as set forth herein or to consummate the transactions contemplated
hereby.
2.6 Other Consents. Except as set forth on Schedule 2.6, no
consent of, or notice to, any person is necessary in connection with the
execution, delivery and performance of this Agreement by Concept or the
Stockholders or the consummation of the Share Exchange by the Stockholders,
including, but not limited to, consents from lenders or parties to leases or
other agreements or commitments other than those consents that, if they were
not obtained or made do not or would not materially and adversely affect the
ability of Concept to perform its obligations as set forth herein or to
consummate the transactions contemplated hereby.
2.7 No Violation. The execution and delivery of this Agreement,
the consummation of the transactions contemplated herein, and compliance by
Concept with any of the provisions hereof will not (i) conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws
of Concept, (ii) except as set forth on Schedule 2.7 attached hereto, require
any consent under or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default or give rise to any
right of termination, cancellation or acceleration thereof under any of the
terms, conditions or provisions of any material contract or other obligation to
which Concept is a party or by which it or any of its properties or assets may
be bound, (iii) result in the creation or imposition of any lien or encumbrance
of any kind upon any of the assets of Concept, or (iv) subject to obtaining the
consents from Governmental
5
<PAGE> 6
Authorities referred to in Section 2.5 above, contravene any applicable
provision of any constitution, treaty, statute, law, code, rule, regulation,
ordinance, policy or order of any Governmental Authority or, to Concept's
knowledge, any orders, decisions, injunctions, judgments, awards and decrees of
or agreements with any court or other Governmental Authority ("Law") currently
in effect to which Concept or its assets or properties are subject.
2.8 Financial Statements. (a) Concept has delivered to CCA true
and correct copies of (i) audited balance sheets of Concept at December 31,
1994, December 31, 1993, and December 31, 1992 and related audited statements
of income and cash flow for the fiscal years then ended, and (ii) the unaudited
balance sheet of Concept as of March 31, 1995 and its related unaudited
statements of income and cash flow for the period ending March 31, 1995
included herein on Schedule 2.8A, and including in each case the notes thereto
(together, the "Concept Financial Statements"). The Concept Financial
Statements present fairly the consolidated assets, liabilities and financial
position of Concept, the results of its operations and all costs and expenses
for the periods specified. Except as set forth on Schedule 2.8A, Concept has
no liabilities or obligations of any kind whatsoever (whether absolute,
contingent, accrued or otherwise), including, without limitation, payroll
taxes, which are not reflected in the Concept Financial Statements which, under
generally accepted accounting principles, would be required to be reflected in
the Concept Financial Statements, other than those liabilities incurred in the
ordinary course of business since the date of the Concept Financial Statements.
All such Concept Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied from the books
and records of Concept which accurately and fairly reflect the transactions and
dispositions of the assets of Concept. Concept has made all required
contributions to fund employee benefit costs required to be made through the
date hereof.
(b) Concept has delivered to CCA true and correct copies of
audited balance sheets of United Concept Limited Partnership ("UCLP") at
December 31, 1994 and related audited statements of income and cash flow for
the fiscal years then ended (the "UCLP Financial Statements"). The UCLP
Financial Statements present fairly the consolidated assets, liabilities and
financial position of Concept the results of its operations and all costs and
expenses for the periods specified. Except as set forth on Schedule 2.8A,
Concept has no liabilities or obligations of any kind whatsoever (whether
absolute, contingent, accrued or otherwise), including, without limitation,
payroll taxes, which are not reflected in the UCLP Financial Statements which,
under generally accepted accounting principles, would be required to be
reflected in the UCLP Financial Statements, other than those liabilities
incurred in the ordinary course of business since the date of the UCLP
Financial Statements. All such UCLP Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
from the books and records of Concept which accurately and fairly reflect the
transactions and dispositions of the assets of Concept. Concept has made all
required contributions to fund employee benefit costs required to be made
through the date hereof.
2.9 Operations Since December 31, 1994. Except as set forth in
Schedule 2.9, since December 31, 1994, Concept has not:
6
<PAGE> 7
(a) suffered any material adverse change in its working
capital, financial condition, assets, liabilities, business or prospects,
experienced any labor difficulty, or suffered any material casualty loss
(whether or not insured);
(b) made any change in its business or operations or in the
manner of conducting its business other than changes in the ordinary course of
business;
(c) incurred any obligations or liabilities (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
except items incurred in the ordinary course of business and consistent with
past practice, or experienced any change in any assumptions underlying or
methods of calculating any bad debt, contingency or other reserves;
(d) paid, discharged or satisfied any claim, lien,
encumbrance or liability (whether absolute, accrued, contingent or otherwise
and whether due or to become due), other than claims, encumbrances or
liabilities (i) which are reflected or reserved against in the Financial
Statements and which were paid, discharged or satisfied since the date thereof
in the ordinary course of business were consistent with past practice, or (ii)
which were incurred and paid, discharged or satisfied since December 31, 1994
in the ordinary course of business and consistent with past practice;
(e) written off as uncollectible any notes or accounts
receivable or any portion thereof, except for immaterial write-downs or
write-offs made in the ordinary course of business, consistent with past
practice and at a rate no greater than during the twelve (12) months ended
December 31, 1994;
(f) cancelled any other debts or claims, or waived any
rights, of substantial value;
(g) sold, transferred or conveyed any of its properties or
assets (whether real, personal or mixed, tangible or intangible), except in the
ordinary course of business and consistent with past practice;
(h) disposed of or permitted to lapse, or otherwise failed to
preserve the exclusive rights of Concept to use any patent, trademark, trade
name, logo or copyright or any such application, or disposed of or permitted to
lapse any license, permit or other form of authorization to use any patent,
trademark, trade name, logo or copyright, or disposed of or disclosed to any
person any trade secret, formula, process or know-how;
(i) granted any increase in the compensation of any officer,
director, employee or agent (including, without limitation, any increase
pursuant to any bonus, pension, profit sharing or other plan or commitment), or
adopted any such plan or other arrangements other than in the ordinary course
of business; and no such increase, or the adoption of any such plan or
arrangement, is planned or required;
7
<PAGE> 8
(j) except as shown on the Financial Statements, made any
capital expenditures or commitments in excess of $25,000 in the aggregate for
replacements or additions to property, plant, equipment or intangible capital
assets;
(k) declared, paid or made or set aside for payment for
making, any dividend or other distribution in respect of its capital stock or
other securities, or directly or indirectly redeemed, purchased or otherwise
acquired any of its capital stock or other securities;
(l) made any change in any method of accounting or accounting
practice;
(m) paid, loaned or advanced any amount to or in respect of,
or sold, transferred or leased any properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement, arrangement
or transaction with, any Stockholder or the officers or directors of Concept,
any affiliates or associates of Concept or its respective officers or
directors, or any business or entity in which Concept or any of its
stockholders has any direct or material indirect interest, except for (i) the
stockholders loans to Concept listed in Schedule 2.9(m), (ii) compensation to
the officers and employees of Concept at rates not exceeding the rates of
compensation in effect at December 31, 1994 and (iii) advances to employees in
the ordinary course of business for travel and expense disbursements in
accordance with past practice, but not in excess of $5,000 at any one time
outstanding;
(n) amended Concept's Certificate of Incorporation or Bylaws;
or
(o) agreed, whether in writing or otherwise, to take any
action described in this Section 2.9.
2.10 Financings. Schedule 2.10 lists each securities offering
completed by Concept since inception (collectively, the "Financings"), and,
other than as described in Schedule 2.10, none of the terms of which have been
defaulted or breached or, after notice or lapse of time or both, will be
defaulted or breached by Concept under any of the agreements executed in
connection with the Financings. Concept has received no notices threatening
such a breach or default.
2.11 Employment Discrimination. Except with respect to the matters
described on Schedule 2.11, to the knowledge of Concept, no person or party
(including, but not limited to, any governmental agency) has any claim or basis
for any action or proceeding, against Concept relating to its employees and
arising out of any statute, ordinance or regulation relating to wages,
collective bargaining, discrimination in employment or employment practices or
occupational safety and health standards (including, but not limited to, the
Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, as
amended, the Occupational Safety and Health Act, or the Age Discrimination in
Employment Act of 1967 or the Americans With Disabilities Act of 1990) which,
if adversely decided, could have a material adverse effect on the condition
(financial or otherwise), assets, liabilities, earnings or business of Concept.
8
<PAGE> 9
2.12 Licenses and Permits. Concept has all local, state and
federal licenses, permits, registrations, certificates, consents,
accreditations and approvals (collectively, the "Licenses and Permits")
necessary to conduct its business in the manner currently conducted except for
those Licenses or Permits that, if they were not obtained, do not or would not
materially and adversely affect the business of Concept. Except as set forth
on Schedule 2.12 hereto, there is no default under any of Concept's Licenses
and Permits, no notices have been received by Concept or its employees, agents
or representatives with respect to threatened, pending, or possible revocation,
termination, suspension or limitation of any such License or Permit, and, to
Concept's knowledge, there exists no grounds for revocation, suspension or
limitation of any such License or Permit.
2.13 Compliance with Applicable Laws. Except as disclosed in
Schedule 2.13 hereto, the business of Concept is and has been operated in
compliance with all applicable Laws and other requirements of Governmental
Authorities and any and all contracts between Concept and any Governmental
Authorities (collectively, "Governmental Contracts"), all to the extent
necessary to avoid any material adverse effect on the business, properties or
conditions (financial or otherwise) of Concept. As of the date of this
Agreement, to the knowledge of Concept, no investigations or review by any
Governmental Authorities with respect to Concept is pending or threatened, nor
has any Governmental Authority indicated an intention to conduct the same other
than, in each case, those the outcome of which, as far as reasonably can be
foreseen, will not have a material adverse effect on Concept.
2.14 Finders and Investment Bankers. Neither Concept nor any of
its officers or directors has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby other than Stephens Inc. pursuant to
certain agreements, accurate and complete copies of which have been provided to
CCA.
2.15 Title to Properties; Encumbrances. Except as set forth in
Schedule 2.15A, Concept has good, valid and marketable title to all properties
and assets it purports to own, real, personal and mixed, tangible and
intangible, including, without limitation, the properties and assets reflected
in the Financial Statements. Except as set forth in Schedule 2.15B, none of
such properties or assets (or any other properties or assets used in the
business of Concept) are subject to any mortgage, pledge, lien, security
interest, conditional sale agreement, encumbrance or charge of any kind, except
(a) liens shown on the Financial Statements as securing specified liabilities,
(b) liens for current taxes not yet due, and (c) minor imperfections of title
and encumbrances, if any, which are not substantial in amount, do not
materially detract from the value of the property subject thereto and do not
materially impair the use of the property subject thereto or impair the
operations of Concept.
2.16 Leases and Contracts. (a) Schedule 2.16 hereto sets forth a
complete and accurate list of all contracts, agreements, consulting
arrangements, purchase orders, leases, subleases, options and commitments, oral
or written, and all assignments, amendments, Schedules, Exhibits and appendices
thereof, affecting or relating to Concept's business, its assets, the Shares or
any interest therein, to which Concept is a party or by which Concept or its
business, assets or shares
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are bound or affected, including, without limitation, Governmental Contracts,
service contracts, equipment leases, and leases of space and ground leases
(collectively, the "Contracts"); provided there shall be no breach of this
Section 2.16 if Immaterial Contracts, as defined below, are omitted.
"Immaterial Contracts" shall mean contracts having a remaining term of less
than one (1) year and involving an expenditure of less than $15,000 in the
aggregate for all obligations under any one contract. Attached to Schedule
2.16 are accurate descriptions of all Contracts.
(b) None of the Contracts has been modified, amended, assigned or
transferred other than in the ordinary course of business except as specified
in Schedule 2.16; and each is, and will be subsequent to the Effective Time, in
full force and effect; and each is valid, binding and enforceable in accordance
with its respective terms, except as limited by bankruptcy, reorganization,
insolvency, moratorium or other similar laws presently or hereafter in effect
affecting the enforcement of creditors' rights generally.
(c) To the knowledge of Concept, no event or condition has
happened or presently exists which constitutes a default or breach, or, after
notice or lapse of time or both, would constitute a default or breach by
Concept under any of the Contracts, and Concept will not do or permit any act
or omit to do or allow the omission of any act which would cause such a default
or breach. There are no counterclaims or offsets under any of the Contracts.
(d) Except as described in Schedule 2.16, there does not exist any
security interest, lien, encumbrance or claim of others created or suffered to
exist on any interest created under any of the Contracts.
(e) No purchase commitment by Concept is in excess of Concept's
ordinary business requirements.
(f) Except as disclosed on Schedule 2.16, the Share Exchange will
not result in a breach of or default under any Contract nor give rights to any
third party to terminate or modify any Contract.
(g) All oral Contracts can be terminated by Concept at any time
before or after the Effective Time, without penalty, upon no more than thirty
(30) days written notice.
2.17 Trademarks, Patents, Etc. Schedule 2.17 is an accurate and
complete list of all patents, trademarks, tradenames, trademark registrations,
service names, service marks, copyrights, formulas and applications therefor
owned by Concept or used or required by Concept in the operation of Concept's
business, title to each of which is, except as set forth in Schedule 2.17
hereto, held by Concept free and clear of all adverse claims, liens, security
agreements, restrictions or other encumbrances. There is no infringement
action, lawsuit, claim or complaint which asserts that Concept's operations
violate or infringe the rights or the trade names, trademarks, trade
registration, service name, service mark or copyright of others with respect to
any apparatus or method of Concept or, to the knowledge of Concept, any
adversely held trademark, trade name, trademark registration, service name,
service mark or copyright, and
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Concept is not in any way making use of any confidential information or trade
secrets of any person except with the consent of such person.
2.18 Pooling of Interests. Concept has not taken or failed to take
any actions which would prevent the accounting for the Share Exchange as a
pooling of interests in accordance with Accounting Principles Board Opinion No.
16, the interpretive releases issued pursuant thereto, and the pronouncements
of the Securities and Exchange Commission.
2.19 Absence of Questionable Payments. Neither Concept nor any
affiliate of Concept nor any other person acting on its behalf has directly or
indirectly (i) used any corporate funds for any unlawful payment to any foreign
or domestic governmental or judicial officials or employees, (ii) made any
unlawful payment (including any bribe, rebate, payoff, kickback or influence
payment) to any person or entity, private or public, whether in the form of
cash, property, services or otherwise, (iii) violated or is in violation of any
provision of any Laws relating to corruption of governmental officials or
representatives, including the Foreign Prohibited Trade Practices Act and
similar Laws, (iv) established or maintained any funds of monies or other
assets for the purposes specified in clauses (i) or (ii) above, or (iv) made
any false or fictitious entry on the books or records of Concept relating to
any payment referred to in clauses (i) or (ii) above.
2.20 Environmental Matters. Except as set forth on Schedule 2.20:
(a) All federal, state and local permits, licenses and
authorizations required for the use and operation of the real property owned,
leased or used by Concept have been obtained and are presently in effect other
than those, the lack of which, would not have a material adverse effect on the
condition (financial or otherwise), assets, liabilities, earnings or business
of Concept.
(b) None of such real property has been used by Concept
or by any other person at any time to handle, treat, store or dispose of any
hazardous or toxic waste or substance, nor is any of the real property,
including all soils, ground waters and service waters located on, in or under
such real property or the improvements located thereon, contaminated with
pollutants or other substances, specifically including, but not limited to,
lead, pcbs and/or asbestos-containing building materials, which contamination
may give rise to a clean-up obligation under any federal, state or local law,
rule, regulation or ordinance.
(c) There are no outstanding violations or any consent
decrees entered against Concept regarding environmental and land use matters,
including, but not limited to, matters affecting the emission of air
pollutants, the discharge of water pollutants, the management of hazardous or
toxic substances or wastes or noise.
(d) There are no presently claimed, threatened or alleged
violations with respect to any federal, state or local environmental law, rule,
regulation, ordinance, permit, license, or authorization and there are no
present discussions with any federal, state or local governmental agency
concerning any alleged violation of environmental laws, rules, regulations,
ordinances,
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permits, licenses or authorizations which could, if adversely decided, have a
material adverse effect on the condition (financial or otherwise), assets,
liabilities, earnings, prospects or business of Concept.
(e) All operations conducted by Concept on such real property
have been and are, in all material respects, in compliance with all federal,
state and local statutes, rules, regulations, ordinances, permits, licenses
and authorizations relating to environmental compliance and control.
(f) There are no presently threatened or pending lawsuits or
administrative proceedings against Concept that may affect Concept regarding
environmental compliance, control or liability.
2.21 Litigation. Except as set forth in Schedule 2.21, there are no
claims, actions, suits, proceedings, or to the knowledge of Concept,
investigations pending or threatened by or against, or otherwise affecting
Concept at law or in equity or before or by any Governmental Authority, and
Concept does not know or have any reason to know of any basis for any such
claim, action, suit, proceeding or investigation. No claim, action, suit,
proceeding or investigation set forth in Schedule 2.21, could, if adversely
decided, have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, earnings, prospects or business of Concept.
2.22 Insurance. Schedule 2.22 hereto sets forth a complete and
accurate list and brief description (including policy numbers, deductibles,
carriers and effective and termination dates) of all policies of fire,
workmen's compensation, health, life, title, automobile, general liability and
other forms of insurance presently in effect with respect to Concept. All such
policies are valid, outstanding and enforceable policies; and will remain in
full force and effect at least through the respective dates set forth in
Schedule 2.22 without the payment of additional premiums; and other than in the
ordinary course, will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. Except as
described in Schedule 2.22 hereto, Concept has not been refused any insurance,
nor has its coverage been limited, by any insurance carrier to which it has
applied for insurance or with which it has carried insurance during the last
five years. Schedule 2.22(a) contains an accurate description of any provision
contained in the policies identified on Schedule 2.22 which provides for
retrospective premium adjustment. Schedule 2.22(b) identifies all risks which
Concept has designated as being self-insured and the amount of reserve set
aside by Concept to cover such risk.
2.23 Employees and Fringe Benefit Plans. (a) Schedule 2.23(a)
hereto sets forth a complete list of all of Concept's directors, officers and
executive employees, together with true and correct copies of any and all
employment contracts, fringe benefits and personnel policies. Except as
provided in Schedule 2.23(a), Concept has no written employment agreements
(other than non-compete agreements) with its employees.
(b) Schedule 2.23(b) hereto contains a summary of the terms
of each employment, bonus, deferred compensation, pension, stock option, stock
appreciation right, profit-sharing or
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retirement plan, arrangement or practice, of Concept, whether formal or
informal, whether legally binding or not, and whether affecting one or more of
its employees. Copies of each such agreement or plan have heretofore been
delivered to CCA. Concept does not have any commitment, whether formal or
informal and whether legally binding or not, (i) to create any additional such
agreement, plan, arrangement or practice; (ii) other than as required by
applicable law, to modify or change any such agreement, plan, arrangement or
practices; or (iii) to maintain for any period of time any such agreement,
plan, arrangement or practice, except as accurately described in Schedule
2.23(b). Schedule 2.23(b) contains an accurate description of the binding
policies (and commitments, if any) of Concept with respect to each such
existing plan, arrangement or practice.
(c) Except as disclosed in Schedule 2.23(c), (i) Concept has
no unfunded past service liability in respect of any of its employee benefit
plans; (ii) the actuarial value of vested benefits under any employee benefit
plan of Concept, computed on a termination basis, does not exceed the fair
market value of the fund assets relating to such plan; (iii) neither Concept
nor any plan or, to the knowledge of Concept, any trustee, administrator,
fiduciary or sponsor of any plan has engaged in any prohibited transactions as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the Code; (iv) all filings and reports as to such plans required
to have been made on or prior to the Closing Date to the Internal Revenue
Service, the United Stated Department of Labor or other Governmental
Authorities have been or will be made on or prior to the Closing Date; (v)
there is no material litigation, disputed claim, governmental proceeding or
investigation pending or, to the knowledge of Concept, threatened with respect
to any of such plans, the related trusts, or any fiduciary, trustee,
administrator or sponsor of such plans; (vi) such plans have been established,
maintained and administered in all material respects in accordance with their
governing documents and applicable provisions of ERISA and the Code and
Treasury Regulations promulgated thereunder; (vii) there has been no
"Reportable Event" as defined in Section 4043 of ERISA with respect to any
Employee Benefit Plan subject to Subtitle B of Title IV of ERISA that has not
been waived by the Pension Benefit Guaranty Corporation; and (viii) except as
set forth on Schedule 2.23(c), all contributions required to be made for all
periods ending prior to the Closing (including the current plan years) will be
made prior to closing in accordance with past practice and the recommended
contribution in any actuarial report.
(d) Except as set forth in Schedule 2.23(d) hereof, Concept
has complied in all material respects with all applicable Laws relating to
employee's employment and/or employment relationships, including, without
limitation, wage related Laws, anti-discrimination Laws and employee safety
Laws.
(e) Except as set forth in Schedule 2.23(e) hereof, Concept
is not a party to any contract or agreement which would require CCA to hire, or
subject CCA to liability if it terminated or did not hire, any employee of
Concept or which would require CCA to pay or provide, or subject CCA to
liability if it did not pay or provide, any employee benefits to any employee
of Concept for periods prior to or after the Closing Date (including any and
all employee benefits and any compensatory, over-time, vacation, sick or
holiday pay).
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2.24 Labor Relations. As of the date hereof, Concept has
approximately 800 employees. Concept is not a party to any labor contract,
collective bargaining agreement, contract, letter of understanding or any other
arrangement, formal or informal, with any labor union or organization which
obligates Concept to compensate its employees at prevailing rates or union
scale, nor are any of its employees represented by any labor union or
organization. To the knowledge of Concept, there is no pending or threatened
labor dispute, work stoppage, unfair labor practice complaint, strike,
administrative or court proceeding or order between Concept and any present or
former employee of Concept. To the knowledge of Concept, there is no pending
or threatened suit, action, investigation or claim between Concept and any
present or former employee of Concept. To the knowledge of Concept, there has
not been any labor union organizing activity with respect to Concept employees
within the last three (3) years.
2.25 Taxes and Returns. (a) Except as disclosed in Schedule 2.25
attached hereto, Concept has timely filed, or caused to be filed, all federal,
state, local and foreign income, gross receipts, sales, use, property,
production, payroll, franchise, withholding, employment, social security,
license, excise, transfer, gains, and other tax returns or reports required to
be filed by it, and has paid or withheld, or caused to be paid or withheld, all
taxes of any nature whatsoever, including any related penalties, interest and
liabilities (any of the foregoing being referred to herein as a "Tax"),
required to be paid or withheld, other than such taxes for which adequate
reserves in the Concept Financial Statements have been established and which
are being contested in good faith. Except as set forth in Schedule 2.25
attached hereto, there are no claims or assessments pending against Concept for
any alleged deficiency in any Tax, and Concept does not know of any threatened
Tax claims or assessments against Concept (other than those for which adequate
reserves in the Concept Financial Statements have been established). Except as
set forth in Schedule 2.25 attached hereto, as of the date of this Agreement,
there are no outstanding requests by Concept for any extension of time within
which to file any return or within which to pay any Taxes shown to be due on
any return. Except as set forth on Schedule 2.25 attached hereto, as of the
date of this Agreement, no taxing authority is conducting or has notified
Concept that it intends to conduct, an audit of any prior tax period of
Concept.
(b) Concept has not made or become obligated to make, or
will not, as a result of the transactions contemplated by this Agreement, make
or become obligated to make, any "excess parachute payment" as defined in
Section 280G of the Code (without regard to subsection (b)(4) thereof).
(c) All monies required to be withheld through Closing by
Concept from employees or independent contractors or collected from customers
for income taxes, social security, unemployment insurance taxes, sales and use
taxes, and the portion of any such taxes to be paid by Concept to Governmental
Authorities, have been collected or withheld and are either paid to the
respective Governmental Authorities or set aside in accounts for such purpose
and appear on the books of Concept.
2.26 Conflicts of Interest. Except as set forth on Schedule 2.26
hereof, no director, officer or stockholder of Concept, or an affiliate of the
same, is either a supplier of goods or
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services to Concept, or directly or indirectly controls or is a director,
trustee, officer, employee or agent of any corporation, firm, association,
partnership or other business entity which is a supplier of goods or services
to Concept. Schedule 2.26 sets forth an accurate description of such
relationships.
2.27 Customers. Schedule 2.27 sets forth a list of the 3 largest
customers of Concept in terms of revenue during the fiscal year ended December
31, 1994 and the three-month period ending March 31, 1995 showing the
approximate total sales by Concept to each such customer during the fiscal year
ended December 31, 1994 and the three-month period ending March 31, 1995.
Except to the extent set forth in Schedule 2.27, there has not been any
material adverse change in the business relationship of Concept with any
customer and Concept did not have any customer who accounted for more than 5%
of Concept's sales during the fiscal year ended December 31, 1994 and the
three-month period ending March 31, 1995.
2.28 Accounts Receivable. All accounts receivable of Concept,
whether or not reflected in the Financial Statements, represent transactions
actually made in the ordinary course of business, and are current and
collectible net of any reserves shown on the Financial Statements (which
reserves are adequate and were calculated consistent with past practice).
Subject to such reserves, each of the accounts receivable either has been
collected in full or is collectible in full, without any setoff.
2.29 Banking Relationships. Schedule 2.29 sets forth the names and
locations of all banks, trust companies, savings and loan associations and
other financial institutions at which Concept maintains safe deposit boxes or
accounts of any nature and the names of all persons authorized to have access
thereto, draw thereon or make withdrawals therefrom. At the closing, Concept
will deliver to CCA copies of all records, including all signatures or
authorization cards, pertaining to such safe deposit boxes and bank accounts.
2.30 No Breach. Except as otherwise disclosed in this Agreement
or any schedule hereto, each arrangement (whether evidenced by a written
document or otherwise and of whatever type) referred to in this Agreement or in
any Schedule or Exhibit hereto under which Concept has any right, interest or
obligation is in full force and effect; to the knowledge of Concept, there have
been no threatened cancellations thereof nor outstanding disputes thereunder,
and Concept has not breached any provision of, nor does there exist any default
in any material respect under, or event (including the execution and delivery
of this Agreement and the consummation of the transaction contemplated hereby)
which is, or with the giving of notice or the passage of time or both would
become, a breach or default by Concept in any material respect under the terms
of any such arrangement.
2.31 Corporate Records. Concept has delivered or provided to CCA
for its review true, complete and correct copies of the following items, as
amended and presently in effect, for Concept: (a) Certificate of
Incorporation, (b) Bylaws, (c) minute books, and (d) stock registration books
(all hereinafter referred to as the "Corporate Records"). The Corporate
Records contain a record of all stockholder, director and executive committee
meetings and actions taken without
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a meeting from the date of Concept's incorporation to the date hereof. The
stock registration books are complete and accurate and contain a complete
record of all transactions in Concept's capital stock from the date of its
incorporation to the date hereof.
2.32 CCA Stock Ownership. Neither Concept nor the Stockholders own
any shares of CCA Stock or other securities convertible into CCA Stock.
2.33 No Undisclosed Liability. Except as and in the extent of the
amounts specifically reflected or reserved against in the Financial Statements
or disclosed in the notes thereto, or as described on Schedule 2.33 or as
incurred in the ordinary course of business subsequent to the periods of the
Financial Statements, Concept does not have any liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise and whether due
or to become due (including, without limitation, liabilities for taxes and
interest, penalties and other charges payable with respect thereto).
2.34 Related Party Transactions. All transactions between Concept
and any Stockholder prior to the Effective Time were conducted at arm's length,
at fair value and were not consummated in contemplation of the Share Exchange.
2.35 Full Disclosure. All of the information provided by Concept
and its representatives herein or in the Schedules or Exhibits is true,
correct, and complete in all material respects and no representation or
warranty, or statement made by Concept in or pursuant to this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make such representation,
warranty or statement not misleading. Documents delivered or to be delivered
to CCA pursuant to this Agreement are or will be true and complete copies of
what they purport to be.
ARTICLE III
COVENANTS OF CONCEPT AND THE STOCKHOLDERS
Concept and the Stockholders, jointly and severally, represent,
covenant and agree as follows:
3.1 Notification of Certain Matters. Concept shall give prompt
notice to CCA if any of the following occur after the date hereof, but prior to
the Effective Time: (i) any notice of, or other communication relating to, a
default or event which, with notice or lapse of time or both, would become
default under any contract to which Concept is a party; (ii) receipt of any
notice or other communication from any third party alleging that the consent of
a third party is or may be required in connection with the transactions
contemplated by this Agreement; (iii) receipt of any material notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; (iv) the occurrence of any event
which would have a material adverse effect on the transaction; (v) the
commencement or threat of any
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litigation involving or affecting Concept, or any of its properties or assets,
or, to its knowledge, any employee, agent, director or officer, in his or her
capacity as such, of Concept which, if pending on the date hereof, would have
been required to have been disclosed in this Agreement or which relates to the
consummation of the Share Exchange or any material development in connection
with any litigation disclosed or required to be disclosed by Concept in or
pursuant to this Agreement; and (vi) the occurrence of any event that would
cause a breach by Concept of any provision of this Agreement or that, if such
event had occurred on the date hereof, would have been required to have been
disclosed in this Agreement.
3.2 Access and Information. Between the date of this Agreement
and the Effective Time, Concept will give CCA and its authorized
representatives (including, without limitation, financial advisors, accountants
and legal counsel) at all reasonable times reasonable access to all offices,
prison facilities and other facilities and, subject to applicable Law and
compliance with contractual obligations, to all Contracts, agreements,
commitments, books and records (including, but not limited to, tax returns) of
Concept, will permit the foregoing to make such reasonable inspections as they
may require and will cause its officers promptly to furnish CCA with such
available financial and operating data and other information with respect to
the business and properties of Concept as CCA may from time to time reasonably
request.
3.3 Best Efforts. Concept agrees to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable, the
Share Exchange and the transactions contemplated by this Agreement and to
satisfy the conditions of the Closing set forth herein, including, but not
limited to: (i) obtaining all necessary approvals or waivers of Concept's
lenders and other third parties, (ii) the defending of any litigation against
Concept challenging the Share Exchange or this Agreement, (iii) obtaining all
necessary actions or nonactions, waivers or consents from Governmental
Authorities required for the consummation of the Share Exchange and the
transactions contemplated thereby, and (iii) obtaining all necessary actions,
waivers or consents from KPMG Peat Marwick required for any filings by CCA with
the Securities and Exchange Commission, the New York Stock Exchange or other
applicable exchange.
3.4 Public Announcements. So long as this Agreement is in effect,
Concept shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Share Exchange or the transactions contemplated by this Agreement without the
prior written consent of CCA.
3.5 Resignation of Directors and Officers. Concept shall cause
the officers and directors of Concept as CCA may request, to resign their
positions as such as of the Effective Time.
3.6 Pooling; Tax Consequences. After the Effective Time, neither
Concept nor the Stockholders shall (i) knowingly take any action or knowingly
fail to take any action that would jeopardize the treatment of the Share
Exchange as a "pooling of interests" for accounting purposes, (ii) knowingly
take any action or knowingly fail to take any action that would
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jeopardize qualification of the Share Exchange as a reorganization within the
meaning of Section 368(a)(1)(B) of the Code or (iii) enter into any contract,
agreement, communication or arrangement with respect to either of the
foregoing.
3.7 No Solicitation. Unless and until this Agreement shall have
been terminated pursuant to its terms, neither Concept nor any of its executive
officers, directors or agents shall, directly or indirectly, encourage, solicit
or initiate discussions or negotiations (with any person other than CCA)
concerning any merger, sale or substantial assets, tender offer, sale of shares
of stock or similar transaction involving Concept or disclose, directly or
indirectly, any information not customarily disclosed to the public concerning
Concept or afford to any other person access to the properties, books or
records of Concept or otherwise assist any person preparing to make or who has
made such an offer or enter into any agreement with any third party providing
for a business combination transaction, equity investment or sale of
significant amount of assets.
3.8 Termination of Employees. Concept shall cause all current
employees of Concept listed on Schedule 3.8A to be terminated effective prior
to the Closing Date (the "Terminated Employees"), and Concept shall pay the
severance, vacation or other amounts due to such Terminated Employees as set
forth on Schedule 3.8 hereto (the "Severance Obligations"). To the extent that
the sum of (i) the Severance Obligations; (ii) the gross compensation to be
paid to the Concept employees listed on Schedule 3.8B (the "Schedule 3.8B
Employees") from the Effective Time through September 30, 1995, and (iii) the
amount paid by Concept or CCA in resolving any other claims, suits or
proceedings brought by any of the Terminated Employees on Schedule 3.8B
Employees as a result of or in connection with the termination of their
employment or otherwise, exceeds $300,000, then the Stockholders, jointly and
severally, shall defend, indemnify and hold CCA and Concept harmless from any
such excess amount over $300,000.
3.9 Employee Benefit Matters. Effective as of the Closing Date,
Concept shall, in accordance with the terms of any governing and applicable
employee benefit plans of Concept, withdraw from participating in such plans as
an adopting employer. Consequently, each employee of Concept shall no longer
be eligible to participate in, or accrue benefits under, any such plan, but
shall be eligible for any distribution allowable therefrom in accordance with
the terms of such plans and the applicable Laws.
3.10 Employee Benefit Reporting and Disclosures. Concept shall
make any and all necessary reports and disclosures required by any federal or
state agency in relation to any employee benefit plans in this transaction.
Further, Concept agrees to provide CCA with any and all information pertaining
to such employee benefit plans which CCA, in its sole discretion , determines
is necessary to comply with any reporting or disclosures required pursuant to
any Laws or to conduct any test required pursuant to the Code or ERISA.
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ARTICLE IV
COVENANTS OF CCA
4.1 Best Efforts. CCA agrees to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the Share
Exchange and the transactions contemplated by this Agreement and to satisfy the
conditions of the Closing set forth herein, including, but not limited to: (i)
obtaining all necessary approvals or waivers of the CCA lenders and other third
parties, (ii) the defending of any litigation against CCA challenging the Share
Exchange or this Agreement, and (iii) obtaining all necessary actions or
nonactions, waivers or consents from Governmental Authorities required for the
consummation of the Share Exchange and the transactions contemplated thereby.
4.2 Stock Adjustments. Nothing in this Agreement shall limit the
right of CCA to issue or agree to issue any of its stock or other securities in
any manner and for any consideration permitted by law prior to or after the
Effective Time; provided, however, that if CCA takes any action which
establishes prior to the Effective Time, a record date or an effective date for
a stock dividend on its common stock, a split-up or any combination of its
common stock or any distribution on shares of its common stock other than cash
dividends, CCA will take all such action as shall be necessary in order that
the Concept Shares will be converted in the Share Exchange into additional
shares of CCA Stock which would have been delivered to the holders of the
Concept Stock if the Share Exchange had been made effective immediately before
such record or effective date.
4.3 Listing Application. CCA shall promptly prepare and submit to
the New York Stock Exchange a Listing Application covering the shares of CCA
Stock issuable in the Share Exchange and shall use its best effort to obtain,
prior to the Effective Time, approval for the listing of such CCA Stock subject
to official notice of issuance.
4.4 Employee Matters. (a) CCA will honor and assume the
employment contracts between Concept and those Concept employees listed on
Schedule 4.4(a) hereto.
(b) CCA shall also offer employment to Mr. William Sandbach.
The terms and conditions of such employment shall be determined by CCA and may,
at the option of CCA, include as a condition to such employment, that Mr.
Sandbach relocate to Nashville, Tennessee. CCA shall not be obligated to offer
employment to any other Concept employee except as provided in this Section
4.4.
(c) CCA shall fund the payment of the Severance Obligations
(to the extent set forth in Section 3.8) to the Terminated Employees in
accordance with Schedule 3.8.
(d) CCA acknowledges the informal arrangement between D. Paul
Alagia and Concept and hereby assumes, from the Effective Time and for a period
of four months, the
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obligations of Concept to (i) pay Mr. Alagia benefits totaling $27,000 per
month. In consideration of such assumption by CCA, Mr. Alagia shall continue
to provide services to Concept consistent with those currently provided by Mr.
Alagia to Concept. The terms and conditions of such arrangement shall be as
set forth in Exhibit D hereto.
4.5 Registration of CCA Common Stock. The CCA Common Stock is to
be issued initially without registration under the Securities Act of 1933, as
amended (the "1933 Act") or registration or qualification under the securities
laws of any state or jurisdiction (the "State Laws"). CCA shall use its best
efforts to register up to 420,000 shares of the CCA Common Stock held by the
Stockholders (the "Registrable CCA Shares") under the 1933 Act, on Securities
and Exchange Commission Form S-3 (or any applicable successor form) in an
underwritten public offering, and to register or qualify such shares under
applicable State Laws, all within 120 days after the Closing Date.
Notwithstanding the foregoing, CCA shall not be obligated to effect such a
registration with respect to any Registrable CCA Shares which the Stockholders
are able to place privately at a price of not less than $30.50 per share within
120 days of the Closing Date. In connection therewith, CCA agrees to use its
reasonable efforts to assist the Stockholders in locating such a private
purchaser for the CCA Common Stock. In connection with the above-described
registration statement, CCA will pay all registration expenses (excluding legal
fees of the Stockholders and their pro rata portion of any filing fees). All
underwriting discounts and selling commissions applicable to the sale of the
CCA Common Stock shall be borne by the participating sellers in proportion to
the number of shares sold by each, or by such persons other than CCA (except to
the extent CCA shall be a seller) as they may agree.
4.6 Transfer of CCA Common Stock. The Stockholders shall not
sell, transfer, assign, pledge, hypothecate or otherwise dispose of any of the
shares of CCA Common Stock or any interest therein unless the CCA Common Stock
is registered under the 1933 Act and any applicable State Laws or unless the
CCA Common Stock is the subject of an opinion of counsel, which opinion and
counsel are reasonably acceptable to CCA, that such registration is not
required. The stock certificates evidencing the CCA Common Stock will bear
legends setting forth the restrictions on transfers stated immediately above,
and stop-transfer instructions will be delivered by CCA to CCA's stock transfer
agent (First Union Bank of North Carolina) reflecting such restrictions. In no
event shall the Stockholders transfer any CCA Common Stock prior to the day
following the first filing by CCA with the Securities and Exchange Commission
of a report on Form 10-K or 10-Q, as appropriate, that includes financial
statements covering a period of at least 30 days of combined operations of
Concept and CCA following the Closing Date. Any and all transfers of CCA
Common Stock by the Stockholders shall comply with the provisions of ASR 135
Rules.
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<PAGE> 21
ARTICLE V
CONDITIONS
5.1 Conditions to Obligations of CCA. The obligations of CCA to
effect the Share Exchange shall be subject to the satisfaction at or prior to
the Closing of the following conditions, any one or more of which may be waived
by CCA:
(a) No Injunction. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or enforced by any court or other Governmental Authority
which prohibits or prevents the consummation of the Share Exchange which has
not been vacated, dismissed or withdrawn by the Effective Time and CCA shall
have received a certificate to that effect signed by an officer of Concept.
(b) Representations, Warranties and Agreements. The
representations and warranties of Concept set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date with the same force and effect as though made at such
time. Concept shall have performed and complied in all material respects with
the covenants and agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing and CCA shall have
received a certificate to that effect signed by an officer of Concept.
(c) Legal Opinion. CCA shall have received an opinion
from Thompson & Mitchell, counsel to Concept, dated the Closing date in the
form attached hereto as Exhibit B.
(d) Litigation. No action or proceeding shall be pending
or threatened by or before any person, court or other Governmental Authority,
seeking to restrain or prohibit or to recover damages in respect of any or all
of the transactions contemplated hereby or to revoke or suspend any license,
permit, order or approval by reason of the Share Exchange or any or all of the
transactions contemplated hereby.
(e) Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Authorities necessary
for the consummation of the Share Exchange shall have been obtained on terms
satisfactory to CCA and shall be in full force and effect.
(f) Other Consents. Consents or waivers from parties
other than Governmental Authorities that are required in connection with the
consummation of the Share Exchange shall have been obtained on terms
satisfactory to CCA and shall be in full force and effect and signed copies
thereof shall have been delivered to CCA.
(g) Secretary of State Certificates. CCA shall have
received a Certificate of the Secretary of State of the State of Delaware, with
respect to Concept, and of each state in which Concept is qualified to do
business as a foreign corporation as of a recent date, showing
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<PAGE> 22
Concept to be validly existing or qualified as a foreign corporation and its
states of existence and qualification, as the case may be, and in good standing
and that all franchise taxes required to be paid and all reports required to be
filed have been duly paid and filed, and with respect to the Certificate of the
Secretary of State of the State of Delaware, listing all documents filed and
attaching certified copies thereof.
(h) Secretary's Certificate of Concept. CCA shall have
received a Certificate of the Secretary of Concept, stating that (i) no
document has been filed relating to or affecting the Certificate of
Incorporation of Concept after the date of the Certificate of the Secretary of
the state of its incorporation furnished pursuant to Section 5.1(g), and (ii)
attached to the Secretary's Certificate is a true and complete copy of Bylaws
of Concept, as the case may be, as in full force and effect at the date of the
Closing.
(i) Resolutions. CCA shall have received certified
copies of resolutions duly adopted by Concept's Board of Directors authorizing
the execution and delivery of this Agreement, the Share Exchange, and the
transactions contemplated hereby, and certifying that such resolutions were
duly adopted and have not been rescinded or amended as of the date of the
Closing.
(j) Audited Financial Statements. CCA shall have
received audited financial statements of Concept for the fiscal year ended
December 31, 1994 and unaudited financial statements for the three month period
ended March 31, 1995. Such audited financial statements shall be accompanied
by the report of KPMG Peat Marwick, independent certified public accountants
of Concept, and shall comply with the applicable requirements of the Securities
and Exchange Commission.
(k) Proceedings Satisfactory. All certificates, opinions
and other documents to be delivered by Concept and all other matters to be
accomplished prior to or at the Closing shall be satisfactory to CCA and its
counsel.
(l) Pooling of Interests. CCA shall be satisfied that
the Share Exchange will qualify for accounting by CCA as a pooling of interests
under generally accepted accounting principles and under applicable rules and
regulations of the Securities and Exchange Commission. In connection
therewith, CCA shall have received, on or before the Closing Date, (i) a letter
from Arthur Andersen, LLP (or any other accountants of CCA's choosing) dated as
of the Closing Date to the effect that the transactions contemplated by this
Agreement may be treated by CCA as a "pooling of interests" for accounting
purposes, and (ii) a letter from KPMG Peat Marwick to Concept dated as of the
Closing Date with respect to transactions by Concept and the Stockholders prior
to the Closing Date.
(m) Resignation of Directors and Officers. Certain
directors and officers of Concept, as specified by CCA, shall have resigned.
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<PAGE> 23
(n) Blue Sky. CCA shall have received all state
securities law authorizations necessary to consummate the transactions
contemplated hereby.
(o) NYSE Listing. CCA shall have received approval from
the NYSE for listing of the CCA Shares.
(p) Release by Stockholders. Each of the Stockholders
shall have executed a general release in form and substance satisfactory to
CCA.
(q) No Loss, Damage or Destruction. In the event there
is any damage to or loss of any of the Assets (whether by fire, theft,
condemnation, vandalism or other cause or casualty), the terms of Section 7.10
will have been complied with to the satisfaction of CCA.
(r) Compliance Evidence. CCA shall have received such
certificates, opinions, documents and information as it may reasonably request
in order to establish satisfaction of the conditions set forth in this Section
5.1
(s) Performance By Concept. Concept shall have performed
and complied with all the covenants and agreements in all material respects and
satisfied in all material respects all the conditions required by this
Agreement to be performed or complied with or satisfied by Concept at or prior
to the Effective Time.
(t) Stockholder Letter. Each Stockholder shall have
executed the Stockholders Letter in the form of Exhibit C hereto.
(u) Noncompetition Agreements. Messrs. D. Paul Alagia
and Harold S. Nelson shall have executed noncompetition agreements each in form
and substance satisfactory to CCA.
(v) Exhibits and Schedules. All Exhibits and Schedules
hereto shall be in form reasonably acceptable to CCA.
5.2 Conditions to Concept's Obligations. The obligations of
Concept to effect the Closing shall be subject to the satisfaction at or prior
to the Closing of the following conditions, any one or more of which may be
waived by Concept:
(a) Representations, Warranties and Agreements. (i) The
representations and warranties of CCA set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made at such time; (ii) CCA shall have performed and
complied in all material respects with the covenants and agreements contained
in this Agreement required to be performed and complied with by it prior to the
Closing; and (iii) Concept shall have received a certificate to that effect
signed by an officer of CCA.
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<PAGE> 24
(b) Legal Opinion. Concept shall have received an opinion
from Stokes & Bartholomew, counsel to CCA, dated the Closing Date in form
satisfactory to Concept.
(c) Secretary's Certificates of CCA. Concept shall have
received a Certificate of the Secretary of CCA stating that no document has
been filed relating to or affecting the Certificate of Incorporation of CCA
after the date of the Certificate of the Secretary of State of Delaware
furnished pursuant to Section 5.2(d), and attached to the Certificate is a true
and complete copy of the Bylaws of CCA as in full force and effect at the date
of the Closing, and a Certificate of the Secretary of State of the State of
Delaware as to the good standing of CCA.
(d) Resolutions. Concept shall have received certified
copies of resolutions duly adopted by the Board of Directors of CCA authorizing
the Agreement, the Share Exchange and the consummation of the transactions
contemplated hereby and the issuance of the aggregate Exchange Consideration by
CCA.
(e) Performance by CCA. CCA shall have performed and
complied with all the covenants and agreements in all material respects and
satisfied in all material respects all the conditions required by this
Agreement to be performed or complied with or satisfied by CCA at or prior to
the Effective Time.
ARTICLE VI
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
6.1 Indemnification by Stockholders. The Stockholders, jointly
and severally, hereby agree to defend, indemnify and hold harmless CCA, Concept
and each of CCA or Concept's respective affiliates, officers, directors,
employees, agents, successors and assigns ("CCA's Indemnified Persons") and
shall reimburse CCA's Indemnified Persons for, from and against each claim,
loss, liability, cost and expense (including, without limitation, interest,
penalties, costs of preparation and investigation, and the reasonable fees,
disbursements and expenses of attorneys, accountants and other professional
advisors) (collectively, "Losses"), directly or indirectly relating to,
resulting from or arising out of:
(a) Any untrue representation, misrepresentation, breach of
warranty or unfulfillment of any covenant, agreement or other obligation by or
of Concept or any Stockholder, any Exhibit or Schedule hereto or in any
certificate, document or instrument delivered to CCA pursuant hereto.
(b) Any Tax liability of Concept not previously paid, or for
which adequate reserves have not been established in the Financial Statements,
which may at any time be asserted or assessed against Concept for any event or
period prior to the Closing Date (regardless of whether the possibility of the
assertion or assessment of any such tax liability shall have been disclosed to
CCA at or prior to the Closing).
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<PAGE> 25
(c) Any and all liabilities or obligations of any Stockholder
to Concept arising outside of this Agreement.
(d) Any liability incurred by Concept in connection with the
matters set forth in Schedule 2 to the Escrow Agreement not otherwise covered
by insurance.
(e) Any liability of CCA or Concept in connection with the
severance matters described in Section 3.8 in excess of $300,000.
(f) Any liability of Concept for legal fees or investment
banking fees in excess of $500,000 incurred in connection with this
transaction.
(g) Any other Loss incidental to any of the foregoing.
6.2 Defense of Third Party Claims. With respect to any claim
under Section 6.1 relating to a third party claim or demand, CCA shall provide
the Stockholder Representatives (as described herein) with prompt written
notice thereof in accordance with Section 7.3 hereof and the appropriate
indemnifying parties may defend, in good faith and at their expense, by legal
counsel chosen by them and reasonably acceptable to CCA any such claim or
demand, and CCA, at its expense, shall have the right to participate in the
defense of any such third party claim. So long as the appropriate indemnifying
parties are defending in good faith any such third party claim, CCA shall not
settle or compromise such third party claim. In any event, CCA shall cooperate
in the settlement or compromise of, or defense against, any such asserted
claim. If the appropriate indemnifying parties do not so elect to defend any
such third party claim, CCA shall have no obligation to do so.
6.3 Time to Assert Claims. All representations and warranties of
Concept and the Stockholders contained herein shall survive the Closing and any
investigation at any time made by or on behalf of any party hereto and, except
for the matters listed on Schedule 6.3 hereto, shall expire on the first
anniversary of the Closing Date. Any indemnification by the Stockholders
pursuant to Section 6.1 hereof with respect to the matters listed on Schedule
6.3 hereof shall expire in accordance with the time periods listed on Schedule
6.3, and the parties hereto acknowledge and agree that such time periods are
reasonable in relation to this transaction. All statements contained in any
certificate, Exhibit, Schedule, list, document or other writing delivered
pursuant hereto or in connection with the transactions contemplated hereby
shall be deemed representations and warranties for all purposes of this
Agreement.
6.4 Limitation on Indemnification. Notwithstanding any provision
contained herein to the contrary, the Stockholders shall not have any
obligation to indemnify or to reimburse CCA or Concept pursuant to Section 6.1
except to the extent that the obligations to the other hereunder exceed in the
aggregate $50,000, in which event the indemnifying party shall reimburse the
indemnified party for all losses exceeding $50,000 to the extent provided in
Section 6.5 hereof, provided that this limitation shall not apply to the
indemnification by the Stockholders set forth in Sections 6.1(b), (e) and (f).
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<PAGE> 26
6.5 CCA's Remedy. (a) At any time, or from time to time, when CCA
is entitled to indemnification from the Stockholders, CCA shall first offset
the amount of Losses incurred by it as a result of such breach against the
Escrow Shares.
(b) In the event CCA shall be entitled to indemnification
under Section 6.1 hereof, after the exhaustion of the right to setoff against
the Escrow Shares, the Stockholders shall be severally liable to CCA for any
Loss sustained by CCA provided, however, that each Stockholder's total
additional liability hereunder shall be limited to such Stockholder's pro rata
portion of the market value of the Exchange Consideration on the Closing Date.
In calculating each Stockholder's liability pursuant to the preceding sentence,
all sums previously received by CCA from the Escrow Account or from the
Stockholders shall be credited proportionately to such Stockholder.
6.6 Other Rights and Remedies. The rights and remedies of the
parties under this Agreement shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against the other parties hereto.
ARTICLE VII
MISCELLANEOUS
7.1 Amendment and Modification. Subject to applicable Law and
Section 7.9 hereof, this Agreement may be amended, modified or supplemented
only by a written agreement executed by Concept, the Stockholders and CCA.
7.2 Waiver of Compliance; Consents. Any failure of Concept, on
the one hand, or CCA, on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by CCA or Concept,
respectively, only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 7.2.
7.3 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice; provided that notices of a change of
address shall be effective only upon receipt thereof):
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<PAGE> 27
(a) If to Concept and CCA:
Corrections Corporation of America
102 Woodmont Boulevard
Suite 800
Nashville, TN 37205
ATTN: Doctor R. Crants, Chairman
and Chief Executive Officer
With a copy to:
Stokes & Bartholomew, P.A.
424 Church Street
Suite 2800
Nashville, TN 37219
ATTN: Elizabeth E. Moore, Esq.
(b) If to the Stockholders:
D. Paul Alagia
100 Wampum Road
Louisville, KY 40207
and
William H. Cull
503 Murray Street
Frankfort, KY 40601
With a copies to:
Thompson & Mitchell
One Mercantile Center
Suite 3300
St. Louis, MO 63101
ATTN: John W. Finger
and:
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
ATTN: C. Christopher Trower
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<PAGE> 28
7.4 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, except that the Stockholders shall bear
Concept's legal fees incurred since January 1, 1995 and all investment banking
fees in connection with the preparation and negotiation of this Agreement and
the transactions contemplated hereby. Notwithstanding the foregoing, Concept
shall pay up to $500,000 of the legal and investment banking fees.
7.5 Stockholder Release. By execution of this Agreement, each of
the Stockholders hereby fully, completely, and irrevocably forever, expressly
releases and discharges CCA and Concept, and each of their officers, directors,
employees, agents, legal representatives, receivers, trustees, and assigns from
all claims of whatever nature, demands, actions, judgments, damages, and
executions that any of the Stockholders hereby ever had, or now has, or may
have, or that anyone claiming through or under him may have, or claim to have,
against CCA or Concept or their officers, directors, employees, agents, legal
representatives, receivers, trustees or assigns. Each Stockholder hereby
represents and warrants that no promise or inducement has been offered to him
except as herein set forth, and that this Release is given without reliance
upon any statement or representation by CCA or Concept or their representatives
concerning the existence of such claims or the nature and extent of any legal
liability or damage therefor.
7.6 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of other parties, nor is
this Agreement intended to confer upon any other person except the parties, any
rights or remedies hereunder.
7.7 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Tennessee applicable
to agreements made and entirely to be performed within such state, except as
Delaware law may apply with respect to the internal governance of Delaware
corporations affected by this Agreement.
7.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7.9 Stockholder Representatives. D. Paul Alagia or, if Mr. Alagia
shall decline or be unable to serve, William H. Cull, or the survivor of them
shall irrevocably serve as the agent and attorney-in-fact (the "Stockholder
Representatives") for the Stockholders with full power and authority through
the termination date of the Escrow Agreement to execute and deliver the Escrow
Agreement (and to be and serve as the attorney-in-fact for the Stockholders as
set forth in Section 7.1 of the Escrow Agreement) and to execute, deliver and
receive on their behalf all notices, requests and other communications
hereunder; to fix and alter on their behalf the date, time and place of the
Closing; to negotiate, resolve and settle claims for indemnification and
set-offs against the Escrow; to waive, amend and modify any provisions of this
Agreement and to
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<PAGE> 29
take such other action on their behalf in connection with the Agreement, the
Closing and the transactions contemplated hereby as they deem appropriate.
7.10 Risk of Loss. In the event there is any uninsured material
damage to or significant loss of any of the Assets (whether by fire, theft,
vandalism, condemnation or other cause or casualty), between the date hereof
and the Effective Time, which in CCA's sole judgment materially adversely
affect the business or operations of any of the Assets, CCA, at its sole
option, may elect to terminate this Agreement in its entirety.
7.11 Section Headings. The articles and section headings contained
in this Agreement are inserted for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
7.12 Interpretation. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as
the identity of the person or entity, as the context may require.
7.13 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto and the documents and instruments referred to herein, embodies
the entire agreement and understanding of the parties hereto and thereto in
respect of the subject matter contained herein. There are no restrictions,
promises, representations, warranties, covenants, or undertakings, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and the understandings between the parties with respect to
such subject matter.
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<PAGE> 30
IN WITNESS WHEREOF, the parties hereto executed this Agreement as of
the date first above written.
CORRECTIONS CORPORATION OF AMERICA
By:
-------------------------------------
Its:
------------------------------------
CONCEPT INCORPORATED
By:
-------------------------------------
Its:
------------------------------------
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STOCKHOLDERS:
D. PAUL ALAGIA AND MARIE JOYCE
MCCARTHY ALAGIA, AS TENANTS BY
THE ENTIRETY
By:
------------------------------------
D. Paul Alagia
By:
------------------------------------
Marie Joyce McCarthy Alagia
---------------------------------------
Charles Hundley
---------------------------------------
John L. Smith
---------------------------------------
Patrick H. Molloy
---------------------------------------
Dorothy J. Watkins
---------------------------------------
Harold S. Nelson
---------------------------------------
Ben F. Morgan, Jr.
---------------------------------------
John C. Watkins, Jr.
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---------------------------------------
David L. Watkins
---------------------------------------
A. W. Sandbach
---------------------------------------
William H. Cull
---------------------------------------
Thomas F. Buetow
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EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made and entered into as of
April 25, 1995 by and among FIRST UNION NATIONAL BANK OF TENNESSEE
("Escrowee"); CONCEPT INCORPORATED, a Delaware corporation ("Concept");
CORRECTIONS CORPORATION OF AMERICA, a Delaware corporation ("CCA"); and the
undersigned representatives of the Concept Stockholders (the "Stockholder
Representatives").
R E C I T A L S:
A. CCA, Concept and the Concept Stockholders are parties to a
Share Exchange Agreement dated April 25, 1995 ("Share Exchange Agreement"), a
copy of which has been delivered to Escrowee, pursuant to which (i) the issued
and outstanding shares of common stock of Concept (the "Concept Shares") will
be exchanged for shares of the common stock of CCA, and (ii) the Stockholder
Representatives (on behalf of the Concept Stockholders) have agreed to enter
into this Agreement to secure certain rights of CCA with respect to
indemnification by the Concept Stockholders under Section 6.1 of the Share
Exchange Agreement.
B. Pursuant to the Share Exchange Agreement, the Concept
Stockholders will receive certain shares of common stock, par value $1.00 per
share, of CCA (the "CCA Stock").
C. After the execution of this Agreement, CCA will deposit
certain shares of CCA Stock to be received by the Concept Stockholders with
Escrowee to be held and disposed of pursuant to the terms of this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained the parties hereto hereby agree as follows:
Section 1. Delivery of Shares.
(a) Concurrently with the execution of this Agreement, the Concept
Stockholders have delivered stock powers or assignments signed in blank by the
Concept Stockholders. CCA has delivered concurrently herewith to Escrowee for
deposit into a special account ("Escrow Account") certificates evidencing
136,250 shares of CCA Stock to be delivered to the Concept Stockholders
pursuant to the Share Exchange Agreement. Such shares represent ten (10%)
percent of the aggregate Exchange Consideration delivered under the Share
Exchange Agreement. The shares of CCA Stock deposited with Escrowee from time
to time pursuant to this Agreement are hereinafter sometimes referred to as the
"Escrowed Shares".
(b) If any securities or other property, including cash dividends,
are distributed or issued by CCA or others from time to time in respect of any
of the shares of CCA Stock then
<PAGE> 34
held by Escrowee pursuant to a stock dividend, exchange, split, merger,
liquidating dividend, or any other type of extraordinary transaction, all of
such securities or other property, and all proceeds from any of the foregoing
and all rights and privileges of the holders thereof shall be immediately
deposited into the Escrow Account. The term "CCA Stock" as used herein and in
the Share Exchange Agreement includes all securities or other property, or
dividends issued or distributed from time to time in respect of the CCA Stock.
If any of the foregoing stock dividends, exchanges, splits, mergers,
liquidating dividends or other extraordinary transactions occur, the shares of
CCA Stock to be held or to be released by Escrowee from time to time in
accordance with the terms hereof shall be adjusted accordingly.
(c) Any charge against the Escrowed Shares pursuant to Section 3
shall be allocated among the Concept Stockholders pro rata in accordance with
the percentages set forth on Schedule 1 attached hereto.
(d) Escrowee shall hold the Escrowed Shares in the Escrow Account
and transfer such shares only in accordance with the terms of this Agreement.
(e) All voting rights with respect to the Escrowed Shares shall be
exercisable from time to time by or on behalf of the record holders of such
shares or their authorized agents.
Section 2. Further Assurances.
The Concept Stockholders, jointly and severally, represent, warrant,
undertake and agree, from time to time, that upon the request of CCA or
Escrowee, such Concept Stockholders shall prepare, execute or deliver or cause
to be prepared, executed or delivered all such documents of transfer or other
instruments, including, without limitation, letters of instruction and
transmittal, stock powers, consents or other instruments necessary to insure
that Escrowee receives and holds the Escrowed Shares pursuant to the terms of
this Agreement.
Section 3. Claimed Amount.
(a) _________________________________ (___________) of the Escrowed
Shares (the "Reserved Shares") shall be held in the Escrow Account primarily
for Claims (as defined in subparagraph (b) next below) relating to the
contingencies set forth on Schedule 2 attached hereto in such manner as
described therein. The remainder of the Escrowed Shares (the "Unreserved
Shares") shall be held in the Escrow Account primarily for any and all other
Claims made by CCA hereunder. Subject to the terms and provisions set forth in
this Agreement, the Escrowed Shares shall be held in the Escrow Account until
after the Expiration Date (as hereinafter defined). For purposes of this
Agreement, the Expiration Date for Claims relating to the Reserved Shares shall
be the expiration date of the applicable statute of limitations or the date of
resolution of the contingency to which the Reserved Shares relate as set forth
on Schedule 2 hereto, as the case may be, as set forth on a joint certificate
executed by CCA and the Stockholder Representatives and delivered to Escrowee.
The Expiration Date for Claims relating
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<PAGE> 35
to the Unreserved Shares shall be the first anniversary of the closing date for
the Share Exchange Agreement.
(b) At any time (or from time to time) on or prior to an
Expiration Date, CCA may give notice to Escrowee and to the Stockholder
Representatives, that CCA claims all or any part of the Escrow Account in
satisfaction of any claim arising under any obligation or liability of the
Concept Stockholders in accordance with Section 6.1 of the Share Exchange
Agreement. (Such claim is hereinafter referred to as a "Claim" and any such
notice of a claim is hereinafter referred to as a "Claim Notice") The Claim
Notice shall briefly set forth (i) the nature of the Claim; and (ii) the amount
of the Claim (hereinafter referred to as the "Claim Amount"). Escrowee shall
be under no obligation to determine the validity of any Claim by CCA hereunder.
(c) Upon receipt of the Claim Notice, the Concept Stockholders,
acting through the Stockholder Representatives, shall have thirty-five (35)
days to deny or approve the Claim by notice in writing to the Escrowee.
(d) If the Concept Stockholders, acting through the Stockholder
Representatives, approve the Claim Amount or upon the expiration of such
thirty-five (35) day period, if the Concept Stockholders, acting through the
Stockholder Representatives, have failed to deny the Claim Notice, Escrowee
shall cause the Escrow Account to be charged for the Claim Amount, and Escrowee
shall pay to CCA (or to CCA's assignees or successors) CCA Stock having a fair
market value equal to the Claim Amount, less the amount of payments which may
previously have been received by CCA from the Concept Stockholders against such
Claim of which Escrowee shall have received prior written confirmation from the
Concept Stockholders and CCA and subject to the limitation on indemnification
set forth in Section 6.4 of the Share Exchange Agreement, and shall release
appropriate stock powers at the time of such payment. Payment of Claim Amounts
relating to the Unreserved Shares shall be made first from such shares and then
from the Reserved Shares to the extent the Unreserved Shares are inadequate.
Payment of Claim Amounts relating to the Reserved Shares shall be paid first
from the Reserved Shares and then from the Unreserved Shares to the extent the
Reserved Shares are inadequate; provided, however, that the Unreserved Shares
may be used to pay Claim Amounts relating to the Reserved Shares that are
asserted on or before April 25, 1996.
(e) For purposes of a release or distribution in satisfaction of a
Claim, the CCA Stock shall be valued at $30.50 per share.
(f) If, within the thirty-five (35) day period referred to in
Subsection 3(c), the Concept Stockholders, acting through the Stockholder
Representatives, shall dispute such Claim by written notice to Escrowee and
CCA, Escrowee shall not distribute any amount from the Escrow Account with
respect to such Claim until Escrowee receives notice of final resolution of the
Claim. A final resolution of the Claim shall occur if (i) a written agreement
is reached among CCA and the Concept Stockholders or their successors and
assigns, acting through the Stockholder Representatives; or (ii) an order,
decree, award or judgment is entered by an arbitrator appointed by the parties
to resolve the Claim or a court of competent jurisdiction and the order,
decree,
3
<PAGE> 36
award or judgment is not appealed or appealable. Upon final resolution of the
Claim, and upon receipt by Escrowee of evidence of such resolution and request
for the Claim Amount by CCA, Escrowee shall pay to CCA (or any assignee or
successor) from the Escrow Account, CCA Stock having a fair market value equal
to the Claim Amount provided by such final resolution to be paid, less the
aggregate amount of any and all payments, if any, which may previously have
been received by CCA from the Concept Stockholders against such Claim of which
Escrowee shall have received prior written confirmation from the Concept
Stockholders, and shall release appropriate stock powers at the time of such
payment.
(g) The Concept Stockholders, jointly and severally, agree,
represent and warrant that any CCA Stock or cash transferred to CCA or its
respective assigns or successors shall no longer constitute a part of the
Escrow Account or otherwise be subject to the provisions of this Agreement, and
shall be owned by CCA or its respective successors and assigns legally and
beneficially free and clear of any and all claims.
Section 4. Distribution or Release of CCA Stock.
(a) On or after April 25, 1996, upon joint certificate of CCA and
the Stockholder Representatives, any remaining Unreserved Shares with respect
to which Escrowee has received no Claim Notice shall be released and
distributed to the Concept Stockholders pro rata in accordance with the
percentages set forth on Schedule 1 attached hereto. Escrowee shall retain the
Reserved Shares until Escrowee receives written notice executed by CCA and the
Stockholder Representatives that all unresolved or unsatisfied Claims with
respect to such Reserved Shares as identified on Schedule 2 have been resolved
or satisfied. Upon receipt of such written notice, the remaining Reserved
Shares allocable to such contingency as set forth on Schedule 2 shall be
released and distributed to the Concept Stockholders pro rata in accordance
with the percentages set forth on Schedule 1 attached hereto.
(b) Upon release of the balance of the Escrowed Shares, if any,
and all other property in the Escrow Account, Escrowee shall be discharged from
all of its obligations under this Agreement.
Section 5. Costs, Charges and Fees of Escrowee.
(a) Except as provided in Section 6(e) all reasonable charges
billed by the Escrowee for services rendered and expenses incurred by it in
performance of its obligations under this Agreement shall be paid by CCA.
(b) The fee to be paid to the Escrowee shall be $1,500.00,
annually.
Section 6. Limitations of Liability and Other Rights of Escrowee.
(a) Escrowee may employ such legal counsel and other experts as it
may deem necessary to retain for advice in connection with its obligations
hereunder, may rely upon the
4
<PAGE> 37
advice of such counsel or experts and may pay such counsel or experts
reasonable compensation therefor.
(b) Escrowee may resign by transmitting written notice thereof to
(i) CCA, and (ii) the Stockholder Representatives. In the event of any such
resignation, such persons to whom notice is required may appoint (by written
notice to all such persons) a successor Escrowee which shall be a national
banking association or trust company doing business in Nashville, Tennessee.
Any successor Escrowee shall have all of the rights, obligations and immunities
of Escrowee set forth herein.
(c) In consideration of Escrowee's acting as Escrowee herein, it
is agreed that it shall in no event be liable for the failure of any of the
conditions of this Agreement or damage caused by the exercise of its discretion
in any particular manner, or for any other reason, except gross negligence or
willful misconduct with reference to the Escrow Account and it shall not be
liable or responsible for its failure to ascertain the terms and conditions, or
to comply with any of the provisions of, any agreement, contract or other
document filed herewith or referred to herein, nor shall it be liable or
responsible for forgeries or false personation.
(d) It is further agreed that if any controversy arises between
the Concept Stockholders and CCA or with any third person with respect to the
subject matter of this Agreement, Escrowee shall not be required to determine
the same or take any action with respect thereto, but may await the settlement
of any such controversy by final appropriate legal proceedings or otherwise as
it may require, anything in the instructions delivered by the parties hereto to
the contrary notwithstanding, and in such event it shall not be liable for
interest or damage.
(e) It is understood that fees and usual charges agreed upon for
Escrowee's services hereunder shall be considered compensation for its ordinary
services as contemplated by this Agreement, and in the event that the
conditions of this Agreement are not promptly fulfilled or that Escrowee
renders any service hereunder not provided for in this Agreement, or that there
is any assignment of any interest in the subject matter of this Agreement or
modification hereof, or that any controversy arises hereunder, that Escrowee is
made a party to, or intervenes in, any litigation pertaining to this Agreement,
Escrowee shall be reasonably compensated for such extraordinary services and
reimbursed for all costs and expenses occasioned by such default, delay,
controversy or litigation and it shall have the rights to retain all documents
and other things of value at any time held by it hereunder until such
compensation, fees, costs and expenses shall be paid, CCA hereby promises to
pay one-half of the aforesaid sums upon demand and the Concept Stockholders
hereby promise to pay one-half of the aforesaid sums upon demand.
(f) It is understood that Escrowee shall at no time be obligated
to invest any cash held in the Escrow Account.
(g) It is understood that Escrowee shall not be responsible for
the failure of any party hereto to deliver to Escrowee shares of CCA Stock
which such party is required to deliver to Escrowee.
5
<PAGE> 38
Section 7. Notices.
--------- -------
(a) if to Concept Stockholders, to the Stockholder Representatives.
(b) if to the Stockholder Representatives, to:
D. Paul Alagia
100 Wampum Road
Louisville, Kentucky 40207
William H. Cull
Concept Incorporated
1802 Waterfront Plaza
Louisville, Kentucky 40202
(c) If to CCA, to:
Corrections Corporation of America
102 Woodmont Boulevard, Suite 800
Nashville, Tennessee 37205
Attention: Doctor R. Crants
(with a copy to:)
Elizabeth E. Moore, Esq.
Stokes & Bartholomew, P.A.
424 Church Street, Suite 2800
Nashville, Tennessee 37219
(d) If to Escrowee, to:
First Union National Bank of Tennessee
901 East Cary Street, 2nd Floor
Richmond, Virginia 23219
Attention: Corporate Trust Department
Such names and addresses may be changed by such notice. Notices served in
accordance with this Section 7 shall be deemed to have been received, if hand
delivered, on the date delivered, and if mailed, on the third (3rd) day after
the day deposited in the mail; provided that notice to Escrowee shall be
effective only upon receipt thereof.
Section 8. Miscellaneous.
(a) The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All pronouns shall be
6
<PAGE> 39
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the persons, firm or corporation may require in the context
thereof.
(b) This Agreement may not be assigned by any party hereto without
the prior written consent of all of the other parties hereto and shall be
binding upon and inure to the benefit of each of the parties and their
respective personal representatives, successors and permitted assigns, if any.
(c) This Agreement shall be construed, and the rights and duties
of the parties hereto determined, in accordance with the laws of the State of
Tennessee.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute but one and the same instrument. The failure of any party hereto to
execute this Agreement shall not affect the obligations of any other person who
has executed this Agreement.
(e) This Agreement constitutes the entire and sole agreement
between the parties hereto with respect to the subject matter hereof and
supersedes and cancels all prior agreements with respect thereto.
(f) This Agreement may not be amended except by an instrument in
writing duly executed by all of the parties to this Agreement to be charged
therewith and delivered on behalf of each of such parties.
(g) If any party to this Agreement is finally adjudicated to have
breached this Agreement, the breaching party shall reimburse all expenses,
including reasonable attorneys' fees and court costs, incurred, respectively,
by the other parties as a result of such breach.
7
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the date first above written.
ESCROWEE:
By:
-------------------------------
Title:
----------------------------
CORRECTIONS CORPORATION OF
ATTEST: AMERICA
By: By:
-------------------------------- -------------------------------
Darrell K. Massengale, Secretary Doctor R. Crants, Chairman
CONCEPT INCORPORATED
By:
-------------------------------
Title:
----------------------------
STOCKHOLDER REPRESENTATIVES:
----------------------------------
D. Paul Alagia
----------------------------------
William H. Cull
8
<PAGE> 41
SCHEDULE 1
<TABLE>
<CAPTION>
Stockholder Number of Shares Percentage
----------- ---------------- ----------
<S> <C> <C>
Paul Alagia (held jointly with wife) 69,045 50.68%
Maria Joyce McCarthy Alagia (joint) 69,045
Charles Hundley 887 0.65%
John L. Smith 5,735 4.21%
Patrick H. Molloy 5,468 4.01%
Dorothy J. Watkins 5,468 4.01%
Harold S. Nelson 10,720 7.87%
Ben F. Morgan, Jr. 9,676 7.10%
John C. Watkins, Jr. 1,116 0.82%
David L. Watkins 1,109 0.81%
A. W. Sandbach 7,784 5.71%
William H. Cull 12,606 9.25%
Thomas F. Buetow 6,636 4.87%
</TABLE>
<PAGE> 42
SCHEDULE 2
<TABLE>
<CAPTION>
Contingency Number of Expiration
----------- --------- ----------
Shares Date
------ ----
<S> <C> <C> <C>
1. Any loss resulting to Concept or CCA from the failure to obtain any consent, 20,000 1 year
approval or waiver not listed on Schedule 2.5 of the Share Exchange Agreement.
2. Any loss resulting to Concept or CCA from the failure of Concept or any of its 15,000 2 years
affiliates to obtain Phase I Environmental Site Assessments with respect to
the Eloy, Texas facility or any other violation of environmental laws with
respect to such facility.
3. Any loss resulting to Concept or CCA from the provision by Concept of free 10,000 1 year
telephone use in its facilities or future claims by government entities for
Concept revenues from inmate telephone calls.
4. Any loss resulting to Concept or CCA from the following litigation matters: 30,000 Date Claim
Resolved
</TABLE>
Thompson v. Lynaugh, et al.; Case No. 4:93-CV-685-Y; USDC, N.
District of Texas
Johnson v. McCullum; CV94-P-1431-W, USDC, N. District of AL
Frierson, et al. v. Concept, et. al; CV95-98, Circuit Court of
Tuscaloosa County, AL
Kalmer v. Concept, et al.; Case No. 17,449, District Court of
Nolan County (Sweetwater)
Garza v. Concept, et al.; Case No. 17,475, District Court of
Nolan County (Sweetwater)
Burse v. Concept; EEOC No. 361940983 (Dallas Office)
Cornett; EEOC No. 310950864 (Dallas Office)
Woodworth v. Lane, et ux.; Case No. CX 940 42189, Superior
Court of Pinal County
Hancock v. Concept; CV 93-P-755-W, USDC, N. District of AL
Judyth E. Hancock v. Concept Incorporated; Equal Employment
Opportunity Commission No. 350950727
John Whiteside v. Concept Incorporated; EEOC Charge No.
350951222
<PAGE> 43
Robert Warren v. Concept Incorporated; Arizona Attorney
General Charge No. __________, EEOC Charge No. 35A-95-0199
Occupational Injury of Vickie Thompson on February 4, 1994.
Occupational Injury of Linda Byrnes on January 26, 1994.
Hardwick v. Sexton; Case No. CV 93-P-755-W, USDC for the N.
District of AL
Newman v. Tuscaloosa, et al.; CV 94-C-0410-W, USDC, N.
District of AL
Wilson v. Watkins; CV 94-U-2491-NE, USDC, N. District of AL
Bester v. Hopkins; Case No. CV 93-C-1799-W, USDC, N. District
of AL
Bryan v. Concept; Case No. ____ 224th District Court of Bexar
County, Texas, a new case with no description of the claim.
Concept, Inc. v. Education Management Systems, Inc.; Case No.
94-CI-00914, Jefferson Circuit Court, Division 15 (An amount
can be assigned to this as it involves money alleged to be
owed to Education Management by Concept.)
Koumjian v. El Paso County, et al.; Case No. 94-CV-374, United
States District Court, Western District of Texas at El Paso
Willie Sam Bivins v. Rena Craig; Case No. CV 95-315, Circuit
Court of Tuscaloosa County, AL
Melvin L. Abrams v. Concept, Inc., et al.; United States
District Court, Northern District of Alabama, Western
Division, Case No. CV-95-C0807-W
<TABLE>
<CAPTION>
Contingency Number of Expiration
----------- --------- ----------
Shares Date
------ ----
<S> <C> <C> <C>
5. Any liability of CCA in Concept with respect to the Severance 3,000 1 year
Obligations described in Section 3.8 of the Share Exchange Agreement.
6. Any liability of Concept for legal fees or investment banking fees in excess of 4,000 1 year
$500,000 incurred in connection with the consummation of the Share Exchange.
7. Any loss resulting to Concept or CCA as a result of any lost Concept stock 15,000 2 years
certificates, any claims as to the ownership of any capital of Concept.
</TABLE>
<PAGE> 44
<TABLE>
<S> <C> <C> <C>
8. Any loss resulting to Concept or CCA as a result of any wage and hour audits 6,500 Applicable
conducted at the Bridgeport, Brownfield, Sweetwater and Tuscaloosa facilities. Statute of
Limitations
</TABLE>
<PAGE> 45
EXHIBIT B
April 25, 1995
Corrections Corporation of America
102 Woodmont Boulevard
Suite 800
Nashville, Tennessee 37205
Re: Concept Incorporated
Gentlemen:
We have acted as special counsel to Concept Incorporated, a Delaware
corporation ("Concept"), and D. Paul Alagia, Jr. and Marie Joyce McCarthy
Alagia, husband and wife residing in the State of Kentucky (the "Alagias"), in
connection with the preparation of the Share Exchange Agreement, dated April
24, 1995, among Corrections Corporation of America, a Delaware corporation
("CCA"), Concept and the stockholders of Concept signatory thereto (the
"Agreement").
As such counsel, we have examined:
(i) the Certificate of Incorporation and all amendments thereto
of Concept, Minerals Wells R.E. Holding Corp., a Delaware
corporation ("Mineral Wells"), and Concept Incorporated -
Overton, a Delaware corporation ("Overton");
(ii) the Bylaws and all amendments thereto of Concept, Mineral
Wells and Overton;
(iii) all relevant corporate proceedings of Concept, Mineral
Wells and Overton; and
(iv) a copy of the executed Agreement.
We also have examined and relied upon the accuracy of
original, certified, conformed, photographic or telecopied copies of such
records, agreements, certificates and other documents as we have deemed
necessary or appropriate in order to enable us to render the opinions expressed
herein. In all such examinations we have assumed (i) the genuineness of all
signatures, (ii) the authenticity of all documents submitted to us as
originals, the conformity with the originals of all documents submitted to us
as certified, conformed, photographic or telecopied copies and the authenticity
of the originals of such latter documents and (iii) that all certificates and
telecopied and telephonic confirmations given by public officials have been
properly
<PAGE> 46
Corrections Corporation of America
April 25, 1995
Page 2
given and are accurate. As to various questions of fact relevant to such
opinions, we have relied upon the accuracy of (i) statements, representations
and warranties made in the Agreement and other certificates and documents
delivered in connection with the transactions contemplated by the Agreement and
(ii) certificates of public officials and officers of Concept, and we have made
no independent investigation or inquiry with respect to such factual matters.
In rendering the following opinions, we have further assumed,
without independent investigation but with your permission, that: (a) CCA is
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to enter into the
Agreement; (b) the execution and delivery of the Agreement has been duly
authorized by all necessary action and proceedings on the part of CCA; (c) the
Agreement has been duly executed and delivered by all parties thereto other
than Concept and the Alagias and constitutes the legal, valid and binding
obligation of such parties, enforceable against such parties in accordance with
its terms; and (d) all parties to the Agreement, other than Concept, have
obtained any and all consents, permits and approvals required by or from any
and all Federal, state, local and foreign governmental and regulatory agencies
and authorities in connection with the transactions contemplated thereby, to
the extent necessary for the legality, validity, binding effect or
enforceability of the Agreement.
Wherever an opinion herein is qualified by the phrase "to the
best of our knowledge", it is limited to the actual knowledge of the attorneys
of our firm who have devoted substantive attention to legal matters referred to
us by Concept. No inference as to our knowledge of any fact should be drawn
from our representation of Concept.
All capitalized terms used in this opinion, unless otherwise
defined herein, are used with the same meaning as defined in the Agreement.
Based upon such review and upon such inquiries and
investigations as we have deemed necessary or relevant, we are of the opinion
that:
1. Each of Concept, Mineral Wells and Overton (Mineral
Wells and Overton hereinafter are referred to collectively as the
"Subsidiaries") (i) is a corporation validly existing and in good standing
under the laws of the State of Delaware; and (ii) has the requisite corporate
power and authority to own its properties and assets and to transact its
business as currently conducted. Concept and each of the Subsidiaries is duly
qualified, is authorized to do business, and is in good standing in the
jurisdiction specified under the heading "States Qualified" for such
corporation on Schedule 1 attached hereto and incorporated by reference herein.
2. The authorized capital stock of Concept consists of
80,000 shares of common stock, $10.00 par value per share, of which, to the
best of our knowledge and subject to the qualifications set forth on Schedule 2
attached hereto and incorporated by reference herein, 20,882 shares are issued
and outstanding. To the best of our knowledge and subject to the
qualifications set forth on Schedule 2, Schedule 2 sets forth the total number
of shares owned of record by each Stockholder. To the best of our knowledge,
except as set forth on Schedule 2, Concept does not have any outstanding
option, warrant, right, subscription or other commitment for the sale or
issuance of any share of its common stock.
<PAGE> 47
Corrections Corporation of America
April 25, 1995
Page 3
3. The execution, delivery, and performance by Concept
of the Agreement (i) are within the corporate power and authority of Concept;
(ii) have been duly authorized by the Board of Directors of Concept; (iii) are
not in contravention of the terms of the Certificate of Incorporation or Bylaws
of Concept or any of the Subsidiaries or, to the best of our knowledge and
except as set forth in Schedule 2.6 to the Agreement, any indenture, contract,
lease, agreement, instrument, or other commitment to which Concept or any of
the Subsidiaries is a party or by which either Concept or any of the
Subsidiaries or any of their properties are bound; and (iv) to the best of our
knowledge, do not contravene any law or regulation or any judgment, order, or
decree applicable to or binding upon Concept or any of the Subsidiaries.
Notwithstanding the foregoing, we express no opinion as to whether performance
by Concept of the Agreement contravenes the terms of the Deed of Trust and
Security Agreement, dated as of November 15, 1993, from Mineral Wells and
Concept to Ray T. Khirallah, Trustee (the "Trustee") or the Deed of Trust and
Security Agreement, dated as of April 7, 1994 from Mineral Wells and Concept to
the Trustee.
4. The Agreement has been duly and validly executed and
delivered by Concept and the Alagias. The Agreement is a valid and binding
obligation of Concept and the Alagias enforceable against Concept and the
Alagias in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
other similar laws now or hereafter in effect relating to creditors' rights or
remedies generally and to general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) and except
as rights to indemnity and contribution may be limited by federal or state
securities laws or policies underlying such laws. Notwithstanding the
foregoing, we express no opinion regarding the enforceability of any provisions
in the Agreement regarding choice of law or the enforceability of the Agreement
as such enforceability may be affected by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"). For purposes of the opinions expressed in this
paragraph, we have assumed, with your consent, that the internal laws of the
State of Tennessee are identical in all respects to the internal laws of the
State of Missouri.
5. To the best of our knowledge, except as set forth on
Schedule 2.6 to the Agreement, no consent, approval, order or authorization of,
or registration, declaration or filing with, or notice to any court,
administrative agency or commission or other state or federal governmental
authority is required to be obtained or made by Concept under any contract or
agreement to which Concept or any of the Subsidiaries is a party or by which
Concept or any of the Subsidiaries, or any of their properties are bound in
connection with the execution, delivery and performance of the Agreement.
Notwithstanding the foregoing, we express no opinion as to whether (i) any
consent is required to be obtained under the Deed of Trust and Security
Agreement, dated as of November 15, 1993, from Mineral Wells and Concept to the
Trustee or the Deed of Trust and Security Agreement, dated as of April 7, 1994,
from Mineral Wells and Concept to the Trustee or (ii) any consent, approval,
order or authorization of, or registration, declaration or filing with, or
notice to any court, administrative agency or commission or other state or
federal governmental authority is required to be obtained or made by Concept or
any of the Subsidiaries under any statute, rule, regulation or other law,
including the HSR Act.
6. To the best of our knowledge, Concept is the record
owner of all the shares of capital stock of each of the Subsidiaries. To the
best of our knowledge, no equity securities of any of the Subsidiaries
<PAGE> 48
Corrections Corporation of America
April 25, 1995
Page 4
are or may become required to be issued by reason of any option, warrant, right
to subscribe to, or written agreement relating to shares of any capital stock
of any Subsidiary.
7. To the best of our knowledge, Concept is not subject
to any order or decree of any court, administrative agency or commission or
other governmental authority or agency specifically applicable to it or any of
its properties, assets, operations or business.
8. Except as set forth in Schedule 2.21 to the
Agreement, to the best of our knowledge (i) there are no actions, suits, or
proceedings pending or threatened against Concept or its properties in any
court or before any governmental commission, board, or authority which, if
adversely determined, would have an adverse affect on Concept and (ii) Concept
is not in default with respect to any order, writ, injunction, decree, or
demand of any court or other governmental or regulatory authority.
Our opinions above are subject to the effect of generally
applicable rules of law and judicial decisions which: (i) limit the
availability of a remedy under certain circumstances where another remedy has
been elected; (ii) may, where less than all of a contract may be unenforceable,
limit the enforceability of the balance of such contract to circumstances in
which the unenforceable portion is not an essential part of the agreed
exchange; (iii) limit or affect the enforceability of provisions releasing,
exculpating or exempting a party from, or requiring indemnification of a party
for, liability for its own action or inaction, to the extent such action or
inaction involves gross negligence, recklessness, willful misconduct or
unlawful conduct or to the extent such release, exculpation, exemption or
indemnification is against public policy or prohibited by law; (iv) limit or
affect the enforceability of provisions to the effect that failure to exercise
or delay in exercising rights or remedies will not operate as a waiver of the
right or remedy; (v) govern and afford judicial discretion regarding the
determination of damages and entitlement to attorneys' fees and other costs;
and (vi) limit or affect the enforceability of provisions expressly or by
implication waiving or releasing rights or defenses.
We are qualified to practice law in the State of Missouri, and
we express no opinion as to any matters of law other than the laws of the State
of Missouri, the General Corporation Law of the State of Delaware and the
Federal laws of the United States.
With the consent of Concept and the Alagias, this opinion is
furnished by us at your request for your sole benefit, and no other person or
entity shall be entitled to rely on this opinion without our express written
consent. This opinion shall not be published or reproduced in any manner or
distributed or circulated to any person or entity without our express written
consent. Our opinion is limited to the matters stated herein, and no opinion
is implied or may be inferred beyond the matters expressly stated herein. This
opinion is rendered as of the date hereof and we assume no, and hereby disclaim
any, responsibility to supplement this opinion with respect to matters
occurring after the date hereof.
Very truly yours,
<PAGE> 49
Schedule 1
1. Concept Incorporated:
a. Arizona
b. Kentucky
c. Texas
2. Mineral Wells R.E. Holding Corp.
a. Texas
<PAGE> 50
Schedule 2
Ownership of Concept Common Stock
Subject to the qualifications set forth below, the following sets
forth the total number of outstanding shares of the common stock of Concept and
number of shares owned of record by each stockholder of Concept:
<TABLE>
<CAPTION>
Stockholder
-----------
Shares
------
<S> <C> <C>
D. Paul Alagia and Marie 10,582
Joyce McCarthy Alagia, as
tenants by the entirety
Thomas F. Buetow 1,017
William H. Cull 1,932
Charles Hundley 136
Patrick H. Molloy 838
Ben F. Morgan, Jr. 1,483
Harold S. Nelson 1,643
A.W. Sandbach 1,193
John L. Smith 879
David L. Watkins 170
Dorothy J. Watkins 838
John C. Watkins, Jr. 171
------
Total: 20,882
</TABLE>
<PAGE> 51
Schedule 2, Continued
Qualifications and Exceptions
1. We express no opinion as to whether Concept has any
outstanding option, warrant, right, subscription or other
commitment for the sale or issuance of any share of its common
stock in favor of Jack Lewis.
2. We express no opinion with respect to the effect on the number
of issued and outstanding shares of common stock of Concept of
the treatment of fractional shares resulting from the
recapitalizations effected by Concept on April 14, 1987,
October 3, 1988 and March 11, 1994 (the "Recapitalizations").
Fractional share interests resulting from each of the
Recapitalizations were not disposed of through the payment of
cash or the issuance of scrip or warrants, and the share
ownership of each stockholder was rounded to the nearest whole
share.
3. We express no opinion as to whether Concept has fully redeemed
the 12,000 shares of Class B common stock issued to Jocelyn
Heard on August 29, 1988.
<PAGE> 52
EXHIBIT C
April 25, 1995
Corrections Corporation of America
102 Woodmont Boulevard, Suite 800
Nashville, Tennessee 37205
Gentlemen:
Pursuant to a Share Exchange Agreement dated April 25, 1995 (the
"Exchange Agreement"), Corrections Corporation of America, a Delaware
corporation ("CCA"), is acquiring all of the capital stock of Concept
Incorporated, a Delaware corporation ("Concept"), pursuant to a share exchange
(the "Exchange"). When the Exchange is consummated, the undersigned shall
receive shares of common stock, par value $1.00 per share of CCA (the "CCA
Shares"). The undersigned is a stockholder of Concept.
In connection with the above-described Exchange, the undersigned
hereby advises you as follows:
1. The undersigned acknowledges receipt from you, prior
to the date of the Exchange Agreement, of (i) that certain
Confidential Offering Memorandum, dated April 24, 1995, relating to
the issuance and sale of the CCA Shares pursuant to the Exchange and
(ii) copies of the SEC Reports and filings, and other documents of CCA
described in Schedule 1 hereto. The undersigned confirms that, prior
to the date of the Exchange Agreement, he/she received and analyzed
all of the foregoing, on his/her own behalf in connection with
evaluating the merits and risks of the possible investment in the CCA
Shares pursuant to the Exchange Agreement.
2. The undersigned acknowledges that sufficient
opportunity was made available to him/her to ask such questions of and
receive answers from CCA and its officers concerning the business
affairs, activities and operations, and the terms and conditions of
the investment by the undersigned in the CCA Shares pursuant to the
Exchange, as he/she might have, and to obtain such additional
information as he/she considered necessary to evaluate the merits and
risks of the Exchange and the investment by the undersigned in the CCA
Shares pursuant thereto and to verify the accuracy of the Confidential
Offering Memorandum and any of the documents and information contained
in the CCA Reports described in Schedule 1, and that all such
questions were answered to the satisfaction of the undersigned, and
all such additional information was supplied.
3. The undersigned acknowledges that he/she has a
sufficient degree of knowledge and experience in financial and
business matters so as to make him/her capable of evaluating the
merits and risks of the possible investment in the CCA Shares by the
undersigned pursuant to the Exchange.
<PAGE> 53
4. The undersigned acknowledges that the CCA Shares to
be issued to the undersigned pursuant to the Exchange will not have
been registered under the Securities Act of 1933, as amended (the
"Securities Act") and, therefore, will not be able to be sold or
otherwise transferred by the undersigned except (i) pursuant to an
effective Registration Statement under the Securities Act or (ii)
pursuant to a transaction with respect to which, in the opinion of
counsel reasonably acceptable to CCA, will not be in violation of the
Securities Act.
5. The undersigned acknowledges that the Exchange will
qualify for accounting by CCA as a "pooling of interests" under
generally accepted accounting principles and under applicable rules
and regulations of the Securities and Exchange Commission, and
therefore, the undersigned will not transfer the CCA Shares prior to
the date following the first filing by CCA with the Securities and
Exchange Commission of a report on Form 10-K, Form 10-Q or Form 8-K,
as appropriate, that includes financial statements covering a period
of at least thirty days following the closing date.
6. The undersigned acknowledges that he/she will be
acquiring shares of CCA Shares pursuant to the Exchange Agreement for
his/her own account and not on behalf of others, and that he/she has
no present plans or intentions to sell, distribute or otherwise
dispose of any such shares except by a distribution (i) pursuant to an
effective Registration Statement under the Securities Act, or (ii)
pursuant to a transaction, which in the opinion of counsel reasonably
acceptable to CCA, will not be in violation of the Securities Act.
7. The undersigned further acknowledges that he/she
understands that he/she must bear the economic risk of investment in
the CCA Shares for an indefinite period because it was not registered
under the Securities Act and, therefore, cannot be transferred or sold
unless such stock is registered under the Securities Act or unless, in
the opinion of counsel reasonably acceptable to CCA, the proposed sale
or transfer is exempt from such registration. The undersigned agrees
that CCA may place a legend on the certificates representing such CCA
Shares in substantially the following form:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY AN AGREEMENT ON FILE AT THE
OFFICES OF THE CORPORATION. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
______________________________________________
<PAGE> 54
Schedule 1
1. Confidential Offering Memorandum dated April 24, 1995.
2. Annual Report to Stockholders for the Year Ended December 31, 1994.
3. Report on Form 10-K for the year ending December 31, 1994.
4. Proxy Statement for Meeting of Stockholders to be held May 26, 1995.
<PAGE> 55
EXHIBIT D
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, made as of the 25th day of April, 1995, by
and between Concept Incorporated, a Delaware corporation ("Concept") and D.
Paul Alagia ("Consultant").
R E C I T A L S:
WHEREAS, Concept desires to obtain the services of D. Paul Alagia as a
consultant; and
WHEREAS, D. Paul Alagia is willing to serve as a consultant upon the
terms and conditions set forth herein.
NOW, THEREFORE, in exchange of mutual promises and for good and
valuable consideration, the legal sufficiency of which is hereby mutually
acknowledged, the parties hereto agree as follows:
1. Term. The term of this Agreement shall begin on the date
hereof and shall continue for a period of four months.
2. Duties of Consultant. Concept hereby engages Consultant for
such consultation services as the board of directors of Concept may direct, and
Consultant agrees to perform such services on the terms and conditions herein
stated. It is hereby acknowledged that the precise services of Consultant may
be extended, altered, or diminished from time to time at the direction of the
board of directors of Concept.
3. Compensation. Concept agrees to (i) pay Consultant the sum of
$27,000.00 per month. Consultant agrees to execute such documents as may be
necessary to enable Concept to renew such life insurance policies during the
term of this Agreement.
4. Independent Contractor. Consultant's relationship with
Concept shall be that of an independent contractor and not an employee for any
purpose whatsoever.
5. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Tennessee.
6. Entire Agreement. This Agreement constitutes the entire
Agreement between the parties hereto with respect to the subject matter hereof
and may be amended only by means of an instrument executed in writing by each
of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
CONCEPT INCORPORATED
By:
---------------------------
Title:
------------------------
------------------------------
D. Paul Alagia
<PAGE> 1
CORRECTIONS CORPORATION NEWS RELEASE
OF AMERICA
Contact: Peggy Wilson Lawrence
(615) 292-3100
CCA ACQUIRES CONCEPT INCORPORATED
NASHVILLE, Tenn., April 26, 1995 - Corrections Corporation of America
(NYSE:CXC) announced today it has acquired Concept Incorporated, the third
largest company in the corrections industry, in a stock-for-stock transaction
worth $40 million. The purchase of the privately held company expands CCA to
36 facilities and 21,487 beds under contract.
In the agreement finalized yesterday, shareholders of Concept
Incorporated received 1,362,496 shares of restricted CCA common stock, and the
company became a wholly-owned subsidiary of CCA. The purchase is being
accounted for as a pooling-of-interests.
Concept Incorporated had assets of $9.6 million at December 31, and
net income for the 1994 year of $763,803 on revenues of $23.3 million.
"We pursued the acquisition because of the exceptional compatibility
between Concept and CCA," said Chairman and CEO Doctor R. Crants. "Their focus
on quality operations and customer service mirrors CCA's philosophy, and the
markets they serve conform closely with our own."
Concept Incorporated currently manages six secure facilities: four
for the state of Texas, one in Alabama and one for the Bureau of Prisons in
Arizona, totaling 2,926 beds. Two other Concept Incorporated facilities in
Texas with a combined 1,500 beds are scheduled to open during the summer of
1995.
"This transaction is an exciting achievement. It dramatically
increases both our revenue base and our market share," Crants continued, "and
the economies of scale we except to realize
<PAGE> 2
should expand profitability in future years. We believe the strength of the
combined companies will substantially extend CCA's competitive advantage in our
rapidly growing marketplace."
Concept Incorporated, founded in 1986 and headquartered in Louisville,
Ken., employs approximately 855 people. Plans call for Concept's facilities to
continue operating with existing management and staff. By September 30
corporate functions will be consolidated in Nashville and duplicate expenses
eliminated.
CCA will release its first quarter earnings report tomorrow, April 27.
Results will reflect CCA and its subsidiaries before the pooling of Concept
Incorporated. Combined and restated financials to include Concept Incorporated
will begin with the second quarter report in late July.
CCA provides detention and corrections services for governmental
agencies. The company is the industry leader in private-sector corrections
with 21,487 beds in 36 facilities under contract in nine U.S. states, Puerto
Rico, Australia and the United Kingdom. CCA's full range of services includes
finance, design, construction, renovation and management of new or existing
jails and prisons, as well as long-distance transportation of inmates.
