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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13560
CORRECTIONS CORPORATION OF AMERICA
(Exact name of Registrant as specified in its charter)
TENNESSEE 62-1156308
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 BURTON HILLS BOULEVARD, NASHVILLE, TENNESSEE 37215
(Address and Zip Code of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 263-3000
102 WOODMONT BLVD., SUITE 800, NASHVILLE, TENNESSEE 37205
(Former name, address and fiscal year if changed since last report)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting common stock held by
non-affiliates of the Registrant was $2,156,105,380 as of March 17, 1998, based
upon the closing price of such stock as reported on the New York Stock Exchange
("NYSE") on that day. There were 80,187,742 shares of common stock, $1.00 par
value per share, outstanding at March 17, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this report incorporates by reference information from the
definitive Proxy Statement for the Annual Meeting of Shareholders, to be held in
May 1998 which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the Securities Exchange Act of 1934 no later than
March 31, 1998.
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CORRECTIONS CORPORATION OF AMERICA
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
<TABLE>
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Item No. Page
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PART I
<S> <C> <C>
1. Business.................................................................................................1
2. Properties..............................................................................................22
3. Legal Proceedings.......................................................................................25
4. Submission of Matters to a Vote of Security Holders.....................................................25
PART II
5. Market for Registrant's Common Equity and Related Shareholder Matters...................................26
6. Selected Financial Data.................................................................................29
7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................31
7A. Quantitative and Qualitative Disclosures about Market Risk..............................................39
8. Financial Statements and Supplementary Data.............................................................39
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures...................39
PART III
10. Directors and Executive Officers of the Registrant......................................................40
11. Executive Compensation..................................................................................40
12. Security Ownership of Certain Beneficial Owners and Management..........................................40
13. Certain Relationships and Related Transactions..........................................................40
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................................40
SIGNATURES
</TABLE>
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CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES,"
"ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-K PURSUANT TO THE "SAFE HARBOR" PROVISION OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "RISK FACTORS" AS
SET FORTH HEREIN AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS." READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER
THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
PART I
ITEM 1. BUSINESS
As used herein, unless the context otherwise requires, the "Company"
means Corrections Corporation of America and its subsidiaries. Unless otherwise
indicated, the information herein has been adjusted to give effect to (i) a
2-for-1 split on the Company's common stock, $1.00 par value (the "Common
Stock"), effected in the form of a stock dividend declared on October 4, 1995
and (ii) a 2-for-1 split on the Common Stock effected in the form of a stock
dividend declared on June 5, 1996.
GENERAL
The Company is the largest developer and manager of privatized
correctional and detention facilities worldwide. The Company's facilities are
located in 19 states, the District of Columbia, Puerto Rico, Australia and the
United Kingdom. As of March 20, 1998, the Company had contracts to manage 68
correctional and detention facilities with an aggregate design capacity of
54,944 beds. Of these 68 facilities, 55 are currently in operation and 13 are
under development by the Company, eight of which are subject to an option to
purchase by CCA Prison Realty Trust ("Prison Realty"), two of which will be
financed and owned by the Company and three of which will be financed and owned
by contracting government entities. The Company, through its United Kingdom
joint venture, UK Detention Services ("UKDS"), manages one facility in the
United Kingdom and, through its Australian joint venture, CC Australia, manages
two facilities in Australia. The Company's ownership interest in UKDS and CC
Australia is accounted for under the equity method. Of the 13 facilities under
development by the Company, eight are scheduled to commence operations during
1998. In addition, at March 9, 1998, the Company had outstanding written
responses to RFPs and other solicitations for nine projects with an aggregate
design capacity of 11,604 beds.
The services provided by the Company to government agencies include
the integrated design, construction and management of new correctional and
detention facilities and the redesign, renovation and management of older
facilities. In addition to providing the fundamental residential services
relating to adult and juvenile inmates, the Company's facilities offer a large
variety of rehabilitation and education programs including basic education, life
skills and employment training and substance abuse treatment. The Company also
provides health care (including medical, dental and psychiatric services),
institutional food services, transportation requirements, and work and
recreational programs. Management of the Company believes that its proven
ability to deliver a full range of high quality correctional and detention
facility management services on a cost-effective and efficient basis to
government agencies
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provides such agencies with sufficient incentives to choose the Company when
awarding new contracts or renewing existing contracts.
In addition to the opening of new facilities, in recent years, the
Company has expanded its service capabilities and broadened its geographic
presence in the United States market through a series of strategic acquisitions
of prison management companies and individual facilities, as well as the
acquisition of an inmate transportation company ("TransCor America, Inc."). The
Company intends to continue to pursue strategic acquisitions of prison
management companies and facilities when the proposed acquisition enhances
shareholder value.
In addition to its domestic operations, the Company has obtained and is
pursuing construction and management contracts for correctional and detention
facilities outside the United States. The Company presently has contracts to
operate one facility in the United Kingdom, and two facilities in Australia, and
also has contracts to provide inmate transportation services in Australia. In
June 1994, the Company entered into an international strategic alliance with
Sodexho S.A., a French conglomerate ("Sodexho"), for the purpose of pursuing
prison management business outside the United States. In connection with the
alliance, Sodexho purchased a significant ownership in the Company and entered
into certain agreements with the Company relating to future financings by the
Company and corporate governance and control matters. See "Business Strategy -
Expansion into International Markets."
To further facilitate the Company's growth, on July 18, 1997, the
Company and certain of its subsidiaries sold nine correctional and detention
facilities to Prison Realty. Simultaneously with the sale of each of the
facilities to Prison Realty, the Company entered into agreements with Prison
Realty to lease the facilities from Prison Realty pursuant to long-term,
non-cancellable triple net leases. In connection with the sale-leaseback
transactions, the Company granted Prison Realty options to acquire five
additional correctional and detention facilities, as well as an option to
acquire any correctional or detention facility acquired or developed and owned
by the Company in the future. To date, the Company has sold thirteen facilities
to Prison Realty for an aggregate purchase price of approximately $491.2 million
in cash. See "Recent Disposition of Assets."
The Company is a Tennessee corporation and is the successor to a
corporation of the same name incorporated in Delaware in 1986 (which is the
successor to a corporation of the same name originally incorporated in Tennessee
in 1983). In May 1997, the Company changed its state of incorporation from
Delaware to Tennessee pursuant to an "migratory merger" which merged the Company
into a newly-formed Tennessee corporation. The Company's principal executive
offices are located at 10 Burton Hills Boulevard, Nashville, Tennessee 37215 and
its telephone number is (615) 263-3000.
BUSINESS STRATEGY
The Company intends to increase revenues and enhance its position as
the largest developer and manager of privatized correctional and detention
facilities worldwide through the following business strategies.
Efficient Development and Management of Facilities. The Company will
continue to provide low cost, high quality management of its facilities. The
Company believes that its quality of personnel, efficient application of
financial resources and adherence to proven policies and procedures enable it to
design, develop and manage correctional and detention facilities at costs lower
than the government agencies that are responsible for performing such
services. The Company believes that its reputation as an innovative and
effective manager of facilities enhances its ability to market its services and
capitalize on a larger scope of opportunities with a variety of government
agencies.
The Company also recognizes the importance of the facility
administrator and the facility's management team in the successful financial
performance of its facilities. Management believes that the Company's reputation
as the leading developer and manager of privatized correctional and detention
facilities enables it to attract highly-qualified facility administrators. Each
facility management team operates each facility in accordance with a
Company-wide policy and procedure regimen, derived from industry standards and
designed to ensure the delivery of consistent, high
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quality services in each of its facilities. The Company seeks to minimize
operating expenses by designing its facilities to optimize correctional officer
staffing consistent with facility security requirements. The Company further
controls operating expenses through the use of electronic surveillance systems
and other technologies.
Development of Domestic Business Opportunities. As a result of the
growth in the demand for privatized correctional and detention facilities, the
Company is selective in the projects it pursues. The Company pursues projects
based on probability of success, geographic location, size, potential
profitability, and political and community acceptability. This approach allows
the Company to enhance its market share and optimize resource allocation,
profitability and financial return. The Company intends to continue its focus on
institutions with an emphasis on medium to maximum security that are 500 to
1,000 beds or larger. Management believes that the Company's experience and
reputation in managing large secure facilities will enable it to maintain its
industry position and capitalize on the trend of governments to privatize larger
facilities.
Strategic Acquisitions. In 1994 and 1995, the Company expanded its
service capabilities and broadened its geographic presence in the United States
through a series of strategic acquisitions that complement the Company's
development activities. In December 1994, the Company acquired TransCor. In
April 1995, the Company acquired Concept Incorporated ("Concept"), a prison
management company with eight facilities and 4,400 beds under contract at the
time of acquisition. In August 1995, the Company acquired Corrections Partners,
Inc. ("CPI"), a prison management company with seven facilities and 2,900 beds
under contract at the time of acquisition. The Company believes that its
acquisitions have significantly enhanced its position as the largest developer
and manager of privatized correctional and detention facilities while increasing
operating efficiencies. Accordingly, the Company intends to continue to pursue
strategic acquisitions of other managers of privatized correctional and
detention facilities.
Expanded Scope of Services. The Company intends to continue to
implement a wide variety of specialized services that address the unique needs
of various segments of the inmate population. Because the facilities operated by
the Company differ with respect to security levels, ages, genders and cultures
of inmates, the Company focuses on the particular needs of an inmate population
and tailors its services based on local conditions and the Company's ability to
provide such services on a cost-effective basis. In addition to core residential
services, the Company offers rehabilitative and educational services such as
counseling, basic education, job skill training and life skills/transition
planning services, all of which are aimed at reducing recidivism. Further,
because management believes alcohol and drug abuse are directly or indirectly
responsible for the majority of criminal offenses in the United States, the
Company has created, and offers to its inmates, its LifeLine program, a
comprehensive long-term substance abuse treatment program. The Company believes
that its success in delivering these specialized services will enable it to
address the changing needs of its customers. By offering a broad range of
specialized services, the Company seeks to provide a solution to the public's
and the government's desire to reduce recidivism and, ultimately, the cost of
crime.
Expansion into International Markets. The Company believes that the
majority of its new business will come from within the United States. However,
the Company and its international strategic partner, Sodexho, believe that
interest in private-sector corrections is developing in other nations. While
management will not detract from its domestic business to pursue international
activities, the Company will participate in selected international projects it
finds attractive. The Company also believes that in order to compete effectively
in international markets it must enter into alliances with strategic local
partners with access to local opportunities and familiarity with local business
practices.
In June 1994, the Company entered into an international strategic
alliance with Sodexho. Among other business ventures, Sodexho provides contract
services to French prisons and has business operations in 66 countries. Pursuant
to the terms of the joint venture agreement between the Company and Sodexho,
only the Company will develop and manage prison management business in the
United States and its territories. In the rest of the world, the Company and
Sodexho will pursue the prison management business opportunities through local
joint venture entities to be established generally on a 50/50 basis. In
connection with the alliance, in October 1995, the Company sold to Sodexho a 50%
interest in CC Australia. In December 1996, the Company sold to Sodexho a 20%
interest in UKDS and granted Sodexho an
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option to purchase an additional 30% interest in UKDS. Sodexho exercised such
option in June 1997. Management believes that, with the formation of the Sodexho
alliance, the Company is well positioned to participate in international
markets.
Cost Reduction Programs. An important component of the Company's
strategy is to position itself as a low cost, high quality provider of prison
management services in all of its markets. As cost containment pressures
increase, the Company will continue to focus on improving operating performance
and efficiency through the following key operating initiatives: (i)
standardization of supply and service purchasing practices and usage; (ii)
improvement of inmate management, resource consumption and reporting procedures;
and (iii) improvement in salary and wage expenses by reducing overtime,
monitoring staff levels and developing productivity standards. The Company
intends to continue to apply these operating cost initiatives throughout its
existing facilities and in new facilities.
RECENT DISPOSITION OF ASSETS
On July 18, 1997, the Company and certain of its subsidiaries, sold the
following nine correctional and detention facilities (the "Initial Facilities")
to Prison Realty for an aggregate purchase price of $308.1 million:
Houston Processing Center located in Houston, Texas;
Laredo Processing Center located in Laredo, Texas;
Bridgeport Pre-Parole Transfer Facility located in Bridgeport, Texas;
Mineral Wells Pre-Parole Transfer Facility located in Mineral Wells,
Texas;
West Tennessee Detention Facility located in Mason, Tennessee;
Leavenworth Detention Center located in Leavenworth, Kansas;
Eloy Detention Center located in Eloy, Arizona;
Central Arizona Detention Center located in Florence, Arizona; and
T. Don Hutto Correctional Center located in Taylor, Texas.
The Company sold the real property and all tangible property associated
with each of the Initial Facilities to Prison Realty. Simultaneously with the
sale of each of the facilities to Prison Realty, the Company entered into
agreements with Prison Realty to lease the facilities from Prison Realty
pursuant to long-term, non-cancellable, triple net leases (the "Leases") which
require the Company to pay all operating expenses, taxes, insurance and other
costs. All of the Leases provide for base rent with certain annual escalations
and have primary terms ranging from 10-12 years which may be extended at the
fair market rates for three additional five-year periods upon the mutual
agreement of the Company and Prison Realty.
In connection with the sale of facilities to Prison Realty, the Company
and certain of its subsidiaries entered into Option Agreements pursuant to which
the Company and certain of its subsidiaries granted Prison Realty exclusive
options to acquire any or all of five correctional facilities until July 18,
2000 for a purchase price equal to the Company's cost of developing,
constructing, and equipping such facilities plus 5% of such costs (the "Option
Agreements"). To date, Prison Realty has exercised its option to acquire two
such facilities, the Northeast Ohio Correction Center located in Youngstown,
Ohio and the Torrance County Detention Facility located in Estancia, New Mexico,
for an aggregate purchase price of $108.7 million. In addition, in connection
with the sale and lease-back arrangements, the Company and Prison Realty entered
into a Right to Purchase Agreement pursuant to which Prison Realty has an option
to acquire at fair market value and lease-back to the Company any correctional
or detention facility acquired or developed and owned by the Company in the
future for a period of three years following the date inmates are first received
at such facility (the "Right to Purchase Agreement"). To date, Prison Realty has
acquired two facilities, the Cimarron Correctional Facility located in Cushing,
Oklahoma and the Davis Correctional Facility located in Holdenville, Oklahoma,
pursuant to the Right to Purchase Agreement for an aggregate purchase price of
$74.4 million (the facilities that are subject to the Option Agreements and the
facilities that are subject to the Right to Purchase Agreement are known,
collectively, as the "Option Facilities"). All such facilities are leased back
to the Company on terms similar to the Leases.
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MARKET
The Company believes the United States private corrections industry is
in a period of significant growth. In the United States, there is a growing
trend toward privatization of government services and functions, including
corrections and detention, as governments of all types face continuing pressure
to control costs and improve the quality of services. As a result of increased
costs, some governments have been forced to limit public services and to seek
more cost-effective means of providing the remaining services. Since
correctional and detention facilities are viewed as an essential service, fiscal
pressures have caused governments to seek to deliver these services more cost
effectively. Further, as a result of the number of crimes committed each year
and the corresponding number of arrests, incarceration costs generally grow
faster than any other part of a government's budget. In an attempt to address
these pressures, government agencies responsible for correctional and
detention facilities are increasingly privatizing facilities. According to the
1996 Private Adult Correctional Facility Census, prepared by Private Corrections
Project Center for Studies in Criminology and Law, University of Florida (the
"1996 Census"), the design capacity of privately managed adult correctional and
detention facilities worldwide has increased dramatically since the first
privatized facility was opened by CCA in 1984. The majority of this growth has
occurred since 1989 as the number of privately managed adult correctional and
detention facilities in operation or under construction worldwide increased from
26 facilities with a design capacity of 10,973 beds in 1989 to 132 facilities
with a design capacity of 85,201 beds in 1996. The majority of all private
prison management contracts are in the United States. At December 31, 1996, 118
of the 132 contracts were for United States facilities with the remaining 14
divided between Australia and the United Kingdom. According to the 1996 Census,
the aggregate capacity of private facilities in operation or under construction
rose from 63,595 beds at December 31, 1995 to 85,201 beds at December 31, 1996,
an increase of 34%. Additionally, the 1996 Facility Census Reports that the
number of private facilities for which contracts have been awarded increased 27%
from 104 in 1995 to 132 in 1996 and that the prisoner population housed in
privately managed facilities expanded by 30% in 1996.
The 1996 Facility Census reports that at December 31, 1996 there were
25 state jurisdictions, the District of Columbia and Puerto Rico, within which
there were private facilities in operation or under construction. Four of these
were state jurisdictions within which facilities were located but where the
facilities are not intended to house the local or state-level prisoners of those
state jurisdictions. An additional six state jurisdictions were contracting for
the housing of state-level or local-level prisoners in private facilities
located beyond their geographical boundaries. Further, all three federal
agencies with prisoner custody responsibilities (i.e., the United States Bureau
of Prisons ("BOP"), the U.S. Immigration and Naturalization Service (the "INS")
and the U.S. Marshals Service (the "USMS") continued to contract with private
management firms.
Management believes that the increase in the demand for privatized
correctional and detention facilities is also a result, in large part, of the
general shortage of beds available in United States correctional and detention
facilities. According to reports issued by the United States Department of
Justice, Bureau of Justice Statistics ("BJS"), the number of inmates housed in
United States federal and state prison facilities increased from 744,208 at
December 31, 1985 to 1,630,940 at June 30, 1996, a compound annual growth rate
of 7.8%.
Industry reports also indicate that inmates convicted of violent crimes
generally serve only one-third of their sentence, with the majority of them
being repeat offenders. Accordingly, there is a perceived public demand for,
among other things, longer prison sentences, as well as prison terms for
juvenile offenders, resulting in even more overcrowding in United States
correctional and detention facilities. Finally, numerous courts and other
government entities in the United States have mandated that additional
services offered to inmates be expanded and living conditions be improved. Many
governments do not have the readily-available resources to make the changes
necessary to meet such mandates.
At December 31, 1997, the Company managed 46 of the 97 privatized
United States adult facilities and 36,589 of the 59,464 private United States
adult beds according to preliminary estimates prepared for the 1997 Private
Adult Correction Facility Census (the "1997 Census"). These facilities include
(i) correctional and detention facilities privatized by federal agencies (i.e.
the BOP, the INS and the USMS), (ii) state prisons, community corrections
facilities,
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intermediate sanction facilities, pre-release centers, work program facilities
and state jail facilities privatized by state agencies, and (iii) city and
county jail facilities and transfer facilities privatized by local agencies.
There are also numerous privatized juvenile offender facilities of which the
Company currently has contracts to operate facilities with an aggregate design
capacity of 691 beds.
The demand for privately-managed correctional and detention centers is
also increasing internationally. Management believes that many countries are
faced with the same fiscal pressures as the United States and, as a result, are
seeking more cost-effective means of providing prison management services. At
December 31, 1997, there were a total of 21 privatized facilities in the United
Kingdom, Scotland and Australia, with an aggregate design capacity of 10,437
beds according to preliminary estimates prepared for the 1997 Census. At
December 31, 1997, the Company, through its joint ventures, had contracts to
manage three of these facilities with an aggregate design capacity of 1,229
beds.
For similar economic reasons, the demand for privatized prisoner
transport services is also increasing domestically and internationally. The
Company believes that an increasing number of government agencies will look
for more cost-effective means of providing these and other ancillary services.
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FACILITIES UNDER MANAGEMENT
The following table summarizes certain information with respect to
correctional and detention facilities under management by the Company, or a
subsidiary or joint venture of the Company, at March 9, 1998.
<TABLE>
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COMMENCE-
FACILITY DESIGN SECURITY MENT OF RENEWAL
NAME/LOCATION CUSTOMERS CAPACITY LEVEL CONTRACT TERM OPTION
- ------------- --------- -------- ----- -------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
DOMESTIC
B.M. Moore Pre-Release State of Texas 500 Minimum/ 6/95 8/98 (1) 1 year
Center Medium
Overton, Texas
Bartlett State Jail State of Texas 962 Minimum/ 10/95 8/98 (1) 2 year
Bartlett, Texas Medium
Bay Correctional Facility State of Florida 750 Medium 8/95 8/98 (1) 2 year
Panama City, Florida
Bay County Jail Bay County, 276 Multi 10/85 9/99 (1) 3 year
Panama City, Florida USMS, INS,
BOP
Bay County Jail Annex Bay County, 401 Multi 4/86 9/99 (1) 3 year
Panama City, Florida USMS, INS
Bent County Correctional State of Colorado 700 Medium 10/96 10/99 (1) 2 year
Facility
Las Animas, Colorado
Bridgeport Pre-Parole State of Texas 200 Minimum 11/87 8/98 ----
Transfer Facility
Bridgeport, Texas
Brownfield Intermediate State of Texas 200 Minimum/ 7/92 8/98 ----
Sanction Facility Medium
Brownfield, Texas
Central Arizona Detention USMS, INS, States 1,792 Multi 10/94 10/2014 ----
Center of Oregon, Alaska,
Florence, Arizona Montana, and New
Mexico
</TABLE>
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<TABLE>
<CAPTION>
COMMENCE-
FACILITY DESIGN SECURITY MENT OF RENEWAL
NAME/LOCATION CUSTOMERS CAPACITY LEVEL CONTRACT TERM OPTION
- ------------- --------- -------- ----- -------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Cimarron Correctional State of Oklahoma 960 Medium 5/97 6/98 (4) 1 year
Facility
Cushing, Oklahoma
Citrus County Detention Citrus County, Polk 300 Multi 10/95 10/2000 (1) 3 year
Center County, USMS
Lecanto, Florida
Cleveland Pre-Release State of Texas 520 Minimum/ 9/89 8/2000 ----
Center Medium
Cleveland, Texas
Correctional Treatment District of 866 Medium 3/97 3/2017 ----
Facility Columbia
Washington, D.C.
Davidson County Juvenile Davidson County, 100 Secure 5/94 4/99 ----
Detention Center State of Tennessee
Nashville, Tennessee
Davis Correctional Facility State of Oklahoma 960 Medium 4/96 6/99 (1) 2 year
Holdenville, Oklahoma
Delta Correctional Facility State of Mississippi 1,016 Minimum/ 9/96 9/99 (1) 2 year
Greenwood, Mississippi Medium
Eden Detention Center BOP, INS 1,225 Minimum 10/95 10/2015 ----
Eden, Texas
Elizabeth Detention Center INS 300 Minimum 1/97 8/98 (1) 1 year
Elizabeth, New Jersey
Eloy Detention Center BOP, INS 1,250(250) Medium 7/94 2/98
Eloy, Arizona
Great Plains Correctional State of Oklahoma 768 Medium 10/91 7/98 ----
Facility
Hinton, Oklahoma
Guayama Correctional Puerto Rico 1,000 Medium 12/95 12/2000 (1) 5 year
Center
Guayama, Puerto Rico
</TABLE>
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<TABLE>
<CAPTION>
COMMENCE-
FACILITY DESIGN SECURITY MENT OF RENEWAL
NAME/LOCATION CUSTOMERS CAPACITY LEVEL CONTRACT TERM OPTION
- ------------- --------- -------- ----- -------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Hardeman County States of Tennessee 2,016 Medium 5/97 6/2000 (6) 3 year
Correctional Center Wisconsin, and
Whiteville, Tennessee Indiana, Madison
County
Hernando County Jail Hernando County, 302 Multi 10/88 10/2000 ----
Brooksville, Florida USMS
Houston Processing Center INS 411 Medium 4/84 9/98 ----
Houston, Texas
Huerfano County State of Colorado 752 Medium 11/97 6/98 ----
Correctional Center
Walsenburg, Colorado
Jesse R. Dawson State Jail State of Texas 2,000 Minimum/ 8/95 8/98 (1) 2 year
Dallas, Texas Medium
Lake City Correctional State of Florida 350 Medium 2/97 2/2000 (1) 2 year
Facility
Lake City, Florida
Laredo Processing Center INS, BOP 258 Minimum/ 3/85 4/98 ----
Laredo, Texas Medium
Leavenworth Detention USMS 327 Maximum 6/92 9/98 ----
Center
Leavenworth, Kansas
Liberty County Jail Liberty County, 382 Multi 11/95 11/98 (1) 2 year
Liberty, Texas USMS, INS
Marion County Jail II Marion County, 670 Multi 11/97 11/2000 (1) 2 year
Indianapolis, Indiana State of Indiana
Metro-Davidson County Davidson County 1,092 Multi 2/92 6/2000 (1) 2 year
Detention Facility
Nashville, Tennessee
Mineral Wells Pre-Parole State of Texas 1,503(300) Minimum 7/89 8/98 ----
Transfer Facility
Mineral Wells, Texas
New Mexico Women's State of New 322 Multi 6/89 6/99 (5) 2 year
Correctional Facility Mexico
Grants, New Mexico
</TABLE>
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<TABLE>
<CAPTION>
COMMENCE-
FACILITY DESIGN SECURITY MENT OF RENEWAL
NAME/LOCATION CUSTOMERS CAPACITY LEVEL CONTRACT TERM OPTION
- ------------- --------- -------- ----- -------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Northeast Ohio Correctional District of 2,016 Medium 5/97 7/98 (4) 1 year
Center Columbia
Youngstown, Ohio
Okeechobee Juvenile State of Florida 100 Secure 12/97 6/2000 ----
Offender Correctional Center
Okeechobee, Florida
Ponce Correctional Center Puerto Rico 1,000 Medium 2/97 2/2002 (1) 5 year
Ponce, Puerto Rico
Ponce Young Adult Puerto Rico 500 Multi 2/97 2/2002 (1) 5 year
Correctional Facility
Ponce, Puerto Rico
Prairie Correctional Facility States of Minnesota, 1,338 Medium 10/96 10/2007 ----
Appleton, Minnesota Colorado and North
Dakota, INS
Shelby Training Center Shelby County, 200 Secure 5/86 4/2015 ----
Memphis, Tennessee BOP
Silverdale Facilities Hamilton County 414 Multi 10/84 9/2000 (4) 4 year
Chattanooga, Tennessee
South Central Correctional State of Tennessee 1,506 Medium 3/92 3/2000 (1) 2 year
Center
Clifton, Tennessee
Southern Nevada Women's State of Nevada 500 Medium 9/97 6/2015 ----
Correctional Facility
Las Vegas, Nevada
Southwest Indiana Regional State of Indiana and 132 Secure 4/95 4/2000 ----
Youth Village surrounding
Vincennes, Indiana Counties
T. Don Hutto Correctional Williamson County, 480 Medium 1/97 1/2000 ----
Center States of Wyoming
Taylor, Texas and Texas
Tall Trees Shelby County, 63 Non-secure 1/84 1/2004 ----
Memphis, Tennessee State of Tennessee
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
COMMENCE-
FACILITY DESIGN SECURITY MENT OF RENEWAL
NAME/LOCATION CUSTOMERS CAPACITY LEVEL CONTRACT TERM OPTION
- ------------- --------- -------- ----- -------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Torrance County Detention State of New 910 Multi 12/90 12/2010 ----
Facility Mexico, USMS,
Estancia, New Mexico INS, Torrance
County
Venus Pre-Release Center State of Texas 1,000 Minimum/ 8/89 8/98 (1) 1 year
Venus, Texas Medium
West Tennessee Detention State of Montana, 600 Multi 9/90 9/2010 ----
Facility USMS, INS, BOP,
Mason, Tennessee U.S. Virgin Islands
Wilkinson County State of Mississippi 500 Medium 1/98 1/2001 (1) 2 year
Correctional Center
Woodville, Mississippi
Winn Correctional Center State of Louisiana 1,474 Medium 3/90 3/2000 ----
Winfield, Louisiana
INTERNATIONAL
Blakenhurst, HM Prison United Kingdom 850 Medium 5/93 5/98 (3) 3 year
Ridditch, England
Borallon Correctional Centre Queensland 469 Multi 2/90 4/2000 ----
Queensland, Australia
Metropolitan Women's Victoria 125 Multi 8/96 8/2001 (5) 3 year
Correctional Centre
Victoria, Austria
</TABLE>
FACILITY MANAGEMENT CONTRACTS
The Company is compensated on the basis of the number of inmates held
in each of its facilities. Contracts may vary to provide fixed per diem rates or
monthly fixed rates. Of the Company's 52 domestic facilities in operation, 48 of
the Company's facility management contracts provide that the Company will be
compensated at an inmate per diem rate based upon actual or minimum guaranteed
occupancy levels and four of the management contracts are based on monthly fixed
rates. In either case, the compensation is invoiced in accordance with
applicable law and is paid on a monthly basis. Occupancy rates for a particular
facility will be low when first opened or when expansions are first available.
However, beyond the start-up period, which typically ranges from 30 to 90 days,
the occupancy rate tends to stabilize. For 1997, the average occupancy, based on
rated capacity, was 93.2% for all facilities operated by the Company.
11
<PAGE> 14
In addition, the Company's contracts generally require the Company to
operate each facility in accordance with all applicable laws and regulations.
The Company is required by its contracts to maintain certain levels of insurance
coverage for general liability, workers' compensation, vehicle liability and
property loss or damage. The Company is also required to indemnify the
contracting agencies for claims and costs arising out of the Company's
operations and, in certain cases, to maintain performance bonds.
The Company's facility contracts are short term in nature. Terms of
federal contracts generally range from one to five years, and contain multiple
renewal options. The terms of local and state contracts may be for longer
periods with additional renewal options. Most facility contracts also generally
contain clauses which allow the government agency to terminate a contract
without cause. The Company's facility contracts are generally subject to annual
or bi-annual legislative appropriation of funds. A failure by a government
agency to receive appropriations could result in termination of the contract by
such agency or a reduction in the management fee payable to the Company. No
assurance can be given that other government agencies will not terminate or
renew a contract with the Company in the future.
OPERATING PROCEDURES
Pursuant to the terms of its management contracts, the Company is
responsible for the overall operation of its facilities, including staff
recruitment, general administration of the facilities, security and supervision
of the offenders and facility maintenance. The Company also provides a variety
of rehabilitative and educational programs at its facilities. Inmates at most
facilities managed by the Company may receive basic education through academic
programs designed to improve inmate literacy levels and the opportunity to
acquire General Education Development ("GED") certificates. The Company also
offers vocational training to inmates who lack marketable job skills. In
addition, the Company offers life skills transition planning programs that
provide inmates job search training and employment skills, health education,
financial responsibility training, parenting and other skills associated with
becoming productive citizens. At several of its facilities, the Company also
offers counseling, education and/or treatment to inmates with alcohol and drug
abuse problems through its LifeLine program.
The Company operates each facility in accordance with Company-wide
policies and procedures and the standards and guidelines established by the
American Correctional Association ("ACA") Commission on Accreditation. The ACA
is an independent organization comprised of professionals in the corrections
industry that establishes guidelines of standards by which a correctional
institution may gain accreditation. The ACA standards, which the ACA believes
safeguard the life, health and safety of offenders and personnel, are the basis
of the accreditation process and define policies and procedures for operating
programs. The ACA standards, which are the industry's most widely accepted
correctional standards, describe specific objectives to be accomplished and
cover such areas as administration, personnel and staff training, security,
medical and health care, food service, inmate supervision and physical plant
requirements. The ACA standards are the most widely accepted correctional
standards. The Company has sought and received ACA accreditation for 24 of the
facilities it currently manages and intends to apply for ACA accreditation for
all of its facilities once they are eligible. The accreditation process is
usually completed 18 to 24 months after a facility is opened.
FACILITY DESIGN, CONSTRUCTION AND FINANCE
In addition to its facility management services, the Company also
provides consultation to various government agencies with respect to the
design and construction of new correctional and detention facilities and the
redesign and renovation of older facilities. Since its inception in January
1983, the Company has designed and constructed 31 of its 52 domestic operating
corrections facilities for various federal, state, and local government
agencies. The Company manages all of the facilities it has designed and
constructed or redesigned and renovated.
Pursuant to the Company's design, build and manage contracts, the
Company is responsible for overall project development and completion.
Typically, the Company develops the conceptual design for a project, then hires
12
<PAGE> 15
architects, engineers and construction companies to complete the development.
When designing a particular facility, the Company utilizes, with appropriate
modifications, prototype designs the Company has used in developing other
projects. Management of the Company believes that the use of such prototype
designs allows it to reduce cost overruns and construction delays. The Company's
facilities are designed to maximize staffing efficiencies by increasing the area
of vision under surveillance by correctional officers and utilizing additional
electronic surveillance systems.
Historically, government entities have used various methods of
construction financing to develop new correctional facilities, including, but
not limited to the following: (i) one-time general revenue appropriation by the
government agency for the cost of the new facility; (ii) general obligation
bonds that are secured by either a limited or unlimited tax levied by the
issuing government entity; or (iii) lease revenue bonds or certificates of
participation secured by an annual lease payment that is subject to annual or
bi-annual legislative appropriation of funds. In certain circumstances, the
Company may provide certain credit enhancements for such financings in the form
of a (i) letter of credit, (ii) guaranty or (iii) other similar agreements.
Generally, when the project is financed using direct government appropriations
or proceeds from the sale of bonds or other obligations issued prior to the
award of the project, or by the Company directly, the financing is in place when
the construction or renovation contract is executed. If the project is financed
using project-specific tax-exempt bonds or other obligations, the construction
contract is generally subject to the sale of such bonds or obligations. In most
circumstances, substantial expenditures for construction will not be made on
such a project until the tax-exempt bonds or other obligations are sold. If such
bonds or obligations are not sold, construction and management of the facility
may either be delayed until alternate financing is procured or development of
the project will be entirely suspended. When the Company is awarded a facility
management contract, appropriations for the first annual or bi-annual period of
the contract's term have generally already been approved, and the contract is
subject to government appropriations for subsequent annual or bi-annual
periods. Of the domestic facilities currently managed by the Company, 21 were
funded by the government using one of the above-described financing vehicles.
FACILITIES UNDER CONSTRUCTION
The following table presents information concerning facilities that are
currently under construction or are being expanded with respect to which the
Company has agreements to provide certain management and operation services:
Location Use Bed Capacity
-------- --- ------------
Alamo, Georgia Medium Security Correctional Facility 508
Construction has begun on a 508-bed medium security facility in Alamo,
Georgia to be known as the Wheeler County Correctional Facility. The
facility will be financed and owned by the Company, and construction is
scheduled for completion in the fourth quarter of 1998. The facility
will house inmates for the State of Georgia. The State of Georgia has
the option to increase the facility design capacity to 750 or 1,000
beds. Prison Realty has an option to purchase the facility pursuant to
the Right to Purchase Agreement.
Boise, Idaho Minimum-Medium Correctional Facility 1,250
Construction has begun on a 1,250-bed multi security facility in Boise,
Idaho. The facility will be financed and owned by the State of Idaho,
and construction is scheduled for completion in the third quarter of
1999. The facility will house inmates for the State of Idaho.
13
<PAGE> 16
Location Use Bed Capacity
-------- --- ------------
Burlington, Colorado Medium Security Correctional Facility 768
Construction has begun on a 768-bed medium security facility in
Burlington, Colorado, to be known as the Kit Carson Correctional
Center. The Company is financing the construction and will own the
facility. Construction is scheduled for completion in the fourth
quarter of 1998. It is anticipated that the facility will house inmates
for the State of Colorado. Prison Realty has an option to purchase the
facility from the Company pursuant to the Right to Purchase Agreement.
California City,
California Medium Security Correctional Facility 2,304
The Company plans to begin construction in the second quarter of 1998
on a 2,304-bed medium security facility in California City, California,
to be known as the California City Correctional Facility. Construction
is scheduled for completion in the third quarter of 1999. It is
anticipated that the facility will house inmates for the State of
California. Prison Realty has an option to purchase the facility from
the Company pursuant to the Right to Purchase Agreement.
Eloy, Arizona Medium Security Correctional Facility 250
(expansion)
Construction has been completed on a 250-bed expansion to the 1,250-bed
Eloy Detention Center in Eloy, Arizona. The facility is owned by Prison
Realty and houses inmates for the BOP and INS.
Frostproof, Florida Multi-Security Correctional Facility 1,008
Construction has begun on a 1,008-bed multi security facility in
Frostproof, Florida. The Company is financing the construction and will
own the facility. Construction is scheduled for completion in the
second quarter of 1999, and the facility will house inmates for Polk
County, Florida.
Lawrenceville,
Virginia Medium Security Correctional Facility 1,500
Construction has begun on a 1,500-bed medium security facility in
Lawrenceville, Virginia. The facility will be financed and owned by the
Brunswick Industrial Development Authority, and construction is
scheduled for completion in the first quarter of 1998. The facility
will house inmates for the State of Virginia.
Mendota, California Medium Security Correctional Facility 1,024
The Company plans to begin construction in the second quarter of 1998
on a 1,024-bed medium security facility in Mendota, California, to be
known as the Mendota Correctional Facility. Construction is scheduled
for completion in the third quarter of 1999, and it is anticipated that
the facility will house Federal inmates. Prison Realty has an option to
purchase the facility from the Company pursuant to the Right to
Purchase Agreement.
Mineral Wells, Texas Medium Security Correctional Facility 300
(expansion)
Construction has begun on a 300-bed expansion to the Mineral Wells
Pre-Parole Transfer Facility in Mineral Wells, Texas. The facility is
owned by Prison Realty and construction is scheduled for completion in
the second quarter of 1998. The facility houses inmates for the State
of Texas.
14
<PAGE> 17
Location Use Bed Capacity
-------- --- ------------
Nicholls, Georgia Medium Security Correctional Facility 508
Construction has begun on a 508-bed medium security facility in
Nicholls, Georgia, to be known as the Coffee County Correctional
Facility. The facility will be financed and owned by the Company, and
construction is scheduled for completion in the fourth quarter of 1998.
The facility will house inmates for the State of Georgia. The State of
Georgia has the option to increase the facility design capacity to 750
or 1,000 beds. Prison Realty has an option to purchase the facility
pursuant to the Right to Purchase Agreement.
San Diego, California Medium Security Correctional Facility 1,000
The Company plans to begin construction in the second quarter of 1998
on a 1,000-bed medium security facility in San Diego. The facility will
be financed and owned by the Company, and construction is scheduled for
completion in the second quarter of 1999. The facility is expected to
house Federal inmates.
Sayre, Oklahoma Medium Security Correctional Facility 1,440
Construction has been completed on a 1,440-bed medium security facility
in Sayre, Oklahoma, known as the North Fork Correctional Facility. The
Company financed and owns the facility. It is anticipated that the
facility will house inmates for the states of Michigan and Oklahoma.
Prison Realty has an option to purchase the facility from the Company
pursuant to the Option Agreements.
Watonga, Oklahoma Medium Security Correctional Facility 1,440
Construction has begun on a 1,440-bed medium security facility in
Watonga, Oklahoma, to be known as the Diamondback Correctional
Facility. The Company is financing and will own the facility, and
construction is scheduled for completion in the fourth quarter of 1998.
It is anticipated that the facility will house inmates for various
states. Prison Realty has an option to purchase the facility from the
Company pursuant to the Right to Purchase Agreement.
Whiteville, Tennessee Medium Security Correctional Facility 1,536
Construction has begun on a 1,536-bed medium security facility in
Whiteville, Tennessee. The Company is financing and will own the
facility and construction is scheduled for completion in the third
quarter of 1998. The facility will house inmates for the State of
Wisconsin. Prison Realty has an option to purchase the facility from
the Company pursuant to the Option Agreements.
ORGANIZATIONAL SYSTEM
The Company has developed a monitoring and evaluation system which,
combined with a centralized organizational structure, positions the Company for
expansion without requiring substantial additions of management personnel or
reduction in quality. The Company devotes considerable resources to assuring
compliance with contractual and other requirements and to maintaining the
highest level of quality assurance at each facility through a system of formal
reporting, corporate oversight, site reviews and inspection by on-site facility
administrators.
Under its facilities management contracts, the Company usually provides
the contracting government agency with the services, personnel and materials
necessary for the operation, maintenance and security of the facility and the
custody of inmates. The Company offers full logistical support to the facilities
it manages, including security, health care services, transportation, building
and ground maintenance, education, treatment and counseling services, and
15
<PAGE> 18
institutional food services. Except for certain aspects of health care services,
which are generally subcontracted, all of the facilities support services are
provided by the Company's personnel.
The Company's business development and project departments are
responsible for marketing the Company's service to government clients.
Marketing responsibilities include identifying new clients, preparing and
delivering formal presentations, identifying project construction partners and
potential financing sources, developing proposals and interfacing with the
Company's customers from contract award through the receipt of inmates.
The operations department, in conjunction with the legal department,
supervises compliance of each facility to operational standards of applicable
management contracts and of professional and government agencies. The
operations department also establishes and monitors the policies and procedures
of the Company. The department's responsibilities include developing specific
policies and procedures manuals, monitoring all management contracts, ensuring
compliance with applicable labor and affirmative action standards, training and
administering all personnel, purchasing supplies and developing educational,
vocational, counseling and life skills inmate programs. The Company provides
meals for inmates at the facilities it operates in accordance with regulatory,
client and nutritional requirements. These catering responsibilities include
hiring and training staff, monitoring food operations, purchasing food and
supplies, and maintaining equipment, as well as adhering to all applicable
safety and nutritional standards and codes.
The Company's finance department oversees the implementation and
development of the billing system for each client and for insuring the prompt,
systematic payment of all Company obligations under the individual management
contracts. This department also monitors and analyzes budgetary and purchasing
procedures, tax reporting requirements and fiscal management policies.
MARKETING
The Company engages in extensive marketing efforts. The Company
believes that it is the industry leader in promoting the benefits of
privatization of prisons and other correctional and detention facilities.
Marketing efforts are conducted and coordinated by the Company's business
development department and senior management with the aid, where appropriate, of
certain independent consultants.
The Company views government agencies responsible for federal, state
and local correctional facilities in the United States and government agencies
responsible for correctional facilities in Puerto Rico, the United Kingdom and
Australia as its primary target markets.
The Company generally receives inquiries from or on behalf of
government agencies that are considering privatization of certain facilities
or that have already decided to contract with private enterprise. When it
receives such an inquiry, the Company determines whether there is an existing
need for the Company's services and whether the legal and political climate in
which the inquiring party operates is conducive to serious consideration of
privatization. Then an initial cost analysis is conducted to further determine
project feasibility.
The Company pursues its domestic business opportunities on two primary
courses. In the first course, the Company follows the traditional competitive
route where a Request for Proposal ("RFP") or Request for Qualification ("RFQ")
is issued by a government agency and a number of companies respond. Management
believes that this competitive approach will produce the majority of new
contract awards to the Company. The second course involves the development of
new facilities in locations where there is a clearly defined, long-term needs
for beds, but where a competitive bidding procedure is not required.
Generally, government agencies responsible for correctional and
detention services procure goods and services through RFPs or RFQs. Most of the
Company's activities in the area of securing new business are in the form of
responding to RFPs. As part of the Company's process of responding to RFPs,
management meets with appropriate personnel from the agency making the request
to best determine the agency's distinct needs. If the project fits within the
Company's strategy, the Company will then submit a written response to the RFP.
A typical RFP requires bidders
16
<PAGE> 19
to provide detailed information, including, but not limited to, the service to
be provided by the bidder, its experience and qualifications, and the price at
which the bidder is willing to provide the services (which services may include
the renovation, improvement or expansion of an existing facility or the
planning, design and construction of a new facility). The Company has and
intends to in the future, engage independent consultants to assist it in
responding to RFPs. Based on the proposals received in response to an RFP, the
agency will award a contract to the successful bidder. In addition to issuing
formal RFPs, local jurisdictions may issue an RFQ. In the RFQ process, the
requesting agency selects a firm believed to be most qualified to provide the
requested services and then negotiates the terms of the contract with that firm,
including the price at which its services are to be provided.
The marketing process for facility management consists of several
critical events. These include issuance of an RFP or RFQ by a government
agency, submission of a response to the RFP or RFQ by the Company, the award of
the contract by a government agency and the commencement of construction or
management of the facility. The Company's experience has been that a substantial
period of time may elapse from the initial inquiry to receipt of a new contract.
As the concept of privatization has gained wider acceptance, however, the length
of time from inquiry to the award of a contract has shortened. The length of
time required to award a contract is also affected, in some cases, by the need
to introduce enabling legislation. If the facility for which an award has been
made must be constructed, the Company's experience has generally been that
management of a newly-constructed facility typically commences between 12 and 24
months after the government agency's award.
While the Company focuses primarily on the traditional competitive
marketing approach described above, it also pursues the development of new
facilities in those areas where a competitive bid process is not required.
Management believes this approach, which has proven successful to the Company to
date, is effective because of the Company's strong client relationships and
reputation for quality corrections management and services.
In addition to marketing its services to federal, state and local
authorities, the Company markets its services internationally, primarily,
through the international alliance formed with Sodexho. The Company is currently
marketing its management services in [Australia, Canada, Continental Europe,
Panama, South Africa, and the United Kingdom].
The marketing efforts of TransCor for inmate transportation services
vary from those of the rest of the Company. TransCor's marketing approach
generally consists of mass mailings, phone calls and personal visits to hundreds
of state and local government agencies, as well as attendance at local, state
and national trade shows.
BUSINESS PROPOSALS
At March 9, 1998, the Company was pursuing nine prospects with a total
of approximately 11,600 beds for which written responses to RFPs and other
solicitations have been submitted. The Company is also pursuing nine prospects
with a total of approximately 8,700 beds for which it has not submitted
proposals. The domestic projects that the Company is pursuing are located in 12
states, including seven states in which the Company is not currently operating.
The Company is also pursuing other projects for which it has not yet submitted,
and may not submit, a response to an RFP. Additionally, the Company is pursuing
business in Australia and the United Kingdom, as well as other foreign facility
prospects, through its alliance with Sodexho. No assurance can be given that the
Company will receive additional awards with respect to proposals submitted.
When a contract requires construction of a new facility, the Company's
success depends, in part, upon its ability to acquire real property for its
facilities on desirable terms and at satisfactory locations. Management expects
that many such locations will be in or near populous areas and therefore
anticipates legal action and other forms of opposition from residents in areas
surrounding each proposal site. The Company may incur significant expenses in
responding to such opposition and there can be no assurance of success.
17
<PAGE> 20
MAJOR CUSTOMERS
The Company's customers consist of local, state and federal
correctional and detention authorities. The following table sets forth, for the
periods indicated, the percentage of the Company's revenues from the State of
Texas in each of 1996 and 1997. The State of Texas was the only single customer
of the Company which accounted for 10% or more of the Company's total revenues
in 1997.
<TABLE>
<CAPTION>
Percentage of Revenues
----------------------
Year ended Year ended
Customer Location 12/31/97 12/31/96
- -------- -------- -------- --------
<S> <C> <C> <C>
State of Texas Venus, Texas 13% 16%
Cleveland, Texas,
Laredo, Texas
Bridgeport, Texas
Mineral Wells, Texas
Brownfield, Texas
Overton, Texas,
Bartlett, Texas
Liberty, Texas
</TABLE>
BACKLOG
Most of the Company's contracts provide for the Company to be
compensated on a per diem/per capita basis, which fluctuates daily. However,
certain contracts guarantee a minimum utilization over the term of such
contracts. The Company's backlog, as shown below, reflects only guaranteed
revenues pursuant to the Company's guaranteed contracts over the term of such
contracts, using current per diem/per capita rates, and disregarding any
renewals of such contracts and adjustments to such rates as a result of
inflation. As of December 31, 1997, the Company's backlog, determined as
described above, was $239.5 million, of which $133.7 million is expected to be
filled during the year ending December 31, 1998. As of December 31, 1996, the
Company's backlog, computed as described above, was $310.0 million.
EMPLOYEES
At December 31, 1997, the Company employed 10,873 full-time employees
and 192 part-time employees. Of such full-time employees, 147 were employed at
the Company's corporate offices and 10,726 were employed at the Company's
facilities and its transportation subsidiary. The Company employs personnel in
the following areas: clerical and administrative, including facility
administrators/wardens, security, food service, medical, transportation and
scheduling, maintenance, teachers, counselors and other support services.
Each of the Company's facilities is managed as a separate operational
unit by the facility administrator or warden. All facilities follow a
standardized code of policies and procedures. The Company has never experienced
a strike or work stoppage. Beginning in 1992, six facilities were approached by
one particular union to organize the work force. The union was defeated or
withdrew in five facilities. In March 1993, the Company reached an agreement
with a union to represent 73 correctional officers at the Silverdale facility.
This contract was decertified in March 1994. In January 1996, the Company
reached an agreement with a union to represent 38 non-security personnel at its
Shelby Training Center. In March 1997, the Company assumed management of the
Correctional Treatment Facility in Washington D.C., and the Company has agreed
to recognize organized labor in representing certain employees at this facility.
In the opinion of management, overall employee relations are considered good.
18
<PAGE> 21
EMPLOYEE TRAINING
Under the laws applicable to the Company's operations, and the
Company's internal policy, the Company's corrections officers are required to
complete a minimum amount of training prior to independent assignment. In most
cases, officers must undergo at least 160 hours of training by the Company
before being allowed to work alone in a position that will bring them in contact
with inmates or detainees. Additional training is required in certain
jurisdictions when necessary to comply with applicable law in order to enable
such officers to work in positions that will bring them into contact with
inmates or detainees. All non-security staff receive 80 hours of initial
training. Accordingly, the Company's training programs meet or exceed all
applicable requirements.
The Company's training is comprised of approximately 40 hours of
instruction concerning the Company's policies, operational procedures and
management philosophy. An additional 120 hours concerning legal issues, rights
of inmates and detainees, techniques of communication and supervision,
improvement of interpersonal skills and job training relating to the particular
position to be filled are also provided. Employees of facilities taken over by
the Company who are offered continued employment undergo at least 40 hours of
training by the Company before reporting to work for the Company. Each of the
Company's employees who has contact with inmates or detainees receives a minimum
of 40 hours of additional training each year, and each facility management
employee of the Company receives at least 40 hours of training each year.
TransCor also has training requirements for its employees. Each new
employee must undergo 40 hours of training, prior to job performance, including
driver training and safety, correctional training and policy and procedures
guidelines. Each employee then performs four weeks of on-the-job training with
an experienced transportation agent. TransCor maintains continuing training for
all employees of 16 to 32 hours per year.
INSURANCE
The Company maintains a $30 million general liability insurance policy
for all of its operations. To date, no payments have been made under the
Company's general liability insurance policies because of any action brought as
a result of the operation of any of its facilities. The Company also maintains
insurance in amounts it deems adequate to cover property and casualty risks,
workers' compensation and directors and officers liability. There can be no
assurance that the aggregate amount and kinds of the Company's insurance are
adequate to cover all risks it may incur or that insurance will be available in
the future.
Each of the Company's facility management contracts and the statutes of
certain states require the maintenance of insurance by the Company. The
Company's contracts provide that in the event the Company does not maintain such
insurance, the contracting agency may terminate its agreement with the Company.
The Company believes it is materially in compliance with respect to these
requirements.
LITIGATION
The Company is currently, and from time to time, subject to claims and
suits arising in the ordinary course of business, including claims for damages
for personal injuries or for wrongful restriction of, or interference with,
inmate privileges. As an owner of real property, the Company may be subject to
certain proceedings relating to personal injury at such facilities. The leases
regarding facilities owned by Prison Realty provide that the Company is
responsible for claims based on personal injury and property damage at such
facilities and required the Company to maintain insurance for such purposes. See
"Risk Factors - Corrections and Detention Industry Risks."
19
<PAGE> 22
RISK FACTORS
The Company is subject to certain risks and uncertainties that could
cause actual results to differ materially from those indicated in the certain
forward looking statements contained herein and elsewhere. The following risk
factors identifies, among others, those risks as determined by the Company.
Revenue and Profit Growth Dependent on Expansion. The Company's growth
is dependent upon its ability to obtain contracts to manage new correctional and
detention facilities and to retain existing management contracts. The rate of
construction of new facilities and the Company's potential for growth will
depend on a number of factors, including crime rates and sentencing patterns in
the United States and other countries in which the Company operates,
government and public acceptance of the concept of privatization, the number
of facilities available for privatization, and the Company's ability to obtain
awards for contracts and to integrate new facilities into its management
structure on a profitable basis. In addition, certain jurisdictions have
recently required the successful bidder to make a significant capital investment
in connection with the financing of a particular project. The Company's ability
to secure awards under such circumstances will therefore also depend on the
Company having significant capital resources. There can be no assurance that the
Company will be able to obtain additional contracts to develop or manage new
facilities on favorable terms.
Risks Associated with Acquisitions. The Company intends to grow
internally through the opening of additional facilities, as well as through
strategic acquisitions. There can be no assurance that the Company will be able
to identify, acquire or profitably manage acquired companies or successfully
integrate such operations into the Company without substantial costs, delays or
other problems. In addition, there can be no assurance that companies acquired
in the future will be profitable at the time of their acquisition or will
achieve levels of profitability that justify the investment therein.
Acquisitions may involve a number of special risks, including adverse short-term
effects on the Company's reported operating results, diversion of management's
attention, dependence on retaining, hiring and training key personnel, and risks
associated with unanticipated problems or legal liabilities, some or all of
which could have a material adverse effect on the Company's financial condition
and results of operation.
Corrections and Detention Industry Risks
Short-Term Nature of Government Contracts. The Company
typically enters into facility management contracts with government
entities with terms of up to five years, with one or more renewal
options that may be exercised only by the contracting government
agency. No assurance can be given that any agency will exercise a
renewal option in the future. Moreover, the contracting agency
typically may terminate a facility contract without cause by giving the
Company written notice.
Dependence on Government Appropriations. The Company's cash
flow is subject to the receipt of sufficient funding of and timely
payment by contracting government entities. If the appropriate
government agency does not receive sufficient appropriations to cover
its contractual obligations, a contract may be terminated, or the
management fee may be deferred or reduced. Any delays in payment could
have an adverse effect on the Company's cash flow. Further, it is part
of the Company's business strategy to acquire facilities from
government entities and to lease those facilities to the government
entity or to finance the facility for the government entity. The
ability of the government entity to make payments under such leases or
in connection with such financing may be dependent upon annual
appropriations.
Dependence on Government Agencies for Inmates. The Company is
dependent on government agencies supplying their facilities with a
sufficient number of inmates to meet the facility's design capacities.
A failure to do so may have a material adverse effect on the Company's
financial condition and results of operations.
20
<PAGE> 23
Dependence on Ability to Develop New Prisons. The success of
the Company in obtaining new awards and contracts may depend, in part,
upon its ability to locate land that can be leased or acquired under
favorable terms. Otherwise desirable locations may be in or near
populated areas and, therefore, may generate legal action or other
forms of opposition from residents in areas surrounding a proposed
site. Moreover, the private corrections industry is subject to public
scrutiny. Negative publicity about an escape, riot or other disturbance
at a privately managed facility may result in publicity adverse to the
Company and the private corrections industry, thereby making it more
difficult for the Company to renew existing contracts, or to obtain new
contracts or sites on which to operate new facilities.
Options to Purchase. When the Company buys a facility from a
government entity, or develops a facility for the same, the
government entity may require the Company to grant the government
entity an option to purchase the facility back from the Company at a
price at or below fair market value. The Company, therefore, may be
required to sell such facility to the government entity upon exercise
of such an option at less than fair market value. Additionally, if the
Company sells such a facility to Prison Realty or to another purchaser,
it may be required to adjust the sales price of such facility for a
certain period of time for such purchaser with respect to the price
paid by such government entity upon exercise of the option and the
price paid by the purchaser.
Legal Proceedings. The Company's ownership and operation of
correctional and detention facilities could expose it to potential
third party claims or litigation by prisoners or other persons related
to personal injury or other damages resulting from contact with a
facility, its managers, personnel, or other prisoners, including
damages arising from a prisoner's escape from, or a disturbance or riot
at, a Company owned facility. In addition, as an owner of real
property, the Company may be subject to certain proceedings relating to
personal injury of persons at such facilities. The Company may be held
responsible under state laws for claims based on personal injury or
property damage.
Regulations. The industry in which the Company operates is subject to
national, federal, state and local regulations which are administered by various
regulatory authorities. Prospective providers of correctional and detention
services must comply with a variety of applicable state and local regulations
including education, health care and safety regulations. The Company's contracts
typically include extensive reporting requirements and require supervision and
on-site monitoring by representatives of contracting government agencies.
State law also typically requires correctional officers to meet certain training
standards. Certain states such as Florida and Texas deem prison guards to be
peace officers and require Company personnel to be licensed and may make them
subject to background investigation. In addition, many state and local
governments are required to enter into a competitive bidding procedure before
awarding contracts for products or services. The laws of certain jurisdictions
may also require the Company to award subcontracts on a competitive basis or to
subcontract with businesses owned by members of minority groups. The failure to
comply with any applicable laws, rules or regulations and the loss of any
required license could have a material adverse effect on the Company's financial
condition and results of operation. Furthermore, the current and future
operations of the Company may be subject to additional regulations as a result
of, among other factors, new statues and regulations and changes in the manner
in which existing statutes and regulations are or may be interpreted or applied.
Any such additional regulations could have a material adverse effect on the
Company's financial condition and results of operation.
Competition. The Company competes primarily on the basis of the quality
and range of services offered, its experience in managing facilities, the
reputation of its personnel and its ability to design, finance and construct new
facilities. The business in which the Company engages is one that other entities
may easily enter without substantial capital investment or experience in
management of correctional or detention facilities. Private sector competitors
of the Company include, among others, Wackenhut Corrections Corporation,
Correctional Services Corporation, Inc., United States Corrections Corp., Group
4 International Corrections Service and Securicor Group. Some of the Company's
international competitors are larger and have greater resources than the
Company. The Company also competes in some markets with smaller local companies
that may have a better understanding of the local conditions
21
<PAGE> 24
and may be better able to gain political and public acceptance. In addition, the
Company competes with government agencies that are responsible for
correctional facilities.
Dependence on Senior Management. The success of the Company's
operations has been and will continue to be highly dependent upon the continued
services of its senior management. The loss of one or more of the Company's
senior management could have a material adverse effect on the Company's
business.
Relationship with Sodexho. Sodexho beneficially owns 15.5% of the
Common Stock. Accordingly, Sodexho may have a significant influence over the
affairs of the Company. Sodexho has agreed to limit its ownership interest in
the Company to 25% (or 30% in certain limited circumstances) through June 23,
1999, subject to earlier termination upon the occurrence of certain events, and
has agreed to certain restrictions on the voting of its Common Stock. Sodexho
has a preemptive right to purchase additional shares of Common Stock or
securities convertible or exchangeable for Common Stock in any issuance of
securities by the Company in an amount necessary to enable Sodexho to maintain a
percentage ownership in the Company equal to 20% of the Common Stock on a fully
diluted basis. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."
Volatility of Market Price. From time to time, there may be significant
volatility in the market price for the Company's Common Stock. The Company
believes that the current market price of the Common Stock reflects expectations
that the Company will be able to continue to operate its facilities profitably
and to develop new facilities at a significant rate and operate them profitably.
If the Company is unable to operate its facilities profitably or develop
facilities at a pace that reflects the expectations of the market, investors
could sell shares of the Common Stock at or after the time that it becomes
apparent that such expectations may not be realized, resulting in a decrease in
the market price of the Common Stock. In addition to the operating results of
the Company, changes in earnings estimated by analysts, changes in general
conditions in the economy or the financial markets or other developments
affecting the Company or the private corrections industry could cause the market
price of the Common Stock to fluctuate substantially. In recent years, the stock
market has experienced extreme price and volume fluctuations. This volatility
has had a significant effect on the market prices of securities issued by many
companies for reasons unrelated to their operations performance.
ITEM 2. PROPERTIES
The Company currently operates facilities located in 19 states, the
District of Columbia, Puerto Rico, Australia and the United Kingdom. As of March
20, 1998, the Company owns five of the 52 domestic facilities it operates,
leases 34 domestic facilities from government agencies and non-profit
corporations and leases 13 facilities from Prison Realty.
On July 18, 1997, the Company and certain of its subsidiaries, sold the
Initial Facilities to Prison Realty for an aggregate purchase price of $308.1
million. The Company sold the real property and all tangible property associated
with each of the Initial Facilities to Prison Realty. Simultaneously with the
sale of each of the facilities to Prison Realty, the Company entered into the
Leases which require the Company to pay all operating expenses, taxes, insurance
and other costs. All of the Leases provide for base rent with certain annual
escalations and have primary terms ranging from 10-12 years which may be
extended at the fair market rates for three additional five-year periods upon
the mutual agreement of the Company and Prison Realty.
In connection with the sale of facilities to Prison Realty, the Company
and certain of its subsidiaries entered into Option Agreements pursuant to which
the Company and certain of its subsidiaries granted Prison Realty exclusive
options to acquire any or all of five correctional facilities until July 18,
2000 for a purchase price equal to the Company's cost of developing,
constructing, and equipping such facilities plus 5% of such costs. To date,
Prison Realty has exercised its option to acquire two such facilities, the
Northeast Ohio Correction Center located in Youngstown,
22
<PAGE> 25
Ohio and the Torrance County Detention Facility located in Estancia, New Mexico,
for an aggregate purchase price of $108.7 million. In addition, in connection
with the sale and lease-back arrangements, the Company and Prison Realty entered
into a Right to Purchase Agreement pursuant to which Prison Realty has an option
to acquire at fair market value and lease-back to the Company any correctional
or detention facility acquired or developed and owned by the Company in the
future for a period of three years following the date inmates are first received
at such facility. To date, Prison Realty has acquired two facilities, the
Cimarron Correctional Facility located in Cushing, Oklahoma and the Davis
Correctional Facility located in Holdenville, Oklahoma, pursuant to the Right to
Purchase Agreement for an aggregate purchase price of $74.4 million.
The location, name and rated capacity of each of the Company's
operating facilities at March 20, 1998, grouped by state, are set forth in the
following table:
<TABLE>
<CAPTION>
NO. OF OWNED, MANAGED
LOCATION CITY NAME BEDS OR LEASED
- -------- ---- ---- ---- ---------
DOMESTIC
<S> <C> <C> <C> <C>
Arizona Eloy Eloy Detention Center 1,250 (250) Leased
Florence Central Arizona 1,792 Leased
Detention Center
Colorado Las Animas Bent County Correctional 700 Managed
Facility
Walsenburg Huerfano County Correctional
Center 752 Owned
Florida Panama City Bay Correctional Facility 750 Managed
Panama City Bay County Jail 276 Managed
Panama City Bay County Jail Annex 401 Managed
Brooksville Hernando County Jail 302 Managed
Lake City Lake City Correctional Facility 350 Managed
Lecanto Citrus County Detention 300 Managed
Facility
Okeechobee Okeechobee Juvenile Offender 100 Managed
Correctional Center
Indiana Vincennes Southwest Indiana Regional 132 Managed
Youth Village
Indianapolis Marion County Jail II 670 Managed
Kansas Leavenworth Leavenworth Detention Center 327 Leased
Louisiana Winnfield Winn Correctional Center 1,474 Managed
Minnesota Appleton Prairie Correctional Facility 1,338 Managed
Mississippi Greenwood Delta Correctional Facility 1,016 Managed
Woodville Wilkinson County Correctional 500 Managed
Center
Nevada Las Vegas Southern Nevada Women's 500 Owned
Correctional Facility
New Jersey Elizabeth Elizabeth Detention Center 300 Managed
New Mexico Estancia Torrance County Detention 910 Leased
Facility
Grants New Mexico Women's 322 Owned
Correctional Facility
</TABLE>
- --------
( )Indicates number of expansion beds.
23
<PAGE> 26
<TABLE>
<CAPTION>
NO. OF OWNED, MANAGED
LOCATION CITY NAME BEDS OR LEASED
- -------- ---- ---- ---- ---------
<S> <C> <C> <C> <C>
Ohio Youngstown Northeast Ohio Correction Center 2,016 Leased
Oklahoma Cushing Cimarron Correctional Facility 960 Leased
Hinton Great Plains Correctional 768 Managed
Facility
Holdenville Davis Correctional Facility 960 Leased
Puerto Rico Guayama Guayama Correctional Center 1,000 Managed
Ponce Ponce Correctional Center 1,000 Managed
Ponce Ponce Young Adult Facility 500 Managed
Tennessee Chattanooga Silverdale Facilities 414 Managed
Clifton South Central Correctional 1,506 Managed
Center
Mason West Tennessee Detention 600 Leased
Facility
Memphis Shelby Training Center 200 Owned
Memphis Tall Trees 63 Managed
Nashville Davidson County Juvenile 100 Managed
Detention Center
Nashville Metro-Davidson County 1,092 Managed
Detention Facility
Whiteville Hardeman County Correctional 2,016 Managed
Center
Texas Bartlett Bartlett State Jail 962 Managed
Bridgeport Bridgeport Pre-Parole Transfer 200 Leased
Facility
Brownfield Brownfield Intermediate 200 Managed
Sanction Facility
Cleveland Cleveland Pre-Release Center 520 Managed
Dallas Jesse R. Dawson State Jail 2,000 Managed
Eden Eden Detention Center 1,225 Managed
Houston Houston Processing Center 411 Leased
Laredo Laredo Processing Center 258 Leased
Liberty Liberty County Jail 382 Managed
Mineral Wells Mineral Wells Pre-Parole 1,503(300) Leased
Transfer Facility
Overton B.M. Moore Pre-Release 500 Managed
Center
Taylor T. Don Hutto Correctional 480 Leased
Center
Venus Venus Pre-Release Center 1,000 Managed
District of Washington Correctional Treatment 866 Owned
Columbia Facility
INTERNATIONAL
Australia Queensland Borallon Corrections Centre 455 Managed
Victoria Metropolitan Women's 125 Owned
Correctional Centre
United Kingdom Redditch Blakenhurst HM Prison 649 Managed
</TABLE>
- -----------------------------
( ) Indicates number of expansion beds.
24
<PAGE> 27
For the first ten months of 1997, the Company maintained its corporate
headquarters in approximately 21,600 square feet of office space at 102 Woodmont
Boulevard, Suite 800, Nashville, Tennessee 37205, at a rate comparable for
similar space in the area. In addition, during the same period, the Company also
leased approximately 13,000 square feet of office space in Brentwood, Tennessee,
at a rate comparable for similar space in the area.
In March 1996, the Company acquired approximately 3.25 acres in the
Burton Hills Office Park, Nashville, Tennessee and began construction on a
75,000 square foot office building. Construction on the office building was
completed in November 1997, at which time the Company terminated the office
leases referred to above and moved the Company's corporate headquarters to the
new building. The Company occupies substantially all of the building with
approximately 844 square feet of the office space being leased by the Company to
Prison Realty and approximately 2,284 square feet of office space being leased
to DC Investment Partners, LLC, a Tennessee limited liability company ("DC
Investments"), which serves as the general partner or investment advisor to five
private investment limited partnerships. D. Robert Crants, III is a principal in
DC Investments and is the son of Doctor R. Crants.
The Company's wholly-owned subsidiary, TransCor, leases approximately
15,000 square feet of office space and a maintenance facility comprising
approximately 8,000 square feet at 1510 Fort Negley Boulevard, Nashville,
Tennessee, at a rate comparable for similar space in the area.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently subject to any material litigation nor, to
the Company's knowledge, is any litigation threatened against the Company, other
than routine litigation arising in the ordinary course of business, some of
which is expected to be covered by liability insurance and all of which
collectively is not expected to have a material adverse effect on the
consolidated financial statements of the Company. See "Risk Factors -
Corrections and Detention Industry Risks - Legal Proceedings."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matters were submitted to a vote of shareholders during the fourth
quarter of 1997.
25
<PAGE> 28
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
SECURITIES OF THE COMPANY
(a) The Company's Common Stock began trading on the New York Stock
Exchange (the "NYSE") under the symbol "CXC" in 1994. Effective as of February
2, 1998, the symbol for the Company's Common Stock was changed to "CCA." The
following table sets forth the quarterly high and low closing sales prices as
reported on the NYSE for the periods indicated. In October 1995, the Company
authorized a 2-for-1 stock split on its Common Stock effective October 31, 1995.
The stock split was paid in the form of a one-share dividend for every share of
Common Stock held by shareholders of record on October 16, 1995. In June 1996,
the Company authorized a 2-for-1 stock split on its Common Stock effective July
2, 1996. The stock split was paid in the form of a one-share dividend for every
share of Common Stock held by shareholders of record on June 19, 1996. All
references herein to the Common Stock are on a post-split basis. The closing
stock price for the Company's Common Stock on the New York Stock Exchange was
$37.06 on December 31, 1997.
<TABLE>
<CAPTION>
Fiscal Year 1997 High Low
---------------- ---- ---
<S> <S> <S>
First Quarter $33.50 $24.25
Second Quarter 40.88 23.50
Third Quarter 44.88 37.00
Fourth Quarter 44.56 29.69
Fiscal Year 1996
----------------
First Quarter $28.50 $17.38
Second Quarter 42.44 26.81
Third Quarter 35.50 27.25
Fourth Quarter 31.75 23.13
</TABLE>
(b) As of March 17, 1998, there were approximately 1,288 holders of
record of the Company's Common Stock.
(c) The Company has not paid any cash dividends to its common
shareholders since its inception and does not anticipate paying any cash
dividends to its common shareholders in the foreseeable future. The Company
intends to retain earnings to provide funds for its operations and growth.
Future cash dividend policy will be determined by the Board of Directors based
on conditions then existing, including the Company's earnings and financial
condition, capital requirements and other relevant factors. In addition, cash
dividends may not be paid without the consent of the Company's lenders.
In September 1992, the Company issued a warrant dividend to its holders
of Common Stock by distributing one warrant for every five outstanding shares of
Common Stock held on the record date (the "Warrants"). The Warrants were
convertible into four shares of Common Stock at an exercise price of $8.50 and
expired on September 14, 1997.
SALE OF UNREGISTERED SECURITIES AND USE OF PROCEEDS FROM REGISTERED SECURITIES
Sale of Unregistered Securities. The Company has sold the following
securities which were not registered under the Securities Act of 1933, as
amended (the "Securities Act"), in the last three years. Unless indicated
otherwise, all securities were sold in private placements pursuant to the
exemption from registration set forth in Section 4(2) of the Securities Act.
26
<PAGE> 29
1995
In April 1995, the Company acquired Concept in a share exchange
transaction (the "Concept Exchange"). In the Concept Exchange, stockholders of
Concept received an aggregate of 5,449,984 (post-split) newly issued restricted
shares of the Company's Common Stock for their outstanding shares of Concept
common stock. At the request of the parties, Stephens, Inc. issued a fairness
opinion in connection with the acquisition (the "Stephens' Fairness Opinion").
In June 1995, as a result of its preemptive right triggered in connection
with the issuance of shares of Common Stock to the stockholders of Concept,
Sodexho purchased 1,090,000 shares of Common Stock from the Company at a
purchase price, as adjusted, of $7.63 per share. Also during 1995, the Company
and Sodexho entered into a forward contract whereby Sodexho would purchase up to
$20,000,000 of convertible subordinated notes at any time prior to December,
1997. In 1997, the Company and Sodexho extended the expiration date of this
contract to December 1999. The notes will bear interest at LIBOR plus 1.35% and
will be convertible into common shares at a conversion price, as adjusted, of
$6.83 per share.
In August 1995, the Company purchased Correction Management Affiliates,
Inc., a Delaware corporation ("CMA"), and Correctional Services Group, Inc., a
Missouri corporation ("CSG"), in a merger of both companies into wholly-owned
subsidiaries of the Company (the "CPI Mergers"). In the CPI Mergers,
shareholders of CMA and CSG received an aggregate of 2,800,000 (post-split)
newly issued restricted shares of the Company's Common Stock for their
outstanding shares of CMA and CSG common stock. Prior to the CPI Mergers, CMA
and CSG owned 100% of the issued and outstanding common stock of CPI.
1996
In February 1996, the Company sold an aggregate principal amount of
$30,000,000 of Convertible Subordinated Notes to PMI Mezzanine Fund, L.P. Such
notes bear interest at a rate of 7.5% per annum, mature on February 29, 2002,
and the principal and accrued interest thereon are convertible into shares of
Common Stock of the Company at a conversion price, as adjusted, of $25.91 per
share.
In April 1996, as a result of Sodexho's preemptive right triggered in
connection with the issuance of the above-described notes, the Company sold an
aggregate principal amount of $20,000,000 Convertible Subordinated Notes to
Sodexho. Such notes bear interest at a rate of 7.5% per annum, mature on April
5, 2002 and the principal and accrued interest thereon are convertible into
shares of Common Stock of the Company at a conversion price, as adjusted, of
$25.91 per share.
In August 1996, the Company issued and sold an aggregate principal amount
of $24,700,000 Corrections Corporation of America Detention Center Revenue Bonds
Series 1996 in a private placement pursuant to Rule 506 of Regulation D
promulgated under the Securities Act. Such bonds were issued pursuant a Trust
Indenture (the "Indenture") between the Company and Liberty Bank and Trust
Company of Tulsa, National Association. The bonds and interest thereon were
limited obligations of the Company payable solely from revenues and funds
pledged under the Indenture and from moneys drawn under an irrevocable letter of
credit. The bonds were scheduled to mature on December 15, 2015, but were paid
in full with proceeds from the sale of the Initial Facilities to Prison Realty
in July 1997.
1997
In February and August 1997, the Company issued an aggregate of 1,003,542
shares of its common stock to Pacific Mutual Life Insurance Company and PM Group
Life Insurance Company pursuant to the conversions of a portion of certain of
its 8.5% Convertible Extendable, Subordinated Notes originally issued in 1992.
In December 1994, 759,764 shares of the Company's Common Stock were
acquired by American Corrections Transport, Inc., a Tennessee corporation
("ACT"), pursuant to the Share Exchange Agreement by and among the
27
<PAGE> 30
Company, TransCor America, Inc. ("TransCor"), and the shareholders of TransCor,
and relating to the Company's acquisition of TransCor. ACT was a shareholder of
TransCor at the time of the 1994 exchange. Subsequently, in October 1997, the
Company agreed to exchange those shares of Common Stock held by ACT for 379,882
shares of the Company's newly authorized Series B Convertible Preferred Stock
(the "Series B Preferred Stock"). ACT agreed to liquidate and distribute its
assets, including the Series B Preferred Stock, to its shareholders immediately
following the exchange. Accordingly, on October 2, 1997 the Company, ACT, the
majority shareholders of ACT, and one additional individual entered into an
Exchange Agreement to effectuate the foregoing transaction. As a condition to
the exchange, ACT agreed to place 189,949 shares of the Series B Preferred Stock
into escrow with such shares being held to satisfy any claim, loss, liability,
costs, and expenses directly or indirectly relating to or resulting from or
arising out of the Exchange Agreement and the consummation of the transactions.
The exchange was structured as a tax-free organization under the meaning
of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended, and
ACT and its shareholder obtained certain tax benefits as a result of the 1997
exchange transaction. The Company assumed no liabilities of ACT as a result of
the exchange. The rights and preferences Series B Preferred Stock, generally,
are as follows: The shares are convertible into shares of the Company's Common
Stock on a 1.94 basis, subject to adjustment, and will automatically convert
into the Company's Common Stock upon notification of the Company. The holders of
the Series B Preferred Stock may convert the shares into shares of Common Stock
in varying increments through September 1, 2000, at which time up to 75% may be
converted. The holders of the Series B Preferred Stock may not transfer or
assign such shares before September 1, 2000, except upon death. The Series B
Preferred Shares shall share in distribution upon an event of sale or
liquidation along with the Company's holders of Common Stock based on their
respective ownership. The Series B Preferred Stock have the same voting rights
as the Common Stock and no dividends shall be declared unpaid on the Common
Stock unless dividends are declared and paid on the Series B Preferred Stock at
the same time at a rate equal to twice that of the Common Stock.
Except for the involvement of Stephens, Inc. in the issuance of the
Stephens' Fairness Opinion regarding the Company's acquisition of Concept in
1995, no underwriters were engaged in connection with the foregoing issuance of
securities.
Use of Proceeds
Initial Offering of Prison Realty Common Shares. Pursuant to Prison
Realty's Registration Statement on Form S-11 (File No. 333-25725)
declared effective by the U.S. Securities and Exchange Commission (the
"Commission") on July 10, 1997, on July 18, 1997 Prison Realty completed
an initial public offering (the "Initial Public Offering") of 21,275,000
of its common shares, $0.01 par value per share (the "Prison Realty
Common Shares"). The gross proceeds to Prison realty from the sale of the
Prison Realty Common Shares were approximately $446.8 million, generating
net proceeds to Prison Realty of $412.1 million after deduction of the
underwriting discount and offering expenses. Pursuant to the requirements
of the Commission, the Company was required to act as a co-registrant on
Form S-3 (File No. 333-25725-01) with respect to the Initial Offering.
The Company did not receive any of the proceeds from the Initial
Offering. Prison Realty, however, used $308.1 million of the net proceeds
to purchase the nine Initial Facilities from the Company in July 1997,
and subsequently used the balance, in part, to purchase three additional
Option Facilities from the Company in 1997. The Initial Offering was
underwritten by a syndicate of underwriters lead managed by J.C. Bradford
& Co., A.G. Edwards & Sons, Inc., Legg Mason Wood Walker-Incorporated,
Lehman Brothers, PaineWebber Incorporated, and Stephens, Inc.
Offering of Prison Realty 8.0% Series A Cumulative Preferred
Shares. Pursuant to Prison Realty's Registration Statement on Form S-11
(File No. 333-43935) declared effective by the Commission on January 26,
1998, on January 30, 1998 and February 27, 1998 Prison Realty completed
an offering (the "Preferred Offering") of 4,300,000 shares of its 8.0%
Series A Cumulative Preferred Shares, $0.01 par value per share (the
"Preferred Shares"). The gross proceeds to Prison Realty from the
Preferred Offering was approximately $107.5 million, generating net
proceeds to Prison Realty of approximately $103.6 million after deduction
of the underwriting discount and estimated offering expenses. Pursuant to
the requirements of the Commission, the Company was required to act as a
co-registrant on Form S-3 (File No. 333-43935-01) with respect to the
Preferred Offering.
28
<PAGE> 31
The Company did not receive any of the proceeds from the Preferred
Offering. Prison Realty used approximately $72.7 million of the proceeds
to repay indebtedness incurred, in part, as the result of purchasing two
facilities from the Company in December 1997 and January 1998,
respectively. The Preferred Offering was underwritten by a syndicate of
underwriters lead managed by J.C. Bradford & Co., NationsBanc Montgomery
Securities LLC, PaineWebber Incorporated, Stephens Inc. and Wheat First
Butcher Singer.
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial data for the five years ended December
31, 1997 are derived from the Company's consolidated financial statements and
include financial data reflecting the acquisitions of TransCor in December 1994,
Concept in April 1995 and CPI in August 1995, all of which were accounted for as
poolings-of-interests. All information contained in the following table should
be read in conjunction with the consolidated financial statements and related
notes of the Company included herein.
29
<PAGE> 32
CORRECTIONS CORPORATION OF AMERICA
SELECTED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues $ 462,249 $292,513 $207,241 $152,375 $132,534
--------- -------- -------- -------- --------
Expenses:
Operating 330,470 211,208 153,692 123,273 107,837
Lease 18,684 2,786 5,904 741 742
General and administrative 16,025 12,607 13,506 8,939 7,332
Depreciation and amortization 14,093 11,339 6,524 5,753 5,759
--------- -------- -------- -------- --------
379,272 237,940 179,626 138,706 121,670
--------- -------- -------- -------- --------
Operating income 82,977 54,573 27,615 13,669 10,864
Interest expense (income), net (4,119) 4,224 3,952 3,439 4,424
--------- -------- -------- -------- --------
Income before income taxes 87,096 50,349 23,663 10,230 6,440
Provision for income taxes 33,141 19,469 9,330 2,312 832
--------- -------- -------- -------- --------
Net income 53,955 30,880 14,333 7,918 5,608
Preferred stock dividends -- -- -- 204 425
--------- -------- -------- -------- --------
Net income allocable to
common stockholders $ 53,955 $ 30,880 $ 14,333 $ 7,714 $ 5,183
========= ======== ======== ======== ========
Net income per share:
Basic $ .70 $ .43 $ .23 $ .14 $ .10
Diluted $ .61 $ .36 $ .18 $ .12 $ .10
Weighted average shares outstanding:
Basic 77,221 71,763 62,257 54,500 50,185
Diluted 90,239 87,040 81,595 62,384 52,155
BALANCE SHEET:
Total assets $ 697,940 $468,888 $213,478 $141,792 $109,285
Long-term debt, less current
portion 127,075 117,535 74,865 47,984 50,558
Total liabilities excluding
deferred gain 214,112 187,136 116,774 80,035 75,103
Stockholders' equity 348,076 281,752 96,704 61,757 34,182
</TABLE>
30
<PAGE> 33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following financial analysis should be read in conjunction with the
above financial information concerning the Company.
General
The Company presently has contracts to manage 68 correctional and
detention facilities with an aggregate design capacity of 54,944 beds. Of these
68 facilities, 55 are currently in operation and 13 are under development by the
Company, eight of which are subject to an option to purchase by CCA Prison
Realty Trust ("Prison Realty"), two of which will be financed and owned by the
Company and three of which will be financed and owned by contracting government
entities. The Company, through its United Kingdom joint venture, UK Detention
Services ("UKDS"), manages one facility in the United Kingdom and, through its
Australian joint venture, CC Australia, manages two facilities in Australia. The
Company's ownership interest in UKDS and CC Australia is accounted for under the
equity method. Of the 13 facilities under development by the Company, eight are
scheduled to commence operations during 1998. In addition, at March 9, 1998, the
Company had outstanding written responses to RFPs and other solicitations for
nine projects with an aggregate design capacity of 11,604 beds.
The following table sets forth the number of facilities under contract
or award at the end of the periods shown:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Contracts(1) 67 59 47
Facilities in operation 54 42 38
Design capacity of contracts 52,890 41,135 28,607
Design capacity of facilities in operation 38,509 24,310 20,252
Compensated mandays(2) 10,524,537 7,113,794 4,799,562
</TABLE>
(1) Consists of facilities in operation and facilities under development for
which contracts have been finalized.
(2) Compensated mandays for a period ended are calculated, for per diem rate
facilities, as the number of beds occupied by residents on a daily basis
during the period ended and, for fixed rate facilities, as the design
capacity of the facility multiplied by the number of days the facility
was in operation during the period.
The Company derives substantially all of its revenues from the
management of correctional and detention facilities for national, federal, state
and local government agencies in the United States and abroad.
31
<PAGE> 34
Domestic Geographic Market Concentration. The Company currently manages
facilities in 19 states, the District of Columbia and Puerto Rico. Management
revenues by state, as a percentage of the Company's total revenues for the years
ended December 31, 1997, 1996 and 1995, respectively, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- ------------------------ ------------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
OF OF TOTAL OF OF TOTAL OF OF TOTAL
FACILITIES REVENUES FACILITIES REVENUES FACILITIES REVENUES
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Arizona 2 12.1% 2 14.7% 2 16.5%
Colorado 2 1.9 1 0.3 -- --
Florida 7 8.9 5 10.3 5 7.8
Indiana 2 .3 1 0.4 1 1.4
Kansas 1 1.9 1 3.0 2 4.6
Louisiana 1 3.1 1 4.7 1 6.1
Minnesota 1 2.6 1 0.7 -- --
Mississippi 1 2.1 1 1.1 -- --
Nevada 1 .4 -- -- -- --
New Jersey 1 2.4 -- -- -- --
New Mexico 2 3.4 3 6.7 3 8.4
Ohio 1 3.5 -- -- -- --
Oklahoma 3 5.6 2 3.0 1 1.9
Puerto Rico 3 6.2 1 4.7 1 0.1
South Carolina -- .8 1 2.1 -- --
Tennessee 9 17.8 8 19.2 8 25.2
Texas 13 21.7 11 23.6 12 22.7
Washington, D.C. 1 3.6 -- -- -- --
</TABLE>
To the extent favorable or unfavorable changes in regulations or market
conditions occur in these markets, such changes would likely have a
corresponding impact on the Company's results of operations.
Revenues for operation of correctional and detention facilities are
recognized as the services are provided, based on a gross rate per day per
inmate or on a fixed monthly rate. Of the Company's 52 domestic facilities in
operation, 48 are compensated on a per diem basis and four are compensated at
fixed monthly rates. The per diem rates or fixed monthly rates vary according to
the type of facility and the extent of services provided at the facility. The
Company has certain contracts which provide for the realization of operating
bonuses which are contingent upon various criteria. The Company also realizes
development fee revenues on the percentage-of-completion method for certain
correctional facilities. Transportation revenues are based on a per mile charge
or a fixed fee per trip.
The Company incurs all facility operating expenses, except for certain
debt service and lease payments with respect to certain facilities that the
Company does not own or lease. The Company currently owns five of the domestic
facilities it manages, manages 34 domestic facilities that are owned or leased
by a government agency, construction of which has been financed by the agency
through one or more of a variety of methods and manages 13 domestic facilities
that are owned and leased to the Company by Prison Realty.
Facility payroll and related taxes constitute the majority of facility
operating expenses for the Company. Substantially all other operating expenses
consist of food, clothing, medical services, utilities, supplies, maintenance,
insurance and other general operating expenses. As inmate populations increase
following the start-up of a facility, operating expenses generally decrease as a
percentage of related revenues. Each facility is fully staffed at the time it is
opened or taken over by the Company, although it may be operating at a
relatively low occupancy rate at such time.
32
<PAGE> 35
The Company's general and administrative costs consist of salaries of
officers and other corporate headquarters personnel, legal, accounting and other
professional fees (including pooling expenses related to certain acquisitions),
travel expenses, executive office rental, and promotional and marketing
expenses. The most significant component of these costs relates to the hiring
and training of experienced corrections and administrative personnel necessary
for the implementation and maintenance of the facility management and
transportation contracts.
Operating income for each facility depends upon the relationship
between operating costs, the rate at which the Company is compensated per
manday, and the occupancy rate. The rates of compensation are fixed by contract
and approximately two-thirds of all operating costs are fixed costs. Therefore,
operating income will vary from period to period as occupancy rates fluctuate.
Operating income will be affected adversely as the Company increases the number
of newly-constructed or expanded facilities under management and experiences
initial low occupancy rates. After a management contract has been awarded, the
Company incurs facility start-up costs that consist principally of initial
employee training, travel and other direct expenses incurred in connection with
the contract. These costs are capitalized and amortized on a straight-line basis
over the shorter of the term of the contract plus renewals, or five years.
Depending on the contract, start-up costs are either fully recoverable as
pass-through costs or are billable to the contracting agency over the initial
term of the contract plus renewals. The Company has historically financed
start-up costs through available cash, the issuance of various securities, cash
from operations and borrowings under the Company's revolving credit facility.
Newly opened facilities are staffed according to contract requirements
when the Company begins receiving inmates. Inmates are typically assigned to a
newly opened facility on a regulated, structured basis over a one-to-three month
period. Until expected occupancy levels are reached, operating losses may be
incurred.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage of revenues of certain items in the Company's statement of operations
and the percentage change from period to period in such items:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
YEAR ENDED DECEMBER 31, 1997 1996
----------------------- COMPARED COMPARED
1997 1996 1995 TO 1996 TO 1995
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 58.0% 41.1%
Expenses:
Operating 71.5 72.2 74.2 56.5 37.4
Lease 4.0 1.0 2.8 570.6 (52.8)
General and administrative 3.5 4.3 6.5 27.1 ( 6.7)
Depreciation and amortization 3.0 3.9 3.2 24.3 73.8
----- ----- -----
Operating income 18.0 18.6 13.3 52.0 97.6
----- ----- -----
Interest expense, net ( .9) 1.4 1.9 (197.5) 6.9
----- ----- -----
Income before income taxes 18.9 17.2 11.4 73.0 112.8
Provision for income taxes 7.2 6.6 4.5 70.2 108.7
----- ----- -----
Net income 11.7% 10.6% 6.9% 74.7 115.4
===== ===== =====
</TABLE>
Year Ended December 31, 1997 Compared with Year Ended December 31, 1996
Revenues. Total revenues increased 58.0% in 1997 as compared to 1996,
with increases in both management and transportation services. Management
revenues increased 59.5% in 1997, or $167.7 million. This increase was
33
<PAGE> 36
primarily due to the opening of new facilities and the expansion of existing
facilities by the Company in 1996 and 1997. In 1997, the Company opened 13 new
facilities with an aggregate design capacity of 11,644 beds, assumed management
of one facility with an aggregate design capacity of 866 beds and expanded six
existing facilities to increase their design capacity by an aggregate of 2,290
beds. Accordingly, 14,800 new beds were brought on line in 1997. Due to the
growth in beds, compensated mandays increased 47.9% in 1997 from 7,113,794 to
10,524,537. Average occupancy remained stable at 93.2% in 1997 as compared to
94.1% in 1996.
Transportation revenues increased $2.0 million or 18.9% in 1997 as
compared to 1996. This growth was primarily the result of an expanded customer
base and increased compensated mileage realized through the opening of two new
transportation hubs in the first quarter of 1997 and more "mass transports,"
which are generally moves of 40 or more inmates per trip.
During the second quarter of 1997, the Company sold 30% of UKDS to
Sodexho and recognized an after-tax gain of $777,000.
Facility Operating Expenses. Facility operating expenses increased
56.5% to 330.5 million in 1997. This increase was due to the increased
compensated mandays and compensated mileage that the Company realized in 1997 as
previously mentioned. As a percentage of revenues, facility operating expenses
decreased to 71.5% in 1997 as compared with 72.2% in 1996. The Company's
management operating cost per compensated manday was $30.51 during 1997 as
compared to $28.82 in 1996. This increase was primarily due to the Company
bringing the 14,800 new beds on line and having multiple facilities in the
start-up phase of operation throughout 1997 which resulted in increased
personnel costs including employee training and overtime. The increase is also
due to the expanded scope of services that the Company has recently encountered
in some of its new contracts.
Lease Expense. Lease expense increased 570.6% in 1997 compared to 1996.
The significant increase in lease expense was the result of the Leases that the
Company entered into with Prison Realty in 1997. Annual first year rent for
these 12 facilities is expected to be approximately $50.0 million. Management
expects that in the future, lease expense will increase as the Company enters
into additional sale-leaseback transactions with Prison Realty.
General and Administrative. General and administrative expenses
increased 27.1% in 1997 over 1996. However, as a percentage of revenues, general
and administrative expenses for 1997 declined to 3.5% as compared to 4.3% for
1996. Management expects that as the Company continues to grow, general and
administrative expenses will increase in volume but continue to decrease as a
percentage of revenues.
Depreciation and Amortization. Depreciation and amortization expenses
increased 24.3% in 1997 over 1996. The increase was due to the 58.4% growth in
beds in operation at the end of 1997 as compared to 1996. Depreciation and
amortization expenses should continue to increase as the Company brings more
beds on line.
Interest Expense, Net. Interest expense for 1997 was actually net
interest income of $4.1 million as compared to $4.2 million of interest expense
in 1996. This change in net interest was primarily the result of the sale of the
12 facilities to Prison Realty for an aggregate purchase price of approximately
$455.1 million which allowed the Company to pay off approximately $182.6 million
in debt and benefit from interest earnings on approximately $128.0 million
invested for a portion of 1997.
Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
Revenues. The Company's total revenues increased 41% from 1995 to 1996
with increases in both management and transportation services. The Company's
management revenues increased 43% in 1996, or $84.2 million. This increase was
due to the opening of new facilities and the expansion of existing facilities by
the Company
34
<PAGE> 37
in 1995 and 1996. In 1996, the Company opened four new facilities with an
aggregate design capacity of 2,501 beds, assumed management of two facilities
with an aggregate design capacity of 899 beds and expanded five existing
facilities to increase their design capacity by an aggregate of 1,058 beds.
Accordingly, 4,458 new beds were brought on line in 1996. Due to the growth in
beds, compensated mandays increased 48% in 1996 from 4,799,562 to 7,113,794.
Average occupancy remained stable at 94.1% for 1996 as compared to 93.9% for
1995.
Transportation revenues increased $1.1 million or 12% in 1996 as
compared to 1995. The 1996 growth was due to a continued marketing effort that
expanded the customer base and resulted in increased compensated mileage.
During the second and fourth quarters of 1996, the Company purchased
the remaining two-thirds of UKDS from its original joint venture partners. After
consideration of several strategic alternatives related to UKDS, the Company
sold 20% of the entity to Sodexho, and recognized an after-tax gain of $515,000.
In conjunction with this transaction, Sodexho was also provided the option to
purchase an additional 30% of UKDS, which option was exercised in the second
quarter 1997.
Facility Operating Expenses. Facility operating expenses increased
37.4% to $213.2 million in 1996 compared to $158.8 million in 1995. This
increase was due to the additional beds on line that increased compensated
mandays and the growth in the transportation services. The average management
operating cost per manday was $28.82 for 1996 as compared to $31.59 for 1995.
The decrease in average cost per manday was due to the Company's ability to
realize more economies of scale as additional beds were brought on line. As a
percentage of revenues, facility operating expenses decreased to 73% from 77%.
This decrease was primarily attributable to the expansion of various facilities
that added lower incremental operating expenses and improved economies of scale.
Salary and related employee benefits constituted approximately 63% and 58% of
facility operating expenses for 1996 and 1995, respectively.
General and Administrative. General and administrative costs decreased
6.7% in 1996 to $13.4 million as compared to $14.3 million in 1995. This
decrease was due to the non-recurring pooling expenses associated with
acquisitions during fiscal 1995 as well as the Company's ability to reduce
duplication in the general and administrative areas by integrating the acquired
companies into its systems.
Depreciation and Amortization. Depreciation and amortization increased
74% to $11.3 million in 1996 as compared to $6.5 million in 1995. The 1996
increase was due to the growth in total beds in owned facilities as well as the
one-time, non-recurring reserve of $850,000 established for the termination of
the Company's contract with South Carolina.
Interest Expenses Net. Interest expense, net, increased 7% in 1996,
consisting of a 48%, or $2.7 million, increase in interest expense, and a 151%,
or $2.4 million, increase in interest income. Interest expense increased due
primarily to the addition of $50.0 million in convertible subordinated notes
issued in February and April 1996, bearing interest at 7.5%. Interest income
increased as a result of the Company investing the net proceeds from an equity
offering, which closed in June 1996.
Year Ended December 31, 1995 Compared with Year Ended December 31, 1994
In 1994 and 1995, the Company expanded its service capabilities and
broadened its geographic presence in the United States through a series of
strategic acquisitions that complemented the Company's development activities
(collectively, the "Acquisitions"). In December 1994, the Company acquired
TransCor, a nationwide provider of inmate transportation services. In April
1995, the Company acquired Concept, a prison management company with eight
facilities and 4,400 beds under contract at the time of acquisition. In August
1995, the Company acquired CPI, a prison management company with seven
facilities and 2,900 beds under contract at the time of acquisition. The
Company's operating results for 1995 were significantly affected by the
Acquisitions. All of these business combinations were
35
<PAGE> 38
accounted for as a pooling-of-interests and, accordingly, the operations of
TransCor, Concept and CPI have been combined in the accompanying consolidated
financial statements. The discussion herein is based upon the combined
operations of the Company, TransCor, Concept and CPI for all periods presented
in the accompanying consolidated financial statements.
Revenues. Total revenues increased 36% from 1994 to 1995 with increases
in both management and transportation services. Management revenues increased
37% in 1995, or $53.2 million. This increase was due to the opening of new
facilities and the expansions of existing facilities in 1994 and 1995 by the
Company and the related Acquisitions. In 1995, the Company opened five new
facilities with an aggregate design capacity of 3,390 beds and assumed
management of three facilities with an aggregate design capacity of 1,688 beds.
The Company also realized the full-year effect of three facilities added in 1994
with an aggregate design capacity of 1,560 beds. The third contributing factor
to growth was the expansion of 13 existing facilities to increase their design
capacity by 1,887 beds. Due to the growth in the number of beds, compensated
mandays increased 27% in 1995 from 3,768,095 to 4,799,562. Average occupancy
remained stable at 93.9% for 1995 as compared to 93.5% for 1994.
Transportation revenues increased $1.7 million or 21% in 1995 as
compared to 1994. The 1995 growth was due to a continued marketing effort that
expanded the customer base and resulted in increased compensated mileage.
During the first quarter of 1995, the Company purchased the remaining
50% of CC Australia from its original joint venture partner. After consideration
of several strategic alternatives related to CC Australia, the Company then sold
50% of the entity to Sodexho during the second quarter of 1995. The Company
accounted for the 100% ownership period on the equity basis of accounting and
recognized an after-tax gain of $783,000 on the sale.
Facility Operating Expenses. Facility operating expenses increased 29%
to $158.8 million in 1995 compared to $123.5 million in 1994. This increase was
due to the additional beds on line that increased compensated mandays and the
growth in the transportation services. The average management operating cost per
manday was $31.59 for 1995 as compared to $31.16 for 1994. The increase in
average cost per manday was due to the significant number of new beds brought on
line in 1995. As the five new facilities were opened, the full complement of
fixed costs was being incurred prior to full occupancy. As a percentage of
revenues, however, facility operating expenses decreased to 77% from 81%. This
decrease was primarily attributable to the expansion of various facilities that
added lower incremental operating expenses and improved economies of scale.
Salary and related employee benefits constituted approximately 58% and 55% of
facility operating expenses for 1995 and 1994, respectively.
General and Administrative. General and administrative costs increased
52% in 1995 to $14.3 million as compared to $9.4 million in 1994. Included in
1995 were approximately $950,000 of non-recurring pooling expenses related to
the Acquisitions. The Company also expanded its management staff to manage its
significant growth. Additional staff was added to bring new business on line,
resulting in cost being incurred prior to revenue being realized. As all
transition issues are finalized from the acquired operations and the duplicate
services are consolidated, general and administrative cost decrease as a
percentage of revenues.
Depreciation and Amortization. Depreciation and amortization increased
$771,000, to $6.5 million in 1995 as compared to $5.8 million in 1994. The 1995
increase was due to the growth in total beds in owned facilities.
Interest Expenses, Net. Interest expense, net, increased 15% in 1995
due to the assumption of debt related to the Eloy Detention Center in Eloy,
Arizona. In July 1995, the Company acquired the remaining 50% of the investment
in a partnership and assumed the assets and debts.
Income Taxes. In 1995, the Company's effective income tax rate
increased to 39% as compared to 23% in 1994. This increase in taxes was due to
the Company's complete utilization of net operating loss carry forwards,
therefore becoming subject to full statutory tax rates.
36
<PAGE> 39
Liquidity and Capital Resources
The Company's business is capital intensive in relation to the
development of a correctional facility. The Company's efforts to obtain
contracts, construct additional facilities and maintain its day-to-day
operations have required the continued acquisition of funds through borrowings
and equity offerings. The Company has financed these activities through the sale
of capital stock, warrants, subordinated convertible notes and senior secured
debt, through the issuance of taxable and tax-exempt bonds, by bank borrowings,
by assisting government agencies in the issuance of municipal bonds and most
recently through the sale and leaseback of certain correctional facilities to
Prison Realty.
The Company's current ratio increased to 2.41 in 1997 as compared to
1.79 in 1996. This improvement was primarily the result of increased cash
balances derived from the sale of the 12 facilities to Prison Realty in 1997.
The ratio of long-term debt to total capitalization decreased to 26.7% at
December 31, 1997 compared to 29.4% at December 31, 1996.
Cash flow from operations for 1997 was $92.0 million as compared to
$24.4 million for 1996. The Company has strengthened its cash flow through its
expanded business, additional focus on larger, more profitable facilities, the
expansion of existing facilities where economies of scale can be realized, and
the continuing effort of cost containment.
In February 1996, the Company issued $30.0 million of its convertible
subordinated notes to an investor. The proceeds were used to repay the
outstanding principal under the Company's working capital credit facility and
construction loan. The notes bear interest at 7.5%, payable quarterly, and
require the Company to maintain specific ratio requirements relating to net
worth, cash flow and debt coverage. The notes are convertible into shares of the
Company's common stock at a conversion price, as adjusted, of $25.91 per share.
In April 1996, due to the triggering of its preemptive right in connection with
the issuance of the convertible subordinated notes, Sodexho purchased $20.0
million of convertible subordinated notes under the same terms and conditions.
In June 1996, the Company completed a public offering of 3,700,000
shares of its Common Stock at a price to the public of $37.50 per share. The
proceeds of the offering, after deducting all associated costs, were $131.8
million.
In October 1996, the Company invested $22.5 million in the 564-bed,
medium security Prairie Correctional Facility located in Appleton, Minnesota
through the purchase of Correctional Facility Revenue Bonds previously issued in
connection with the construction of the facility. In 1997, through the expansion
of the facility, the Company increased the capacity to 1,338 beds and increased
its investment in the facility by approximately $36.4 million.
The Company has a revolving credit facility with a group of banks which
matures in September 1999. The credit facility provides for borrowings of up to
$170.0 million for general corporate purposes and letters of credit. The credit
facility bears interest, at the election of the Company, at either the bank's
prime rate or a rate which is .5% above the applicable 30, 60, or 90 day LIBOR
rate. Interest is payable quarterly with respect to prime rate loans and at the
expiration of the applicable LIBOR period with respect to LIBOR based loans.
There are no prepayment penalties associated with the credit facility. The
credit facility requires the Company, among other things, to maintain maximum
leverage ratios and a minimum debt service coverage ratio. The facility also
limits certain payments and distributions. As of December 31, 1997, there was
$70.0 million borrowed under this facility. Letters of credit totaling $1.6
million had been issued leaving the total unused commitment at $98.4 million.
The Company also has a $2.5 million credit facility with a bank that
provides for the issuance of letters of credit and matures in September 1999. As
of December 31, 1997 there were $1.6 million in letters of credit issued,
leaving the unused commitment at $0.9 million.
In July 1997, the Company sold ten of its facilities to Prison Realty
for approximately $378.3 million. The proceeds were used to pay off $131.0
million of credit facility debt, $42.2 million of first mortgage debt and $9.4
million of senior secured notes. The remaining proceeds were used to fund
existing construction projects and for general
37
<PAGE> 40
working capital purposes. In October 1997, the Company sold an additional
facility to Prison Realty for approximately $38.5 million. In November and
December 1997, the Company purchased two correctional facilities for $74.4
million. Subsequently, the Company sold these facilities to Prison Realty for
$74.4 million. Management expects that as a result of this relationship, the
Company will have access to additional capital that will help fund future
growth.
The Company anticipates making cash investments in connection with
future acquisitions and expansions. In addition, in accordance with the
developing trend of private prison managers toward making strategic financial
investments in facilities, the Company plans to use a portion of its cash to
finance start-up costs, leasehold improvements and equity investments in the
facilities, if appropriate in connection with undertaking new contracts. The
Company believes that the cash flow from operations, the availability of future
capital from Prison Realty and amounts available under its credit facility will
be sufficient to meet its capital requirements for the foreseeable future.
Furthermore, management believes that additional resources may be available to
the Company through a variety of other financing methods.
YEAR 2000 COMPLIANCE
In 1997, the Company made significant improvements to its computer
systems, software and applications. Although the Company believes that its
software applications and programs are "Year 2000" compliant, there can be no
assurance that coding errors or other defects will not be discovered in the
future. Also, the Company has not initiated formal communications with any of
the entities which contract with it to determine the extent to which the Company
is vulnerable to those third parties' failure to remediate their own Year 2000
issues. The Company anticipates it will do so in 1998, in advance of any impact
from the issue. Any Year 2000 compliance problem of the Company or other third
parties could result in a material adverse effect on the Company's business,
prospects, results of operations and financial condition.
38
<PAGE> 41
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation
S-X are included in this Report on Form 10-K commencing on page F-1 as indicated
below.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants....................................... F-1
Consolidated Balance Sheets as of December 31, 1997
and 1996....................................................................... F-2
Consolidated Statements of Operations for the years
ended December 31, 1997, 1996, and 1995........................................ F-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1997, 1996,
and 1995....................................................................... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996, and 1995........................................ F-6
Notes to Consolidated Financial Statements..................................... F-9
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with the Company's
accountants on any matter of accounting principles and practices or financial
statement disclosures. Arthur Andersen LLP was selected by the Company's Board
of Directors to serve as independent auditors of the Company during the fiscal
year 1997 and has been selected by the Board to serve in such capacity during
the fiscal year 1998.
39
<PAGE> 42
PART III
Certain information required by this Part III is omitted from this
Report in that the Company will file a definitive proxy statement within 120
days after the end of its fiscal year pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended, and in connection with its Annual
Meeting of Shareholders to be held in May 1998 (the "Proxy Statement") and the
information included in the Proxy Statement is incorporated in this Annual
Report on Form 10-K by reference to the Proxy Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information responsive to this Item is contained in the sections
entitled "Proposals for Shareholder Action - Proposal 1 - Election of Directors"
included in the Company's Proxy Statement, which information is incorporated
herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information responsive to this Item is contained in the sections
entitled "Executive Compensation," included in the Company's Proxy Statement,
other than the Compensation Committee Report and Performance Graph required by
Items 402(k) and (l) of Regulation S-K, which information is incorporated herein
by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information responsive to this item is contained in the section
entitled "Security Ownership by Directors, Officers, and Certain Beneficial
Owners" included in the Company's Proxy Statement, which information is
incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information responsive to this Item is contained in the sections
entitled "Certain Relationships and Related Transactions" included in the
Company's Proxy Statement, which information is incorporated herein by this
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Financial Statements.
The Financial Statements as set forth under Item 8 of
this Report on Form 10-K have been filed herewith
beginning on Page F-1 of this Report.
(2) Financial Statement Schedules.
All schedules specified in the accounting regulations
of the Securities and Exchange Commission have been
omitted because they are either inapplicable or are
not required.
(3) The Exhibits are listed in the Index of Exhibits
Required by Item 601 of Regulation S-K included
herewith.
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this Report.
(c) Certain Exhibits. See Item 14(a)(3) above.
(d) Certain Financial Statements. See Item 14(a) (1) and (2) above.
40
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CORRECTIONS CORPORATION OF AMERICA
Date: March 27, 1998 By: /s/ Doctor R. Crants
----------------------------------
Doctor R. Crants, Chairman of
the Board, Chief Executive
Officer and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints DOCTOR R. CRANTS and DARRELL K. MASSENGALE, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to the Annual
Report on Form 10-K of Corrections Corporation of America for the fiscal year
ended December 31, 1997, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission and the New York Stock Exchange, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dated indicated.
Date: March 27, 1998 /s/ Doctor R. Crants
---------------------------------------------
Doctor R. Crants, Chairman of the Board,
Chief Executive Officer, President and
Director (Principal Executive Officer)
Date: March 27, 1998 /s/ Darrell K. Massengale
---------------------------------------------
Darrell K. Massengale, Vice President,
Finance; Chief Financial Officer;
Secretary and Treasurer (Principal
Financial and Accounting Officer)
Date: March 27, 1998 /s/ Thomas W. Beasley
---------------------------------------------
Thomas W. Beasley, Chairman Emeritus
and Director
Date: March 27, 1998 /s/ William F. Andrews
---------------------------------------------
William F. Andrews, Director
41
<PAGE> 44
Date: March 27, 1998 /s/ Samuel W. Bartholomew, Jr.
---------------------------------------------
Samuel W. Bartholomew, Jr., Director
Date: March 27, 1998 /s/ Jean-Pierre Cuny
---------------------------------------------
Jean-Pierre Cuny, Director
Date: March 27, 1998 /s/ Joseph F. Johnson
---------------------------------------------
Joseph F. Johnson, Director
Date: March 27, 1998 /s/ R. Clayton McWhorter
---------------------------------------------
R. Clayton McWhorter, Director
42
<PAGE> 45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Corrections Corporation of America:
We have audited the accompanying consolidated balance sheets of CORRECTIONS
CORPORATION OF AMERICA (a Tennessee corporation) AND SUBSIDIARIES as of December
31, 1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Corrections Corporation of America and Subsidiaries as of December 31, 1997 and
1996, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
February 16, 1998
F-1
<PAGE> 46
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1997 1996
- ----------------------------------------------- -------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash, cash equivalents and restricted cash $136,147 $ 8,282
Accounts receivable, net of allowances 89,822 100,551
Prepaid expenses 4,868 2,940
Deferred tax assets - 1,026
Other 2,585 1,643
-------- --------
Total current assets 233,422 114,442
PROPERTY AND EQUIPMENT, NET 266,493 288,697
OTHER LONG-TERM ASSETS:
Notes receivable 59,264 22,859
Investment in direct financing leases 90,184 12,898
Deferred tax assets 10,195 -
Restricted investments - 587
Other 38,382 29,405
-------- --------
Total assets $697,940 $468,888
======== ========
</TABLE>
(continued)
F-2
<PAGE> 47
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
(continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ---------------------------------------------------------------- --------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 32,094 $ 39,224
Accrued salaries and wages 9,778 5,487
Income taxes payable 14,128 886
Deferred tax liabilities 1,229 -
Other accrued expenses 20,361 10,016
Current portion of long-term debt 5,847 8,281
Current portion of deferred gain on real estate transactions 13,223 -
--------- ---------
Total current liabilities 96,660 63,894
LONG-TERM DEBT, NET OF CURRENT PORTION 127,075 117,535
DEFERRED TAX LIABILITIES - 4,717
DEFERRED GAIN ON REAL ESTATE TRANSACTIONS, NET
OF CURRENT PORTION 122,529 -
OTHER NONCURRENT LIABILITIES 3,600 990
--------- ---------
Total liabilities 349,864 187,136
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - Series B - $1 (one dollar) par value;
400 shares authorized 380 -
Common stock - $1 (one dollar) par value; 150,000
shares authorized 80,230 75,029
Additional paid-in capital 215,833 165,317
Retained earnings 92,475 42,132
Treasury stock, at cost (40,842) (726)
--------- ---------
Total stockholders' equity 348,076 281,752
--------- ---------
Total liabilities and stockholders' equity $ 697,940 $ 468,888
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 48
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
REVENUES $ 462,249 $292,513 $207,241
--------- -------- --------
EXPENSES:
Operating 330,470 211,208 153,692
Lease 18,684 2,786 5,904
General and administrative 16,025 12,607 13,506
Depreciation and amortization 14,093 11,339 6,524
--------- -------- --------
379,272 237,940 179,626
--------- -------- --------
OPERATING INCOME 82,977 54,573 27,615
INTEREST (INCOME) EXPENSE, NET (4,119) 4,224 3,952
--------- -------- --------
INCOME BEFORE INCOME TAXES 87,096 50,349 23,663
PROVISION FOR INCOME TAXES 33,141 19,469 9,330
--------- -------- --------
NET INCOME $ 53,955 $ 30,880 $ 14,333
========= ======== ========
NET INCOME PER COMMON SHARE:
Basic $ .70 $ .43 $ .23
========= ======== ========
Diluted $ .61 $ .36 $ .18
========= ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, BASIC 77,221 71,763 62,257
========= ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, DILUTED 90,239 87,040 81,595
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 49
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------- ------------------------------------------
SERIES B ISSUED TREASURY STOCK
--------------- ----------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 - $ - 59,380 $ 59,380 (78) $ (307)
Issuance of common stock - - 1,158 1,158 - -
Stock options exercised and
warrants repurchased or
converted to stock - - 2,228 2,228 74 270
Income tax benefits of incentive
stock option exercises - - - - - -
Conversion of long-term debt - - 1,774 1,774 - -
Net income - - - - - -
---- ------ ------ -------- ------- --------
BALANCE, DECEMBER 31, 1995 - - 64,540 64,540 (4) (37)
Issuance of common stock - - 3,700 3,700 - -
Stock options exercised and
warrants converted to stock - - 6,789 6,789 (19) (689)
Income tax benefits of incentive
stock option exercises - - - - - -
Compensation expense related
to deferred stock awards - - - - - -
Net income - - - - - -
---- ------ ------ -------- ------- --------
BALANCE, DECEMBER 31, 1996 - - 75,029 75,029 (23) (726)
Exchange of preferred stock for
acquisition of American
Corrections Transport 380 380 - - (760) (32,812)
Stock options and warrants
exercised - - 4,197 4,197 (41) (1,975)
Stock repurchased - - - - (123) (5,329)
Income tax benefits of incentive
stock option exercises - - - - - -
Conversion of long-term debt - - 1,004 1,004 - -
Compensation expense related
to deferred stock awards and
stock options - - - - - -
Net income - - - - - -
---- ------ ------ -------- ------- --------
BALANCE, DECEMBER 31, 1997 380 $ 380 80,230 $ 80,230 (947) $(40,842)
==== ====== ====== ======== ======= ========
</TABLE>
<TABLE>
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
CAPITAL EARNINGS EQUITY
---------- -------- ----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $ (1,182) $ 3,866 $ 61,757
Issuance of common stock 7,184 - 8,342
Stock options exercised and
warrants repurchased or 1,699 1,639
converted to stock (2,558)
Income tax benefits of incentive
stock option exercises 3,987 - 3,987
Conversion of long-term debt 4,872 - 6,646
Net income - 14,333 14,333
--------- -------- ---------
BALANCE, DECEMBER 31, 1995 16,560 15,641 96,704
Issuance of common stock 128,112 - 131,812
Stock options exercised and
warrants converted to stock 8,177 (4,389) 9,888
Income tax benefits of incentive
stock option exercises 11,944 - 11,944
Compensation expense related
to deferred stock awards 524 - 524
Net income - 30,880 30,880
--------- -------- ---------
BALANCE, DECEMBER 31, 1996 165,317 42,132 281,752
Exchange of preferred stock for
acquisition of American
Corrections Transport 32,432 - -
Stock options and warrants
exercised 10,626 (3,612) 9,236
Stock repurchased - - (5,329)
Income tax benefits of incentive
stock option exercises 6,328 - 6,328
Conversion of long-term debt 673 - 1,677
Compensation expense related
to deferred stock awards and
stock options 457 - 457
Net income - 53,955 53,955
--------- -------- ---------
BALANCE, DECEMBER 31, 1997 $ 215,833 $ 92,475 $ 348,076
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 50
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 53,955 $ 30,880 $ 14,333
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 14,093 11,339 6,524
Deferred and other noncash income taxes (6,329) 13,117 6,162
Other noncash items 457 524 -
Gain on disposal of assets (881) (3,501) (1,284)
Equity in earnings of unconsolidated entities (916) (1,098) (619)
Recognized gain on real estate transactions (5,906) - -
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable 16,027 (55,993) (12,750)
Prepaid expenses (1,928) (1,371) (18)
Other current assets (942) (623) (87)
Accounts payable (7,130) 28,467 1,991
Income taxes payable 13,242 190 374
Accrued expenses 14,636 2,459 3,140
Other liabilities 3,600 - -
--------- --------- --------
Net cash provided by operating activities 91,978 24,390 17,766
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment (297,293) (165,703) (25,926)
Acquisition of UCLP - - (5,250)
(Increase) decrease in restricted cash and investments 4,037 (3,025) (619)
Increase in other assets (17,868) (11,163) (8,500)
Investments in affiliates, net 1,707 (3,138) (3,717)
Proceeds from disposals of assets 457,802 6,747 3,763
Investment in notes receivable (38,156) (22,500) -
Increase in direct financing leases (84,295) (3,693) -
Payments received on direct financing
leases and notes receivable 3,462 553 328
--------- --------- --------
Net cash provided by (used in) investing activities 29,396 (201,922) (39,921)
--------- --------- --------
</TABLE>
(continued)
F-6
<PAGE> 51
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(continued)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt $ - $ 74,700 $ 7,111
Payments on long-term debt (57,194) (24,443) (8,648)
(Payments on) proceeds from line of credit, net 66,000 (10,500) 13,715
Payment of debt issuance costs and
prepayment penalties (2,772) (433) (260)
Proceeds from issuance of common stock - 131,006 7,859
Proceeds from exercise of stock options and
warrants 9,236 9,889 868
Purchase of treasury stock and warrants (5,329) - (630)
--------- --------- --------
Net cash provided by financing activities 9,941 180,219 20,015
--------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 131,315 2,687 (2,140)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,832 2,145 4,285
--------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 136,147 $ 4,832 $ 2,145
========= ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amounts capitalized) $ 6,579 $ 8,979 $ 5,145
========= ========= ========
Income taxes $ 24,351 $ 6,630 $ 3,060
========= ========= ========
</TABLE>
(continued)
F-7
<PAGE> 52
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(continued)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Long-term debt was converted into
common stock through the exercise
of stock warrants:
Other assets $ - $ - $ 27
Long-term debt - - (1,428)
Common stock - - 400
Additional paid-in capital - - 1,001
---------- ---------- ---------
$ - $ - $ -
========== ========== =========
Long-term debt was converted into common stock:
Other assets $ 23 $ - $ 53
Long-term debt (1,700) - (6,700)
Common stock 1,004 - 887
Additional paid-in capital 673 - 5,760
---------- ---------- ---------
$ - $ - $ -
========== ========== =========
The Company acquired property and
equipment by assuming long-term debt:
Property and equipment $ - $ - $ (27,392)
Long-term debt - - 27,392
---------- ---------- ---------
$ - $ - $ -
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-8
<PAGE> 53
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Corrections Corporation of America, a Tennessee corporation, (together
with its subsidiaries, collectively referred to as the "Company") operates
and manages prisons and other correctional facilities and provides
prisoner transportation services for government agencies. The Company
provides a full range of related services to government agencies,
including managing, financing, designing and constructing new facilities
and redesigning and renovating older facilities. All material intercompany
transactions and balances have been eliminated in consolidation.
At December 31, 1997, the Company has a 50% interest in Corrections
Corporation of Australia PTY LTD ("CC Australia"). CC Australia provides
services similar to the Company in Australia and surrounding countries. At
December 31, 1997, the Company's wholly-owned subsidiary, CCA (UK)
Limited, has a 50% interest in UK Detention Services Limited ("UKDS"), a
United Kingdom joint venture. UKDS provides services similar to the
Company in the United Kingdom. The Company accounts for these investments
under the equity method. Assets and liabilities are converted from their
functional currency into the U.S. dollar utilizing the conversion rate in
effect at the balance sheet date. Revenue and expense items are converted
using the weighted average rate during the period. The excess of the
Company's investment in these unconsolidated subsidiaries over the
underlying equity is being amortized over twenty-five years.
Deferred project development costs consist of costs that can be directly
associated with a specific anticipated contract and, if recovery from that
contract is probable, are deferred until the anticipated contract has been
awarded. At the time the contract is awarded to the Company, the deferred
project development costs are either capitalized as part of property and
equipment or are transferred to project development costs. Costs of
unsuccessful or abandoned contracts are charged to depreciation and
amortization expense when their recovery is not considered probable.
Internal costs incurred in securing new clients including costs of
responding to requests for proposals are expensed as incurred. Facility
start-up costs, principally costs of initial employee training, travel and
other direct expenses incurred in connection with opening of new
facilities, to the extent recoverable under each negotiated contract, are
deferred and recorded as other assets. Project development costs and
start-up costs are amortized on a straight-line basis over the lesser of
the initial term of the contract plus renewals or five years. The
difference between amortization calculated under the Company's policy and
amortization calculated over the initial term of the contract is not
material.
F-9
<PAGE> 54
Debt issuance costs are amortized on a straight-line basis over the life
of the related debt. This amortization is charged to depreciation and
amortization expense.
Property and equipment is carried at cost. Betterments, renewals and
extraordinary repairs that extend the life of the asset are capitalized;
other repairs and maintenance are expensed. Interest is capitalized to the
asset to which it relates in connection with the construction of major
facilities. The cost and accumulated depreciation applicable to assets
retired are removed from the accounts and the gain or loss on disposition
is recognized in income. Depreciation is computed by the straight-line
method for financial reporting purposes and accelerated methods for tax
reporting purposes based upon the estimated useful lives of the related
assets.
Investment in direct financing leases represents the portion of the
Company's management contract with government agencies that represents
payments on building and equipment leases. The leases are accounted for
using the financing method and, accordingly, the minimum lease payments to
be received over the term of the leases less unearned income are
capitalized as the Company's investments in the leases. Unearned income is
recognized as income over the term of the leases using the interest
method.
Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." This statement generally requires the Company to record deferred
income taxes for the differences between book and tax bases of its assets
and liabilities.
The Company maintains contracts with various government entities to
manage their facilities for fixed per diem rates or monthly fixed rates.
The Company also maintains contracts with various federal, state and local
government entities for the housing of inmates in Company owned
facilities at fixed per diem rates. These contracts usually contain
expiration dates with renewal options ranging from annual to multi-year
renewals. Most of these contracts have current terms that require renewal
every two to five years. The Company expects to renew these contracts for
periods consistent with the remaining renewal options allowed by the
contracts or other reasonable extensions. Fixed monthly rate revenue is
recorded in the month earned and fixed per diem revenue is recorded based
on the per diem rate multiplied by the number of inmates housed during the
respective period. The Company recognizes development revenue on the
percentage-of-completion method and recognizes any additional management
service revenues when earned or awarded by the respective authorities.
To meet the reporting requirements of SFAS 107, "Disclosures About Fair
Value of Financial Instruments," the Company calculates the fair value of
financial instruments using quoted market prices. At December 31, 1997,
there were no material differences in the book values of the Company's
financial instruments and their related fair values, except for the
Company's convertible subordinated notes (see Note 7) and the forward
contract for convertible subordinated notes (see Note 13), which based on
the conversion rate on the underlying equity securities, have an estimated
fair market value of approximately $378,000.
F-10
<PAGE> 55
For purposes of the statements of cash flows, the Company excludes
restricted cash from cash and cash equivalents. As of December 31, 1997,
the Company has no restricted cash. The Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of," the Company continually
evaluates the recoverability of the carrying values of its long-lived
assets.
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
effective for fiscal years beginning after December 15, 1997. This
statement requires that changes in the amounts of certain items, including
gains and losses on certain securities, be shown in the financial
statements. The Company does not anticipate the adoption of SFAS 130 to
have a material effect on the Company's financial statements.
In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information" effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for the way
that public business enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. The Company will adopt the provisions of SFAS
131 effective January 1, 1998 and, if appropriate, will begin disclosing
information about its operating segments accordingly. The Company does not
anticipate the adoption of SFAS 131 to have a material effect on the
Company's financial statements.
Certain reclassifications of 1996 and 1995 amounts have been made to
conform with the 1997 presentation.
F-11
<PAGE> 56
2. MERGERS AND ACQUISITIONS
On April 25, 1995, the Company issued 5,450 shares of its common stock for
all the outstanding shares of Concept Incorporated ("Concept"). Concept
operates and manages prisons and other correctional facilities for
government agencies.
On August 18, 1995, the Company issued 2,800 shares of its common stock
for all the outstanding shares of Corrections Management Affiliates, Inc.
("CMA") and Correctional Services Group, Inc. ("CSG"). CMA and CSG operate
and manage prisons and other correctional facilities for government
agencies.
The transactions above were accounted for under the pooling-of-interests
method of accounting, and the Company has previously filed restated
financial statements. In the preparation of the consolidated financial
statements, the Company made certain immaterial adjustments and
reclassifications to the historical financial statements of Concept, CMA
and CSG to be consistent with the accounting policies of the Company.
The Company exercised its option to acquire the remaining 50% of its
investment in United-Concept Limited Partnership ("UCLP") during 1995. The
acquisition was accounted for under the purchase method of accounting. The
purchase price was allocated to assets acquired and liabilities assumed
based on the estimated fair market value at the date of the acquisition.
The operations of UCLP on a consolidated basis prior to the acquisition
are not material to the Company's results of operations.
During the first quarter of 1995, the Company purchased the remaining 50%
of CC Australia from its original joint venture partner. After
consideration of several strategic alternatives related to CC Australia,
the Company sold 50% of the entity to Sodexho S.A. ("Sodexho"), a French
conglomerate, during the second quarter of 1995. The Company accounted for
the 100% ownership period on the equity basis of accounting and recognized
an after-tax gain of $783 on the sale.
During the second and fourth quarters of 1996, the Company purchased the
remaining two-thirds of UKDS from its original joint venture partners.
After consideration of several strategic alternatives related to UKDS, the
Company sold 20% of the entity to Sodexho in December 1996 and recognized
an after-tax gain of $515. In conjunction with this transaction, Sodexho
was also provided the option to purchase an additional 30% of UKDS. In the
second quarter of 1997, Sodexho exercised its option to purchase an
additional 30% of UKDS, and the Company recognized an after-tax gain of
$777 on the sale.
On October 2, 1997, the Company exchanged 380 shares of Series B
convertible preferred stock for substantially all of the assets of
American Corrections Transport (primarily consisting of 760 shares of the
Company's common stock) in a tax-free reorganization pursuant to Section
368(a)(l)(C) of the Internal Revenue Code of 1986, as amended. Of the
preferred shares issued, 190 are held in escrow for the resolution of
specified contingencies.
F-12
<PAGE> 57
3. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
--------- ---------
<S> <C> <C>
Land $ 13,632 $ 14,276
Buildings and improvements 95,614 140,470
Equipment 19,863 19,376
Office furniture and fixtures 2,626 2,937
Construction in progress 152,042 137,405
--------- ---------
283,777 314,464
Less accumulated depreciation (17,284) (25,767)
--------- ---------
$ 266,493 $ 288,697
========= =========
</TABLE>
Depreciation expense was $9,710, $7,147, and $4,428 for 1997, 1996 and 1995,
respectively.
4. NOTES RECEIVABLE
Notes receivable consists of the following:
<TABLE>
DECEMBER 31,
-------------------------
1997 1996
-------- --------
<S> <C> <C>
Notes receivable, principal and interest
payments of $535 monthly through
September 2017, interest at 9.25%, secured
by a first mortgage on a facility $ 58,154 $ 22,401
Notes receivable, $700 is secured by a third
mortgage on a facility and is due in
January 1999, remaining balance is due in
monthly principal and interest payments
through April 1999, weighted average
interest rate at 11.14% 876 876
Other 1,310 -
-------- --------
60,340 23,277
Less current portion in accounts receivable (1,076) (418)
-------- --------
$ 59,264 $ 22,859
======== ========
</TABLE>
F-13
<PAGE> 58
5. INVESTMENT IN DIRECT FINANCING LEASES
At December 31, 1997, the Company's investment in direct financing leases
represents building and equipment leases between the Company and certain
government agencies. Certain of the agreements contain provisions that
allow the government agencies to purchase the buildings and equipment for
predetermined prices at specific intervals during the contract period.
A schedule of minimum future rentals to be received under the direct
financing leases at December 31, 1997, is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ---------
<S> <C>
1998 $ 6,909
1999 6,909
2000 6,909
2001 6,909
2002 6,909
Thereafter 88,087
---------
Total minimum obligation 122,632
Less unearned income (28,226)
---------
Present value of direct financing leases 94,406
Less current portion in accounts receivable (4,222)
---------
Long-term portion $ 90,184
=========
</TABLE>
6. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------- -------
<S> <C> <C>
Deferred project development costs $ 786 $ 284
Project development costs, less
accumulated amortization of $513 and
$499, respectively 5,832 3,989
Facility start-up costs, less accumulated
amortization of $5,351 and $4,296, respectively 20,459 11,404
Debt issuance costs, less accumulated
amortization of $1,135 and $1,698, respectively 1,191 2,555
Deferred placement fees 2,404 2,404
Investments in affiliates 6,941 7,893
Other assets 769 876
------- -------
$38,382 $29,405
======= =======
</TABLE>
F-14
<PAGE> 59
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
--------- ---------
<S> <C> <C>
Revolving Credit Facility payable to a
group of banks, principal due
September 1999, interest payable
quarterly at the bank's prime rate
(8.5% at December 31, 1997) or LIBOR
plus .5% (6.22% at December 31, 1997),
collateralized by the pledge of stock
of the Company's first tier domestic
subsidiaries $ 70,000 $ 4,000
Convertible Subordinated Notes,
principal due at maturity in 2002 with
call provisions beginning in March
2000, interest payable quarterly at
7.5% 50,000 50,000
Convertible Subordinated Notes,
principal due at maturity in 1999 with
call provisions beginning in June 1999,
interest payable semi-annually at 8.5% 7,000 7,000
Convertible Subordinated Notes, principal due at maturity
in 1998 with call provisions beginning in June 1997,
interest payable quarterly at 8.5% 5,800 7,500
Senior Secured Notes, principal paid in
full in July 1997 - 10,328
Secured Notes Payable, principal paid in
full in March 1997 - 1,210
Detention Center Revenue Bonds, principal paid in
full in July 1997 - 24,700
Notes payable to a bank, principal paid in
full in July 1997 - 20,911
Other 122 167
--------- ---------
132,922 125,816
Less current portion (5,847) (8,281)
--------- ---------
$ 127,075 $ 117,535
========= =========
</TABLE>
F-15
<PAGE> 60
At December 31, 1997, the Company's revolving credit facility provides for
borrowings up to $170,000. The facility bears interest at the bank's prime
rate or LIBOR plus .50%, .75% or 1.0% depending on the Company's leverage
ratio. The facility is used for working capital and letters of credit.
Letters of credit totaling $1,600 have been issued to secure the Company's
worker's compensation insurance policy. The unused commitment at December
31, 1997 was $98,400. The facility is subject to renewal on September 6,
1999.
At December 31, 1997, the Company has a $2,500 letter of credit facility.
Letters of credit totaling $1,615 have been issued to secure the Company's
worker's compensation insurance policy, performance bonds and utility
deposits. The unused commitment at December 31, 1997 was $885. The
facility is subject to renewal on September 6, 1999.
Restricted cash of $3,450 at December 31, 1996, represents cash held in
sinking funds established for the funding of current year principal and
interest on certain bonds and current construction obligations.
The Company does not maintain any significant formal or informal
compensating balance arrangements with financial institutions.
The Convertible Subordinated Notes are convertible into the Company's
common stock at prices ranging from $1.69 to $25.91 per share. The Company
may require conversion under certain conditions after the stock has a
market value of 150% of the conversion price for a specified period. In
1997, Convertible Subordinated Notes with a face value of $1,700 were
converted into 1,004 shares of common stock.
The provisions of the credit facilities and notes contain restrictive
covenants, the most restrictive of which are limits on the payment of
dividends, incurrence of additional indebtedness, investments and mergers.
The agreements also require that the Company maintain specific ratio
requirements relating to cash flow, tangible net worth, interest coverage
and earnings. The Company was in compliance with the covenants at December
31, 1997.
The Company capitalized interest of $6,263, $502 and $717 in 1997, 1996
and 1995, respectively. Interest (income) expense, net is comprised of the
following for each year:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Interest expense $ 6,633 $ 8,200 $ 5,534
Interest income (10,752) (3,976) (1,582)
-------- ------- -------
$ (4,119) $ 4,224 $ 3,952
======== ======= =======
</TABLE>
Maturities of long-term debt for the next five years and thereafter are:
1998 - $5,847; 1999 - $77,047; 2000 - $28; 2001 - $0; and 2002 - $50,000.
F-16
<PAGE> 61
8. RELATIONSHIP WITH CCA PRISON REALTY TRUST
On July 18, 1997, the Company sold nine correctional and detention
facilities (the "Initial Facilities") to CCA Prison Realty Trust, a
Maryland real estate investment trust, ("Prison Realty") for an aggregate
amount of $308,100. The Company entered into agreements with Prison Realty
to lease the Initial Facilities back to the Company pursuant to long-term,
non-cancelable triple net leases (the "Leases") which require the Company
to pay all operating expenses, taxes, insurance and other costs. All of
the Leases have initial terms ranging from 10-12 years which may be
extended at the fair market rates for three additional five-year periods
upon the mutual agreement of the Company and Prison Realty.
The Company entered into option agreements with Prison Realty pursuant to
which Prison Realty was granted the option to acquire and leaseback any or
all of five option facilities to the Company at any time during the
three-year period following the acquisition of the Initial Facilities. In
addition, the Company granted Prison Realty an option to acquire, at fair
market value, and leaseback to the Company any correctional or detention
facility acquired or developed and owned by the Company in the future for
a period of three years following the date the Company first receives
inmates at such facility.
Subsequent to the sale of the Initial Facilities through December 31,
1997, the Company individually sold three correctional and detention
facilities to Prison Realty and immediately entered into 10-year lease
agreements with Prison Realty with terms substantially similar to the
Leases with respect to the Initial Facilities.
As of December 31, 1997, the net property and equipment has been removed
from the balance sheet, and the gains realized on the sale transactions
have been deferred and are being recognized as lease expense reductions
over the terms of the leases.
The Chairman of the Board of Directors, President and Chief Executive
Officer of the Company is also the Chairman of the Board of Trustees of
Prison Realty.
F-17
<PAGE> 62
9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
provision for income taxes is comprised of the following components:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
-------- ------- ------
<S> <C> <C> <C>
CURRENT PROVISION
Federal $ 35,930 $ 5,567 $2,853
State 3,540 785 315
-------- ------- ------
39,470 6,352 3,168
-------- ------- ------
INCOME TAXES CHARGED TO EQUITY
Federal 5,679 10,719 3,567
State 649 1,225 420
-------- ------- ------
6,328 11,944 3,987
-------- ------- ------
DEFERRED PROVISION
Federal (11,360) 1,052 1,946
State (1,297) 121 229
-------- ------- ------
(12,657) 1,173 2,175
-------- ------- ------
Provision for income taxes $ 33,141 $19,469 $9,330
======== ======= ======
</TABLE>
F-18
<PAGE> 63
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
-------- -------
<S> <C> <C>
CURRENT DEFERRED TAX ASSETS
Asset reserves and liabilities not yet
deductible for tax $ 2,546 $ 2,067
Deferred revenue 2,731 -
-------- -------
Total current deferred tax assets 5,277 2,067
-------- -------
CURRENT DEFERRED TAX LIABILITIES
Tax in excess of book amortization 6,480 -
Income item not yet taxable and other 26 1,041
-------- -------
Total current deferred tax liabilities 6,506 1,041
-------- -------
Net current deferred tax assets (liabilities) $ (1,229) $ 1,026
======== =======
NONCURRENT DEFERRED TAX ASSETS
Deferred gain on real estate transactions $ 12,684 $ -
Other 2,245 788
-------- -------
Total noncurrent deferred tax assets 14,929 788
-------- -------
NONCURRENT DEFERRED TAX LIABILITIES
Tax in excess of book depreciation 2,443 3,876
Income items not yet taxable and other 2,291 1,629
-------- -------
Total noncurrent deferred tax liabilities 4,734 5,505
-------- -------
Net noncurrent deferred tax assets (liabilities) $ 10,195 $(4,717)
======== =======
</TABLE>
F-19
<PAGE> 64
A reconciliation of the statutory federal income tax rate and the effective
tax rate as a percentage of pretax income for the years ended December 31,
is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal rate 35.0% 35.0% 34.0%
State taxes, net of federal tax benefit 4.0 4.0 4.0
Other items, net (.9) (.3) 1.4
---- ---- ----
38.1% 38.7% 39.4%
==== ==== ====
</TABLE>
F-20
<PAGE> 65
10.EARNINGS PER SHARE
In the fourth quarter of 1997, the Company adopted the provisions of SFAS
128, "Earnings Per Share." Under the standards established by SFAS 128,
earnings per share is measured at two levels: basic earnings per share and
diluted earnings per share. Basic earnings per share is computed by
dividing net income by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is computed by
dividing net income by the weighted average number of common shares after
considering the additional dilution related to convertible preferred stock,
convertible subordinated notes, options and warrants. Earnings per share
for 1996 and 1995 have been restated to conform with the provisions of SFAS
128.
In computing diluted earnings per common share, the Company's stock warrants
and stock options are considered dilutive using the treasury stock method,
and the Series B convertible preferred stock and the 8.5% convertible
subordinated notes are considered dilutive using the if-converted method.
The following table presents information necessary to calculate diluted
earnings per share for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net income $53,955 $30,880 $14,333
Interest expense applicable to
convertible subordinated
notes, net of tax 700 752 740
------- ------- -------
Adjusted net income $54,655 $31,632 $15,073
======= ======= =======
Weighted average common
shares outstanding 77,221 71,763 62,257
Effect of dilutive options and warrants 7,279 9,028 13,089
Conversion of preferred stock 182 - -
Conversion of convertible
subordinated notes 5,557 6,249 6,249
------- ------- -------
Adjusted diluted common
shares outstanding 90,239 87,040 81,595
======= ======= =======
Diluted earnings per share $ .61 $ .36 $ .18
======= ======= =======
</TABLE>
F-21
<PAGE> 66
11.STOCKHOLDERS' EQUITY
Preferred Stock -
The Company has authorized 1,000 shares of $1 (one dollar) par value Series
A preferred stock. At December 31, 1997, no Series A preferred stock was
issued or outstanding.
The Company has authorized 400 shares of $1 (one dollar) par value Series B
convertible preferred stock. The preferred stock has the same voting rights
as the Company's common stock. Dividends are paid on the preferred stock at
a rate equal to two times the dividend being paid on each share of the
Company's common stock. Each share of the preferred stock is convertible
into 1.94 shares of the Company's common stock. The preferred stock is
convertible at the Company's option any time on or after January 1, 1998 and
at the holder's option in twenty-five percent increments beginning July 1,
1999 through January 1, 2001. At December 31, 1997, 380 shares of Series B
convertible preferred stock were issued and outstanding.
Stock Offering -
On June 5, 1996, the Company completed a secondary public offering of 3,700
new shares of its common stock. The net proceeds of $131,812 were used to
develop, acquire and expand correctional and detention facilities.
Stock Split -
On June 5, 1996, the Board of Directors declared a two-for-one stock split
of the Company's common stock to be effective on July 2, 1996. An amount
equal to the par value of the common shares outstanding as of July 2, 1996,
was transferred from additional paid-in capital to the common stock account.
On October 4, 1995, the Board of Directors declared a two-for-one stock
split of the Company's common stock to be effective on October 31, 1995. An
amount equal to the par value of the common shares outstanding as of October
31, 1995, was transferred from additional paid-in capital to the common
stock account. All references to number of shares and to per share data in
the consolidated financial statements have been adjusted for these stock
splits.
Stock Warrants -
The Company has issued stock warrants to certain affiliated and unaffiliated
parties for providing certain financing, consulting and brokerage services
to the Company and to stockholders as a dividend. At December 31, 1997,
1,100 stock warrants were outstanding. The warrants were issued June 23,
1994 with an exercise price of $15.80 per warrant and an expiration date of
December 31, 1999. Each warrant entitles the warrant holder to four common
shares upon exercise. The warrants are exercisable from the date of
issuance.
F-22
<PAGE> 67
Stock Option Plans -
The Company has incentive and nonqualified stock option plans under which
options may be granted to "key employees" as designated by the Board of
Directors. The options are granted with exercise prices that equal market
value on the date of grant. The options are exercisable after the later of
two years from the date of employment or one year after the date of grant
until ten years after the date of the grant.
The Company's Board of Directors approved a stock repurchase program for up
to an aggregate of 400 shares of the Company's stock for the purpose of
funding the employee stock options, stock ownership and stock award plans.
On September 30, 1997, the Company repurchased 123 shares of the Company's
stock from a member of the Board of Directors of the Company at the market
price pursuant to this program.
Stock option transactions relating to the Company's incentive and
nonqualified stock option plans are summarized below:
<TABLE>
<CAPTION>
1997
----------------------
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
-------- -------
<S> <C> <C>
Outstanding at beginning of period 3,503 $ 9.96
Granted 454 23.83
Exercised (1,078) 7.60
Canceled (26) 26.21
------ ------
Outstanding at end of period 2,853 $12.91
====== ======
Available for future grant 2,802 -
====== ======
Exercisable 2,337 $ 9.98
====== ======
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
-------- -------
<S> <C> <C>
Outstanding at beginning of period 3,916 $ 3.73
Granted 903 27.06
Exercised (1,297) 2.92
Canceled (19) 22.97
------ ------
Outstanding at end of period 3,503 $ 9.96
====== ======
Available for future grant 2,950 -
====== ======
Exercisable 2,601 $ 4.06
====== ======
</TABLE>
F-23
<PAGE> 68
<TABLE>
<CAPTION>
1995
----------------------
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
Outstanding at beginning of period 3,470 $ 2.31
Granted 1,248 7.61
Exercised (754) 3.49
Canceled (48) 5.82
------ ------
Outstanding at end of period 3,916 $ 3.73
====== ======
Available for future grant 3,818 -
====== ======
Exercisable 2,680 $ 1.93
====== ======
</TABLE>
The weighted average fair value of options granted during 1997, 1996 and
1995 was $10.14, $12.28 and $3.21 per option, respectively. The options
outstanding at December 31, 1997, have exercise prices between $1.04 and
$33.13 and a weighted average remaining contractual life of 7 years.
In addition to the plans mentioned above, the Company has a nonqualified
stock option plan to encourage stock ownership by selected employees of the
Company. Pursuant to the plan, stock options may be granted to key
employees upon authorization by the Board of Directors. The aggregate
number of options that may be granted under the plan is 1,440. As of
December 31, 1997, 240 options were outstanding at an option price of $1.35
per share.
During 1995, the Company authorized the issuance of 337 shares of common
stock to certain key employees as a deferred stock award. The award becomes
fully vested ten years from the date of grant based on continuous employment
with the Company. The Company is expensing the $3,670 of awards over the
vesting period.
During 1997, the Company granted 80 stock options to a member of the Board
of Directors of the Company to purchase the Company's common stock. The
options were granted with an exercise price less than the market value on
the date of grant. The options are exercisable immediately.
F-24
<PAGE> 69
In October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based
Compensation." SFAS 123 establishes new financial accounting and reporting
standards for stock-based compensation plans. The Company has adopted the
disclosure-only provisions of SFAS 123 and continues to account for
stock-based compensation using the intrinsic value method as prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related Interpretations. As a result, no compensation cost
has been recognized for the Company's stock option plans under the criteria
established by SFAS 123. Had compensation cost for the stock option plans
been determined based on the fair value of the options at the grant date for
awards in 1997, 1996 and 1995 consistent with the provisions of SFAS 123,
the Company's net income and net income per share would have been reduced to
the pro forma amounts indicated below for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net income - as reported $ 53,955 $ 30,880 $ 14,333
Net income - pro forma 48,911 25,995 13,550
Net income per share - Basic - as reported $ .70 $ .43 $ .23
Net income per share - Basic - pro forma .63 .36 .22
Net income per share - Diluted - as reported $ .61 $ .36 $ .18
Net income per share - Diluted - pro forma .55 .31 .18
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the pro forma compensation cost may not be
representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Expected dividend yield 0.0% 0.0% 0.0%
Expected stock price volatility 40.4% 49.5% 50.3%
Risk-free interest rate 5.3% 5.9% 6.8%
Expected life of options 4 years 4 years 4 years
</TABLE>
F-25
<PAGE> 70
Employee Stock Ownership Plan -
The Company has an Employee Stock Ownership Plan whereby each employee of
the Company who is at least 18 years of age is eligible for membership in
the plan as of January 1 of their first anniversary year in which they have
completed at least one thousand hours of service.
Benefits, which become 40% vested after four years of service and 100%
vested after five years of service, are paid on death, retirement or
termination. The Board of Directors has discretion in establishing the
amount of the Company contributions. The Company's contributions to the
plan may be in the form of common stock, cash or other property.
Contributions to the plan amounted to $3,723, $2,086 and $1,366 for the
years ended December 31, 1997, 1996 and 1995, respectively.
12.REVENUES AND EXPENSES
Approximately 98%, 99% and 99% of the Company's revenues for the years ended
December 31, 1997, 1996 and 1995, respectively, relate to amounts earned
from federal, state and local government management and transportation
contracts.
The Company had revenues of 21%, 21% and 23% from the federal government and
59%, 54% and 49% from state governments for the years ended December 31,
1997, 1996 and 1995, respectively. One state government accounted for
revenues of 13%, 16% and 18% for the years ended December 31, 1997, 1996 and
1995, respectively. In 1997, the Company recognized $7,900 as additional
management service revenues. For the years ended December 31, 1997 and
1996, the Company recognized after tax development fee income of $2,453 and
$1,629, respectively, related to a contract to design, construct and equip a
managed detention facility.
Accounts receivable include $81,387 and $55,924 due from federal, state and
local governments at December 31, 1997 and 1996, respectively. Accounts
receivable and accounts payable at December 31, 1997, consist of the
following:
<TABLE>
<CAPTION>
ACCOUNTS ACCOUNTS
RECEIVABLE PAYABLE
---------- -------
<S> <C> <C>
Trade $77,506 $21,021
Construction 3,394 11,073
Other 8,922 -
------- -------
$89,822 $32,094
======= =======
</TABLE>
Salaries and related benefits represented 66%, 64% and 60% of operating
expenses for the years ended December 31, 1997, 1996 and 1995, respectively.
F-26
<PAGE> 71
13.INTERNATIONAL ALLIANCE
The Company has entered into an International Alliance (the "Alliance") with
Sodexho to pursue prison management business outside the United States. In
conjunction with the Alliance, Sodexho purchased an equity position in the
Company by acquiring several instruments. In 1994, the Company sold Sodexho
2,800 shares of common stock at $3.75 per share and a $7,000 convertible
subordinated note bearing interest at 8.5%. Sodexho also received 1,100
warrants at $15.80 per warrant that expire December 1999. Each warrant
entitles Sodexho to four common shares upon exercise. In consideration of
the placement of the aforementioned securities, the Company agreed to pay
Sodexho $3,960 over a four-year period ending in 1998. These fees include
debt issuance costs and private placement equity fees. These fees have been
allocated to the various instruments and are charged to debt issuance costs
or equity as the respective financings are completed. Sodexho is subject to
a standstill agreement that limits their ownership to 25% in the Company and
has certain preemptive rights to retain its percentage ownership.
In 1995, Sodexho purchased 1,090 shares of common stock for $7.63 per share
pursuant to their contractual preemptive right. Also during 1995, the
Company and Sodexho entered into a forward contract whereby Sodexho would
purchase up to $20,000 of convertible subordinated notes at any time prior
to December 1997. In 1997, the Company and Sodexho extended the expiration
date of this contract to December 1999. The notes will bear interest at
LIBOR plus 1.35% and will be convertible into common shares at a conversion
price of $6.83 per share.
In 1996, the Company sold $20,000 of convertible notes to Sodexho pursuant
to their contractual preemptive right. The notes bear interest at 7.5% and
are convertible into common shares at a conversion price of $25.91 per
share.
14.RELATED PARTY TRANSACTIONS
The Company pays legal fees to a law firm of which one of the partners is a
stockholder and a member of the Board of Directors of the Company. Legal
fees, including fees related to the Company's mergers and acquisitions, paid
to the law firm amounted to $1,109, $683 and $675 in 1997, 1996 and 1995,
respectively.
In 1997, the Company paid $382 to a member of the Board of Directors of the
Company for consulting services related to various contractual
relationships. Also in 1997, the Company paid $911 to National Corrections
and Rehabilitation Corporation, a company that is majority-owned by a member
of the Board of Directors, for services rendered at one of its facilities.
F-27
<PAGE> 72
15.COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities, office space and equipment under
long-term operating leases expiring through 2009. Gross lease expense
(before reductions associated with recognition of deferred gains on real
estate transactions) was approximately $22,443, $2,786 and $5,904 for the
years ended December 31, 1997, 1996 and 1995, respectively. Minimum lease
commitments for noncancelable leases are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1998 $ 52,580
1999 52,628
2000 53,470
2001 55,452
2002 57,670
Thereafter 340,667
--------
Total $612,467
========
</TABLE>
The nature of the Company's business results in claims and litigation
alleging that the Company is liable for damages arising from the conduct of
its employees or others. In the opinion of management, there are no pending
legal proceedings that would have a material effect on the consolidated
financial position or results of operations of the Company.
Each of the Company's management contracts and the statutes of certain
states require the maintenance of insurance. The Company maintains various
insurance policies including employee health, worker's compensation,
automobile liability and general liability insurance. These policies are
fixed premium policies with various deductible amounts that are self-funded
by the Company. Reserves are provided for estimated incurred claims within
the deductible amounts.
The Company guarantees $113 of a bank facility for CC Australia. The
Company has provided a $1,000 performance bond in connection with UKDS's
management contract with the United Kingdom.
The Company provides a limited guarantee related to a bond issue on the Eden
Detention Center in Eden, Texas. The maximum obligation as of December 31,
1997 was $22,290. In the event the Company is required to fund amounts
pursuant to this limited guarantee, the Company will obtain ownership rights
to the facility.
F-28
<PAGE> 73
16.EVENT SUBSEQUENT TO DECEMBER 31, 1997
On January 5, 1998, the Company sold the Davis Correctional Facility,
located in Holdenville, Oklahoma, to Prison Realty for $36,100. The Company
will continue to operate the medium-security correctional facility under the
terms of a 10-year operating lease, with terms substantially similar to
those of the Leases. Annual first year rent for the facility is expected to
be approximately $4,000.
F-29
<PAGE> 74
INDEX OF EXHIBITS
Exhibits marked with an * are filed herewith. Exhibits following
exhibit number 10(yyyy) are numbered beginning with 10.102. Other exhibits have
previously been filed with the Commission and are incorporated herein by
reference.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2(a) Agreement of Sale and Purchase between the Company and CCA Prison
Realty Trust, dated July 7, 1997.(33)
3(a) Charter of the Company. (29)
3(b) By-Laws of the Company. (30)
3(d)* Articles of Amendment to Charter of the Company Setting Forth the
Powers, Preferences, Rights, Qualifications, Limitations and
Restrictions of its Series B Convertible Preferred Stock, dated
October 2, 1997.
3(e)* Articles of Amendment to Charter of the Company, dated December
30, 1997.
4(f) 8.5% Convertible Extendable Subordinated Notes originally due
September 30, 1998, dated as of June 22, 1992 in the aggregate
principal amount of $2,500,000, made payable to Pacific Mutual
Life Insurance Company and PM Group Life Insurance Company. (9)
4(g) 8.5% Convertible Extendable Subordinated Notes originally due
September 30, 1998, dated as of December 2, 1992 in the aggregate
principal amount of $1,500,000, made payable to Pacific Mutual
Life Insurance Company and PM Group Life Insurance Company. (9)
4(l) 8.5% Convertible Extendable Subordinated Notes originally due
September 30, 1998, dated as of April 29, 1993 in the aggregate
principal amount of $2,500,000, made payable to Pacific Mutual
Life Insurance Company and PM Group Life Insurance Company.(10)
4(o) 8.5% Convertible Subordinated Note due November 7, 1999 made
payable to Sodexho S.A. in the aggregate principal amount of
$7,000,000.(11)
4(p) Stock Purchase Warrant for the purchase of Common Stock of the
Company issued to Sodexho, S.A. on June 23, 1994.(12)
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
4(r) Form of Amended 8.5% Convertible Extendable Subordinated Notes
originally due September 30, 1998, dated as of June 22, 1992 in
the aggregate principal amount of $2,500,000, made payable to
Cudd & Co. and Atwell & Co. (Original Exhibit No. 4(f)).(21)
4(s) Form of Amended 8.5% Convertible Extendable Subordinated Notes
originally due September 30, 1998, dated as of December 2, 1992
in the aggregate principal amount of $1,500,000, made payable to
Cudd & Co. and Atwell & Co. (Original Exhibit No. 4(g)).(21)
4(t) Form of Amended 8.5% Convertible Extendable Subordinated Notes
originally due September 30, 1998, dated as of April 29, 1993 in
the aggregate principal amount of $3,500,000, made payable to
Cudd & Co. and Atwell & Co. (Original Exhibit No. 4(l).(21)
4(u) Form of 7.5% Convertible, Subordinated Note due February 28, 2002
made payable to PMI Mezzanine Fund, L.P. in the aggregate
principal amount of $30,000,000.(21)
4(v) Form of 7.5% Convertible, Subordinated Note due February 28, 2002
made payable to Sodexho S. A., in the aggregate principal amount
of $20,000,000.(22)
4(w) Note Purchase Agreement, dated as of April 5, 1996, by and among
Sodexho, S.A. and the Company, relating to the issuance of 7.5%
Convertible, Subordinated Notes in the aggregate principal amount
of $20,000,000.(22)
4(x) Registration Rights Agreement with respect to the Note Purchase
Agreement, dated as of April 5, 1996, by and among Sodexho, S.A.
and the Company.(22)
4(z)* 8.5% Convertible, Extendable, Subordinated Note originally due
September 30, 1998, dated as of June 22, 1992 in the aggregate
amount of $104,000, made payable to Atwell & Co.
4(aa)* 8.5% Convertible, Extendable, Subordinated Note originally due
September 30, 1998, dated as of June 22, 1992 in the aggregate
amount of $696,000, made payable to Atwell & Co.
4(bb)* 1997 Amendment to 1994 Securities Purchase Agreement by and
between the Company and Sodexho S.A., dated December 30, 1997.
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
4(cc) Option Agreement dated March 31, 1997 by and between the Company
and Joseph F. Johnson relating to the grant of an option to
purchase 80,000 shares of the Company's common stock.(34)
4(dd) The Company's Non-Employee Directors' Compensation Plan.(35)
10(c) The Company's Option Plan dated January 23, 1985, as amended by
First Amendment to the Company's Stock Option Plan, together with
forms of Incentive Stock Option Agreement and Non-Qualified Stock
Option Agreement. (1)
10(d) Non-Qualified Stock Option Plan of the Company, dated January 16,
1986, and related form of Non-Qualified Stock Option Agreement.
(1)
10(e) The Company's 1988 Flexible Stock Option Plan. (4)
10(v) Memorandum of Understanding regarding privatization of France's
penitentiary system. (2)
10(aa) Second Amendment to the Company's Stock Option Plan of Company,
dated March 27, 1987, together with form of Incentive Stock
Option Agreement. (3)
10(qq) Third Amendment to the Company's Stock Option Plan dated March
18, 1988. (5)
10(xx) U.S. Government Lease for Real Property by and between the United
States of America and the Company, dated April 10, 1984, relating
to the Houston facility. (6)
10(zz) The Company's 1989 Stock Bonus Plan. (7)
10(eee) Letter of Guaranty, dated October 27, 1989, between the Company
and National Australia Bank Limited, relating to the guaranty by
the Company of certain advances made by National Australia Bank
Limited to Corrections Corporation to Australia, Pty. Ltd. (7)
10(fff) Assignment and Assumption Agreement, dated March 2, 1990, by and
between the Company and Esmor, Inc., relating to the assignment
of Esmor, Inc.'s leasehold interest in real property located in
San Diego County, California and the assignment of Esmor Inc.'s
contract with the
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
Immigration and Naturalization Service for the construction and
operation of an INS Detention Facility. (7)
10(mmm) First Amendment to the Company's 1988 Flexible Stock Option Plan,
dated June 8, 1989. (7)
10(nnn) First Amendment to the Company's Non-Qualified Stock Option Plan,
dated June 8, 1989. (7)
10(bbbb) Standard Transfer Form, dated September 8, 1991, between the
Company and Houghton Holdings Limited (formerly John Holland
Holdings Limited) relating to the purchase by the Company of
7,500 shares in Corrections Corporation of Australia Pty. Ltd.
and related Amended and Restated Letter of Guaranty. (8)
10(iiii) The Company's Amended and Restated Employee Stock Ownership
Plan.(8)
10(yyyy) The Company's Non-Employee Director Stock Option Plan.(10)
10.102 First Amendment to the Company's 1991 Flexible Stock Option Plan
dated March 11, 1994.(17)
10.109 Amendments to the Amended and Restated Corrections Corporation of
America Employee Savings and Stock Ownership Plan dated June 3,
1994.(17)
10.112 International Joint Venture Agreement, dated June 23, 1994,
between the Company and Sodexho, S.A.(13)
10.113 Securities Purchase Agreement, dated June 23, 1994, between the
Company and Sodexho, S.A., including form of 8.5% Note, form of
Warrant, and form of 8.75% Notes.(14)
10.114 Stockholders Agreement, dated June 23, 1994, between the Company
and Sodexho, S.A.(15)
10.132 Share Exchange Agreement by and among the Company, TransCor
America, Inc. and the Shareholders of TransCor America, Inc.,
dated December 30, 1994.(16)
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.138 Amended and Restated Corrections Corporation of America 1989
Stock Bonus Plan dated February 20, 1995.(17)
10.139 The Company's 1995 Employee Stock Incentive Plan effective as of
March 20, 1995.(19)
10.140 Stock Purchase Agreement, dated March 31, 1995, between the
Company and Chubb Security Holdings Australia Limited A.C.N. 003
590 921.(21)
10.141 Share Exchange Agreement, dated as of April 25, 1995, among the
Company, Concept Incorporated, and the Stockholders of Concept
Incorporated.(18)
10.142 Note Purchase Agreement dated as of June 22, 1992, among Pacific
Mutual Life Insurance Company, PM Group Life Insurance Company
and the Company as amended by Amendment No. 1 to the Note
Purchase Agreement, dated as of August 25, 1992, Amendment No. 2
to the Note Purchase Agreement, dated as of October 29, 1992,
Amendment No. 3 to Note Purchase Agreement, dated as of April 29,
1993 and Amendment No. 4 to the Note Purchase Agreement, dated as
of April 25, 1995.(21)
10.143 Stock Purchase Agreement, dated as of June 9, 1995, between
Sodexho S.A. and the Company concerning sale of shares of
Corrections Corporation of Australia Pty. Ltd. A.C.N. 010 921
641.(21)
10.144 Stock Purchase Agreement, dated as of June 29, 1995, between
Sodexho S.A. and the Company.(21)
10.145 Amendment No. 1 to Securities Purchase Agreement, dated as of
July 11, 1995, between Sodexho S.A. and the Company.(21)
10.148 Purchase Agreement, dated July 17, 1995, between Concept
Incorporated and Landmark Organization Southwest, Inc.(21)
10.149 Purchase Agreement, dated July 17, 1995, between Concept
Incorporated and U.C. Eloy, Inc.(21)
10.150 Agreement and Plan of Merger, dated as of August 18, 1995, among
the Company, CMA Acquisition, Inc., CSG Acquisition, Inc.,
Correction Management Affiliates, Inc., Correctional Services
Group, Inc., the shareholders of Correction Management
Affiliates, Inc. and the shareholders of Correctional Services
Group, Inc.(20)
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.151 Shareholders' Agreement, dated as of October 17, 1995, among
Corrections Corporation of Australia Pty. Ltd., the Company, and
Sodexho S.A.(21)
10.152 First Amendment to Stock Purchase Agreement, dated October 17,
1995, between Sodexho S.A. and the Company.(21)
10.153 First Amendment to Amended and Restated Corrections Corporation
of America 1989 Stock Bonus Plan, dated November 3, 1995.(21)
10.155 Note Purchase Agreement, dated as of February 29, 1996, between
the Company and PMI Mezzanine Fund, L.P.(21)
10.156 Guaranty Agreement, dated as of July 10, 1996, among the Company,
as Guarantor, Eden Correctional Facilities Corporation, as the
Issuer, and Liberty Bank and Trust Company of Tulsa, National
Association, as the Trustee, with respect to the Taxable
Detention Facility Revenue Bond, Series 1995 in the aggregate
principal amount of $22,875,000.(22)
10.157 Credit Agreement, dated as of September 6, 1996, among the
Company, as Borrower, various Lenders, and First Union National
Bank of Tennessee, as Administrative Agent.(22)
10.158 Letter of Credit Facility Agreement, dated as of September 6,
1996, among the Company and First Union National Bank of
Tennessee and First Union National Bank of North Carolina.(22)
10.159 Intercompany Subordination Agreement, dated as of September 6,
1996, among the Company, five of its wholly owned subsidiaries,
including CCA International, Inc., TransCor America, Inc.,
Concept Incorporated, Correction Management Affiliates, Inc., and
Correctional Services Group, Inc. and First Union National Bank
of Tennessee.(22)
10.160 Unconditional Guaranty Agreement, with Supplement, dated as of
September 6, 1996, in favor of First Union National Bank of
Tennessee among the Company, five of its wholly owned
subsidiaries, including CCA International, Inc., TransCor
America, Inc., Concept Incorporated, Correction Management
Affiliates, Inc., and Correctional Services Group, Inc. and First
Union National Bank of Tennessee.(22)
10.161 Form of Pledge Agreement, with Supplement, dated as of September
6, 1996 by the Company and five of its wholly owned subsidiaries,
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
including CCA International, Inc., TransCor America, Inc.,
Concept Incorporated, Correction Management Affiliates, Inc., and
Correctional Services Group, Inc., individually, in favor of
First Union National Bank of Tennessee as Administrative Agent
for various Lenders.(22)
10.162 Amendment No. 2, dated December 31, 1996, to the Securities
Purchase Agreement dated as of June 23, 1994, between Sodexho
S.A. and the Company.(22)
10.163 Purchase Agreement, dated as of December 31, 1996, among the
Company, Corrections Corporation of America (U.K.) Limited and
Sodexho S.A., relating to U.K. Detention Services, Ltd.(22)
10.164 Shareholders' Agreement, dated as of December 31, 1996, among the
Company, Corrections Corporation of America (U.K.) Limited and
Sodexho S.A., relating to U.K. Detention Services, Ltd.(22)
10.165 Option Agreement, dated as of December 31, 1996, among the
Company, Corrections Corporation of America (U.K.) Limited and
Sodexho S.A., relating to U.K. Detention Services, Ltd.(22)
10.166* Master Agreement to Lease between CCA Prison Realty Trust and the
Company.
10.167 Right to Purchase Agreement between CCA Prison Realty Trust and
the Company.(23)
10.168* Trade Name Use Agreement between CCA Prison Realty Trust and the
Company.
10.169 Option Agreement between CCA Prison Realty Trust and the Company
with respect to the Northeast Ohio Correctional Center.(24)
10.170 Option Agreement between CCA Prison Realty Trust and the Company
with respect to the Torrance County Detention Facility.(25)
10.171 Option Agreement between CCA Prison Realty Trust and the Company
with respect to the Southern Colorado Correctional Facility.(26)
10.172 Option Agreement between CCA Prison Realty Trust and the Company
with respect to the North Fork Correctional Facility.(27)
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.173 Option Agreement between CCA Prison Realty Trust and the Company
with respect to the Whiteville Correctional Center.(28)
10.174* Purchase and Sale Agreement, dated November 18, 1997, among the
Holdenville Industrial Authority and the Company.
10.175* Exercise Agreement, dated January 5, 1998, by and between the
Company and CCA Prison Realty Trust with respect to the
Holdenville, Oklahoma facility.
10.176* Purchase and Sale Agreement, dated November 26, 1997, among the
Cushing Municipal Authority and the Company.
10.177* Exercise Agreement, dated December 11, 1997, by and between the
Company and CCA Prison Realty Trust with respect to the Cushing,
Oklahoma facility.
10.178* Stock Repurchase Agreement, dated as of September 30, 1997,
between the Company and Thomas W. Beasley.
10.179* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Houston Processing Center.
10.180* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Laredo Processing Center.
10.181* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Bridgeport Pre-Parole Transfer Facility.
10.182* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Mineral Wells Pre-Parole Transfer Facility.
10.183* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the West Tennessee Detention Facility.
10.184* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Leavenworth Detention Center.
10.185* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Eloy Detention Center.
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.186* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Central Arizona Detention Center.
10.187* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the T. Don Hutto Correctional Center.
10.188* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Northeast Ohio Correctional Facility.
10.189* Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Torrance County Detention Facility.
10.190 Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Cimarron Correctional Facility.(31)
10.191 Lease Agreement between the Company and CCA Prison Realty Trust
with respect to the Davis Correctional Facility.(32)
10.192* Exchange Agreement, dated October 2, 1997, among the Company,
American Corrections Transport, Inc., Michael H. Shmerling, L.M.
Company, Tom Loventhal, J. Thomas Martin, Peter Weiss, Kenneth
Anchor, and Bernard Goldstein.
10.193* Stock Repurchase Agreement, dated March 2, 1998, between the
Company and Doctor R. Crants.
10.194* Form of Employment Agreement between the Company and Doctor R. Crants.
10.195* Amendment and Waiver to Credit Agreement, dated July 18, 1997,
by and among the Company, certain Lenders, and First Union
National Bank of Tennessee as Administrative Agent for the
Lenders.
21 The Company has the following five wholly-owned subsidiaries: CCA
International, Inc., Technical and Business Institute of America,
Inc., TransCor America, Inc., Concept Incorporated, and
Correctional Services Group, Inc.
23* Consent of Arthur Andersen LLP.
24* Power of Attorney (Included on signature page).
27* Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 83
- ------------------------
(1) Incorporated herein by reference to exhibit of same number to Company's
Registration Statement on Form S-1, filed August 15, 1986 (Reg. No.
33-8052).
(2) Incorporated herein by reference to exhibit of same number to Amendment
No. 1 to the Company's Registration Statement on Form S-1, filed
September 19, 1986 (Reg. No. 33-8052).
(3) Incorporated herein by reference to Exhibit 10(cc) to the Company's
Annual Report on Form 10-K with respect to the fiscal year ended
December 31, 1986 (File No. 0-15719).
(4) Incorporated herein by reference to Exhibit A to the Company's
definitive Proxy Statement relating to the 1988 Annual Meeting of
Stockholders (File No. 0-15719).
(5) Incorporated herein by reference to Exhibit B to the Company's
definitive Proxy Statement relating to the 1988 Annual Meeting of
Stockholders (File No. 0-15719).
(6) Incorporated herein by reference to exhibit of the same number to the
Company's Annual Report on Form 10-K with respect to the fiscal year
ended December 31, 1988 (File No. 0-15719).
(7) Incorporated herein by reference to exhibit of the same number to the
Company's Annual Report on Form 10-K with respect to the fiscal year
ended December 31, 1989 (File No. 0-15719).
(8) Incorporated herein by reference to exhibit of the same number to the
Company's Annual Report on Form 10-K with respect to the fiscal year
ended December 31, 1991 (File No. 0-15719).
(9) Incorporated herein by reference to exhibit of the same number to the
Company's Annual Report on Form 10-K with respect to the fiscal year
ended December 31, 1992 (File No. 0-15719).
(10) Incorporated herein by reference to exhibit of the same number to the
Company's Annual Report on Form 10-K with respect to the fiscal year
ended December 31, 1993 (File No. 0-15719).
(11) Incorporated herein by reference to Exhibit 2 to the Company's Report
on Form 8-K filed June 30, 1994 (File No. 0-15719).
<PAGE> 84
(12) Incorporated herein by reference to Exhibit 2 to the Company's Report
on Form 8-K filed June 30, 1994 (File No. 0-15719).
(13) Incorporated herein by reference to Exhibit 1 to the Company's Report
on Form 8-K filed June 30, 1994 (File No. 0-15719).
(14) Incorporated herein by reference to Exhibit 2 to the Company's Report
on Form 8-K filed June 30, 1994 (File No. 0-15719).
(15) Incorporated herein by reference to Exhibit 3 to the Company's Report
on Form 8-K filed June 30, 1994 (File No. 0-15719).
(16) Incorporated herein by reference to Exhibit 3 to the Company's Report
on Form 8-K filed January 12, 1995 (File No. 1-13560).
(17) Incorporated herein by reference to exhibit of the same number to the
Company's Annual Report on Form 10-K with respect to the fiscal year
ended December 31, 1994 (File No. 1-13560).
(18) Incorporated herein by reference to Exhibit 2 to the Company's Report
on Form 8-K filed May 10, 1995 (File No. 1-13560).
(19) Incorporated herein by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 filed July 20, 1995 (Reg. No.
33-61173).
(20) Incorporated herein by reference to Exhibit 1 the Company's Report on
Form 8-K filed August 31, 1995 (File No. 1-13560).
(21) Incorporated herein by reference to exhibit of the same number to the
Company's Annual Report in Form 10-K with respect to the fiscal year
ended December 31, 1995 (File No. 1-13560).
(22) Incorporated herein by reference to exhibit of the same number to the
Company's Annual Report in Form 10-K with respect to the fiscal year
ended December 31, 1996 (File No. 1-13560).
(23) Incorporated herein by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-3 (Commission File No. 333-25727-01)
Amendment No. 4 (Filed July 9, 1997).
(24) Incorporated herein by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-3 (Commission File No. 333-25727-01)
Amendment No. 4 (Filed July 9, 1997).
<PAGE> 85
(25) Incorporated herein by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-3 (Commission File No. 333-25727-01)
Amendment No. 4 (Filed July 9, 1997).
(26) Incorporated herein by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-3 (Commission File No. 333-25727-01)
Amendment No. 4 (Filed July 9, 1997).
(27) Incorporated herein by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-3 (Commission File No. 333-25727-01)
Amendment No. 4 (Filed July 9, 1997).
(28) Incorporated herein by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-3 (Commission File No. 333-25727-01)
Amendment No. 4 (Filed July 9, 1997).
(29) Incorporated herein by reference to Exhibit 3.1 to the Company's
Registration Statement on Form 8-B filed July 10, 1997 (File No.
1-13560).
(30) Incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form 8-B filed July 10, 1997 (File No.
1-13560).
(31) Incorporated herein by reference to Exhibit 10.29 to the Company's
Registration Statement on Form S-3 (Commission File Number
333-43935-01) (Filed January 9, 1998).
(32) Incorporated herein by reference to Exhibit 10.30 to the Company's
Registration Statement on Form S-3 (Commission File Number
333-43935-01) (Filed January 9, 1998).
(33) Incorporated herein by reference to Exhibit 2 to the Company's
Registration Statement on Form S-3 (Commission File No. 333-25727-01)
Amendment No. 4 (Filed July 9, 1997).
(34) Incorporated herein by reference to Appendix B to the Company's
definitive Proxy Statement relating to the 1998 Annual Meeting of
Shareholders which will be filed within 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A.
(35) Incorporated herein by reference to Appendix A to the Company's
definitive Proxy Statement relating to the 1998 Annual Meeting of
Shareholders which will be filed within 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A.
<PAGE> 1
EXHIBIT 3(d)
ARTICLES OF AMENDMENT TO THE CHARTER OF
CORRECTIONS CORPORATION OF AMERICA
SETTING FORTH THE POWERS, PREFERENCES, RIGHTS,
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK
The undersigned, acting on behalf of Corrections Corporation of
America, a corporation incorporated under the Tennessee Business Corporation Act
(the "Corporation"), adopts the following articles of amendment to its Charter:
1. Pursuant to the authority vested in the Board of Directors of the
Corporation in accordance with the Tennessee Business Corporation Act and the
provisions of the Charter of the Corporation, a series of class of authorized
preferred stock, par value $1.00 per share of the Corporation is hereby created
and the designations and number of shares thereof and the voting powers,
preferences and relative participating optional and other special rights of the
shares of such series, and the qualifications, limitations and restrictions
thereof are as follows:
A. Designation. The shares of such series shall be designated as Series
B Convertible Preferred Stock (hereinafter referred to as the "Series B
Preferred Stock"). The number of shares initially constituting the Series B
Preferred Stock shall be 400,000, which number may be decreased (but not
increased) by the Board of Directors, without a vote of shareholders; provided,
however, that such number may not decreased below the number of then outstanding
shares of Series B Preferred Stock.
B. Voting Rights.
1. Class Voting of Series B Preferred Stock and Common Stock.
Except as otherwise required by law, or as specifically provided herein, the
holders of shares of Series B Preferred Stock and the holders of the
Corporation's $1.00 per share par value common stock (the "Common Stock") shall
vote together as a single class on all matters submitted to a vote of the
shareholders of the Corporation, with each holder of Series B Preferred Stock
entitled to one (1) vote per share of Series B Preferred Stock owned by such
shareholder at the record date for the determination of shareholders entitled to
vote on such matters or, if no such record date is established, at the date such
vote is taken or any written consent of shareholders is solicited.
2. Series B Preferred Stock Voting as a Class. Except as
otherwise required by applicable law, the holders of the Series B Preferred
Stock shall have no right to vote as a class.
C. Dividends. No dividend may be declared or paid or set aside for
payment to, or other distribution made upon, the Common Stock or on any other
stock of the Corporation ranking junior to or on a parity with the Series B
Preferred Stock as to dividends unless the same dividends are declared and paid
(or declared and a sum sufficient for the payment thereof set apart for such
payment) on the Series B Preferred Stock at a rate equal to two (2) times the
dividend being paid on each share of Common Stock.
1
<PAGE> 2
D. Liquidation.
1. In the event of any liquidation, dissolution, or winding up
of the Corporation, whether voluntary or involuntary, holders of each share of
Series B Preferred Stock shall be entitled to be paid out of the assets of the
Corporation available for distribution to holders of the Corporation's capital
stock an amount per share equal to One and No/100 Dollar ($1.00)(the "Preference
Amount"). The Preference Amount shall be tendered to the holders of the Series B
Preferred Stock with respect to such liquidation, dissolution, or winding up
before any sums shall be paid or any assets distributed to the holders of shares
of Common Stock or to the holders of any other stock of the Corporation ranking
junior to or on a parity with the Series B Preferred Stock as to liquidation
preferences, but after the payment of liquidation amounts to the holders of any
other stock of the Corporation ranking senior to the Series B Preferred Stock as
to liquidation preferences. If the assets of the Corporation shall be
insufficient to permit the payment in full to the holders of the Series B
Preferred Stock of the Preference Amount, then the entire assets of the
Corporation available for such distribution shall be distributed ratably among
the holders of the Series B Preferred Stock. After the Preference Amount payment
shall have been made in full to the holders of the Series B Preferred Stock or
funds necessary for such payment shall have been set aside by the Corporation in
trust for the account of holders of the Series B Preferred Stock so as to be
available for such payment, holders of the Series B Preferred Stock shall be
entitled to participate in further distributions to the holders of the Common
Stock of the Corporation as if all of the shares of the Series B Preferred Stock
had been converted into shares of Common Stock pursuant to Section E hereof.
2. Whenever the Preference Amount shall be paid in property
other than cash, the value of such distribution shall be the fair value thereof
determined in good faith by the Board of Directors of the Corporation.
3. In case outstanding shares of Series B Preferred Stock
shall be subdivided into a greater number of shares of Series B Preferred Stock,
the Preference Amount in effect immediately prior to each such subdivision,
simultaneously with the effectiveness of such subdivision, shall be
proportionately reduced, and, conversely, in case outstanding shares of Series B
Preferred Stock shall be combined into a smaller number of shares of Series B
Preferred Stock, the Preference Amount in effect immediately prior to each such
combination, simultaneously with the effectiveness of such combination, shall be
proportionately increased.
E. Conversion Rights. The holders of the Series B Preferred Stock shall
have the following conversion rights:
1. Mandatory Conversion. At any time on and after January 1,
1998, at the election of the Corporation, each share of the Series B Preferred
Stock will be converted automatically into 1.94 fully paid and nonassessable
shares of Common Stock (the "Conversion Ratio"). This mandatory conversion shall
occur with respect to all, but not less than all, of the Series B Preferred
Stock within thirty (30) days of the Corporation's delivery of written notice
thereof to each holder of the Series B Preferred Stock. The Conversion Ratio
shall be subject to adjustment as provided in Section E.3. below.
2
<PAGE> 3
2. Right to Convert. On and after July 1, 1999, each holder of
shares of Series B Preferred Stock may convert up to twenty-five percent (25%)
of the total number of Series B Preferred Shares into 1.94 fully paid and
nonassessable shares of Common Stock. On and after January 1, 2000, each holder
of shares of Series B Preferred Stock may convert up to an additional
twenty-five (25%) of the total number of Series B Preferred Shares into 1.94
fully paid and nonassessable shares of Common Stock. On and after July 1, 2000,
each holder of shares of Series B Preferred Stock may convert up to an
additional twenty-five percent (25%) of the total number of Series B Preferred
Shares into 1.94 fully paid and nonassessable shares of Common Stock. On and
after January 1, 2001, each holder of shares of Series B Preferred Stock may
convert any unconverted shares of Series B Preferred Stock into 1.94 fully paid
and nonassessable shares of Common Stock. The Conversion Ratio shall be subject
to adjustment as provided in Section E.3. below. In the event of a liquidation
of the Company, the conversion rights shall terminate at the close of business
on the first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of Series B Preferred Stock.
3. Adjustment to Conversion Ratio Upon Occurrence of
Extraordinary Common Stock Event. Upon the happening of an Extraordinary Common
Stock Event (as hereinafter defined), the Conversion Ratio, simultaneously with
the happening of such Extraordinary Common Stock Event, shall be adjusted by
multiplying the then effective Conversion Ratio by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such Extraordinary Common Stock Event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall thereafter
be the Conversion Ratio. The Conversion Ratio, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive Extraordinary
Common Stock Event(s). "Extraordinary Common Stock Event" shall mean (x) the
issuance of additional shares of Common Stock as a dividend or other
distribution on all outstanding shares of Common Stock, (y) a stock split or
subdivision of outstanding shares of Common Stock into a greater number of
shares of Common Stock, or (z) a reverse stock split or combination of
outstanding shares of Common Stock into a smaller number of shares of Common
Stock.
4. Statement Specifying Adjusted Conversion Ratio. If the
Conversion Ratio is adjusted, the Corporation shall file at its principal
executive offices and shall mail within thirty (30) days after the date upon
which such adjustment shall be made, by registered or certified mail to each
registered holder of shares of Series B Preferred Stock, a statement signed by a
responsible financial officer of the Corporation specifying the adjusted
Conversion Ratio and setting forth in reasonable detail the method of
calculation of such adjustment and the facts requiring the adjustment and upon
which the calculation is based.
5. Exercise of Conversion Privilege. To exercise the
conversion privilege pursuant to Section E.2., a holder of Series B Preferred
Stock shall surrender the certificate(s) representing the shares being converted
to the Corporation at its principal office, and shall give written notice to the
Corporation at that office that such shareholder elects to convert such shares.
Such notice also shall state the name(s) and address(es) in which the
certificate(s) for shares of Common Stock issuable upon such conversion shall be
issued. The certificate(s) for shares of Series B Preferred Stock surrendered
for conversion shall be accompanied by proper assignment thereof to the
Corporation or in blank. The date when such written notice is received by the
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<PAGE> 4
Corporation, together with the certificate(s) representing the shares of Series
B Preferred Stock being converted, shall be the "Conversion Date." As promptly
as practicable after the Conversion Date, the Corporation shall issue and
deliver to the holder of the shares of Series B Preferred Stock being converted,
or on its written order, such certificate(s) as it may request of the number of
whole shares of Common Stock issuable upon the conversion of such shares of
Series B Preferred Stock in accordance with the provisions of this Section E.5.,
and cash, as provided in Section E.6., in respect of any fraction of a share of
Common Stock issuable upon such conversion. Such conversion shall be deemed to
have been effected immediately prior to the close of business on the Conversion
Date, and at such time the rights of the holder as holder of the converted
shares of Series B Preferred Stock shall cease and the person(s) in whose
name(s) any certificate(s) for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder(s) of record of the
shares of Common Stock represented thereby.
6. Cash in Lieu of Fractional Shares. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series B Preferred Stock. Instead of any fractional
shares of Common Stock that otherwise would be issuable upon conversion of
Series B Preferred Stock, the Corporation shall pay to the holder of the shares
of Series B Preferred Stock that were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of the fair
market value price per share of the Common Stock (as determined in a reasonable
manner prescribed by the Board of Directors) at the close of business on the
Conversion Date. The determination as to whether any fractional shares are
issuable shall be based upon the total number of shares of Series B Preferred
Stock being converted at any one time by any holder thereof, not upon each share
of Series B Preferred Stock being converted.
7. Partial Conversion. In the event some, but not all, of the
shares of Series B Preferred Stock represented by a certificate(s) surrendered
by a holder are converted, the Corporation shall execute and deliver to or on
the order of the holder, at the expense of the holder of the shares of the
Series B Preferred Stock that were converted, a new certificate(s) representing
the number of shares of Series B Preferred Stock that were not converted.
8. Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series B Preferred Stock, such number of its shares of Common Stock as
from time to time shall be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock, and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred Stock, the Corporation shall take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
9. No Charge for Conversion. The issuance of certificates for
shares of Common Stock upon the conversion of any shares of the Series B
Preferred Stock shall be made without charge to the converting holder for such
certificates or for any tax in respect of the issuance of such certificates, and
such certificates shall be issued in the name of, or in such names as may be
directed by, the holder of the Series B Preferred Stock; provided, however, that
the Corporation shall not be required to pay any taxes or other government
charges which may be payable in
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<PAGE> 5
respect of any transfer involved in the issuance and delivery of any such
certificate in a name other than that of the holder of the Series B Preferred
Stock, and the Corporation shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Corporation the amount of such tax or other
government charge or shall have established to the reasonable satisfaction of
the Corporation that such tax or other government charge has been paid or
provided for. The Corporation may also require, as a condition to the issuance
and delivery of any such certificate, an opinion of counsel acceptable to the
Corporation to the effect that the proposed transfer does not require
registration under federal or any state securities law.
10. Notices of Record Date. In the event of any:
a. taking by the Corporation of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase, or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right;
b. capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of
the Corporation, a merger, or a sale; or
c. voluntary or involuntary dissolution, liquidation,
or winding up the Corporation;
then and in each such event the Corporation shall mail or cause to be mailed to
each holder of Series B Preferred Stock a notice specifying (i) the record date
for such dividend, distribution, or right and a description of such dividend,
distribution, or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, merger, or sale is expected to become
effective, and (iii) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
recapitalization, merger, sale, dissolution, liquidation, or winding up. Such
notice shall be mailed at least 10 days prior to the date specified in such
notice on which such action is to be taken.
F. Dividend Payment Upon Conversion. At the date of any conversion,
whether pursuant to the holder's option described in Section E.2. or whether
such conversion is automatic pursuant to Section E.1., the Corporation shall pay
to the holder of record of any Series B Preferred Stock surrendered for or
subject to conversion any cumulated but unpaid dividends on the shares so
converted. This payment shall be made by the Corporation in cash or in
marketable securities of the Corporation or another issuer having a fair market
value on the date of payment in an amount equal to the cumulated dividend so
paid. For purposes hereof, "marketable securities" shall mean equity securities
of an issuer which have been registered under the Securities Exchange Act of
1934, as amended, and which are listed on a national securities exchange or
included in an interdealer quotation system which reports last sale information.
G. No Reissuance of Series B Preferred Stock. No share(s) of Series B
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion, or otherwise shall be
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<PAGE> 6
reissued, and, upon conversion, all such shares shall be canceled, retired, and
eliminated from the shares that the Corporation shall be authorized to issue.
The Corporation from time to time may take such appropriate corporate action as
may be necessary to reduce the authorized number of shares of the Series B
Preferred Stock accordingly.
H. No Dilution or Impairment. The Corporation will not, by amendment of
its Charter or through any reorganization, transfer of assets, consolidation,
merger, share exchange, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Series B Preferred Stock set forth herein, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holders of the Series B Preferred Stock against dilution or
other impairment.
I. Transfer Restriction. Prior to January 1, 2001, no holder of Series
B Preferred Stock may sell or dispose of (except by bona fide pledge where the
pledgee is subject in all respects to the transfer provisions of this Section I)
his or her shares of Series B Preferred Stock; provided, however, that, in the
event of the death of a holder of shares of Series B Preferred Stock, the shares
of Series B Preferred Stock owned by such shareholder may be transferred by will
or intestate succession.
Dated this 2nd day of October, 1997.
CORRECTIONS CORPORATION OF AMERICA
By: /s/Darrell K. Massengale
-----------------------------------------
Darrell K. Massengale
Chief Financial Officer and Secretary
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<PAGE> 1
EXHIBIT 3(e)
ARTICLES OF AMENDMENT TO THE CHARTER
OF
CORRECTIONS CORPORATION OF AMERICA
CORPORATE CONTROL NUMBER: 0330360
Pursuant to the provisions of Section 48-20-106 of the Tennessee
Business Corporation Act, as amended, the undersigned corporation adopts the
following Articles of Amendment to its Charter:
1. The name of the corporation is Corrections Corporation of
America (the "Corporation").
2. Section 2 of the Charter of the Corporation is amended as
follows:
The address of the principal office of the Corporation is 10
Burton Hills Boulevard, Nashville, Davidson County, Tennessee
37215.
3. Section 4 (b) of the Charter of the Corporation is amended as
follows:
The address of the Corporation's registered agent, Linda
Cooper, is 10 Burton Hills Boulevard, Nashville, Davidson
County, Tennessee 37215.
4. The Board of Directors of the Corporation approved these
amendments by resolution dated December 30, 1997, without
shareholder approval, as such is not required by law.
5. These amendments are to be effective upon filing of these
Articles of Amendment with the Secretary of State.
Dated: December 30, 1997. CORRECTIONS CORPORATION OF AMERICA
By: /s/ Darrell K. Massengale
-----------------------------------------
Darrell K. Massengale, Chief Financial
Officer and Secretary
<PAGE> 1
EXHIBIT 4(z)
CORRECTIONS CORPORATION OF AMERICA
8.5% CONVERTIBLE, EXTENDABLE, SUBORDINATED
NOTE ORIGINALLY DUE SEPTEMBER 30, 1998
dated as of
No. 016 June 22, 1992
SECTION 1. PAYMENT OBLIGATION. CORRECTIONS CORPORATION OF
AMERICA, a corporation duly organized and existing under the laws of the State
of Delaware (herein called the "Corporation"), for value received, hereby
promises to pay to ATWELL & CO, or registered assigns (hereinafter referred to
as the "Holder"), the principal sum of One Hundred Four Thousand Dollars
($104,000) on the Maturity Date, and to pay interest thereon from the date
hereof quarterly on September 30, December 31, March 31 and June 30 of each
year, commencing September 30, 1992, at (i) the Coupon Rate, or (ii) upon the
occurrence of a Triggering Event and until the date on which such Triggering
Event is cured or waived or until the date that is ninety (90) days from initial
occurrence of the Triggering Event, whichever is later, at the Triggering Event
Rate, until the principal hereof is paid to the person in whose name this Note
is registered at the close of business on the Business Day immediately preceding
the date such payment is due. Payment of the principal of and interest on this
Note will be made by cashiers check or by wire transfer of immediately available
funds, in currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts, at such address or to such
account, as applicable, as shall be designated to the Corporation by the Holder.
SECTION 2. DEFINITIONS. As used herein, the following terms
will be deemed to have the meanings set forth below:
"BOARD" means the board of directors of the Corporation.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday, or
Friday that is not a day on which banking institutions in Los Angeles,
California are authorized or obligated by law or executive order to
close.
"CHANGE EVENT" shall mean:
(a) the acquisition by any individual, entity, or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more
of the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in
the election of directors, but excluding, for this purpose,
any such acquisition by (i) the Corporation or any of its
subsidiaries, (ii) any employee benefit plan (or related
trust) of the Corporation or its subsidiaries, or (iii)
<PAGE> 2
any corporation with respect to which, following such
acquisition, more than 50% of the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by
individuals and entities who were the beneficial owners of
voting securities of the Corporation immediately prior to such
acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the
combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in
the election of directors; or
(b) the Incumbent Board shall cease for any reason to
constitute as least fifty percent (50%) of the members of the
Board; or
(c) approval by the stockholders of the Corporation of a
reorganization, merger, or consolidation, in each case, with
respect to which all or substantially all the individuals and
entities who were the respective beneficial owners of the
voting securities of the Corporation immediately prior to such
reorganization, merger, or consolidation do not, following
such reorganization, merger, or consolidation beneficially
own, directly or indirectly, more than 50% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the
corporation resulting from such reorganization, merger, or
consolidation; or
(d) the sale or other disposition of all or substantially all
the assets or property of the Corporation in one transaction
or a series of related transactions.
"CLOSING DATE" shall have the meaning ascribed thereto in Section 2.2
of the Note Purchase Agreement.
"COMMON STOCK" means the common stock of the Corporation, par value
$1.00 per share.
"CONVERSION PRICE" means $1.694 per share of Common Stock, subject to
adjustment from time to time as herein set forth.
"CONVERSION RATIO" means the number of Conversion Shares to be
delivered upon conversion of One Hundred Dollars ($100) of principal
amount of this Note. Subject to the provisions for adjustment set forth
herein, the Conversion Ration shall be determined as the quotient of
(i) the principal amount of this Note to be converted, divided by (ii)
the Conversion Price. Subject to the provisions for adjustment set
forth herein, the Conversion Ratio initially shall be 59.03:1.0.
"CONVERSION SHARES" means fully paid and nonassessable shares of Common
Stock issuable upon conversion of the indebtedness evidenced by this
Note.
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<PAGE> 3
"CONVERTIBLE NOTES" means the Corporation's (a) $7,000,000 original
aggregate principal amount 8.5% Convertible Subordinated Notes due
November 7, 1999, and (b) the Corporation's $2,700,000 aggregate
principal amount 8.5% Convertible Subordinated Notes due on various
dates, the latest of which is January 16, 2000.
"COUPON RATE" means eight and one-half percent (8.5%) per annum.
"CURRENT MARKET PRICE" when used with reference to shares of Common
Stock, shall mean the closing price per share of Common Stock on such
date and, when used with reference to shares of Common Stock for any
period shall mean the average of the daily closing prices per share of
Common Stock for such period. The closing price for each day shall be
the last quoted sale price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or such other system then in use, or, if on
any such date the Common Stock is not quoted nor so reported, the
average of the closing bide and asked prices as furnished by a
professional market maker making a market in the Common Stock selected
by the Board. If the Common Stock is listed or admitted to trading on a
national securities exchange, the closing price shall be the last sale
price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as securities
listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading. If the Common Stock is
not publicly held or so listed or publicly traded, "Current Market
Price" shall mean the fair market value per share of Common Stock as
determined in good faith by the Board based on an opinion of an
independent investment banking firm with an established national
reputation as a valuer of securities, which opinion may be based on
such assumptions as such firm shall deem to be necessary and
appropriate.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 7.1 of
the Note Purchase Agreement.
"EXCHANGE ACT" shall have the meaning set forth in Section 3.1 of the
Note Purchase Agreement.
"INCUMBENT BOARD" means the individuals who, as of the Closing Date,
constitute the Board; provided, however, that any individual becoming a
director subsequent to the Closing Date, whose election, or nomination
for election by the Corporation's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board.
3
<PAGE> 4
"MAJOR TRANSACTION" shall mean:
(a) approval by the stockholders of the Corporation of a
reorganization, merger, or consolidation, in each case, with
respect to which all or substantially all the individuals and
entities who were the respective beneficial owners of the
voting securities of the Corporation immediately prior to such
reorganization, merger, or consolidation do not, following
such reorganization, merger, or consolidation beneficially
own, directly or indirectly, more than 50% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the
Corporation resulting from such reorganization, merger, or
consolidation; or
(b) the sale or other disposition of all or substantially all
the assets or property of the Corporation in one transaction
or a series of related transactions.
"MANDATORY CONVERSION DATE" means the Business Day specified by the
Corporation, in compliance with the provisions hereof, as the date on
which all or a portion of the indebtedness evidenced by this Note will
be converted into shares of Common Stock pursuant to the Corporation's
right to compel such conversion.
"MANDATORY CONVERSION NOTICE" means a written notice substantially in
the form of the notice attached hereto as Exhibit A and incorporated
herein by this reference.
"MANDATORY PREPAYMENT DATE" means the Business Day specified by the
Holder, in compliance with the provision hereof, as the date on which
all or a portion of the indebtedness evidenced by this Note must be
prepaid pursuant to the Holder's right to compel such prepayment.
"MANDATORY PREPAYMENT NOTICE" means a written notice substantially in
the form of the notice attached hereto as Exhibit B and incorporated
herein by this reference.
"MATURITY DATE" means (i) September 30, 1998, or (ii) September 30,
1999, if the Holder of this Note elects, by written notice given to the
Corporation at least sixty (60) days but not more than one hundred
twenty (120) days prior to September 30, 1998, to extend the then
extant "Maturity Date" to September 30, 1999, or (iii) September 30,
2000, if the Holder of this Note elects, by written notice given to the
Corporation at least sixty (60) days but not more than one hundred
twenty (120) days prior to September 30, 1999, to extend the then
extant "Maturity Date" to September 30, 2000.
"NOTE" means this 8.5% convertible, extendable, subordinated note
issued by the Corporation.
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<PAGE> 5
"NOTE PURCHASE AGREEMENT" means that certain Note Purchase Agreement,
dated as of June 22, 1992, between the Corporation, Pacific Mutual Life
Insurance Company, and PM Group Life Insurance Company, as amended from
time to time.
"OPTIONAL CONVERSION NOTICE" means a written notice substantially in
the form of the notice attached hereto as Exhibit C and incorporated
herein by this reference.
"OPTIONAL PREPAYMENT NOTICE" means a written notice substantially in
the form of the notice attached hereto as Exhibit D and incorporated
herein by this reference.
"SENIOR INDEBTEDNESS" means the principal of and premium, if any, and
unpaid interest on (a) indebtedness (other than indebtedness evidenced
by the Convertible Notes, indebtedness that is subordinated in right of
payment to one or more item or type of indebtedness of the Corporation,
or indebtedness incurred in violation of the terms and conditions of
the Note Purchase Agreement) of the Corporation, irrespective of
whether secured and whether heretofore or hereafter (i) incurred for
borrowed money, or (ii) evidenced by a note or similar instrument given
in connection with the acquisition by the Corporation of any business,
properties, or assets, including securities (but not including any
account payable or other obligation created or assumed by the
Corporation in the ordinary course of business in connection with the
obtaining of materials or services), (b) any refundings, renewals,
extensions, or deferrals of any of the indebtedness included as Senior
Indebtedness by virtue of clause (a) hereof, and (c) obligations under
capital leases; in each case for the payment of which the Corporation
is liable directly or indirectly by guarantee, letter of credit,
obligation to purchase or acquire, or otherwise, unless the terms of
the instrument evidencing such indebtedness or capital lease or
pursuant to which such indebtedness or capital lease is outstanding
specifically provide that such indebtedness or capital lease is not
superior in right of payment to the indebtedness evidenced by this
Note.
"TRADING DAY" means, if the Common Stock is listed or admitted to
trading on any national securities exchange, a day on which such
exchange is open for the transaction of business, otherwise, a Business
Day.
"TRANCHE C CLOSING DATE" shall have the meaning ascribed thereto in
Section 3.1 of the Note Purchase Agreement.
"TRIGGERING EVENT" means the occurrence of any Unmatured Event of
Default or Event of Default described in clauses (i), (ii), and (iv)
through (x), inclusive, of Section 7.1 of the Note Purchase Agreement.
For purposes of determining the period during which the Triggering
Event Rate shall be in effect, a Triggering Event shall not be deemed
to have occurred until the date on which the Holder shall have given
notice of the occurrence thereof to the Corporation.
"TRIGGERING EVENT RATE" means ten and one-half percent (10.5%) per
annum.
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<PAGE> 6
"UNMATURED EVENT OF DEFAULT"shall mean any event or condition, the
occurrence of which would, with the lapse of time or the giving of
notice, or both, constitute an Event of Default.
SECTION 3. OPTIONAL CONVERSION. (a) Subject to and upon
compliance with the provisions of this Note, the Holder is entitled, at its
option, at any time on or before the close of business on the Business Day prior
to the Maturity Date, or in case this Note or a portion hereof is called for
conversion by the Corporation in accordance with the terms hereof, or the
Corporation elects to prepay in accordance with the terms hereof, then until and
including, but not after, the close of business on the third Business Day prior
to the Mandatory Conversion Date or the Optional Prepayment Date, to convert all
or a portion of the principal amount of the indebtedness evidenced by this Note
into Conversion Shares.
(b) The principal amount of the indebtedness evidenced by this
Note or any portion of the principal amount of the indebtedness evidenced hereby
that is One Thousand Dollars ($1,000), an integral multiple of One Thousand
Dollars ($1,000), or the remaining balance of the principal amount of the
indebtedness evidenced by this Note may be converted into Conversion Shares.
Subject to the provisions for adjustment set forth hereinafter, the indebtedness
evidenced by the Note shall be convertible into Conversion Shares at a price per
share equal to the Conversion Price and the number of Conversion Shares to be
deliverable to the Holder upon conversion of One Hundred Dollars ($100) of the
principal amount of this Note shall be equal to the Conversion Ratio.
(c) Conversion of all or a portion of the indebtedness
evidenced by this Note may be effected by the Holder upon the surrender to the
Corporation at the principal office of the Corporation in the State of Tennessee
or at the office of any agent or agents of the Corporation, as may be designated
by the Board, of this Note, duly endorsed or assigned to the Corporation or in
blank, accompanied by an Optional Conversion Notice to the Corporation that the
Holder elects to convert the principal amount of the indebtedness evidenced by
this Note or, if less than the entire principal amount of the indebtedness
evidenced by this Note is to be converted, the portion thereof to be converted.
Such Optional Conversion Notice shall specify the name or names in which the
Holder wishes the certificate or certificates for shares of Common Stock to be
issued. In case such notice shall specify a name or names other than that of the
Holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names. Other
than such taxes, the Corporation will pay any and all issue and other taxes
(other than taxes based on income) that may be payable in respect of any issue
or delivery of shares of Common Stock on conversion of the indebtedness
evidenced by this Note. No payment or adjustment shall be made upon any
conversion of this Note on account of any dividends or other distributions
payable on the Conversion Shares; provided, however, that the Holder shall be
entitled to receive the full amount of any dividends or other distributions
declared with respect to the Conversion Shares with a record date on or after
the effective date of such conversion.
As promptly as practicable, and in any event within five (5)
Business Days after the surrender of this Note and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes (or the
demonstration to the satisfaction of the Corporation that such taxes have
6
<PAGE> 7
been paid), the Corporation shall deliver or cause to be delivered, either by
personal delivery or by certified or registered mail or by a recognized
overnight courier service, in any such case, properly insured, to the Holder in
accordance with the written instructions of the Holder (i) certificates
representing the number of Conversion Shares to which the Holder shall be
entitled, and (ii) if less than the entire principal amount of indebtedness
evidenced by this Note, for the balance of the indebtedness that is not being so
converted. Such conversion shall be deemed to have been made at the close of
business on the date of giving such notice and of such surrender of this Note so
that the rights of the Holder (as a noteholder) with respect to the principal
amount being converted shall cease, and the person or persons entitled to
receive the Conversion Shares issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Stock as of such day.
All accrued but unpaid interest through the Business Day immediately preceding
the date of such conversion with respect to the principal amount of the
indebtedness evidenced by this Note being converted shall be payable upon
conversion.
The Corporation shall not be required to convert, and no
surrender of this Note shall be effective for that purpose, while the transfer
books of the Corporation for the Common Stock are closed for any purpose (but
not for any period in excess of 15 days); but the surrender of this Note for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if the
conversion had been made on the date this Note is surrendered, and at the
Conversion Ratio in effect at the date of such surrender.
(d) In case this Note is to be prepaid pursuant to the
mandatory prepayment provisions hereof, such right of conversion shall cease and
terminate as to the portion of this Note that is to be prepaid at the close of
business on the Business Day next preceding the date fixed for mandatory
prepayment unless the Corporation shall default in the payment of the Mandatory
Prepayment Amount.
(e) In connection with the conversion of the indebtedness
evidenced by this Note, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the Trading
Day on which such indebtedness evidenced by this Note is deemed to have been
converted. If more than one note shall be surrendered for conversion by the
Holder at the same time, the number of full shares of Common Stock issuable on
conversion thereof shall be computed on the basis of the total amount of
indebtedness to be converted.
(f) (i) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the indebtedness evidenced by this
Note, free from any preemptive rights, such number of its authorized but
unissued shares of Common Stock as will from time to time be sufficient to
permit the conversion of all of the indebtedness evidenced by this Note, and
shall take all action required to increase the authorized number of shares of
Common Stock if necessary to permit the conversion of all of the indebtedness
evidenced by this Note.
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<PAGE> 8
(ii) If the Corporation shall issue shares of Common
Stock upon conversion of indebtedness evidenced by this Note as contemplated by
this Section 3, the Corporation shall issue together with each such share of
Common Stock any rights issued to holders of Common Stock of the Corporation,
irrespective of whether such rights shall be exercisable at such time, but only
if such rights are issued and outstanding and held by other holders of Common
Stock of the Corporation at such time and have not expired.
(g) The Conversion Ratio will be subject to adjustment from
time to time as follows:
(i) In case the Corporation shall at any time or from
time to time after the Closing Date (A) pay a dividend, or make a distribution,
on the outstanding shares of Common Stock in shares of Common Stock, (B)
subdivide the outstanding shares of Common Stock, (C) combine the outstanding
shares of Common Stock into a smaller number of shares, or (D) issue by
reclassification of the shares of Common Stock any shares of capital stock of
the Corporation, then, and in each such case, the Conversion Ratio in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the Holder shall be entitled to receive the
number of shares of Common Stock (or other capital stock) of the Corporation
that the Holder would have owned or have been entitled to receive after the
happening of any of the events described above, had the indebtedness evidenced
by this Note been converted immediately prior to the happening of such event or
the record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such subdivision,
reclassification, or combination, at the close of business on the day upon which
such corporate action becomes effective. No adjustment shall be made pursuant to
this clause (i) in connection with any transaction to which subsection (h)
applies.
(ii) In case the Corporation shall issue shares of
Common Stock (or rights, warrants, or other securities convertible into or
exchangeable for shares of Common Stock) after the Closing Date at a price per
share (or having a conversion price per share) less than the Current Market
Price per share of Common Stock, as of the date of issuance of such shares or of
such convertible securities, then, and in each such case, the Conversion Ratio
shall be adjusted so that the Holder shall be entitled to receive, upon the
conversion hereof, the number of shares of Common Stock determined by
multiplying (A) the applicable Conversion Ratio on the day immediately prior to
such date by (B) a fraction, the numerator of which shall be the sum of (1) the
number of shares of Common Stock outstanding on such date plus (2) the number of
additional shares of Common Stock issued (or into which the convertible
securities may convert), and the denominator of which shall be the sum of (x)
the number of shares of Common Stock purchasable at the then Current Market
Price per share with the aggregate consideration received or receivable by the
Corporation for the total number of shares of Common Stock so issued (or into
which the rights, warrants, or other convertible securities may convert).
8
<PAGE> 9
An adjustment made pursuant to this clause (ii) shall
be made on the next Business Day following the date on which any such issuance
is made and shall be effective retroactively to the close of business on the
date of such issuance. For purposes of this clause (ii), the aggregate
consideration received or receivable by the Corporation in connection with the
issuance of shares of Common Stock shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such Common Stock,
rights, warrants, and convertible securities plus the minimum aggregate amount,
if any, payable upon exercise of conversion of any such rights, warrants, and
convertible securities into shares of Common Stock. The issuance of any shares
of Common Stock (whether treasury shares or newly issued shares) pursuant to (a)
a dividend or distribution on, or subdivision, combination or reclassification
of, the outstanding shares of Common Stock requiring an adjustment in the
conversion ratio pursuant to clause (i) of this subsection (g), or (b) any
restricted stock or stock option plan or program of the Corporation, or (c) any
option, warrant, right, or convertible security outstanding as of the date
hereof, or (d) the terms of a firmly committed underwritten public offering,
shall not be deemed to constitute an issuance of Common Stock or convertible
securities by the Corporation to which this clause (ii) applies.
Upon the expiration of any unexercised options,
warrants, or rights to convert any convertible securities for which an
adjustment has been made pursuant to this clause (ii), the adjustment shall
forthwith be reversed to effect such rate of conversion as would have been in
effect at the time of such expiration or termination had such options, warrant,
rights or convertible securities, to the extent outstanding immediately prior to
such expiration or termination, never been issued. If the purchase price
provided for in any option, warrant, or rights to convert any convertible
securities for which an adjustment has been made pursuant to this clause (ii),
the additional consideration, if any, payable upon the conversion or exchange of
any convertible securities for which an adjustment has been made, or the rate at
which any convertible securities referred to above are convertible into or
exchangeable for Common Stock shall, at any time, increase or decrease (other
than under or by reason of provisions designed to protect against dilution),
then, the Conversion Ratio in effect at the time of such event shall forthwith
be readjusted to the Conversion Ratio that would have been in effect at such
time and such options, warrants, or rights or convertible securities still
outstanding provided for such changed purchase price, additional consideration,
or conversion rate, as the case may be, at the time initially granted, issued or
sold. No adjustment shall be made pursuant to this clause (ii) in connection
with any transaction to which subsection h applies.
(iii) In case the Corporation shall at any time or
from time to time after the Closing Date declare, order, pay, or make a dividend
or other distribution (including, without limitation, any distribution of stock
or other securities or property or rights or warrants to subscribe for
securities of the Corporation or any of its subsidiaries by way of dividend or
spinoff), on its Common Stock, other than (A) dividends payable in cash in an
aggregate amount not to exceed 50% of net income from continuing operations
before extraordinary items of the Corporation, determined in accordance with
generally accepted accounting principles, during the period (treated as one
accounting period) commencing on March 31, 1992, and ending on the date such
dividend is paid; provided, that, to the extent required by the terms thereof,
such dividend shall have been previously
9
<PAGE> 10
consented to by the holders of the notes issued pursuant to the Note Purchase
Agreement, or (B) dividends or distributions of shares of Common Stock which are
referred to in clause (i) of this subsection (g), then, and in each such case,
the Conversion Ratio shall be adjusted so that the Holder shall be entitled to
receive, upon the conversion hereof, the number of shares of Common Stock
determined by multiplying (1) the applicable Conversion Ratio on the day
immediately prior to the record date fixed for the determination of stockholders
entitled to receive such dividend or distribution by (2) a fraction, the
numerator of which shall be the Current Market Price per share of Common Stock
for the period of 20 Trading Days preceding such record date, and the
denominator of which shall be such Current Market Price per share of Common
Stock less the fair market value, as determined in good faith by the Board, a
certified resolution with respect to which shall be mailed to the Holder, per
share of Common Stock of such dividend or distribution. No adjustment shall be
made pursuant to this clause (iii) in connection with any transaction to which
subsection (h) applies.
(iv) For purposes of this subsection (g), the number
of shares of Common Stock at any time outstanding shall not include any shares
of Common Stock then owned or held by or for the account of the Corporation.
(v) The term "dividend," as used in this subsection
(g), shall mean a dividend or other distribution upon stock of the Corporation.
(vi) Anything in this subsection (g) to the contrary
notwithstanding, the Corporation shall not be required to give effect to any
adjustment in the Conversion Ratio unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Ratio by at least
one one-hundredth (.01) of one share of Common Stock, and when the cumulative
net effect of more than one adjustment so determined shall be to change the
Conversion Ratio by at least one one-hundredth (.01) of one share of Common
Stock, such change in Conversion Ratio shall thereupon be given effect.
(vii) The certificate of any firm of independent
public accountants of recognized standing selected by the Board (which may be
the firm of independent public accountants regularly employed by the
Corporation) shall be presumptively correct for any computation made under this
subsection (g).
(viii) If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
subsection (g) or in the Conversion Ratio then in effect shall be required by
reason of the taking of such record.
(h) In the case of any Major Transaction occurring at any
time, at the option of the Holder, the indebtedness evidenced by the Note shall
thereafter be convertible into, in whole and in
10
<PAGE> 11
part and in lieu of the Common Stock issuable upon such conversion prior to
consummation of such Major Transaction, the kind and amount of shares of stock
and other securities and property receivable (including cash) upon the
consummation of such Major Transaction by a holder of that number of shares of
Common Stock into which such indebtedness, or portion thereof, was convertible
immediately prior to such Major Transaction (including, on a pro rata basis, the
cash, securities, or property received by holders of Common Stock in any tender
or exchange offer that is a step in such Major Transaction). In case securities
or property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 3 shall be deemed
to apply, so far as appropriate and nearly as may be, to such other securities
or property.
(i) In case at any time or from time to time the Corporation
shall pay any stock dividend or make any other non-cash distribution of the
holders of its Common Stock, or shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or any
other right, or there shall be any capital reorganization or reclassification of
the Common Stock of the Corporation or consolidation or merger of the
Corporation with or into another corporation or other entity, or any sale or
conveyance to another corporation or other entity of the assets or property of
the Corporation as an entirety or substantially as an entirety, or there shall
be a voluntary or involuntary dissolution, liquidation, or winding up of the
Corporation, then, in any one or more of said cases the Corporation shall give
at least 20 days prior written notice (the time of mailing of such notice shall
be deemed to be the time of giving thereof) to the Holder at the address of the
Holder as shown on the books of the Corporation as of the date of which (i) the
books of the Corporation shall close or a record shall be taken for such stock
dividend, distribution, or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, or winding up shall take place, as the case may be, provided that
in the case of any Major Transaction to which subsection (h) applies the
Corporation shall give at least 30 days prior written notice as aforesaid. Such
notice shall also specify the date as of which the holders of the Common Stock
of record shall participate in said dividend, distribution, or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, or conveyance or participate in such dissolution,
liquidation, or winding up, as the case may be. Failure to give such notice
shall not invalidate any action so taken.
(j) Anything herein to the contrary notwithstanding, the
issuance or sale of the following shares of Common Stock or options, warrants,
or other rights to purchase Common Stock shall be excluded from any calculation
of, and shall not be deemed issued or sold for purposes of calculating, any
reduction, adjustment, or readjustment of the Conversion Ratio hereunder: (i)
shares of Common Stock issued upon conversion of the indebtedness evidenced by
this Note or any portion thereof; (ii) shares of Common Stock or options,
warrants, or other rights to purchase Common Stock issuable, reserved for
issuance, or issued pursuant to a stock option plan, employee stock ownership
plan, or other compensatory benefit plan of the Corporation, duly adopted by the
Board; (iii) shares of Common Stock, issuable, reserved for issuance, or issued
pursuant to any currently outstanding warrants or options, or any options,
warrants, or other rights issuable, reserved for issuance, or issued to officers
of the Corporation in the future for compensatory purposes, if fully
11
<PAGE> 12
authorized by the Board; and (iv) shares of Common Stock issued upon conversion
of the indebtedness evidenced by the Convertible Notes or the currently issued
and outstanding preferred stock.
SECTION 4. REPORTS AS TO ADJUSTMENTS. Upon any adjustment of
the Conversion Ratio then in effect and any increase or decrease in the number
of shares of Common Stock issuable upon the operation of the conversion set
forth in Section 3, then, and in each such case, the Corporation shall promptly
deliver to the Holder, a certificate signed by the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Ratio then in effect following such adjustment and
the increased or decreased number of shares issuable upon the conversion granted
by Section 3, and shall set forth in reasonable detail the method of calculation
of each and a brief statement of the facts requiring such adjustment. Where
appropriate, such notice to the Holder may be given in advance and included as
part of the notice required under the provisions of Section 3(i).
SECTION 5. MANDATORY CONVERSION. (a) At any time after June
22, 1997, and so long as at such time the Common Stock is listed or admitted to
trading on a national securities exchange, the Corporation may require the
Holder to convert all or a portion of the principal amount of the indebtedness
evidenced by this Note into shares of Common Stock if, at such time, the Current
Market Price of the Common Stock has equalled or exceeded one hundred fifty
percent (150%) of the Conversion Price (as it may from time to time be adjusted)
for forty-five (45) consecutive Trading Days following the forty-fifth monthly
anniversary of the Closing Date. To exercise such right, the Corporation must
deliver a Mandatory Conversion Notice of the exercise of such right to the
Holder within thirty (30) days of the last day of such forty-five (45) day
period, such Mandatory Conversion Notice must be given at least ten (10)
Business Days, but not more than fifteen (15) Business Days prior to the
proposed Mandatory Conversion Date, and such Mandatory Conversion Notice must
specify the proposed Mandatory Conversion Date and the portion of the principal
amount of the indebtedness evidenced by this Note to be converted into Common
Stock.
(b) All conversions effected pursuant to the preceding
paragraph will be made effective as of the close of business on the Mandatory
Conversion Date at the Conversion Ratio in effect on the Mandatory Conversion
Date; provided, however, that, in order to be able to convert, the Current
Market Price on the Mandatory Conversion Date must equal or exceed one hundred
fifty percent (150%) of the Conversion Price in effect on the Mandatory
Conversion Date. If the Current Market Price on the Mandatory Conversion Date
does not equal or exceed one hundred fifty percent (150%) of the Conversion
Price in effect on the Mandatory Conversion Date, the Corporation's election to
require conversion will be deemed void and no conversion will be effected
pursuant to such notice. Such event will not be deemed, however, to alter or
restrict the Corporation's right to again require conversion at such time as the
Current Market Price equals or exceeds one hundred fifty percent (150%) of the
then current Conversion Price for forty-five (45) consecutive Trading Days prior
to such time. Upon conversion required by the Corporation pursuant to this
paragraph
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<PAGE> 13
and the immediately preceding paragraph, all accrued but unpaid interest with
respect to the principal amount of the indebtedness evidenced by this Note being
converted shall be payable in accordance with the provisions of the following
paragraph.
(c) Conversions of the indebtedness evidenced by this Note
effected by the exercise of the Corporation's right to require conversion will
be deemed effective as of the close of business on the Mandatory Conversion Date
without any action by the Holder and the Holder will, as of such time, be a
stockholder of the Corporation with respect to the number of shares of Common
Stock into which the principal balance evidenced by this Note (or such portion
of the principal balance evidenced by this Note as the Corporation shall have
specified) shall have been converted. The Holder agrees promptly to surrender
this Note for cancellation following mandatory conversion. Certificates
representing the shares of Common Stock issuable by the Corporation as a result
of the mandatory conversion of all or a portion of the principal balance of the
indebtedness evidenced by this Note and all dividends and other distributions
payable with respect to such shares and all accrued but unpaid interest payable
pursuant to the immediately preceding paragraph will be retained by the
Corporation pending surrender of this Note for cancellation. As promptly as
practicable, and in any event within five (5) Business Days after the surrender
of this Note, the Corporation shall deliver or cause to be delivered, either by
personal delivery or by certified or registered mail or by a recognized
overnight courier service, in any such case, properly insured, to the Holder in
accordance with the written instructions of the Holder (i) certificates
representing the number of Conversion Shares to which the Holder shall be
entitled, and (ii) if less than the entire principal amount of indebtedness
evidenced by this Note is being converted, a new promissory note, in the form of
this Note, for the balance of the indebtedness that is not being so converted.
(d) In connection with the conversion of the indebtedness
evidenced by this Note, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the Trading
Day on which such indebtedness evidenced by this Note is deemed to have been
converted. If more than one note shall be surrendered for conversion by the
Holder at the same time, the number of full shares of Common Stock issuable on
conversion thereof shall be computed on the basis of the total amount of
indebtedness to be converted.
SECTION 6. MANDATORY PREPAYMENT. In the case of any Change
Event occurring at any time, at the option of the Holder, the Holder may require
the Corporation to prepay all or a portion of the then outstanding principal
amount of the indebtedness evidenced by this Note. To exercise such right of
prepayment, the Holder must provide the Corporation with a Mandatory Prepayment
Notice at least thirty (30) days prior to the proposed Mandatory Prepayment Date
which Mandatory Prepayment Notice shall specify the portion of the principal
amount of the indebtedness evidenced by this Note (which must be in integral
multiples of One Thousand Dollars ($1,000)) to be prepaid. On the Mandatory
Prepayment Date specified, the Corporation shall prepay the portion of the
principal amount of the indebtedness evidenced by this Note that the Holder has
specified must be prepaid on such date, plus accrued interest on such principal
amount to the date of the
13
<PAGE> 14
prepayment. Any prepayment shall be made by cashiers check or by wire transfer
of immediately available funds, in currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts,
at such address or to such account, as applicable, as shall be designated to the
Corporation by the Holder.
SECTION 7. OPTIONAL PREPAYMENT. The Note shall be subject to
prepayment, at the option of the Corporation, at any time and from time to time
on and after July 1, 1997. To exercise such right of prepayment, the Corporation
must provide the Holder with an Optional Prepayment Notice at least sixty (60)
days prior to the proposed Optional Prepayment Date which Optional Prepayment
Notice shall specify the portion of the principal amount of the indebtedness
evidenced by this Note (which must be in integral multiples of One Thousand
Dollars ($1,000)) to be prepaid. The Holder's option to convert the indebtedness
evidenced by this Note as set forth in Section 3 hereof shall continue
notwithstanding the exercise of the option of the Corporation to prepay under
this Section 7, so long as the Holder requests conversion in accordance with the
terms hereof up to and including, but not after, the close of business on the
third Business Day prior to the Optional Prepayment Date. On the Optional
Prepayment Date specified, the Corporation shall prepay the portion of the
principal amount of the indebtedness evidenced by this Note that the Corporation
has specified is to be prepaid on such date, plus accrued interest on such
principal amount to the date of the prepayment. Any prepayment shall be made by
cashiers check or by wire transfer of immediately available funds, in currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts, at such address or to such account, as
applicable, as shall be designated to the Corporation by the Holder. This Note
shall not be subject to prepayment, whether in whole or in part, on or before
June 30, 1997.
SECTION 8. SUBORDINATION. (a) The Corporation covenants and
agrees, and the Holder likewise covenants and agrees, that no payment shall be
made by the Corporation on account of principal of or interest on this Note, or
otherwise, if there shall have occurred and be continuing, and the Corporation
and the Holder shall have received notice from the holder or holders of, a
default with respect to any Senior Indebtedness (i) permitting the acceleration
thereof and such default is the subject of a judicial proceeding, or (ii) in an
aggregate principal amount of not less than One Million Dollars ($1,000,000)
entitling such holder or holders of, a default with respect to any Senior
Indebtedness (i) permitting the acceleration thereof and such default is the
subject of a judicial proceeding, or (ii) in an aggregate principal amount of
not less than One Million Dollars ($1,000,000) entitling such holder or holders
to compel the acceleration thereof (provided, however, that in the case of
Senior Indebtedness issued pursuant to an indenture, such notice may be validly
given only by the trustee under such indenture), unless and until such default
or Event of Default shall have been cured or waived or shall have ceased to
exist or such notice is withdrawn or found by a court of competent jurisdiction
to be invalid.
(b) Upon any payment by the Corporation or distribution of
assets of the Corporation of any kind or character, whether in cash, property,
or securities, to creditors of the Corporation under any dissolution or winding
up or liquidation or reorganization of the Corporation, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership, or other similar
14
<PAGE> 15
proceedings, all amounts due or to become due upon all Senior Indebtedness shall
first be paid in full in money or money's worth, or payment thereof provided
for, before any payment is made on account of the principal of or interest on
this Note and upon such dissolution or winding up or liquidation or
reorganization, any payment by the Corporation, or distribution of assets of the
Corporation of any kind or character, whether in cash, property, or securities,
to which the Holder would be entitled except for the provisions hereof, shall be
paid by the Corporation or by any receiver, trustee in bankruptcy, liquidating
trustee, agent, or other person making such payment or distribution directly to
the holders of Senior Indebtedness or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full in money or money's worth, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness,
before any payment or distribution is made to the Holder.
(c) The foregoing notwithstanding, in the event that any
payment of or distribution of assets of the Corporation of any kind or
character, whether in cash, property or securities, prohibited by the foregoing,
shall be received by the Holder before all Senior Indebtedness is paid in full
in money or money's worth, or provision is made for such payment, then and in
such event such payment or distribution shall be paid over or delivered to the
holders of Senior Indebtedness or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in full
in money or money's worth, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to pay all
Senior Indebtedness in full in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness (but subject to the power of a court of competent jurisdiction to
make other equitable provision, which shall have been determined by such court
to give effect to the rights conferred herein upon the Senior Indebtedness and
the holders thereof with respect to this Note or the Holder hereof by a lawful
plan or reorganization or readjustment under applicable bankruptcy law).
(d) The holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Holder, without
incurring responsibility to the Holder and without impairing or releasing the
obligations of the Holder to the holders of Senior Indebtedness: (i) change the
manner, place, or terms of payment or change or extend the time of payment of,
or renew or alter Senior Indebtedness, or otherwise amend, in any manner, Senior
Indebtedness is outstanding; provided, however, that the average weighted
maturity of such Senior Indebtedness shall not be decreased without the consent
of the Holder; (ii) sell, exchange, release, or otherwise deal with any property
pledged, mortgaged, or otherwise securing Senior Indebtedness; (iii) release any
person liable in any manner for the collection of Senior Indebtedness; and (iv)
exercise or refrain from exercising any rights against the Corporation and any
other person.
15
<PAGE> 16
(e) Subject to the payment in full of all amounts then due
(whether by acceleration of the maturity thereof or otherwise) on account of the
principal of, premium, if any, and interest on all Senior Indebtedness at the
time outstanding, the Holder shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property, or
securities of the Corporation applicable to the Senior Indebtedness until the
principal of and interest on this Note shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions by the Corporation to
the holders of Senior Indebtedness of any cash, property, or securities to which
the Holder would be entitled except for the provisions hereof, and no payments
over pursuant to the provisions hereof to the holders of Senior Indebtedness by
the Holder, shall, as between the Corporation, its creditors other than holders
of Senior Indebtedness, and the Holder, be deemed to be a payment by the
Corporation to or on account of the Senior Indebtedness.
(f) It is understood that the foregoing provisions of this
Note are and are intended solely for the purpose of defining the relative rights
of the Holder on the one hand and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Note is intended to or shall impair, as
among the Corporation, its creditors other than the holders of Senior
Indebtedness, and the Holder, the obligation of the Corporation, which is
absolute and unconditional, to pay to the Holder the principal of and interest
on this Note as and when the same shall become due and payable in accordance
with its terms, or is intended to or shall affect the relative rights of the
Holder and creditors of the Corporation other than the holders of Senior
Indebtedness, nor shall anything herein prevent the Holder from exercising all
remedies otherwise permitted by applicable law upon default under this Note or
the Note Purchase Agreement.
(g) Upon any payment or distribution of assets of the
Corporation referred to herein, the Holder shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation, or reorganization proceedings are pending,
or certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent, or other person making such payment or distribution, delivered to the
Holder, for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of Senior Indebtedness and other indebtedness of
the Corporation, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon, and all other facts pertinent thereto.
(h) The Corporation shall give prompt written notice to the
Holder of any fact known to the Corporation that would prohibit the making of
any payment of moneys to or by the Corporation in respect of this Note.
SECTION 9. ACCELERATION. This Note and the indebtedness
evidenced hereby is subject to acceleration under the terms and conditions set
forth in the Note Purchase Agreement.
SECTION 10. MISCELLANEOUS. (a) Any notice required by the
provisions of this Note to be given to the Holder or the Corporation shall be
given and deemed received or delivered in accordance with the provisions of
Section 10.4 of the Note Purchase Agreement.
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<PAGE> 17
(b) In the event of prepayment or conversion of this Note in
part only, a new note or notes for the unpaid or unconverted portion hereof will
be issued in the name or names requested by the Holder upon the cancellation
hereof.
(c) The transfer of this Note is registrable on the books of
the Corporation upon surrender of this Note for registration of transfer at the
offices of the Corporation in Nashville, Tennessee, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Corporation duly executed by, the Holder or its attorney duly authorized in
writing, and thereupon one or more new notes of authorized denominations and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees. New notes are issuable only in registered form without coupons
in denominations of One Thousand Dollars ($1,000) and any integral multiple
thereof. This Note is exchangeable for a like aggregate principal amount of
notes of a different authorized denomination, as requested by the Holder. No
service charge shall be made of any such registration of transfer or exchange,
but the Corporation may require payment of a sum sufficient to cover any tax or
other government charge payable in connection therewith.
(d) Prior to the due presentment of this Note for registration
of transfer, the Corporation and any agent of the Corporation may treat the
person in whose name this Note is registered as the owner hereof for all
purposes, irrespective of whether this Note be overdue, and neither the
Corporation nor any such agent shall be affected by notice to the contrary.
(e) This Note shall be governed by and construed in accordance
with the laws of the State of California.
(f) The Corporation agrees, to the extent permitted by law, to
pay to the Holder all costs and expenses (including attorneys' fees) incurred by
it in the collection hereof or the enforcement of any right or remedy provided
for herein (including such costs and expenses incurred in connection with a
workout or an insolvency or bankruptcy proceeding).
(g) The provisions of the Note Purchase Agreement are hereby
incorporated into this Note by this reference.
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<PAGE> 18
IN WITNESS WHEREOF, the undersigned has executed this Note effective as
of the date first above written.
CORRECTIONS CORPORATION OF AMERICA,
A Delaware corporation
By: /s/ Doctor R. Crants
-------------------------------------------
Doctor R. Crants, Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Darrell K. Massengale
- --------------------------------
Darrell K. Massengale, Secretary
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<PAGE> 19
[FORM OF MANDATORY CONVERSION NOTICE]
- -----------------
- -----------------
- -----------------
Notice is hereby given that, in accordance with the terms and
conditions of the Note hereinafter described and that certain Note Purchase
Agreement, dated June 22, 1992, between Corrections Corporation of America,
Pacific Mutual Life Insurance Company, and PM Group Life Insurance Company, as
amended from time to time, Corrections Corporation of America hereby elects to
require conversion of the 8.5% Convertible, Extendable, Subordinated Note,
originally due September 30, 1998, issued by it (the "Note"). The Note to be
converted and the principal amount thereof to be converted are as follows:
<TABLE>
<CAPTION>
Principal Number of
Outstanding Amount to be Shares to
Note Number Principal Amount Converted Be Delivered
- ----------- ---------------- --------- ------------
<S> <C> <C> <C>
</TABLE>
The Mandatory Conversion Date will be _______________________________ .
CORRECTIONS CORPORATION OF AMERICA
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Exhibit A
19
<PAGE> 20
[FORM OF MANDATORY PREPAYMENT NOTICE]
TO: CORRECTIONS CORPORATION OF AMERICA
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- -----------------
- -----------------
The undersigned owner of the attached Note hereby gives notice that, in
accordance with the terms and conditions of such Note and that certain Note
Purchase Agreement, dated June 22, 1992, between Corrections Corporation of
America, Pacific Mutual Life Insurance Company, and PM Group Life Insurance
Company, as amended from time to time, it hereby exercises its right to require
prepayment of such Note or portion thereof (which is $1,000 or an integral
multiple thereof), plus all accrued but unpaid interest with respect to such
principal amount.
The Mandatory Prepayment Date shall be _____________. The principal
amount to be prepaid shall be $__________________________.
[Name of Holder]
Dated:
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By:
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Name:
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Title:
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Exhibit B
20
<PAGE> 21
[FORM OF CONVERSION NOTICE]
TO: CORRECTIONS CORPORATION OF AMERICA
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- -----------------
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The undersigned owner of the attached Note hereby gives notice that, in
accordance with the terms and conditions of such Note and the Note Purchase
Agreement, dated June 22, 1992, between Corrections Corporation of America,
Pacific Mutual Life Insurance Company, and PM Group Life Insurance Company, as
amended from time to time, it hereby exercises its right to convert such Note,
or portion thereof (which is $1,000 or an integral multiple thereof), below
designated, into shares of Common Stock of Corrections Corporation of America
and directs that the shares issuable and deliverable upon the conversion, and
any notes representing any unconverted principal amount thereof, be issued and
delivered to the registered holder of such Note unless a different name has been
indicated below. If shares or a new note representing unconverted principal are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
[Name of Holder]
Dated:
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By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
Principal Amount to be converted (in
an integral multiple of $1,000, if
less than all):
$
----------------------
Exhibit C
21
<PAGE> 22
Fill in for registration of shares of Common Stock and Note if to be issued
otherwise than to the registered Holder.
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Name
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Address
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Please print name and address
(including zip code number)
SOCIAL SECURITY OR OTHER TAXPAYER
IDENTIFYING NUMBER
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22
<PAGE> 23
[FORM OF OPTIONAL PREPAYMENT NOTICE]
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- ----------
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Notice is hereby given that, in accordance with the terms and
conditions of the Note hereinafter described and that certain Note Purchase
Agreement, dated June 22, 1992, between Corrections Corporation of America,
Pacific Mutual Life Insurance Company, and PM Group Life Insurance Company, as
amended from time to time, Corrections Corporation of America hereby elects to
prepay the 8.5% Convertible, Extendable, Subordinated Note, originally due
September 30, 1998, issued by it (the "Note"). Prepayment of such Note or
portion thereof (which is $1,000 or an integral multiple thereof), plus all
accrued but unpaid interest with respect to such principal amount shall be
effective on the Optional Prepayment Date set forth below.
The Optional Prepayment Date shall be ___________. The principal amount
to be prepaid shall be $_______________________.
CORRECTIONS CORPORATION OF AMERICA
By:
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Name:
--------------------------
Title:
-------------------------
Exhibit D
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<PAGE> 1
EXHIBIT 4(aa)
CORRECTIONS CORPORATION OF AMERICA
8.5% CONVERTIBLE, EXTENDABLE, SUBORDINATED
NOTE ORIGINALLY DUE SEPTEMBER 30, 1998
dated as of
No. 017 June 22, 1992
SECTION 1. PAYMENT OBLIGATION. CORRECTIONS CORPORATION OF
AMERICA, a corporation duly organized and existing under the laws of the State
of Delaware (herein called the "Corporation"), for value received, hereby
promises to pay to ATWELL & CO, or registered assigns (hereinafter referred to
as the "Holder"), the principal sum of Six Hundred Ninety-Six Thousand Dollars
($696,000) on the Maturity Date, and to pay interest thereon from the date
hereof quarterly on September 30, December 31, March 31 and June 30 of each
year, commencing September 30, 1992, at (i) the Coupon Rate, or (ii) upon the
occurrence of a Triggering Event and until the date on which such Triggering
Event is cured or waived or until the date that is ninety (90) days from initial
occurrence of the Triggering Event, whichever is later, at the Triggering Event
Rate, until the principal hereof is paid to the person in whose name this Note
is registered at the close of business on the Business Day immediately preceding
the date such payment is due. Payment of the principal of and interest on this
Note will be made by cashiers check or by wire transfer of immediately available
funds, in currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts, at such address or to such
account, as applicable, as shall be designated to the Corporation by the Holder.
SECTION 2. DEFINITIONS. As used herein, the following terms
will be deemed to have the meanings set forth below:
"BOARD" means the board of directors of the Corporation.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday, or
Friday that is not a day on which banking institutions in Los Angeles,
California are authorized or obligated by law or executive order to
close.
"CHANGE EVENT" shall mean:
(a) the acquisition by any individual, entity, or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more
of the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in
the election of directors, but excluding, for this purpose,
any such acquisition by (i) the Corporation or any of its
subsidiaries, (ii) any employee benefit plan (or related
trust) of the Corporation or its subsidiaries, or (iii)
<PAGE> 2
any corporation with respect to which, following such
acquisition, more than 50% of the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by
individuals and entities who were the beneficial owners of
voting securities of the Corporation immediately prior to such
acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the
combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in
the election of directors; or
(b) the Incumbent Board shall cease for any reason to
constitute as least fifty percent (50%) of the members of the
Board; or
(c) approval by the stockholders of the Corporation of a
reorganization, merger, or consolidation, in each case, with
respect to which all or substantially all the individuals and
entities who were the respective beneficial owners of the
voting securities of the Corporation immediately prior to such
reorganization, merger, or consolidation do not, following
such reorganization, merger, or consolidation beneficially
own, directly or indirectly, more than 50% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the
corporation resulting from such reorganization, merger, or
consolidation; or
(d) the sale or other disposition of all or substantially all
the assets or property of the Corporation in one transaction
or a series of related transactions.
"CLOSING DATE" shall have the meaning ascribed thereto in Section 2.2
of the Note Purchase Agreement.
"COMMON STOCK" means the common stock of the Corporation, par value
$1.00 per share.
"CONVERSION PRICE" means $1.694 per share of Common Stock, subject to
adjustment from time to time as herein set forth.
"CONVERSION RATIO" means the number of Conversion Shares to be
delivered upon conversion of One Hundred Dollars ($100) of principal
amount of this Note. Subject to the provisions for adjustment set forth
herein, the Conversion Ration shall be determined as the quotient of
(i) the principal amount of this Note to be converted, divided by (ii)
the Conversion Price. Subject to the provisions for adjustment set
forth herein, the Conversion Ratio initially shall be 59.03:1.0.
"CONVERSION SHARES" means fully paid and nonassessable shares of Common
Stock issuable upon conversion of the indebtedness evidenced by this
Note.
2
<PAGE> 3
"CONVERTIBLE NOTES" means the Corporation's (a) $7,000,000 original
aggregate principal amount 8.5% Convertible Subordinated Notes due
November 7, 1999, and (b) the Corporation's $2,700,000 aggregate
principal amount 8.5% Convertible Subordinated Notes due on various
dates, the latest of which is January 16, 2000.
"COUPON RATE" means eight and one-half percent (8.5%) per annum.
"CURRENT MARKET PRICE" when used with reference to shares of Common
Stock, shall mean the closing price per share of Common Stock on such
date and, when used with reference to shares of Common Stock for any
period shall mean the average of the daily closing prices per share of
Common Stock for such period. The closing price for each day shall be
the last quoted sale price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or such other system then in use, or, if on
any such date the Common Stock is not quoted nor so reported, the
average of the closing bide and asked prices as furnished by a
professional market maker making a market in the Common Stock selected
by the Board. If the Common Stock is listed or admitted to trading on a
national securities exchange, the closing price shall be the last sale
price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as securities
listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading. If the Common Stock is
not publicly held or so listed or publicly traded, "Current Market
Price" shall mean the fair market value per share of Common Stock as
determined in good faith by the Board based on an opinion of an
independent investment banking firm with an established national
reputation as a valuer of securities, which opinion may be based on
such assumptions as such firm shall deem to be necessary and
appropriate.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 7.1 of
the Note Purchase Agreement.
"EXCHANGE ACT" shall have the meaning set forth in Section 3.1 of the
Note Purchase Agreement.
"INCUMBENT BOARD" means the individuals who, as of the Closing Date,
constitute the Board; provided, however, that any individual becoming a
director subsequent to the Closing Date, whose election, or nomination
for election by the Corporation's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board.
3
<PAGE> 4
"MAJOR TRANSACTION" shall mean:
(a) approval by the stockholders of the Corporation of a
reorganization, merger, or consolidation, in each case, with
respect to which all or substantially all the individuals and
entities who were the respective beneficial owners of the
voting securities of the Corporation immediately prior to such
reorganization, merger, or consolidation do not, following
such reorganization, merger, or consolidation beneficially
own, directly or indirectly, more than 50% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the
Corporation resulting from such reorganization, merger, or
consolidation; or
(b) the sale or other disposition of all or substantially all
the assets or property of the Corporation in one transaction
or a series of related transactions.
"MANDATORY CONVERSION DATE" means the Business Day specified by the
Corporation, in compliance with the provisions hereof, as the date on
which all or a portion of the indebtedness evidenced by this Note will
be converted into shares of Common Stock pursuant to the Corporation's
right to compel such conversion.
"MANDATORY CONVERSION NOTICE" means a written notice substantially in
the form of the notice attached hereto as Exhibit A and incorporated
herein by this reference.
"MANDATORY PREPAYMENT DATE" means the Business Day specified by the
Holder, in compliance with the provision hereof, as the date on which
all or a portion of the indebtedness evidenced by this Note must be
prepaid pursuant to the Holder's right to compel such prepayment.
"MANDATORY PREPAYMENT NOTICE" means a written notice substantially in
the form of the notice attached hereto as Exhibit B and incorporated
herein by this reference.
"MATURITY DATE" means (i) September 30, 1998, or (ii) September 30,
1999, if the Holder of this Note elects, by written notice given to the
Corporation at least sixty (60) days but not more than one hundred
twenty (120) days prior to September 30, 1998, to extend the then
extant "Maturity Date" to September 30, 1999, or (iii) September 30,
2000, if the Holder of this Note elects, by written notice given to the
Corporation at least sixty (60) days but not more than one hundred
twenty (120) days prior to September 30, 1999, to extend the then
extant "Maturity Date" to September 30, 2000.
"NOTE" means this 8.5% convertible, extendable, subordinated note
issued by the Corporation.
4
<PAGE> 5
"NOTE PURCHASE AGREEMENT" means that certain Note Purchase Agreement,
dated as of June 22, 1992, between the Corporation, Pacific Mutual Life
Insurance Company, and PM Group Life Insurance Company, as amended from
time to time.
"OPTIONAL CONVERSION NOTICE" means a written notice substantially in
the form of the notice attached hereto as Exhibit C and incorporated
herein by this reference.
"OPTIONAL PREPAYMENT NOTICE" means a written notice substantially in
the form of the notice attached hereto as Exhibit D and incorporated
herein by this reference.
"SENIOR INDEBTEDNESS" means the principal of and premium, if any, and
unpaid interest on (a) indebtedness (other than indebtedness evidenced
by the Convertible Notes, indebtedness that is subordinated in right of
payment to one or more item or type of indebtedness of the Corporation,
or indebtedness incurred in violation of the terms and conditions of
the Note Purchase Agreement) of the Corporation, irrespective of
whether secured and whether heretofore or hereafter (i) incurred for
borrowed money, or (ii) evidenced by a note or similar instrument given
in connection with the acquisition by the Corporation of any business,
properties, or assets, including securities (but not including any
account payable or other obligation created or assumed by the
Corporation in the ordinary course of business in connection with the
obtaining of materials or services), (b) any refundings, renewals,
extensions, or deferrals of any of the indebtedness included as Senior
Indebtedness by virtue of clause (a) hereof, and (c) obligations under
capital leases; in each case for the payment of which the Corporation
is liable directly or indirectly by guarantee, letter of credit,
obligation to purchase or acquire, or otherwise, unless the terms of
the instrument evidencing such indebtedness or capital lease or
pursuant to which such indebtedness or capital lease is outstanding
specifically provide that such indebtedness or capital lease is not
superior in right of payment to the indebtedness evidenced by this
Note.
"TRADING DAY" means, if the Common Stock is listed or admitted to
trading on any national securities exchange, a day on which such
exchange is open for the transaction of business, otherwise, a Business
Day.
"TRANCHE C CLOSING DATE" shall have the meaning ascribed thereto in
Section 3.1 of the Note Purchase Agreement.
"TRIGGERING EVENT" means the occurrence of any Unmatured Event of
Default or Event of Default described in clauses (i), (ii), and (iv)
through (x), inclusive, of Section 7.1 of the Note Purchase Agreement.
For purposes of determining the period during which the Triggering
Event Rate shall be in effect, a Triggering Event shall not be deemed
to have occurred until the date on which the Holder shall have given
notice of the occurrence thereof to the Corporation.
"TRIGGERING EVENT RATE" means ten and one-half percent (10.5%) per
annum.
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<PAGE> 6
"UNMATURED EVENT OF DEFAULT"shall mean any event or condition, the
occurrence of which would, with the lapse of time or the giving of
notice, or both, constitute an Event of Default.
SECTION 3. OPTIONAL CONVERSION. (a) Subject to and upon
compliance with the provisions of this Note, the Holder is entitled, at its
option, at any time on or before the close of business on the Business Day prior
to the Maturity Date, or in case this Note or a portion hereof is called for
conversion by the Corporation in accordance with the terms hereof, or the
Corporation elects to prepay in accordance with the terms hereof, then until and
including, but not after, the close of business on the third Business Day prior
to the Mandatory Conversion Date or the Optional Prepayment Date, to convert all
or a portion of the principal amount of the indebtedness evidenced by this Note
into Conversion Shares.
(b) The principal amount of the indebtedness evidenced by this
Note or any portion of the principal amount of the indebtedness evidenced hereby
that is One Thousand Dollars ($1,000), an integral multiple of One Thousand
Dollars ($1,000), or the remaining balance of the principal amount of the
indebtedness evidenced by this Note may be converted into Conversion Shares.
Subject to the provisions for adjustment set forth hereinafter, the indebtedness
evidenced by the Note shall be convertible into Conversion Shares at a price per
share equal to the Conversion Price and the number of Conversion Shares to be
deliverable to the Holder upon conversion of One Hundred Dollars ($100) of the
principal amount of this Note shall be equal to the Conversion Ratio.
(c) Conversion of all or a portion of the indebtedness
evidenced by this Note may be effected by the Holder upon the surrender to the
Corporation at the principal office of the Corporation in the State of Tennessee
or at the office of any agent or agents of the Corporation, as may be designated
by the Board, of this Note, duly endorsed or assigned to the Corporation or in
blank, accompanied by an Optional Conversion Notice to the Corporation that the
Holder elects to convert the principal amount of the indebtedness evidenced by
this Note or, if less than the entire principal amount of the indebtedness
evidenced by this Note is to be converted, the portion thereof to be converted.
Such Optional Conversion Notice shall specify the name or names in which the
Holder wishes the certificate or certificates for shares of Common Stock to be
issued. In case such notice shall specify a name or names other than that of the
Holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names. Other
than such taxes, the Corporation will pay any and all issue and other taxes
(other than taxes based on income) that may be payable in respect of any issue
or delivery of shares of Common Stock on conversion of the indebtedness
evidenced by this Note. No payment or adjustment shall be made upon any
conversion of this Note on account of any dividends or other distributions
payable on the Conversion Shares; provided, however, that the Holder shall be
entitled to receive the full amount of any dividends or other distributions
declared with respect to the Conversion Shares with a record date on or after
the effective date of such conversion.
As promptly as practicable, and in any event within five (5)
Business Days after the surrender of this Note and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes (or the
demonstration to the satisfaction of the Corporation that such taxes have
6
<PAGE> 7
been paid), the Corporation shall deliver or cause to be delivered, either by
personal delivery or by certified or registered mail or by a recognized
overnight courier service, in any such case, properly insured, to the Holder in
accordance with the written instructions of the Holder (i) certificates
representing the number of Conversion Shares to which the Holder shall be
entitled, and (ii) if less than the entire principal amount of indebtedness
evidenced by this Note, for the balance of the indebtedness that is not being so
converted. Such conversion shall be deemed to have been made at the close of
business on the date of giving such notice and of such surrender of this Note so
that the rights of the Holder (as a noteholder) with respect to the principal
amount being converted shall cease, and the person or persons entitled to
receive the Conversion Shares issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Stock as of such day.
All accrued but unpaid interest through the Business Day immediately preceding
the date of such conversion with respect to the principal amount of the
indebtedness evidenced by this Note being converted shall be payable upon
conversion.
The Corporation shall not be required to convert, and no
surrender of this Note shall be effective for that purpose, while the transfer
books of the Corporation for the Common Stock are closed for any purpose (but
not for any period in excess of 15 days); but the surrender of this Note for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if the
conversion had been made on the date this Note is surrendered, and at the
Conversion Ratio in effect at the date of such surrender.
(d) In case this Note is to be prepaid pursuant to the
mandatory prepayment provisions hereof, such right of conversion shall cease and
terminate as to the portion of this Note that is to be prepaid at the close of
business on the Business Day next preceding the date fixed for mandatory
prepayment unless the Corporation shall default in the payment of the Mandatory
Prepayment Amount.
(e) In connection with the conversion of the indebtedness
evidenced by this Note, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the Trading
Day on which such indebtedness evidenced by this Note is deemed to have been
converted. If more than one note shall be surrendered for conversion by the
Holder at the same time, the number of full shares of Common Stock issuable on
conversion thereof shall be computed on the basis of the total amount of
indebtedness to be converted.
(f) (i) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the indebtedness evidenced by this
Note, free from any preemptive rights, such number of its authorized but
unissued shares of Common Stock as will from time to time be sufficient to
permit the conversion of all of the indebtedness evidenced by this Note, and
shall take all action required to increase the authorized number of shares of
Common Stock if necessary to permit the conversion of all of the indebtedness
evidenced by this Note.
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<PAGE> 8
(ii) If the Corporation shall issue shares of Common
Stock upon conversion of indebtedness evidenced by this Note as contemplated by
this Section 3, the Corporation shall issue together with each such share of
Common Stock any rights issued to holders of Common Stock of the Corporation,
irrespective of whether such rights shall be exercisable at such time, but only
if such rights are issued and outstanding and held by other holders of Common
Stock of the Corporation at such time and have not expired.
(g) The Conversion Ratio will be subject to adjustment from
time to time as follows:
(i) In case the Corporation shall at any time or from
time to time after the Closing Date (A) pay a dividend, or make a distribution,
on the outstanding shares of Common Stock in shares of Common Stock, (B)
subdivide the outstanding shares of Common Stock, (C) combine the outstanding
shares of Common Stock into a smaller number of shares, or (D) issue by
reclassification of the shares of Common Stock any shares of capital stock of
the Corporation, then, and in each such case, the Conversion Ratio in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the Holder shall be entitled to receive the
number of shares of Common Stock (or other capital stock) of the Corporation
that the Holder would have owned or have been entitled to receive after the
happening of any of the events described above, had the indebtedness evidenced
by this Note been converted immediately prior to the happening of such event or
the record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such subdivision,
reclassification, or combination, at the close of business on the day upon which
such corporate action becomes effective. No adjustment shall be made pursuant to
this clause (i) in connection with any transaction to which subsection (h)
applies.
(ii) In case the Corporation shall issue shares of
Common Stock (or rights, warrants, or other securities convertible into or
exchangeable for shares of Common Stock) after the Closing Date at a price per
share (or having a conversion price per share) less than the Current Market
Price per share of Common Stock, as of the date of issuance of such shares or of
such convertible securities, then, and in each such case, the Conversion Ratio
shall be adjusted so that the Holder shall be entitled to receive, upon the
conversion hereof, the number of shares of Common Stock determined by
multiplying (A) the applicable Conversion Ratio on the day immediately prior to
such date by (B) a fraction, the numerator of which shall be the sum of (1) the
number of shares of Common Stock outstanding on such date plus (2) the number of
additional shares of Common Stock issued (or into which the convertible
securities may convert), and the denominator of which shall be the sum of (x)
the number of shares of Common Stock purchasable at the then Current Market
Price per share with the aggregate consideration received or receivable by the
Corporation for the total number of shares of Common Stock so issued (or into
which the rights, warrants, or other convertible securities may convert).
8
<PAGE> 9
An adjustment made pursuant to this clause (ii) shall
be made on the next Business Day following the date on which any such issuance
is made and shall be effective retroactively to the close of business on the
date of such issuance. For purposes of this clause (ii), the aggregate
consideration received or receivable by the Corporation in connection with the
issuance of shares of Common Stock shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such Common Stock,
rights, warrants, and convertible securities plus the minimum aggregate amount,
if any, payable upon exercise of conversion of any such rights, warrants, and
convertible securities into shares of Common Stock. The issuance of any shares
of Common Stock (whether treasury shares or newly issued shares) pursuant to (a)
a dividend or distribution on, or subdivision, combination or reclassification
of, the outstanding shares of Common Stock requiring an adjustment in the
conversion ratio pursuant to clause (i) of this subsection (g), or (b) any
restricted stock or stock option plan or program of the Corporation, or (c) any
option, warrant, right, or convertible security outstanding as of the date
hereof, or (d) the terms of a firmly committed underwritten public offering,
shall not be deemed to constitute an issuance of Common Stock or convertible
securities by the Corporation to which this clause (ii) applies.
Upon the expiration of any unexercised options,
warrants, or rights to convert any convertible securities for which an
adjustment has been made pursuant to this clause (ii), the adjustment shall
forthwith be reversed to effect such rate of conversion as would have been in
effect at the time of such expiration or termination had such options, warrant,
rights or convertible securities, to the extent outstanding immediately prior to
such expiration or termination, never been issued. If the purchase price
provided for in any option, warrant, or rights to convert any convertible
securities for which an adjustment has been made pursuant to this clause (ii),
the additional consideration, if any, payable upon the conversion or exchange of
any convertible securities for which an adjustment has been made, or the rate at
which any convertible securities referred to above are convertible into or
exchangeable for Common Stock shall, at any time, increase or decrease (other
than under or by reason of provisions designed to protect against dilution),
then, the Conversion Ratio in effect at the time of such event shall forthwith
be readjusted to the Conversion Ratio that would have been in effect at such
time and such options, warrants, or rights or convertible securities still
outstanding provided for such changed purchase price, additional consideration,
or conversion rate, as the case may be, at the time initially granted, issued or
sold. No adjustment shall be made pursuant to this clause (ii) in connection
with any transaction to which subsection h applies.
(iii) In case the Corporation shall at any time or
from time to time after the Closing Date declare, order, pay, or make a dividend
or other distribution (including, without limitation, any distribution of stock
or other securities or property or rights or warrants to subscribe for
securities of the Corporation or any of its subsidiaries by way of dividend or
spinoff), on its Common Stock, other than (A) dividends payable in cash in an
aggregate amount not to exceed 50% of net income from continuing operations
before extraordinary items of the Corporation, determined in accordance with
generally accepted accounting principles, during the period (treated as one
accounting period) commencing on March 31, 1992, and ending on the date such
dividend is paid; provided, that, to the extent required by the terms thereof,
such dividend shall have been previously
9
<PAGE> 10
consented to by the holders of the notes issued pursuant to the Note Purchase
Agreement, or (B) dividends or distributions of shares of Common Stock which are
referred to in clause (i) of this subsection (g), then, and in each such case,
the Conversion Ratio shall be adjusted so that the Holder shall be entitled to
receive, upon the conversion hereof, the number of shares of Common Stock
determined by multiplying (1) the applicable Conversion Ratio on the day
immediately prior to the record date fixed for the determination of stockholders
entitled to receive such dividend or distribution by (2) a fraction, the
numerator of which shall be the Current Market Price per share of Common Stock
for the period of 20 Trading Days preceding such record date, and the
denominator of which shall be such Current Market Price per share of Common
Stock less the fair market value, as determined in good faith by the Board, a
certified resolution with respect to which shall be mailed to the Holder, per
share of Common Stock of such dividend or distribution. No adjustment shall be
made pursuant to this clause (iii) in connection with any transaction to which
subsection (h) applies.
(iv) For purposes of this subsection (g), the number
of shares of Common Stock at any time outstanding shall not include any shares
of Common Stock then owned or held by or for the account of the Corporation.
(v) The term "dividend," as used in this subsection
(g), shall mean a dividend or other distribution upon stock of the Corporation.
(vi) Anything in this subsection (g) to the contrary
notwithstanding, the Corporation shall not be required to give effect to any
adjustment in the Conversion Ratio unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Ratio by at least
one one-hundredth (.01) of one share of Common Stock, and when the cumulative
net effect of more than one adjustment so determined shall be to change the
Conversion Ratio by at least one one-hundredth (.01) of one share of Common
Stock, such change in Conversion Ratio shall thereupon be given effect.
(vii) The certificate of any firm of independent
public accountants of recognized standing selected by the Board (which may be
the firm of independent public accountants regularly employed by the
Corporation) shall be presumptively correct for any computation made under this
subsection (g).
(viii) If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
subsection (g) or in the Conversion Ratio then in effect shall be required by
reason of the taking of such record.
(h) In the case of any Major Transaction occurring at any
time, at the option of the Holder, the indebtedness evidenced by the Note shall
thereafter be convertible into, in whole and in
10
<PAGE> 11
part and in lieu of the Common Stock issuable upon such conversion prior to
consummation of such Major Transaction, the kind and amount of shares of stock
and other securities and property receivable (including cash) upon the
consummation of such Major Transaction by a holder of that number of shares of
Common Stock into which such indebtedness, or portion thereof, was convertible
immediately prior to such Major Transaction (including, on a pro rata basis, the
cash, securities, or property received by holders of Common Stock in any tender
or exchange offer that is a step in such Major Transaction). In case securities
or property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 3 shall be deemed
to apply, so far as appropriate and nearly as may be, to such other securities
or property.
(i) In case at any time or from time to time the Corporation
shall pay any stock dividend or make any other non-cash distribution of the
holders of its Common Stock, or shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or any
other right, or there shall be any capital reorganization or reclassification of
the Common Stock of the Corporation or consolidation or merger of the
Corporation with or into another corporation or other entity, or any sale or
conveyance to another corporation or other entity of the assets or property of
the Corporation as an entirety or substantially as an entirety, or there shall
be a voluntary or involuntary dissolution, liquidation, or winding up of the
Corporation, then, in any one or more of said cases the Corporation shall give
at least 20 days prior written notice (the time of mailing of such notice shall
be deemed to be the time of giving thereof) to the Holder at the address of the
Holder as shown on the books of the Corporation as of the date of which (i) the
books of the Corporation shall close or a record shall be taken for such stock
dividend, distribution, or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, or winding up shall take place, as the case may be, provided that
in the case of any Major Transaction to which subsection (h) applies the
Corporation shall give at least 30 days prior written notice as aforesaid. Such
notice shall also specify the date as of which the holders of the Common Stock
of record shall participate in said dividend, distribution, or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, or conveyance or participate in such dissolution,
liquidation, or winding up, as the case may be. Failure to give such notice
shall not invalidate any action so taken.
(j) Anything herein to the contrary notwithstanding, the
issuance or sale of the following shares of Common Stock or options, warrants,
or other rights to purchase Common Stock shall be excluded from any calculation
of, and shall not be deemed issued or sold for purposes of calculating, any
reduction, adjustment, or readjustment of the Conversion Ratio hereunder: (i)
shares of Common Stock issued upon conversion of the indebtedness evidenced by
this Note or any portion thereof; (ii) shares of Common Stock or options,
warrants, or other rights to purchase Common Stock issuable, reserved for
issuance, or issued pursuant to a stock option plan, employee stock ownership
plan, or other compensatory benefit plan of the Corporation, duly adopted by the
Board; (iii) shares of Common Stock, issuable, reserved for issuance, or issued
pursuant to any currently outstanding warrants or options, or any options,
warrants, or other rights issuable, reserved for issuance, or issued to officers
of the Corporation in the future for compensatory purposes, if fully
11
<PAGE> 12
authorized by the Board; and (iv) shares of Common Stock issued upon conversion
of the indebtedness evidenced by the Convertible Notes or the currently issued
and outstanding preferred stock.
SECTION 4. REPORTS AS TO ADJUSTMENTS. Upon any adjustment of
the Conversion Ratio then in effect and any increase or decrease in the number
of shares of Common Stock issuable upon the operation of the conversion set
forth in Section 3, then, and in each such case, the Corporation shall promptly
deliver to the Holder, a certificate signed by the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Ratio then in effect following such adjustment and
the increased or decreased number of shares issuable upon the conversion granted
by Section 3, and shall set forth in reasonable detail the method of calculation
of each and a brief statement of the facts requiring such adjustment. Where
appropriate, such notice to the Holder may be given in advance and included as
part of the notice required under the provisions of Section 3(i).
SECTION 5. MANDATORY CONVERSION. (a) At any time after June
22, 1997, and so long as at such time the Common Stock is listed or admitted to
trading on a national securities exchange, the Corporation may require the
Holder to convert all or a portion of the principal amount of the indebtedness
evidenced by this Note into shares of Common Stock if, at such time, the Current
Market Price of the Common Stock has equalled or exceeded one hundred fifty
percent (150%) of the Conversion Price (as it may from time to time be adjusted)
for forty-five (45) consecutive Trading Days following the forty-fifth monthly
anniversary of the Closing Date. To exercise such right, the Corporation must
deliver a Mandatory Conversion Notice of the exercise of such right to the
Holder within thirty (30) days of the last day of such forty-five (45) day
period, such Mandatory Conversion Notice must be given at least ten (10)
Business Days, but not more than fifteen (15) Business Days prior to the
proposed Mandatory Conversion Date, and such Mandatory Conversion Notice must
specify the proposed Mandatory Conversion Date and the portion of the principal
amount of the indebtedness evidenced by this Note to be converted into Common
Stock.
(b) All conversions effected pursuant to the preceding
paragraph will be made effective as of the close of business on the Mandatory
Conversion Date at the Conversion Ratio in effect on the Mandatory Conversion
Date; provided, however, that, in order to be able to convert, the Current
Market Price on the Mandatory Conversion Date must equal or exceed one hundred
fifty percent (150%) of the Conversion Price in effect on the Mandatory
Conversion Date. If the Current Market Price on the Mandatory Conversion Date
does not equal or exceed one hundred fifty percent (150%) of the Conversion
Price in effect on the Mandatory Conversion Date, the Corporation's election to
require conversion will be deemed void and no conversion will be effected
pursuant to such notice. Such event will not be deemed, however, to alter or
restrict the Corporation's right to again require conversion at such time as the
Current Market Price equals or exceeds one hundred fifty percent (150%) of the
then current Conversion Price for forty-five (45) consecutive Trading Days prior
to such time. Upon conversion required by the Corporation pursuant to this
paragraph
12
<PAGE> 13
and the immediately preceding paragraph, all accrued but unpaid interest with
respect to the principal amount of the indebtedness evidenced by this Note being
converted shall be payable in accordance with the provisions of the following
paragraph.
(c) Conversions of the indebtedness evidenced by this Note
effected by the exercise of the Corporation's right to require conversion will
be deemed effective as of the close of business on the Mandatory Conversion Date
without any action by the Holder and the Holder will, as of such time, be a
stockholder of the Corporation with respect to the number of shares of Common
Stock into which the principal balance evidenced by this Note (or such portion
of the principal balance evidenced by this Note as the Corporation shall have
specified) shall have been converted. The Holder agrees promptly to surrender
this Note for cancellation following mandatory conversion. Certificates
representing the shares of Common Stock issuable by the Corporation as a result
of the mandatory conversion of all or a portion of the principal balance of the
indebtedness evidenced by this Note and all dividends and other distributions
payable with respect to such shares and all accrued but unpaid interest payable
pursuant to the immediately preceding paragraph will be retained by the
Corporation pending surrender of this Note for cancellation. As promptly as
practicable, and in any event within five (5) Business Days after the surrender
of this Note, the Corporation shall deliver or cause to be delivered, either by
personal delivery or by certified or registered mail or by a recognized
overnight courier service, in any such case, properly insured, to the Holder in
accordance with the written instructions of the Holder (i) certificates
representing the number of Conversion Shares to which the Holder shall be
entitled, and (ii) if less than the entire principal amount of indebtedness
evidenced by this Note is being converted, a new promissory note, in the form of
this Note, for the balance of the indebtedness that is not being so converted.
(d) In connection with the conversion of the indebtedness
evidenced by this Note, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the Trading
Day on which such indebtedness evidenced by this Note is deemed to have been
converted. If more than one note shall be surrendered for conversion by the
Holder at the same time, the number of full shares of Common Stock issuable on
conversion thereof shall be computed on the basis of the total amount of
indebtedness to be converted.
SECTION 6. MANDATORY PREPAYMENT. In the case of any Change
Event occurring at any time, at the option of the Holder, the Holder may require
the Corporation to prepay all or a portion of the then outstanding principal
amount of the indebtedness evidenced by this Note. To exercise such right of
prepayment, the Holder must provide the Corporation with a Mandatory Prepayment
Notice at least thirty (30) days prior to the proposed Mandatory Prepayment Date
which Mandatory Prepayment Notice shall specify the portion of the principal
amount of the indebtedness evidenced by this Note (which must be in integral
multiples of One Thousand Dollars ($1,000)) to be prepaid. On the Mandatory
Prepayment Date specified, the Corporation shall prepay the portion of the
principal amount of the indebtedness evidenced by this Note that the Holder has
specified must be prepaid on such date, plus accrued interest on such principal
amount to the date of the
13
<PAGE> 14
prepayment. Any prepayment shall be made by cashiers check or by wire transfer
of immediately available funds, in currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts,
at such address or to such account, as applicable, as shall be designated to the
Corporation by the Holder.
SECTION 7. OPTIONAL PREPAYMENT. The Note shall be subject to
prepayment, at the option of the Corporation, at any time and from time to time
on and after July 1, 1997. To exercise such right of prepayment, the Corporation
must provide the Holder with an Optional Prepayment Notice at least sixty (60)
days prior to the proposed Optional Prepayment Date which Optional Prepayment
Notice shall specify the portion of the principal amount of the indebtedness
evidenced by this Note (which must be in integral multiples of One Thousand
Dollars ($1,000)) to be prepaid. The Holder's option to convert the indebtedness
evidenced by this Note as set forth in Section 3 hereof shall continue
notwithstanding the exercise of the option of the Corporation to prepay under
this Section 7, so long as the Holder requests conversion in accordance with the
terms hereof up to and including, but not after, the close of business on the
third Business Day prior to the Optional Prepayment Date. On the Optional
Prepayment Date specified, the Corporation shall prepay the portion of the
principal amount of the indebtedness evidenced by this Note that the Corporation
has specified is to be prepaid on such date, plus accrued interest on such
principal amount to the date of the prepayment. Any prepayment shall be made by
cashiers check or by wire transfer of immediately available funds, in currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts, at such address or to such account, as
applicable, as shall be designated to the Corporation by the Holder. This Note
shall not be subject to prepayment, whether in whole or in part, on or before
June 30, 1997.
SECTION 8. SUBORDINATION. (a) The Corporation covenants and
agrees, and the Holder likewise covenants and agrees, that no payment shall be
made by the Corporation on account of principal of or interest on this Note, or
otherwise, if there shall have occurred and be continuing, and the Corporation
and the Holder shall have received notice from the holder or holders of, a
default with respect to any Senior Indebtedness (i) permitting the acceleration
thereof and such default is the subject of a judicial proceeding, or (ii) in an
aggregate principal amount of not less than One Million Dollars ($1,000,000)
entitling such holder or holders of, a default with respect to any Senior
Indebtedness (i) permitting the acceleration thereof and such default is the
subject of a judicial proceeding, or (ii) in an aggregate principal amount of
not less than One Million Dollars ($1,000,000) entitling such holder or holders
to compel the acceleration thereof (provided, however, that in the case of
Senior Indebtedness issued pursuant to an indenture, such notice may be validly
given only by the trustee under such indenture), unless and until such default
or Event of Default shall have been cured or waived or shall have ceased to
exist or such notice is withdrawn or found by a court of competent jurisdiction
to be invalid.
(b) Upon any payment by the Corporation or distribution of
assets of the Corporation of any kind or character, whether in cash, property,
or securities, to creditors of the Corporation under any dissolution or winding
up or liquidation or reorganization of the Corporation, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership, or other similar
14
<PAGE> 15
proceedings, all amounts due or to become due upon all Senior Indebtedness shall
first be paid in full in money or money's worth, or payment thereof provided
for, before any payment is made on account of the principal of or interest on
this Note and upon such dissolution or winding up or liquidation or
reorganization, any payment by the Corporation, or distribution of assets of the
Corporation of any kind or character, whether in cash, property, or securities,
to which the Holder would be entitled except for the provisions hereof, shall be
paid by the Corporation or by any receiver, trustee in bankruptcy, liquidating
trustee, agent, or other person making such payment or distribution directly to
the holders of Senior Indebtedness or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full in money or money's worth, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness,
before any payment or distribution is made to the Holder.
(c) The foregoing notwithstanding, in the event that any
payment of or distribution of assets of the Corporation of any kind or
character, whether in cash, property or securities, prohibited by the foregoing,
shall be received by the Holder before all Senior Indebtedness is paid in full
in money or money's worth, or provision is made for such payment, then and in
such event such payment or distribution shall be paid over or delivered to the
holders of Senior Indebtedness or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in full
in money or money's worth, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to pay all
Senior Indebtedness in full in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness (but subject to the power of a court of competent jurisdiction to
make other equitable provision, which shall have been determined by such court
to give effect to the rights conferred herein upon the Senior Indebtedness and
the holders thereof with respect to this Note or the Holder hereof by a lawful
plan or reorganization or readjustment under applicable bankruptcy law).
(d) The holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Holder, without
incurring responsibility to the Holder and without impairing or releasing the
obligations of the Holder to the holders of Senior Indebtedness: (i) change the
manner, place, or terms of payment or change or extend the time of payment of,
or renew or alter Senior Indebtedness, or otherwise amend, in any manner, Senior
Indebtedness is outstanding; provided, however, that the average weighted
maturity of such Senior Indebtedness shall not be decreased without the consent
of the Holder; (ii) sell, exchange, release, or otherwise deal with any property
pledged, mortgaged, or otherwise securing Senior Indebtedness; (iii) release any
person liable in any manner for the collection of Senior Indebtedness; and (iv)
exercise or refrain from exercising any rights against the Corporation and any
other person.
15
<PAGE> 16
(e) Subject to the payment in full of all amounts then due
(whether by acceleration of the maturity thereof or otherwise) on account of the
principal of, premium, if any, and interest on all Senior Indebtedness at the
time outstanding, the Holder shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property, or
securities of the Corporation applicable to the Senior Indebtedness until the
principal of and interest on this Note shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions by the Corporation to
the holders of Senior Indebtedness of any cash, property, or securities to which
the Holder would be entitled except for the provisions hereof, and no payments
over pursuant to the provisions hereof to the holders of Senior Indebtedness by
the Holder, shall, as between the Corporation, its creditors other than holders
of Senior Indebtedness, and the Holder, be deemed to be a payment by the
Corporation to or on account of the Senior Indebtedness.
(f) It is understood that the foregoing provisions of this
Note are and are intended solely for the purpose of defining the relative rights
of the Holder on the one hand and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Note is intended to or shall impair, as
among the Corporation, its creditors other than the holders of Senior
Indebtedness, and the Holder, the obligation of the Corporation, which is
absolute and unconditional, to pay to the Holder the principal of and interest
on this Note as and when the same shall become due and payable in accordance
with its terms, or is intended to or shall affect the relative rights of the
Holder and creditors of the Corporation other than the holders of Senior
Indebtedness, nor shall anything herein prevent the Holder from exercising all
remedies otherwise permitted by applicable law upon default under this Note or
the Note Purchase Agreement.
(g) Upon any payment or distribution of assets of the
Corporation referred to herein, the Holder shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation, or reorganization proceedings are pending,
or certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent, or other person making such payment or distribution, delivered to the
Holder, for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of Senior Indebtedness and other indebtedness of
the Corporation, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon, and all other facts pertinent thereto.
(h) The Corporation shall give prompt written notice to the
Holder of any fact known to the Corporation that would prohibit the making of
any payment of moneys to or by the Corporation in respect of this Note.
SECTION 9. ACCELERATION. This Note and the indebtedness
evidenced hereby is subject to acceleration under the terms and conditions set
forth in the Note Purchase Agreement.
SECTION 10. MISCELLANEOUS. (a) Any notice required by the
provisions of this Note to be given to the Holder or the Corporation shall be
given and deemed received or delivered in accordance with the provisions of
Section 10.4 of the Note Purchase Agreement.
16
<PAGE> 17
(b) In the event of prepayment or conversion of this Note in
part only, a new note or notes for the unpaid or unconverted portion hereof will
be issued in the name or names requested by the Holder upon the cancellation
hereof.
(c) The transfer of this Note is registrable on the books of
the Corporation upon surrender of this Note for registration of transfer at the
offices of the Corporation in Nashville, Tennessee, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Corporation duly executed by, the Holder or its attorney duly authorized in
writing, and thereupon one or more new notes of authorized denominations and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees. New notes are issuable only in registered form without coupons
in denominations of One Thousand Dollars ($1,000) and any integral multiple
thereof. This Note is exchangeable for a like aggregate principal amount of
notes of a different authorized denomination, as requested by the Holder. No
service charge shall be made of any such registration of transfer or exchange,
but the Corporation may require payment of a sum sufficient to cover any tax or
other government charge payable in connection therewith.
(d) Prior to the due presentment of this Note for registration
of transfer, the Corporation and any agent of the Corporation may treat the
person in whose name this Note is registered as the owner hereof for all
purposes, irrespective of whether this Note be overdue, and neither the
Corporation nor any such agent shall be affected by notice to the contrary.
(e) This Note shall be governed by and construed in accordance
with the laws of the State of California.
(f) The Corporation agrees, to the extent permitted by law, to
pay to the Holder all costs and expenses (including attorneys' fees) incurred by
it in the collection hereof or the enforcement of any right or remedy provided
for herein (including such costs and expenses incurred in connection with a
workout or an insolvency or bankruptcy proceeding).
(g) The provisions of the Note Purchase Agreement are hereby
incorporated into this Note by this reference.
17
<PAGE> 18
IN WITNESS WHEREOF, the undersigned has executed this Note effective as
of the date first above written.
CORRECTIONS CORPORATION OF AMERICA,
A Delaware corporation
By: /s/ Doctor R. Crants
-------------------------------------------
Doctor R. Crants, Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Darrell K. Massengale
- --------------------------------
Darrell K. Massengale, Secretary
18
<PAGE> 19
[FORM OF MANDATORY CONVERSION NOTICE]
- -----------------
- -----------------
- -----------------
Notice is hereby given that, in accordance with the terms and
conditions of the Note hereinafter described and that certain Note Purchase
Agreement, dated June 22, 1992, between Corrections Corporation of America,
Pacific Mutual Life Insurance Company, and PM Group Life Insurance Company, as
amended from time to time, Corrections Corporation of America hereby elects to
require conversion of the 8.5% Convertible, Extendable, Subordinated Note,
originally due September 30, 1998, issued by it (the "Note"). The Note to be
converted and the principal amount thereof to be converted are as follows:
<TABLE>
<CAPTION>
Principal Number of
Outstanding Amount to be Shares to
Note Number Principal Amount Converted Be Delivered
- ----------- ---------------- --------- ------------
<S> <C> <C> <C>
</TABLE>
The Mandatory Conversion Date will be _______________________________ .
CORRECTIONS CORPORATION OF AMERICA
By:
--------------------------------
Name: --------------------------
Title: -------------------------
Exhibit A
19
<PAGE> 20
[FORM OF MANDATORY PREPAYMENT NOTICE]
TO: CORRECTIONS CORPORATION OF AMERICA
- -----------------
- -----------------
- -----------------
The undersigned owner of the attached Note hereby gives notice that, in
accordance with the terms and conditions of such Note and that certain Note
Purchase Agreement, dated June 22, 1992, between Corrections Corporation of
America, Pacific Mutual Life Insurance Company, and PM Group Life Insurance
Company, as amended from time to time, it hereby exercises its right to require
prepayment of such Note or portion thereof (which is $1,000 or an integral
multiple thereof), plus all accrued but unpaid interest with respect to such
principal amount.
The Mandatory Prepayment Date shall be _____________. The principal
amount to be prepaid shall be $__________________________.
[Name of Holder]
Dated:
--------------
By:
--------------------------------
Name: --------------------------
Title: -------------------------
Exhibit B
20
<PAGE> 21
[FORM OF CONVERSION NOTICE]
TO: CORRECTIONS CORPORATION OF AMERICA
- -----------------
- -----------------
- -----------------
The undersigned owner of the attached Note hereby gives notice that, in
accordance with the terms and conditions of such Note and the Note Purchase
Agreement, dated June 22, 1992, between Corrections Corporation of America,
Pacific Mutual Life Insurance Company, and PM Group Life Insurance Company, as
amended from time to time, it hereby exercises its right to convert such Note,
or portion thereof (which is $1,000 or an integral multiple thereof), below
designated, into shares of Common Stock of Corrections Corporation of America
and directs that the shares issuable and deliverable upon the conversion, and
any notes representing any unconverted principal amount thereof, be issued and
delivered to the registered holder of such Note unless a different name has been
indicated below. If shares or a new note representing unconverted principal are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
[Name of Holder]
Dated:
--------------
By:
--------------------------------
Name: --------------------------
Title: -------------------------
Principal Amount to be converted (in
an integral multiple of $1,000, if
less than all):
$
----------------------
Exhibit C
21
<PAGE> 22
Fill in for registration of shares of Common Stock and Note if to be issued
otherwise than to the registered Holder.
- ---------------------------
Name
- ---------------------------
Address
- ---------------------------
Please print name and address
(including zip code number)
SOCIAL SECURITY OR OTHER TAXPAYER
IDENTIFYING NUMBER
- ---------------------------
22
<PAGE> 23
[FORM OF OPTIONAL PREPAYMENT NOTICE]
- ----------
- ----------
- ----------
Notice is hereby given that, in accordance with the terms and
conditions of the Note hereinafter described and that certain Note Purchase
Agreement, dated June 22, 1992, between Corrections Corporation of America,
Pacific Mutual Life Insurance Company, and PM Group Life Insurance Company, as
amended from time to time, Corrections Corporation of America hereby elects to
prepay the 8.5% Convertible, Extendable, Subordinated Note, originally due
September 30, 1998, issued by it (the "Note"). Prepayment of such Note or
portion thereof (which is $1,000 or an integral multiple thereof), plus all
accrued but unpaid interest with respect to such principal amount shall be
effective on the Optional Prepayment Date set forth below.
The Optional Prepayment Date shall be ___________. The principal amount
to be prepaid shall be $_______________________.
CORRECTIONS CORPORATION OF AMERICA
By:
--------------------------------
Name: --------------------------
Title: -------------------------
Exhibit D
23
<PAGE> 1
EXHIBIT 4(bb)
1997 AMENDMENT TO
1994 SECURITIES PURCHASE AGREEMENT BY AND BETWEEN
CORRECTIONS CORPORATION OF AMERICA AND SODEXHO S.A.
THIS 1997 AMENDMENT TO 1994 SECURITIES PURCHASE AGREEMENT BY AND
BETWEEN CORRECTIONS CORPORATION OF AMERICA AND SODEXHO S.A., dated December 30,
1997 (the "1997 Amendment"), is entered into by and between Sodexho S.A., a
French corporation (the "Purchaser") and Corrections Corporation of America, a
Tennessee corporation and successor in interest to a Delaware corporation of the
same name (the "Corporation").
RECITALS:
WHEREAS, the Corporation and the Purchaser are parties to that certain
Securities Purchase Agreement, dated June 23, 1994, as amended on July 11, 1995
and December 31, 1996 (the Securities Purchase Agreement as amended, known as
the "Securities Purchase Agreement"), pursuant to which, among other things, the
Purchaser received the right to purchase up to $20,000,000 aggregate principal
amount Floating Rate Convertible Note (the "Convertible Note") from the
Corporation on or before December 31, 1997 (the "Expiration Date"); and
WHEREAS, the Purchaser now desires and the Corporation has agreed to
extend the Expiration Date for a period of two (2) years, namely until December
31, 1999 pursuant to the terms and conditions of this Agreement (the
"Extension").
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, covenants and conditions set forth in this Amendment and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Corporation and the Purchaser hereby agree as follows:
1. Amendment of Securities Purchase Agreement.
1.1 The first full paragraph of Section 2.1 of the Securities Purchase
Agreement is hereby amended by deleting such paragraph in its entirety
from the Securities Purchase Agreement and by substituting in lieu
thereof the following language:
Right to Purchase Floating Rate Notes. Subject to the terms
and conditions set forth below, at any time prior December 31,
1999, the Purchaser will have the right to purchase up to $20
million aggregate principal amount Floating Rate Notes
convertible at the conversion price of $6.825 (the "Rights").
1.2 All other provisions contained in the Securities Purchase
Agreement, any exhibits or attachments thereto, and any documents or
instruments referred to therein, shall be hereby
<PAGE> 2
amended, where appropriate and the context permits, to reflect the
Extension and amendments contained in Section 1.1 above.
2. Effectiveness of this Amendment. This 1997 Amendment shall become
effective immediately upon the execution and delivery of this 1997 Amendment by
the Purchaser and the Corporation.
3. Corporate Power and Authorization. The Corporation hereby warrants
and represents to Purchaser that (i) it has the requisite corporate power and
authority to execute, deliver and perform its obligations under this 1997
Amendment; (ii) the execution and delivery by the Corporation of this Amendment
and the consummation of the transactions contemplated hereby (a) have been duly
authorized by all necessary corporate action on the part of the Corporation and
(b) do not and will not require any authorization, consent, approval or license
from or any registration, qualification, designation, declaration or filing
with, any court or government department, commission, board, bureau, agency or
instrumentality, domestic or foreign; and (iii) this 1997 Amendment has been
duly and validly executed and delivered by the Corporation and constitutes the
legal, valid and binding obligation of the Corporation, enforceable in
accordance with its terms.
4. Miscellaneous.
4.1. Amendment to Securities Purchase Agreement. The Securities
Purchase Agreement is hereby, and shall henceforth be deemed to be,
amended, modified and supplemented in accordance with the provisions
hereof, and the respective rights, duties and obligations under the
Securities Purchase Agreement shall hereafter be determined, exercised
and enforced under the Securities Purchase Agreement, as amended,
subject in all respects to such amendments, modifications, and
supplements and all terms and conditions of this 1997 Amendment.
Initially capitalized terms used in this 1997 Amendment shall have the
meanings ascribed thereto in the Securities Purchase Agreement, as
amended hereby, unless otherwise defined herein.
4.2. Ratification of the Agreement. Except as expressly set forth in
this 1997 Amendment, all agreements, covenants, undertakings,
provisions, stipulations, and promises contained in the Agreement and
the Securities are hereby ratified, re-adopted, approved, and confirmed
and remain in full force and effect.
4.3. No Implied Waiver. The execution, delivery and performance of
this 1997 Amendment shall not, except as expressly provided herein,
constitute a waiver or modification of any provision of, or operate as
a waiver of any right, power or remedy of the Purchaser under the
Securities Purchase Agreement or prejudice any right or remedy that
the Purchaser may have or may have in the future under or in
connection with the Securities Purchase Agreement or any instrument or
agreement referred to therein. The Corporation acknowledges and agrees
that the representations and warranties of the Corporation
2
<PAGE> 3
contained in the Securities Purchase Agreement and in this 1997
Amendment shall survive the execution and delivery of this 1997
Amendment and the effectiveness hereof.
4.4. Governing Law. The parties hereby expressly agree that this 1997
Amendment shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware. The English
language version of all documents relating to the transactions
contemplated hereby will govern.
4.5. Counterparts; Facsimile Execution. This 1997 Amendment may be
executed in counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument. Delivery of an executed counterpart of this 1997 Amendment
by facsimile shall be equally as effective as delivery of a manually
executed counterpart. Any party delivering an executed counterpart of
this 1997 Amendment by facsimile shall also deliver a manually executed
counterpart, but the failure to deliver a manually executed counterpart
shall not affect the validity, enforceability, and binding effect of
this 1997 Amendment.
IN WITNESS WHEREOF, the undersigned have caused this 1997 Amendment to
be executed by their duly authorized officers as of the date first written
above.
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-------------------------------
Its: Chairman and CEO
------------------------------
SODEXHO S.A.
By: /s/ Jean-Pierre Cuny
-------------------------------
Its: Senior V.P.
------------------------------
3
<PAGE> 1
EXHIBIT 10.166
MASTER AGREEMENT TO LEASE
BETWEEN
CCA PRISON REALTY TRUST, LANDLORD
AND
CORRECTIONS CORPORATION OF AMERICA, TENANT
DATED: JULY 18, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I SEPARATE LEASE AGREEMENTS; PREMISES AND TERM....................................1
1.01 Separate Lease Agreements.......................................................1
1.02 Leased Property.................................................................2
1.03 Term............................................................................2
1.04 Holding Over....................................................................3
1.05 Surrender.......................................................................3
ARTICLE II RENT............................................................................3
2.01 Base Rent.......................................................................3
2.02 Additional Rent.................................................................3
2.02.01 Other Additional Rent...........................................................4
2.03 Place(s) of Payment of Rent; Direct Payment of Other Additional Rent............4
2.04 Net Lease.......................................................................4
2.05 No Termination, Abatement, Etc..................................................4
ARTICLE III IMPOSITIONS AND UTILITIES.......................................................5
3.01 Payment of Impositions..........................................................5
3.02 Definition of Impositions.......................................................6
3.03 Utilities.......................................................................6
3.04 Escrow of Impositions...........................................................7
3.05 Discontinuance of Utilities.....................................................7
ARTICLE IV INSURANCE.......................................................................8
4.01 Property Insurance..............................................................8
4.02 Liability Insurance.............................................................8
4.03 Insurance Requirements..........................................................9
4.04 Replacement Cost...............................................................10
4.05 Blanket Policy.................................................................10
4.06 No Separate Insurance..........................................................10
4.07 Waiver of Subrogation..........................................................10
4.08 Mortgages......................................................................11
ARTICLE V INDEMNITY; HAZARDOUS SUBSTANCES................................................11
5.01 Tenant's Indemnification.......................................................11
5.02 Hazardous Substances or Materials..............................................11
5.03 Limitation of Landlord's Liability.............................................12
ARTICLE VI USE AND ACCEPTANCE OF PREMISES.................................................13
6.01 Use of Leased Property.........................................................13
6.02 Acceptance of Leased Property..................................................13
6.03 Conditions of Use and Occupancy................................................13
6.04 Financial Statements and Other Information.....................................14
</TABLE>
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<TABLE>
<S> <C> <C> <C>
ARTICLE VII REPAIRS, COMPLIANCE WITH LAWS, AND MECHANICS' LIENS............................14
7.01 Maintenance....................................................................14
7.02 Compliance with Laws...........................................................14
7.03 Required Alterations...........................................................15
7.04 Mechanics' Liens...............................................................15
7.05 Replacements of Fixtures.......................................................15
ARTICLE VIII ALTERATIONS AND SIGNS; TENANT'S PROPERTY; CAPITAL
ADDITIONS TO THE LEASED PROPERTY...............................................16
8.01 Tenant's Right to Construct....................................................16
8.02 Scope of Right.................................................................16
8.03 Cooperation of Landlord........................................................17
8.04 Commencement of Construction...................................................17
8.05 Rights in Tenant Improvements..................................................18
8.06 Personal Property..............................................................18
8.07 Requirements for Personal Property.............................................18
8.08 Signs..........................................................................20
8.09 Financings of Capital Additions to a Leased Property...........................20
ARTICLE IX DEFAULTS AND REMEDIES..........................................................22
9.01 Events of Default..............................................................22
9.02 Remedies.......................................................................24
9.03 Right of Set-Off...............................................................26
9.04 Performance of Tenant's Covenants..............................................26
9.05 Late Charge....................................................................27
9.06 Litigation; Attorneys' Fees....................................................27
9.07 Remedies Cumulative............................................................27
9.08 Escrows and Application of Payments............................................27
9.09 Power of Attorney..............................................................27
ARTICLE X DAMAGE AND DESTRUCTION.........................................................28
10.01 General........................................................................28
10.02 Landlord's Inspection..........................................................29
10.03 Landlord's Costs...............................................................29
10.04 Rent Abatement.................................................................29
10.05 Substantial Damage During Lease Term...........................................30
10.06 Damage Near End of Term........................................................30
ARTICLE XI CONDEMNATION...................................................................30
11.01 Total Taking...................................................................30
11.02 Partial Taking.................................................................31
11.03 Restoration....................................................................31
11.04 Landlord's Inspection..........................................................31
11.05 Award Distribution.............................................................32
11.06 Temporary Taking...............................................................32
ARTICLE XII TENANT'S RIGHT OF FIRST REFUSAL................................................32
</TABLE>
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<TABLE>
<S> <C> <C> <C>
12.01 Rights of First Refusal........................................................32
12.02 Restriction on Exercise of Purchase Refusal Right..............................33
ARTICLE XIII ASSIGNMENT AND SUBLETTING; ATTORNMENT..........................................34
13.01 Prohibition Against Subletting and Assignment..................................34
13.02 Changes of Control.............................................................34
13.03 Operating/Service Agreements...................................................35
13.03.01 Permitted Agreements...........................................................35
13.03.02 Terms of Agreements............................................................35
13.03.03 Copies.........................................................................35
13.03.04 Assignment of Rights in Agreements.............................................35
13.03.05 Licenses, Etc..................................................................35
13.04 Assignment.....................................................................35
13.05 REIT Limitations...............................................................36
13.06 Attornment.....................................................................36
ARTICLE XIV ARBITRATION....................................................................36
14.01 Controversies..................................................................36
14.02 Appointment of Arbitrators.....................................................37
14.03 Arbitration Procedure..........................................................37
14.04 Expenses.......................................................................37
14.05 Enforcement of the Arbitration Award...........................................37
ARTICLE XV QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES..............38
15.01 Quiet Enjoyment................................................................38
15.02 Landlord Mortgages; Subordination..............................................38
15.03 Attornment; Non-Disturbance....................................................38
15.04 Estoppel Certificates..........................................................39
ARTICLE XVI MISCELLANEOUS..................................................................39
16.01 Notices........................................................................39
16.02 Advertisement of Leased Property...............................................40
16.03 Landlord's Access..............................................................40
16.04 Entire Agreement...............................................................40
16.05 Severability...................................................................41
16.06 Captions and Headings..........................................................41
16.07 Governing Law..................................................................41
16.08 Memorandum of Lease............................................................41
16.09 Waiver.........................................................................41
16.10 Binding Effect.................................................................41
16.11 Authority......................................................................41
16.12 Transfer of Permits, Etc.......................................................41
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C> <C>
16.13 Modification...................................................................42
16.14 Incorporation by Reference.....................................................42
16.15 No Merger......................................................................42
16.16 Laches.........................................................................42
16.17 Waiver of Jury Trial...........................................................42
16.18 Permitted Contests.............................................................43
16.19 Construction of Lease..........................................................43
16.20 Counterparts...................................................................43
16.21 Relationship of Landlord and Tenant............................................43
16.22 Landlord's Status as a REIT....................................................44
16.23 Sale of Real Estate Assets.....................................................44
ARTICLE XVII NONDISCLOSURE AND RELATED MATTERS..............................................44
17.01 Covenant Not to Disclose.......................................................44
17.02 Non-Interference Covenant......................................................44
17.03 Business Materials and Property Disclosure.....................................45
17.04 Breach by Landlord.............................................................45
</TABLE>
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<PAGE> 6
MASTER AGREEMENT TO LEASE
This Master Agreement to Lease ("Agreement") dated as of the 18th day
of July, 1997 by and between CCA PRISON REALTY TRUST, a Maryland real estate
investment trust ("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a
Tennessee corporation ("Tenant").
RECITALS
WHEREAS, Tenant (or one or more of Tenant's affiliates) has
concurrently conveyed to Landlord various properties upon which Tenant engages
in the business of the development and management of correctional and detention
facilities, which properties are listed on Schedule A attached hereto (the "Real
Estate Conveyance"), and Landlord and Tenant desire to provide for the lease by
Landlord back to the Tenant of such properties; and
WHEREAS, Landlord may from time to time lease additional properties
that Landlord may acquire to Tenant; and
WHEREAS, Landlord and Tenant desire that each of the properties listed
on Schedule A and each additional property that Landlord may lease to Tenant
shall be the subject of a separate and individual lease agreement describing
said property, the rent and various other terms of said lease (each such lease
agreement referred to individually as a "Lease," and the property that is the
subject of an individual Lease being referred to as "Leased Property"); and
WHEREAS, Landlord and Tenant desire to set forth in this Agreement
certain terms and conditions applicable to all Leases of all Leased Properties,
except as any individual Lease with respect to a particular Leased Property may
otherwise provide;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein and in each Lease, Landlord and
Tenant agree as follows:
ARTICLE I
SEPARATE LEASE AGREEMENTS; PREMISES AND TERM
1.01 Separate Lease Agreements. Landlord and Tenant are
concurrently entering into a separate Lease for each of the Leased Properties
referred to in Schedule A hereto, and may in the future enter into one or more
additional separate Leases for one or more additional Leased Properties. Except
as specifically set forth in a separate Lease, or any amendment, supplement,
schedule or exhibit thereto, all of the provisions of this Agreement shall be
deemed to be incorporated into and made a part of each such separate Lease made
between the Landlord as landlord (or Lessor) and the Tenant as tenant (or
Lessee) during the term of such separate Lease.
<PAGE> 7
1.02 Leased Property. Except as set forth in an individual Lease
(including any schedule or exhibit thereto), the property that is the subject of
each Lease and that shall be considered as leased by the Landlord to the Tenant
thereunder shall consist of:
(a) The land described in the Lease, together with all rights,
titles, appurtenant interests, covenants, licenses, privileges and
benefits thereto belonging, and any easements, rights-of-way, rights of
ingress or egress or other interests in, on, or to any land, highway,
street, road or avenue, open or proposed, in, on, across, in front of,
abutting or adjoining such real property including, without limitation,
any strips and gores adjacent to or lying between such real property
and any adjacent real property (the "Land");
(b) All buildings, improvements, structures and Fixtures now
located or to be located or to be constructed on the Land, including,
without limitation, landscaping, parking lots and structures, roads,
drainage and all above ground and underground utility structures,
equipment systems and other so-called "infrastructure" improvements
(the "Improvements");
(c) All equipment, machinery, fixtures, and other items of
real and/or personal property, including all components thereof,
located in, on or used in connection with, and permanently affixed to
or incorporated into, the Improvements, including, without limitation,
all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and
theft protection equipment, and similar systems, all of which, to the
greatest extent permitted by law, are hereby deemed to constitute real
estate, together with all replacements, modifications, alterations and
additions thereto (collectively the "Fixtures");
(d) All furniture, equipment, inventory and other personal
property identified on Schedule B attached hereto and incorporated
herein by reference (the "Personal Property"). For purposes hereof, (i)
Personal Property shall include all items of property which Tenant is
obligated to install, place, use, maintain, repair and/or replace
pursuant to the provisions of Sections 8.06 and 8.07 hereof however,
such Personal Property is and shall remain the property of Tenant until
the expiration or termination of this Lease, and (ii) Personal Property
shall not include certain proprietary property of Tenant as set forth
on Schedule C.
The Land, Improvements, Fixtures and Personal Property are hereinafter referred
to as the "Leased Property."
SUBJECT, HOWEVER, to the easements, liens, encumbrances, restrictions,
agreements, and other title matters listed or specifically referred to in any
individual Lease ("Permitted Exceptions").
1.03 Term. The term of each Lease shall be as set forth in the
individual Lease for a particular Leased Property.
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<PAGE> 8
1.04 Holding Over. Should Tenant, without the express consent of
Landlord, continue to hold and occupy the Leased Property after the expiration
of the Term, such holding over beyond the Term and the acceptance or collection
of Rent by the Landlord shall operate and be construed as creating a tenancy
from month-to-month and not for any other term whatsoever. During any such
holdover period Tenant shall pay to Landlord for each month (or portion thereof)
Tenant remains in the Leased Property one hundred fifty percent (150%) of the
Base Rent in effect on the expiration date. Said month-to-month tenancy may be
terminated by Landlord by giving Tenant ten (10) days written notice, and at any
time thereafter Landlord may re-enter and take possession of the Leased
Property.
1.05 Surrender. Except as a result of (i) Tenant Improvements and
Capital Additions (as such terms are defined in Section 8.01 hereof); (ii)
normal and reasonable wear and tear (subject to the obligation of Tenant to
maintain the Leased Property in good order and repair during the Term); and
(iii) casualty, taking or other damage and destruction not required to be
repaired by Tenant, Tenant shall surrender and deliver up the Leased Property,
including all Personal Property and replacements thereof required to be provided
by Tenant pursuant to the terms of Sections 8.06 and 8.07 hereof, at the
expiration or termination of the Term broom clean, free of all Tenant's personal
property (but not the Personal Property), and in as good order and condition as
of the Commencement Date.
ARTICLE II
RENT
2.01 Base Rent. Unless otherwise provided in an individual Lease,
Tenant shall pay Landlord annual base rent for each Leased Property that is the
subject of a Lease without notice, demand, set-off or counterclaim in advance,
in lawful money of the United States of America in the amount specified therein
(the "Base Rent") for the Term in consecutive monthly installments payable in
advance on the Commencement Date of each Lease and thereafter on the first day
of each month during the Term, in accordance with the Base Rent Schedule set
forth in or attached to each individual Lease.
2.02 Additional Rent. Beginning on the first day of the month
following the first anniversary date of each Lease, the Tenant shall pay
Landlord an amount (the "Additional Rent") each year equal to a percentage of
the prior year Total Rent (for the purposes hereof, Total Rent is Base Rent plus
Additional Rent) under such Lease, such percentage being the greater of (i) four
percent (4%) or (ii) the percentage which is twenty-five percent (25%) of the
percentage increase in gross management revenues realized by Tenant from its
operations at the applicable Leased Property for such prior year exclusive of
any such increase as is attributable to an expansion in the size or number of
beds in such Leased Property. The Additional Rent shall be payable monthly, in
advance, along with Base Rent, and otherwise in the manner as set forth in
Section 2.01 above. Tenant shall provide to Landlord, not later than thirty (30)
days following each anniversary date of each Lease, Tenant's statement,
certified by Tenant's chief financial officer, setting forth such percentage
increase
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<PAGE> 9
in gross management revenues realized by Tenant for the applicable Leased
Facility for the prior year.
2.02.01 Other Additional Rent. In addition to Base Rent and Additional
Rent, Tenant shall pay all other amounts, liabilities, obligations and
Impositions (as hereinafter defined ) which Tenant assumes or agrees to pay
under this Agreement or any Lease and any fine, penalty, interest, charge and
cost which may be added for nonpayment or late payment of such items
(collectively the "Other Additional Rent").
2.03 Place(s) of Payment of Rent; Direct Payment of Other
Additional Rent. The Base Rent, Additional Rent and Other Additional Rent are
hereinafter referred to as "Rent." Landlord shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Agreement, in
any Lease or by statute or otherwise in the case of nonpayment of the Rent.
Tenant shall make all payments of Base Rent and Additional Rent at Landlord's
principal place of business or as Landlord may otherwise from time to time
direct in writing, and all payments of Other Additional Rent directly to the
person or persons to whom such amount is owing at the time and times when such
payments are due, and shall give to Landlord such evidence of such direct
payments as Landlord shall reasonably request.
2.04 Net Lease. Each Lease shall be deemed and construed to be an
"absolute net lease" or "triple net lease," and Tenant shall pay all Rent,
Impositions, and other charges and expenses in connection with each Leased
Property throughout the Term, without abatement, deduction or set-off.
2.05 No Termination, Abatement, Etc. Except as otherwise
specifically provided in this Agreement or a particular Lease, Tenant shall
remain bound by this Agreement or such Lease in accordance with its terms.
Except as otherwise specifically provided in the Agreement or a particular
Lease, Tenant shall not, without the prior written consent of Landlord, modify,
surrender or terminate the Agreement or such Lease, nor seek nor be entitled to
any abatement, deduction, deferment or reduction of Rent, or set-off against the
Rent. Except as specifically provided in this Agreement or a particular Lease,
the obligations of Landlord and Tenant shall not be affected by reason of (i)
the lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any part thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of eviction by
paramount title; (ii) any claim which Tenant has or might have against Landlord
or by reason of any default or breach of any warranty by Landlord under this
Agreement or a particular Lease or any other agreement between Landlord and
Tenant, or to which Landlord and Tenant are parties; (iii) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceeding affecting Landlord or any assignee or transferee
of Landlord; or (iv) any other cause, whether similar or dissimilar to any of
the foregoing, other than a discharge of Tenant from any such obligations as a
matter of law. Except as otherwise specifically provided in this Agreement or a
particular Lease, and to the maximum extent permitted by law, Tenant hereby
specifically waives all rights, including but not limited to any rights under
any statute relating to rights of tenants in any state in which any Leased
Property is located, arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it
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<PAGE> 10
by law (a) to modify, surrender or terminate any Lease or quit or surrender the
Leased Property or any portion thereof; or (b) entitling Tenant to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Tenant hereunder. The obligations of Landlord and Tenant hereunder shall be
separate and agreements and the Rent and all other sums shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Agreement or a particular Lease or by
termination of this Agreement or a particular Lease other than by reason of an
Event of Default.
ARTICLE III
IMPOSITIONS AND UTILITIES
3.01 Payment of Impositions. Subject to the adjustments set forth
herein, Tenant shall pay, as Other Additional Rent, all Impositions (as
hereinafter defined) that may be levied or become a lien on the Leased Property
or any part thereof at any time (whether prior to or during the Term), without
regard to prior ownership of said Leased Property, before the same becomes
delinquent. Tenant shall furnish to Landlord on an annual basis copies of
official receipts or other satisfactory proof evidencing such payments. Tenant's
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part
thereof. Tenant, at its expense, shall prepare and file all tax returns and
reports in respect of any Imposition as may be required by governmental
authorities, provided, Landlord shall be responsible for the preparation and
filing of any such tax returns or reports in respect of any real or personal
property owned by Landlord. Tenant shall be entitled to any refund due from any
taxing authority if no Event of Default (as hereinafter defined) shall have
occurred hereunder and be continuing. Landlord shall be entitled to any refund
from any taxing authority if an Event of Default has occurred and is continuing.
Any refunds retained by Landlord due to an Event of Default shall be applied as
provided in Section 9.08. Landlord and Tenant shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made with
respect to the Leased Property as may be necessary to prepare any required
returns and reports. In the event governmental authorities classify any property
covered by this Lease as personal property, Landlord and Tenant shall file all
personal property tax returns in such jurisdictions where it may legally so file
with respect to their respective owned personal property. Landlord, to the
extent it possesses the same, and Tenant, to the extent it possess the same,
will provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Tenant will be provided with copies of assessment notices indicating a
value in excess of the reported value in sufficient time for Tenant to file a
protest. Tenant may, upon notice to Landlord, at Tenant's option and at Tenant's
sole cost and expense, protest, appeal, or institute such other proceedings as
Tenant may deem appropriate to effect a reduction of real estate or personal
property assessments and Landlord, at Tenant's expense as aforesaid, shall fully
cooperate with Tenant in such protest, appeal, or other action. Tenant shall
provide Landlord copies of all materials filed or presented in connection with
any such proceeding. Tenant shall promptly reimburse Landlord for all personal
property taxes paid by Landlord upon receipt of billings accompanied by copies
of a bill therefor and payments thereof which identify the
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<PAGE> 11
personal property with respect to which such payments are made. Impositions
imposed in respect to the tax-fiscal period during which the Term commences and
terminates shall be adjusted and prorated between Landlord and Tenant on a per
diem basis, with Tenant being obligated to pay its pro rata share from and
including the Commencement Date to and including the expiration or termination
date of the Term, whether or not such Imposition is imposed before or after such
commencement or termination, and Tenant's obligation to pay its prorated share
thereof shall survive such termination. Tenant shall also pay to Landlord a sum
equal to the amount which Landlord may be caused to pay of any privilege tax,
sales tax, gross receipts tax, rent tax, occupancy tax or like tax (excluding
any tax based on net income), hereinafter levied, assessed, or imposed by any
federal, state, county or municipal governmental authority, or any subdivision
thereof, upon or measured by rent or other consideration required to be paid by
Tenant under this Agreement.
3.02 Definition of Impositions. "Impositions" means, collectively,
(i) taxes (including without limitation, all real estate and personal property
ad valorem (whether assessed as part of the real estate or separately assessed
as unsecured personal property, sales and use, business or occupation, single
business, gross receipts, transaction, privilege, rent or similar taxes, but not
including income or franchise or excise taxes payable with respect to Landlord's
receipt of Rent); (ii) assessments (including without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed with in
the Term); (iii) ground rents, water, sewer or other rents and charges, excises,
tax levies, and fees (including without limitation, license, permit, inspection,
authorization and similar fees); (iv) to the extent they may become a lien on
the Leased Property all taxes imposed on Tenant's operations of the Leased
Property including without limitation, employee withholding taxes, income taxes
and intangible taxes; and (v) all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or unforseen,
of every character in respect of the Leased Property or any part thereof and/or
the Rent (including all interest and penalties thereon due to any failure in
payment by Tenant), which at any time prior to, during or in respect of the Term
hereof may be assessed or imposed on or in respect of or be a lien upon (a)
Landlord or Landlord's interest in the Leased Property or any part thereof; (b)
the Leased Property or any part thereof or any rent therefrom or any estate,
right, title or interest therein; or (c) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Leased Property or the leasing or use of the Leased Property or any part
thereof. Tenant shall not, however, be required to pay (i) any tax based on net
income (whether denominated as a franchise or capital stock or other tax)
imposed on Landlord; or (ii) except as provided in Section 13.01, any tax
imposed with respect to the sale, exchange or other disposition by Landlord of
any Leased Property or the proceeds thereof; provided, however, that if any tax,
assessment, tax levy or charge which Tenant is obligated to pay pursuant to the
first sentence of this definition and which is in effect at any time during the
Term hereof is totally or partially repealed, and a tax, assessment, tax levy or
charge set forth in clause (i) or (ii) immediately above is levied, assessed or
imposed expressly in lieu thereof Tenant shall then pay such tax, levy, or
charge set forth in said clause (i) or (ii).
3.03 Utilities. Tenant shall contract for, in its own name, and
will pay, as Other Additional Rent all taxes, assessments, charges/deposits, and
bills for utilities, including without limitation
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<PAGE> 12
charges for water, gas, oil, sanitary and storm sewer, electricity, telephone
service, trash collection, and all other utilities which may be charged against
the occupant of the Improvements during the Term. Tenant shall at all times
maintain that amount of heat necessary to ensure against the freezing of water
lines. Tenant hereby agrees to indemnify and hold Landlord harmless from and
against any liability or damages to the utility systems and the Leased Property
that may result from Tenant's failure to maintain sufficient heat in the
Improvements.
3.04 Escrow of Impositions. In the event Tenant persistently fails
to timely pay Impositions with respect to any Leased Facility, then, upon thirty
(30) days written notice from Landlord to Tenant, Tenant shall thereafter
deposit with Landlord on the first day of each month during the remaining Term
hereof and any extended Term, a sum equal to one-twelfth (1/12th) of the
Impositions assessed against such Leased Property which sums shall be used by
Landlord toward payment of such Impositions. If, at the end of any applicable
tax year, any such funds held by Landlord are insufficient to make full payment
of taxes or other Impositions for which such funds are held, Tenant, on demand,
shall pay to Landlord any additional funds necessary to pay and discharge the
obligations of Tenant pursuant to the provisions of this section. If, however,
at the end of any applicable tax year, such funds held by Landlord are in excess
of the total payment required to satisfy taxes or other Impositions for which
such funds are held, Landlord shall apply such excess amounts to Tenant's tax
and Imposition escrow fund for the next tax year. If any such excess exists
following the expiration or earlier termination of any Lease, and subject to
Section 9.08 below, Landlord shall promptly refund such excess amounts to
Tenant. The receipt by Landlord of the payment of such Impositions by and from
Tenant shall only be as an accommodation to Tenant and the taxing authorities,
and shall not be construed as rent or income to Landlord, Landlord serving, if
at all, only as a conduit for delivery purposes. All such deposits by Tenant
shall be held in an interest-bearing account with one or more national banks
having total assets of not less than $1,000,000,000, with all interest thereon
accruing in favor of Tenant. In lieu of making escrow deposits as aforesaid,
Tenant may elect to provide Landlord with a letter of credit, or a payment bond,
in the face amount of one year's Impositions on the subject Leased Property,
issued by a national bank or reputable bonding or surety company, in all
respects reasonably acceptable to Landlord. Said letter of credit or payment
bond shall be drawable or callable, as the case may be, upon Tenant's failure to
timely pay any such Impositions, for the sole purpose of providing the funds
necessary to pay such Impositions, and shall otherwise be in form and substance
reasonably satisfactory to Landlord.
For purposes hereof, "persistently fails to timely pay Impositions"
shall mean failure to timely pay any Imposition with respect to any Leased
Premises for any two (2) Lease Years in any five (5) Lease Year Period,
notwithstanding Tenant's subsequent payment of such Impositions.
3.05 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business for
any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of Rent or operate to
release Tenant from any of Tenant's obligations under this Lease.
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ARTICLE IV
INSURANCE
4.01 Property Insurance. Tenant shall, at Tenant's expense, keep
the Improvements, Fixtures, and other components of the Leased Property insured
against the following risks:
(a) Loss or damage by fire, vandalism and malicious mischief,
sprinkler leakage and all other physical loss perils commonly covered
by "All Risk" insurance in an amount not less than one hundred percent
(100%) of the then full replacement cost thereof (as hereinafter
defined). Such policy shall include an agreed amount endorsement if
available at a reasonable cost. Such policy shall also include
endorsements for contingent liability for operation of building laws,
demolition costs, and increased cost of construction.
(b) Loss or damage by explosion of steam boilers, pressure
vessels, or similar apparatus, now or hereafter installed on the Leased
Property, in commercially reasonable amounts acceptable to Landlord.
(c) Loss of rent under a rental value or business interruption
insurance policy covering risk of loss during the first six (6) months
of reconstruction necessitated by the occurrence of any hazards
described in Sections 4.01(a) or 4.01(b), above, and which causes an
abatement of Rent as provided in Article X hereof, in an amount
sufficient to prevent Landlord or Tenant from becoming a co-insurer,
containing endorsements for extended period of indemnity and premium
adjustment, and written with an agreed amount clause, if the insurance
provided for in this clause (c) is available.
(d) If the Land is located in whole or in part within a
designated flood plain area, loss or damage caused by flood in
commercially reasonable amounts acceptable to Landlord.
(e) Loss or damage commonly covered by blanket crime insurance
including employee dishonesty, loss of money orders or paper currency,
depositor's forgery, and loss of property accepted by Tenant for
safekeeping, in commercially reasonable amounts acceptable to Landlord.
(f) In connection with any repairs or rebuilding by Tenant
under Article X hereof, Tenant shall maintain (or cause its contractor
to maintain) appropriate builder's risk insurance covering any loss or
casualty to the subject Improvements during the course of such repairs
or rebuilding.
4.02 Liability Insurance. Tenant shall, at Tenant's expense,
maintain liability insurance against the following:
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(a) Claims for personal injury or property damage commonly
covered by comprehensive general liability insurance with endorsements
for blanket, contractual, personal injury, owner's protective
liability, real property, fire damage, legal liability, broad form
property damage, and extended bodily injury, with commercially
reasonable amounts for bodily injury and property damage acceptable to
Landlord, but with a combined single limit of not less than Five
Million Dollars ($5,000,000.00) per occurrence and Ten Million Dollars
($10,000,000.00) in the aggregate. At Landlord's request, such
$5,000,000.00 and $10,000,000.00 minimum requirements shall be
increased by up to four percent (4%) per year.
(b) Claims commonly covered by worker's compensation insurance
for all persons employed by Tenant on the Leased Property. Such
worker's compensation insurance shall be in accordance with the
requirements of all applicable local, state, and federal law.
4.03 Insurance Requirements. The following provisions shall apply
to all insurance coverages required hereunder:
(a) The carriers of all policies shall have a Best's Rating of
"A-" or better and a Best's Financial Category of XII or larger and
shall be authorized to do insurance business in the state in which the
Leased Property is located.
(b) Tenant shall be the "named insured" and Landlord and any
mortgagee of Landlord shall be an "additional named insured" on each
policy.
(c) Tenant shall deliver to Landlord certificates or policies
showing the required coverages and endorsements. The policies of
insurance shall provide that the policy may not be canceled or not
renewed, and no material change or reduction in coverage may be made,
without at least thirty (30) days' prior written notice to Landlord.
(d) The policies shall contain a severability of interest
and/or cross-liability endorsement, provide that the acts or omissions
of Tenant will not invalidate the Landlord's coverage, and provide that
Landlord shall not be responsible for payment of premiums.
(e) All loss adjustment shall require the written consent of
Landlord and Tenant, as their interests may appear.
(f) At least ten (10) days prior to the expiration of each
policy, Tenant shall deliver to Landlord a certificate showing renewal
of such policy and payment of the annual premium therefor.
Landlord shall have the right to review the insurance coverages
required hereunder with Tenant from time to time, to obtain the input of third
party professional insurance advisors (at Landlord's expense) with respect to
such insurance coverages, and to consult with Tenant in Tenant's
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annual review and renewal of such insurance coverages. All insurance coverages
hereunder shall be in such form, substance and amounts as are customary or
standard in Tenant's industry.
4.04 Replacement Cost. The term "full replacement cost" means the
actual replacement cost thereof from time to time including increased cost of
construction, with no reductions or deductions. Tenant shall, not later than
thirty (30) days after the anniversary of each policy of insurance, of the Term,
increase the amount of the replacement cost endorsement for the Improvements. If
Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased
Property, Landlord may have such full replacement cost redetermined at any time
after such Permitted Alterations are made, regardless of when the full
replacement cost was last determined.
4.05 Blanket Policy. Tenant may carry the insurance required by
this Article under a blanket policy of insurance, provided that the coverage
afforded Tenant will not be reduced or diminished or otherwise be different from
that which would exist under a separate policy meeting all of the requirements
of this Agreement.
4.06 No Separate Insurance. Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing insurance
by securing an additional policy or additional policies, unless all parties
having an insurable interest in the subject matter of the insurance, including
Landlord and any mortgagees, are included therein as additional named insureds
or loss payees, the loss is payable under said insurance in the same manner as
losses are payable under this Agreement, and such additional insurance is not
prohibited by the existing policies of insurance. Tenant shall immediately
notify Landlord of the taking out of such separate insurance or the increasing
of any of the amounts of the existing insurance by securing an additional policy
or additional policies. The term "mortgages" as used in this Agreement includes
Deeds of Trust and the term "mortgagees" includes trustees and beneficiaries
under a Deed of Trust.
4.07 Waiver of Subrogation. Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term or any extension or renewal thereof, for any and all loss
of, or damage to, any of its property located within or upon, or constituting a
part of, the Leased Property, which loss or damage is covered by valid and
collectible insurance policies, to the extent that such loss or damage is
recoverable under such policies. Said mutual waiver shall be in addition to, and
not in limitation or derogation of, any other waiver or release contained in
this Lease with respect to any loss or damage to property of the parties hereto.
Inasmuch as the said waivers will preclude the assignment of any aforesaid claim
by way of subrogation (or otherwise) to an insurance company (or any other
person), each party hereto agrees immediately to give each insurance company
which has issued to it policies of insurance, written notice of the terms of
said mutual waivers, and to have such insurance policies properly endorsed,
if necessary, to prevent the invalidation of said insurance coverage by reason
of said waivers, so long as such endorsement is available at a reasonable cost.
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4.08 Mortgages. The following provisions shall apply if Landlord
now or hereafter places a mortgage on the Leased Property or any part thereof:
(i) Tenant shall obtain a standard form of mortgage clause insuring the interest
of the mortgagee; (ii) Tenant shall deliver evidence of insurance to such
mortgagee; (iii) loss adjustment shall require the consent of the mortgagee; and
(iv) Tenant shall obtain such other coverages and provide such other information
and documents as may be reasonably required by the mortgagee.
ARTICLE V
INDEMNITY; HAZARDOUS SUBSTANCES
5.01 Tenant's Indemnification. Subject to Section 4.07, Tenant
hereby agrees to indemnify and hold harmless Landlord, its agents, and employees
from and against any and all demands, claims, causes of action, fines,
penalties, damages (including consequential damages), losses, liabilities
(including strict liability), judgments, and expenses (including, without
limitation, attorneys' fees, court costs, and the costs set forth in Section
9.06) incurred in connection with or arising from: (i) the use, condition,
operation or occupancy of each Leased Property; (ii) any activity, work, or
thing done, or permitted or suffered by Tenant in or about the Leased Property;
(iii) any acts, omissions, or negligence of Tenant or any person claiming under
Tenant, or the contractors, agents, employees, invitees, or visitors of Tenant
or any such person; (iv) any claim of any person incarcerated in the Leased
Premises, including claims alleging breach or violation of such person's civil
or legal rights; (v) any breach, violation, or nonperformance by Tenant or any
person claiming under Tenant or the employees, agents, contractors, invitees, or
visitors of Tenant or of any such person, of any term, covenant, or provision of
this Agreement or any Lease or any law, ordinance, or governmental requirement
of any kind; (vi) any injury or damage to the person, property or business of
Tenant, its employees, agents, contractors, invitees, visitors, or any other
person entering upon the Leased Property under the express or implied invitation
of Tenant; and (vii) and any accident, injury to or death of persons or loss of
damage to any item of property occurring at the Leased Property. If any action
or proceeding is brought against Landlord, its employees, or agents by reason of
any such claim, Tenant, upon notice from Landlord, will defend the claim at
Tenant's expense with counsel reasonably satisfactory to Landlord. In the event
Landlord reasonably determines that its interests and the interests of Tenant in
any such action or proceeding are not substantially the same and that Tenant's
counsel cannot adequately represent the interests of Landlord therein, Landlord
shall have the right to hire separate counsel in any such action or proceeding
and the reasonable costs thereof shall be paid for by Tenant.
5.02 Hazardous Substances or Materials. Tenant shall not, either
with or without negligence, injure, overload, deface, damage or otherwise harm
any Leased Property or any part or component thereof; commit any nuisance;
permit the emission of any hazardous agents or substances; allow the release or
other escape of any biologically or chemically active or other hazardous
substances or materials so as to impregnate, impair or in any manner affect,
even temporarily, any element or part of any Leased Property, or allow the
storage or use of such substances or materials in any manner not sanctioned by
law or by the highest standards prevailing
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in the industry for the storage and use of such substances or materials; nor
shall Tenant bring onto any Leased Property any such materials or substances;
permit the occurrence of objectionable noise or odors; or make, allow or suffer
any waste whatsoever to any Leased Property. Landlord may inspect the Leased
Property from time to time, and Tenant will cooperate with such inspections.
Without limitation, "hazardous substances" for the purpose of this Section 5.02
shall include any substances regulated by any local, state or federal law
relating to environmental conditions and industrial hygiene, including, without
limitation, the Resource Conservation and Recovery Act of 1976 ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), the Hazardous Materials Transportation Act, the Federal Water
Pollution Control Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, and all similar federal,
state and local environmental statutes, ordinances and the regulations, orders,
or decrees now or hereafter promulgated thereunder. Notwithstanding the
foregoing, Tenant anticipates using, storing and disposing of certain hazardous
substances in connection with operation of correctional or detention facilities
which are not in violation of the foregoing laws. Such substances include, but
are not limited to the following: medical wastes, diesel fuel, maintenance and
janitorial supplies, and waste from reprographic activities. Upon request by
Landlord, Tenant shall submit to Landlord annual reports regarding Tenant's use,
storage, and disposal of any of the foregoing materials, said reports to include
information regarding continued hazardous materials inspections, personal
interviews, and federal, state and local agency listings. In addition, Tenant
shall execute affidavits, representations and the like from time to time at
Landlord's request concerning Tenant's best knowledge and belief regarding the
presence or absence of hazardous materials on the Leased Property. Other than
for circumstances involving Landlord's gross negligence or intentional
misconduct, Tenant shall indemnify and hold harmless Landlord from and against
all liabilities (including punitive damages), costs and expenses (including
reasonable attorneys' fees) imposed upon or asserted against the Landlord or the
Leased Property on account of, among other things, any applicable federal, state
or local law, ordinance, regulation, order, permit, decree or similar items
relating to hazardous substances, human health or the environment (collectively,
"Environmental Laws") (irrespective of whether there has occurred any violation
of any Environmental Law ), in respect of the Leased Property, including (a)
liability for response costs and for costs of removal and remedial action
incurred by the United States Government, any state or local governmental unit
to any other person or entity, or damages from injury to or destruction or loss
of natural resources, including the reasonable costs of assessing such injury,
destruction or loss, incurred pursuant to any Environmental Law, (b) liability
for costs and expenses of abatement, investigation, removal, remediation,
correction or clean-up, fines, damages, response costs or penalties which arise
from the provisions of any Environmental Law, (c) liability for personal injury
or property damage arising under any statutory or common-law tort theory,
including damages assessed for the maintenance of a public or private nuisance
or for carrying on of a dangerous activity or (d) by reason of a breach of an
environmental representation or warranty by Tenant.
5.03 Limitation of Landlord's Liability. Landlord, its agents and
employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike,
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insurrection, war, court order, requisition, order of governmental body or
authority, fire, explosion, falling objects, steam, water, rain or snow, leak or
flow of water (including water from the elevator system), rain or snow from any
Leased Property or into any Leased Property or from the roof, street, subsurface
or from any other place, or by dampness or from the breakage, leakage,
obstruction, or other defects of the pipes, sprinklers, wires, appliances,
plumbing, air conditioning, or lighting fixtures of the Leased Property, or from
construction, repair, or alteration of the Leased Property or from any acts or
omissions of any other occupant or visitor of the Leased Property, or from the
presence or release of any hazardous substance or material on or from the Leased
Property or from any other cause beyond Landlord's control.
ARTICLE VI
USE AND ACCEPTANCE OF PREMISES
6.01 Use of Leased Property. Tenant shall use and occupy each
Leased Property exclusively as a correctional or detention facility or other
purpose for which the Leased Property is being used at the Commencement Date of
the Term, and for no other purpose without the prior written consent of the
Landlord. Tenant shall obtain and maintain all approvals, licenses, and consents
needed to use and operate each Leased Property for such purposes. Tenant shall
promptly deliver to Landlord complete copies of surveys, examinations,
certification and licensure inspections, compliance certificates, and other
similar reports issued to Tenant by any governmental agency.
6.02 Acceptance of Leased Property. Except as otherwise
specifically provided in this Agreement or in any individual Lease, Tenant
acknowledges that (i) Tenant and its agents have had an opportunity to inspect
the Leased Property; (ii) Tenant has found the Leased Property fit for Tenant's
use; (iii) delivery of the Leased Property to Tenant is in an "as-is" condition;
(iv) Landlord is not obligated to make any improvements or repairs to the Leased
Property; and (v) the roof, walls, foundation, heating, ventilating, air
conditioning, telephone, sewer, electrical, mechanical, utility, plumbing, and
other portions of the Leased Property are in good working order. Tenant waives
any claim or action against Landlord with respect to the condition of the Leased
Property. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR
USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO
QUALITY OR THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
6.03 Conditions of Use and Occupancy. Tenant agrees that during the
Term it shall use and keep the Leased Property in a careful, safe and proper
manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed extra
hazardous on account of fire or otherwise; keep the Leased Property in such
repair and condition as may be required by the local board of health, or other
city, state or federal authorities, free of all cost
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to Landlord; not permit any acts to be done which will cause the cancellation,
invalidation, or suspension of any insurance policy; and permit Landlord and its
agents to enter upon the Leased Property at all reasonable times after notice to
Tenant to examine the condition thereof.
6.04 Financial Statements and Other Information. Within ten (10)
days following Tenant's filing of quarterly and annual reports with the
Securities and Exchange Commission, Tenant shall deliver to Landlord copies of
such reports. Tenant shall provide Landlord at the same time Tenant provides
copies of its quarterly and annual reports as aforesaid (or more often as may be
reasonably requested by Landlord in writing), the following additional financial
information for each calendar quarter hereafter, with respect to each Leased
Property: gross revenues, average occupancy rates and total cash flow (i.e.,
operating income plus depreciation and amortization plus Base Rent plus
Additional Rent hereunder). Tenant shall also deliver to Landlord such
additional financial information as Landlord may reasonably request, provided
the same is of a type normally maintained by Tenant or can be obtained without
undue cost or burden on Tenant's personnel and does not constitute information
which Tenant reasonably determines to be proprietary or confidential.
Additionally, upon Landlord's request, Tenant shall provide Landlord with copies
of Tenant's annual capital expenditure budgets for each Leased Property and any
reports generated by Tenant regarding maintenance and repairs of the Leased
Property.
ARTICLE VII
REPAIRS, COMPLIANCE WITH LAWS, AND MECHANICS' LIENS
7.01 Maintenance. Tenant shall maintain each Leased Property in
good order, repair and appearance, and repair each Leased Property, including
without limitation, all interior and exterior, structural and nonstructural
repairs and replacements to the roof, foundations, exterior walls, building
systems, HVAC systems, parking areas, sidewalks, water, sewer and gas
connections, pipes, and mains. Tenant shall pay as Other Additional Rent the
full cost of maintenance, repairs, and replacements. Tenant shall maintain all
drives, sidewalks, parking areas, and lawns on or about the Leased Property in a
clean and orderly condition, free of accumulations of dirt, rubbish, snow and
ice. Tenant shall permit Landlord to inspect the Leased Property at all
reasonable times, and shall implement all reasonable suggestions of the Landlord
as to the maintenance and replacement of the Leased Property.
7.02 Compliance with Laws. Tenant shall comply with all laws,
ordinances, orders, rules, regulations, and other governmental requirements
relating to the use, condition, or occupancy of each Leased Property, whether
now or hereafter enacted and in force including without limitation, (i)
licensure requirements for operation as a correctional or detention facility,
(ii) requirements of any board of casualty insurance underwriters or insurance
service office for any other similar body having jurisdiction over the Leased
Property, and (iii) all zoning and building codes and Environmental Laws. At
Landlord's request, from time to time, Tenant shall deliver to Landlord copies
of certificates or permits evidencing compliance with such laws, including
without limitation, copies of the correctional or detention facility licenses,
certificates of occupancy and building
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permits. Tenant shall provide Landlord with copies of any notice from any
governmental authority alleging any non-compliance by Tenant or any Leased
Facility with any of the foregoing requirements and such evidence as Landlord
may reasonably require of Tenant's remediation thereof. Tenant hereby agrees to
defend, indemnify and hold Landlord harmless from and against any loss,
liability (including strict liability), claim, damage (including consequential
damages), cost and expense (including attorneys' fees) resulting from any
failure by Tenant to comply with any laws, ordinances, rules, regulations, and
other governmental requirements.
7.03 Required Alterations. Tenant shall, at Tenant's sole cost and
expense, make any additions, changes, improvements or alterations to each Leased
Property, including structural alterations, which may be required by any
governmental authorities, including those required to continue licensure
requirements as a correctional or detention facility, whether such changes are
required by Tenant's use, changes in the law, ordinances, or governmental
regulations, defects existing as of the date of this Lease, or any other cause
whatsoever. Tenant shall provide prior written notice to Landlord of any changes
to each Leased Property pursuant to this Section 7.03 which involve changes to
the structural integrity of such Leased Property or materially affect the
operational capabilities or rated capacity of the Leased Facility. All such
additions, changes, improvements or alterations shall be deemed to be a Tenant
Improvement and shall comply with all laws requiring such alterations and with
the provisions of Section 8.01.
7.04 Mechanics' Liens. Tenant shall have no authority to permit or
create a lien against Landlord's interest in the Leased Property, and Tenant
shall post notices or file such documents as may be required to protect
Landlord's interest in the Leased property against liens. Tenant hereby agrees
to defend, indemnify, and hold Landlord harmless from and against any mechanics'
liens against the Leased Property by reason of work, labor services or materials
supplied or claimed to have been supplied on or to the Leased Property. Tenant
shall immediately remove, bond-off, or otherwise obtain the release of any
mechanics' lien filed against the Leased Property. Tenant shall pay all expenses
in connection therewith, including without limitation, damages, interest, court
costs and reasonable attorneys' fees.
7.05 Replacements of Fixtures. Tenant shall not remove Fixtures
from any Leased Property except to replace the Fixtures by other similar items
of equal quality and value. Items being replaced by Tenant may be removed and
shall become the property of Tenant and items replacing the same shall be and
remain the property of the Landlord. Tenant shall execute, upon written request
from Landlord, any and all documents necessary to evidence Landlord's ownership
of the Fixtures and replacements therefor. Tenant may finance replacements for
the Fixtures by equipment lease or by a security agreement and financing
statement; provided, however, that for any item of Fixtures or Personal Property
having a cost greater than or equal to Twenty Thousand Dollars ($20,000.00),
Tenant may not finance replacements by security agreement or equipment lease
unless (i) Landlord has consented to the terms and conditions of the equipment
lease or security agreement; (ii) the equipment lessor or lender has entered
into a nondisturbance agreement with the Landlord upon terms and conditions
acceptable to Landlord, including without limitation, the following: (a)
Landlord shall have the right (but not the obligation) to assume such security
agreement or
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equipment lease upon the occurrence of an Event of Default by Tenant under any
Lease; (b) the equipment lessor or lender shall notify Landlord of any default
by Tenant under the equipment lease or security agreement and give Landlord a
reasonable opportunity to cure such default; and (c) Landlord shall have the
right to assign its rights under the equipment lease, security agreement, or
nondisturbance agreement; and (iii) Tenant shall, within thirty (30) days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.
ARTICLE VIII
ALTERATIONS AND SIGNS; TENANT'S PROPERTY;
CAPITAL ADDITIONS TO THE LEASED PROPERTY
8.01 Tenant's Right to Construct. During the Term of this
Agreement, so long as no Event of Default shall have occurred and be continuing
as to the Leased Property that is the subject of such improvements, Tenant may
make Capital Additions (as defined herein), or other alterations, additions,
changes and/or improvements to any Leased Property as deemed necessary or useful
to operate the Leased Property as a correction or detention facility (the
"Primary Intended Use") (individually, a "Tenant Improvement," or collectively,
"Tenant Improvements") with the prior written consent of the Landlord, which
will not be unreasonably withheld or delayed. "Capital Additions" shall mean the
construction of one or more new buildings or one or more additional structures
annexed to any portion of any of the Improvements on a particular Leased
Property, which are constructed on any parcel of land or portion of the Land of
a particular Leased Property during the Term of any individual Lease, including
the construction of a new floor, or the repair, replacement, restoration,
remodeling or rebuilding of the Improvements or any portion thereof on any
Leased Property which are not normal, ordinary or recurring to maintain the
Leased Property. Except as otherwise agreed to by Landlord in writing, any such
Tenant Improvement shall be made at Tenant's sole expense and shall become the
property of Landlord upon termination of this Lease. Unless made on an emergency
basis to prevent injury to person or property, Tenant will submit plans to
Landlord for Landlord's prior approval, such approval not to be unreasonably
withheld or delayed, for any Tenant Improvement which is not a Capital Addition
and which has a cost of more than $500,000 or a cost which, when aggregated with
the costs of all such Tenant Improvements for any individual Leased Facility in
the same Lease Year, would cause the total costs of all such Tenant Improvements
to exceed $1,000,000. Such $500,000 and $1,000,000 amounts shall be increased by
four percent (4%) per annum, cumulatively for each subsequent Lease Year.
Additionally, in connection with any Tenant Improvement, including any Capital
Addition, Tenant shall provide Landlord with copies of any plans and
specification therefor, Tenant's budget relating thereto, any required
government permits or approvals, any construction contracts or agreements
relating thereto, and any other information relating to such Tenant Improvement
as Landlord shall reasonably request.
8.02 Scope of Right. Subject to Section 8.01 herein and Section
7.03 concerning required alterations, at Tenant's cost and expense, Tenant shall
have the right to:
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(a) seek any governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need
that Tenant requires to construct any Tenant Improvement;
(b) erect upon the Leased Property such Tenant Improvements as
Tenant deems desirable;
(c) make additions, alterations, changes and improvements in
any Tenant Improvement so erected; and
(d) engage in any other lawful activities that Tenant
determines are necessary or desirable for the development of the Leased
Property in accordance with its Primary Intended Use;
provided, however, Tenant shall not make any Tenant Improvement which would, in
Landlord's reasonable judgment, impair the value or Primary Intended Use of any
Leased Property without Landlord's prior written consent and provided, further
that Tenant shall not be permitted to create a mortgage, lien or any other
encumbrance on any individual Leased Property without Landlord's prior written
consent.
8.03 Cooperation of Landlord. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement within ten (10) business days following the later of (a) the date
Landlord receives Tenant's request, or (b) the date of delivery of any such
application or document to Landlord, so long as the taking of such action,
including the execution of said applications or documents, shall be without cost
to Landlord (or if there is a cost to Landlord, such cost shall be reimbursed by
Tenant), and will not cause Landlord to be in violation of any law, ordinance or
regulation.
8.04 Commencement of Construction. Tenant agrees that:
(a) Tenant shall diligently seek all governmental approvals
relating to the construction of any Tenant Improvement;
(b) Once Tenant begins the construction of any Tenant
Improvement, Tenant shall diligently prosecute any such construction to
completion in accordance with applicable insurance requirements and the
laws, rules and regulations of all governmental bodies or agencies
having jurisdiction over the Leased Property;
(c) Landlord shall have the right at any time and from time to
time to post and maintain upon the Leased Property such notices as may
be necessary to protect Landlord's interest from mechanics' liens,
materialmen's liens or liens of a similar nature;
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(d) Tenant shall not suffer or permit any mechanics' liens or
any other claims or demands arising from the work of construction of
any Tenant Improvement to be enforced against the Leased Property or
any part thereof, and Tenant agrees to hold Landlord and said Leased
Property free and harmless from all liability from any such liens,
claims or demands, together with all costs and expenses in connection
therewith;
(e) All work shall be performed in a good and workmanlike
manner consistent with standards in the industry; and
(f) Subject to Section 8.09 in the case of Capital Additions,
Tenant shall not secure any construction or other financing for the
Tenant Improvements which is secured by a portion of the Leased
Property without Landlord's prior written consent, and any such
financing (i) shall not exceed the cost of the Tenant Improvements,
(ii) shall be subordinate to any mortgage or encumbrance now existing
or hereinafter created with respect to the Leased Property, and (iii)
shall be limited solely to Tenant's interest in the Leased Property
that is the subject of the improvements.
8.05 Rights in Tenant Improvements. Notwithstanding anything to the
contrary in this Lease, all Tenant Improvements constructed pursuant to Section
8.01, any and all subsequent additions thereto and alterations and replacements
thereof, shall be the sole and absolute property of Tenant during the Term of
the particular Lease. Upon the expiration or early termination of any Lease, all
such Tenant Improvements shall become the property of Landlord. Without limiting
the generality of the foregoing, Tenant shall be entitled to all federal and
state income tax benefits associated with any Tenant Improvement during the Term
of this Agreement.
8.06 Personal Property. Tenant shall install, place, and use on the
Leased Property such fixtures, furniture, equipment, inventory and other
personal property in addition to the Fixtures as may be required or as Tenant
may, from time to time, deem necessary or useful to operate the Leased Property
as a correctional or detention facility.
8.07 Requirements for Personal Property. Tenant shall comply with
all of the following requirements in connection with Personal Property:
(a) With respect to each Leased Property, Tenant shall notify
Landlord within one hundred twenty (120) days after each Lease Year of
any additions, substitutions, or replacements of an item of Personal
Property at such Leased Property which individually has a cost of more
than $25,000.00 and shall furnish Landlord with such other information
as Landlord may reasonably request from time to time.
(b) The Personal Property shall be installed in a good and
workmanlike manner, in compliance with all governmental laws,
ordinances, rules, and regulations and all insurance requirements, and
be installed free and clear of any mechanics' liens.
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(c) Tenant shall, at Tenant's sole cost and expense, maintain,
repair, and replace the Personal Property.
(d) Tenant shall, at Tenant's sole cost and expense, keep
Personal Property insured against loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage, and other physical loss perils
commonly covered by fire and extended coverage, boiler and machinery,
and difference in conditions insurance in an amount not less than
ninety percent (90%) of the then full replacement cost thereof. Tenant
shall use the proceeds from any such policy for the repair and
replacement of Personal Property. The insurance shall meet the
requirements of Section 4.03.
(e) Tenant shall pay all taxes applicable to Personal
Property.
(f) If Personal Property is damaged or destroyed by fire or
any other case, Tenant shall promptly repair or replace Personal
Property unless Tenant is entitled to and elects to terminate the Lease
pursuant to Section 10.05.
(g) Unless an Event of Default (or any event which, with the
giving of notice of lapse of time, or both, would constitute an Event
of Default) has occurred and remains uncured beyond any applicable
grace period, Tenant may remove Personal Property from the Leased
Property from time to time provided that (i) the items removed are not
required to operate the Leased Property as a licensed correctional or
detention facility (unless such items are being replaced by Tenant);
and (ii) Tenant repairs any damage to the Leased Property resulting
from the removal of Personal Property.
(h) Tenant shall remove any of Tenant's personal property
which does not constitute Personal Property hereunder, upon the
termination or expiration of the Lease and shall repair any damage to
the Leased Property resulting from the removal of Tenant's personal
property. If Tenant fails to remove Tenant's personal property within
ninety (90) days after the termination or expiration of the Lease, then
Tenant shall be deemed to have abandoned Tenant's personal property,
Tenant's personal property shall become the property of Landlord, and
Landlord may remove, store and dispose of Tenant's personal property.
In such event, Tenant shall have no claim or right against Landlord for
such property or the value thereof regardless of the disposition
thereof by Landlord. Tenant shall pay Landlord, upon demand, all
expenses incurred by Landlord in removing, storing, and disposing of
Tenant's personal property and repairing any damage caused by such
removal. Tenant's obligations hereunder shall survive the termination
or expiration of the Lease. Notwithstanding the foregoing, it is
understood and agreed that all property constituting Personal Property
hereunder shall be and/or become the sole and exclusive property of
Landlord upon the expiration or termination of the Lease.
(i) Tenant shall perform its obligations under any equipment
lease or security agreement for Personal Property.
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8.08 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the occurrence of an Event of Default or
the termination or expiration of a Lease, Tenant shall, within thirty (30) days
after notice from Landlord, remove the signs and restore the applicable Leased
Property to its original condition.
8.09 Financings of Capital Additions to a Leased Property.
(a) Landlord may, but shall be under no obligation to,
provide or arrange construction, permanent or other financing for a
Capital Addition proposed to be made to any Leased Property by Tenant.
Within thirty (30) days of receipt of such a request by Tenant,
Landlord shall notify Tenant as to whether it will finance the proposed
Capital Addition and, if so, the terms and conditions upon which it
would do so, including the terms of any amendment to an individual
Lease or a new lease agreement for such proposed Capital Addition.
(b) If Landlord agrees to finance the proposed Capital
Addition of Tenant, Tenant shall provide Landlord with the following:
(i) all customary or other required loan
documentation which may be required;
(ii) any information, certificates, licenses,
permits or documents requested by either Landlord or any
lender with whom Landlord has agreed or may agree to provide
financing which are necessary to confirm that Tenant will be
able to use the Capital Addition upon completion thereof in
accordance with the Primary Intended Use (as defined in
Section 8.01), including all required, federal, state or local
government licenses and approvals;
(iii) a certificate from Tenant's architect,
setting forth in reasonable detail the projected (or actual,
if available) cost of the proposed Capital Addition;
(iv) an amendment to this Lease, or a new lease
agreement, duly executed and acknowledged, in form and
substance satisfactory to Landlord and Tenant, and containing
such provisions as may be necessary or appropriate, including
without limitation, any appropriate changes in the legal
description of the Land, the Rent, and other changes with
respect to the Capital Addition;
(v) a deed conveying title to Landlord to any
land acquired for the purpose of constructing the Capital
Addition, free and clear of any liens or encumbrances except
those approved by Landlord and, both prior to and following
completion of the Capital Addition, an as-built survey thereof
satisfactory to Landlord;
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(vi) endorsements to any outstanding policy of
title insurance covering the Leased Property or a supplemental
policy of title insurance covering the Leased Property
satisfactory in form and substance to Landlord (a) updating
the same without any additional exceptions, except as may be
permitted by Landlord; and (b) increasing the coverage thereof
by an amount equal to the fair market value of the Capital
Addition;
(vii) if required by Landlord, (a) an owner's
policy of title insurance insuring fee simple title to any
land conveyed to Landlord pursuant to subparagraph (v), free
and clear of all liens and encumbrances except those approved
by Landlord and (b) a lender's policy of title insurance
satisfactory in form and substance to Landlord and any lending
institution advancing a portion of the cost of the Capital
Addition;
(viii) if required by Landlord, upon completion of
the Capital Addition, an M.A.I. appraisal of the Leased
Property indicating that the value of the Leased Property upon
completion of the Capital Addition exceeds the fair market
value of the Leased Property prior thereto by an amount not
less than ninety-five percent (95%) of the cost of such
Capital Addition; and
(ix) such other certificates (including, but not
limited to, endorsements, increasing the insurance coverage,
if any, at the time required), documents, opinions of counsel,
appraisals, surveys, certified copies of duly adopted
resolutions of the board of directors of Tenant authorizing
the execution and delivery of any amendment to an individual
Lease or new lease agreement and any other instruments as may
be reasonably required by Landlord and any lending institution
advancing any portion of the cost of the Capital Addition.
(c) Upon making a request to finance a Capital Addition,
whether or not such financing is actually consummated, Tenant shall pay
or agree to pay, upon demand, all reasonable costs and expenses of
Landlord and any lending institution which has committed to finance
such Capital Addition which have been paid or incurred by them in
connection with the financing of the Capital Addition, including, but
not limited to, (i) the fees and expenses of their respective counsel,
(ii) all printing expenses, (iii) the amount of any filing,
registration and recording taxes and fees, (iv) documentary stamp
taxes, if any, (v) title insurance charges, appraisal fees, if any,
rating agency fees, if any, (vi) commitment fees, if any, and (vii)
costs of obtaining regulatory and governmental approvals for the
construction, operation, use or occupancy of the Capital Addition.
(d) (i) If Landlord and Tenant are unable to agree on the
terms of the financing of a Capital Addition by Landlord, Tenant may
undertake the cost of any such Capital Addition and seek construction,
permanent or other financing from other sources.
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(ii) In the event Tenant shall construct any Capital
Addition and shall have obtained construction, permanent or other
financing in connection therewith from sources other than Landlord, as
set forth in the foregoing Section 8.09(d)(i), Landlord shall have the
option to acquire such Capital Addition for a period of three (3) years
following the date Tenant first receives inmates in such Capital
Addition ("Service Commencement Date"). The price at which Landlord may
acquire such Capital Addition shall be the fair market value of the
Capital Addition, as reasonably and mutually determined by Landlord and
Tenant, provided, Landlord and Tenant agree that for the first two (2)
years following the Service Commencement Date the fair market value of
such Capital Addition shall be deemed to be equal to Tenant's actual
costs and expenses to acquire, develop, design, construct and equip
such Capital Addition ("Tenant's Cost"), as reflected on the books of
Tenant, plus five percent (5%) of Tenant's Cost. Landlord's exercise of
such option shall require Landlord to acquire such Capital Addition on
such terms and conditions as Landlord and Tenant shall reasonably
agree, which shall be generally consistent with the terms and
conditions of Landlord's initial acquisition of the related Leased
Property from Tenant. Upon such acquisition, Landlord shall lease such
Capital Addition to Tenant on the terms and conditions set forth
herein, and Landlord and Tenant shall execute a new Lease, or an
amendment to the existing Lease, with respect thereto. In such case,
for acquisitions of Capital Additions within five (5) years of the date
hereof, the annual Base Rent shall be the greater of (i) the fair
market rental value of the Capital Addition, as reasonably and mutually
determined by Landlord and Tenant and (ii) eleven percent (11%) of the
purchase price of such Capital Addition. For Capital Additions
thereafter, the Base Rent shall be the fair market rental value of the
Capital Addition, as reasonably and mutually determined by Landlord and
Tenant. Regardless of whether the foregoing option is exercised, all
Capital Additions shall become the property of Landlord upon the
expiration or termination of this Lease.
ARTICLE IX
DEFAULTS AND REMEDIES
9.01 Events of Default. The occurrence of any one or more of the
following shall be an event of default ("Event of Default") hereunder:
(a) Tenant fails to pay in full any installment of Rent, or
any other monetary obligation payable by Tenant to Landlord under a
Lease, within fifteen (15) days after notice of nonpayment from
Landlord;
(b) Tenant fails to observe and perform any other covenant,
condition or agreement under this Agreement or a Lease to be performed
by Tenant (except those described in Section 9.01(a) of this Agreement)
and such failure continues for a period of thirty (30) days after
written notice thereof is given to Tenant by Landlord; or if, by reason
of the nature of such default, the same cannot with due diligence be
remedied within said thirty (30) days, such failure will not be deemed
to continue if Tenant proceeds promptly and
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with due diligence to remedy the failure and diligently completes the
remedy thereof; provided, however, said cure period will not extend
beyond thirty (30) days if the facts or circumstances giving rise to
the default are creating a further harm to Landlord or the Leased
Property and Landlord makes a good faith determination that Tenant is
not undertaking remedial steps that Landlord would cause to be taken if
such Lease were then to terminate;
(c) If Tenant: (a) admits in writing its inability to pay its
debts generally as they become due, (b) files a petition in bankruptcy
or a petition to take advantage of any insolvency act, (c) makes an
assignment for the benefit of its creditors, (d) is unable to pay its
debts as they mature, (e) consents to the appointment of a receiver of
itself or of the whole or any substantial part of its property, or (f)
files a petition or answer seeking reorganization or arrangement under
the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state thereof;
(d) If Tenant, on a petition in bankruptcy filed against it,
is adjudicated as bankrupt or a court of competent jurisdiction enters
an order or decree appointing, without the consent of Tenant, a
receiver of Tenant of the whole or substantially all of its property,
or approving a petition filed against it seeking reorganization or
arrangement of Tenant under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof, and such judgment, order or decree is not vacated or set aside
or stayed within ninety (90) days from the date of the entry thereof;
(e) If the estate or interest of Tenant in any Leased Property
or any part thereof is levied upon or attached in any proceeding and
the same is not vacated or discharged within the later of ninety (90)
days after commencement thereof or thirty (30) days after receipt by
Tenant of notice thereof from Landlord (unless Tenant is contesting
such lien or attachment in accordance with this Agreement);
(f) Any representation or warranty made by Tenant in the
Agreement or any Lease or in any certificate, demand or request made
pursuant to any Lease proves to be incorrect, in any material respect
and any adverse effect on Landlord of any such misrepresentation or
breach of warranty has not been corrected to Landlord's satisfaction
within thirty (30) days after Tenant becomes aware of, or is notified
by the Landlord of the fact of, such misrepresentation or breach of
warranty;
(g) A default by Tenant in any payment of principal or
interest on any obligations for borrowed money having a principal
balance of Twenty-Five Million Dollars ($25,000,000) or more in the
aggregate (excluding obligations which are limited in recourse to
specific property of Tenant provided that such property is not a
substantial portion of the assets of Tenant and excluding any debt
which is denominated as "subordinated debt"), or in the performance of
any other provision contained in any instrument under which any such
obligation is created or secured (including the breach of any covenant
thereunder), if an
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effect of such default is that the holder(s) of such obligation cause
such obligation to become due prior to its stated maturity; or
(h) A final, non-appealable judgment or judgments for the
payment of money in excess of Ten Million Dollars ($10,000,000) in the
aggregate not fully covered (excluding deductibles) by insurance is
rendered against Tenant and the same remains undischarged, unvacated,
unbonded or unstayed for a period of one hundred twenty (120)
consecutive days.
Notwithstanding the foregoing, an Event of Default under the foregoing
subsections (a), (c), (d), (g) and (h) shall constitute an Event of Default
under all of the Leases and an Event of Default under the foregoing subsections
(b), (e) and (f) shall constitute an Event of Default only with respect to the
specific Lease and Leased Property to which such Event of Default applies.
Provided, with respect to the Events of Default under the foregoing subsections
(b), (e) and (f), if such Events of Default shall at any time be applicable to
Leased Properties for which the monthly Base Rent constitutes, in the aggregate,
greater than twenty-five percent (25%) of the monthly Base Rent for all of the
Leased Properties, then such Events of Default shall constitute Events of
Default under all of the Leases.
9.02 Remedies. To the extent any Event of Default is applicable
only to a specific Lease or Leases, or a specific Leased Property or Leased
Properties (in accordance with Section 9.01 above), the remedies set forth
herein shall be exercisable solely with respect to such Lease or Leases, or
Leased Property or Leased Properties, and shall not be exercisable with respect
to any other Leases or Leased Property. To the extent any Event of Default
constitutes an Event of Default under all of the Leases (in accordance with
Section 9.01 above), the remedies set forth herein shall be exercisable with
respect to all of the Leases and all of the Leased Properties. Subject to the
foregoing provisions, Landlord may exercise any one or more of the following
remedies upon the occurrence of an Event of Default:
(a) Landlord may terminate the applicable Lease, exclude
Tenant from possession of the subject Leased Property and use
reasonable efforts to lease such Leased Property to others. If any
Lease is terminated pursuant to the provisions of this subparagraph
(a), Tenant will remain liable to Landlord for damages in an amount
equal to the Rent and other sums which would have been owing by Tenant
under such Lease for the balance of the Term if the Lease had not been
terminated, less the net proceeds, if any, of any re-letting of the
subject Leased Property by Landlord subsequent to such termination,
after deducting all Landlord's expenses in connection with such
re-letting, including without limitation, the expenses set forth in
Section 9.02(b)(2) below. Landlord will be entitled to collect such
damages from Tenant monthly on the days on which the Rent and other
amounts would have been payable under the subject Lease if such Lease
had not been terminated and Landlord will be entitled to receive such
damages from Tenant on each such day. Alternatively, at the option of
Landlord, if such Lease is terminated, Landlord will be entitled to
recover from Tenant (a) all unpaid Rent then due and payable, and (b)
the worth at the time of the award (as hereafter defined) of the Rent
which would have been due and payable from the date of termination
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through the Expiration Date as if the Lease had not been terminated.
The "worth at the time of award" of the amount referred to in clause
(b) is computed at "present value" using New York Prime Rate. For
purposes of this Agreement, "New York Prime Rate" shall mean that rate
of interest identified as prime or national prime by the Wall Street
Journal, or if not published or found, then the rate of interest
charged by the American bank with the greatest number of assets on
ninety (90) day unsecured notes to its preferred customers. For the
purpose of determining unpaid Rent under clause (b), the Rent reserved
in the Lease will be deemed to be the sum of the following: (i) the
Base Rent computed pursuant to Section 2.01; (ii) the Additional Rent
computed pursuant to Section 2.02; and (iii) the Other Additional Rent
computed pursuant to Section 2.02.01. Such computation of Other
Additional Rent shall be based on the Other Additional Rent paid for
the Lease Year preceding the date of termination, increased by 4% per
year thereafter. Following payments by Tenant of the foregoing amounts,
Landlord shall deliver and pay over to Tenant all rent, income, and
other proceeds of any nature realized from the sale, lease or other
disposition or utilization of the Leased Premises, if any, actually
received by Landlord, up to the amounts so paid by Tenant less
Landlord's reasonably incurred costs and expenses of maintaining and
re-leasing or selling the Leased Premises.
(b) (1) Without demand or notice, Landlord may re-enter and
take possession of the applicable Leased Property or any part of such
Leased Property; and repossess such Leased Property as of the
Landlord's former estate; and expel the Tenant and those claiming
through or under Tenant from such Leased Property; and, remove the
effects of both or either, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or
preceding breach of covenants or conditions. If Landlord elects to
re-enter, as provided in this paragraph (b) or if Landlord takes
possession of such Leased Property pursuant to legal proceedings or
pursuant to any notice provided by law, Landlord may, from time to
time, without terminating the subject Lease, re-let such Leased
Property or any part of such Leased Property, either alone or in
conjunction with other portions of the Improvements of which such
Leased Property are a part, in Landlord's name but for the account of
Tenant, for such term or terms (which may be greater or less than the
period which would otherwise have constituted the balance of the Term
of this Lease) and on such terms and conditions (which may include
concessions of free rent, and the alteration and repair of such Leased
Property) as Landlord, in its uncontrolled discretion, may determine.
Landlord may collect and receive the Rents for such Leased Property.
Landlord will not be responsible or liable for any failure to re-let
such Leased Property, or any part of such Leased Property, or for any
failure to collect any Rent due upon such re-letting. No such re-entry
or taking possession of such Leased Property by Landlord will be
construed as an election on Landlord's part to terminate this Lease
unless a written notice of such intention is given to Tenant. No notice
from Landlord under this Lease or under a forcible entry and detainer
statute or similar law will constitute an election by Landlord to
terminate this Lease unless such notice specifically says so. Landlord
reserves the right following any such re-entry or re-letting, or both,
to exercise its right to terminate this Lease by giving Tenant such
written notice, and, in that event such Lease will terminate as
specified in such notice.
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(2) If Landlord elects to take possession of such
Leased Property according to this subparagraph (b) without terminating
such Lease, Tenant will pay Landlord (i) the Rent, Additional Rent and
other sums which would be payable under such Lease if such repossession
had not occurred, less (ii) the net proceeds, if any, of any re-letting
of such Leased Property after deducting all of Landlord's expenses
incurred in connection with such re-letting, including without
limitation, all repossession costs, brokerage commissions, legal
expense, attorneys' fees, expense of employees, alteration, remodeling,
repair costs, and expense of preparation for such re-letting. If, in
connection with any re-letting, the new Lease term extends beyond the
existing Term or such Leased Property covered by such re-letting
includes areas which are not part of such Leased Property, a fair
apportionment of the Rent received from such re-letting and the
expenses incurred in connection with such re-letting will be made in
determining the net proceeds received from such re-letting. In
addition, in determining the net proceeds from such re-letting, any
rent concessions will be apportioned over the term of the new Lease.
Tenant will pay such amounts to Landlord monthly on the days on which
the Rent and all other amounts owing under this Agreement or such Lease
would have been payable if possession had not been retaken, and
Landlord will be entitled to receive the rent and other amounts from
Tenant on each such day.
(c) Landlord may re-enter the applicable Leased Property and
have, repossess and enjoy such Leased Property as if such Lease had not
been made, and in such event, Tenant and its successors and assigns
shall remain liable for any contingent or unliquidated obligations or
sums owing at the time of such repossession.
(d) Landlord may take whatever action at law or in equity as
may appear necessary or desirable to collect the Rent and other amounts
payable under the applicable Lease then due and thereafter to become
due, or to enforce performance and observance of any obligations,
agreements or covenants of Tenant under such Lease.
9.03 Right of Set-Off. Landlord may, and is hereby authorized by
Tenant, at any time and from time to time, after advance notice to Tenant, to
set-off and apply any and all sums held by Landlord, including all sums held in
any escrow for Impositions, any indebtedness of Landlord to Tenant, and any
claims by Tenant against Landlord, against any obligations of Tenant under this
Agreement or any Lease and against any claims by Landlord against Tenant,
whether or not Landlord has exercised any other remedies hereunder. The rights
of Landlord under this Section are in addition to any other rights and remedies
Landlord may have against Tenant.
9.04 Performance of Tenant's Covenants. Landlord may perform any
obligation of Tenant which Tenant has failed to perform within two (2) days
after Landlord has sent a written notice to Tenant informing it of its specific
failure (provided no such notice shall be required if Landlord has previously
notified Tenant of such failure under the provisions of Section 9.01). Tenant
shall reimburse Landlord on demand, as Other Additional Rent, for any
expenditures thus incurred by Landlord and shall pay interest thereon at the New
York Prime Rate (as herein defined).
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9.05 Late Charge. Any payment not made by Tenant for more than ten
(10) days after the due date shall be subject to a late charge payable by Tenant
as Rent of three percent (3%) of the amount of such overdue payment.
9.06 Litigation; Attorneys' Fees. Within ten (10) days after Tenant
has knowledge of any litigation or other proceeding that may be instituted
against Tenant, against any Leased Property to secure or recover possession
thereof, or that may affect the title to or the interest of Landlord in such
Leased Property, Tenant shall give written notice thereof to Landlord. Within
thirty (30) days of Landlord's presentation of an invoice, Tenant shall pay all
reasonable costs and expenses incurred by Landlord in enforcing or preserving
Landlord's rights under this Agreement and each Lease, whether or not an Event
of Default has actually occurred or has been declared and thereafter cured,
including without limitation, (i) the fees, expenses, and costs of any
litigation, receivership, administrative, bankruptcy, insolvency or other
similar proceeding; (ii) reasonable attorney, paralegal, consulting and witness
fees and disbursements; and (iii) the expenses, including without limitation,
lodging, meals, and transportation, of Landlord and its employees, agents,
attorneys, and witnesses in preparing for litigation, administrative,
bankruptcy, insolvency or other similar proceedings and attendance at hearings,
depositions, and trials in connection therewith. All such costs, charges and
fees as incurred shall be deemed to be Other Additional Rent under this
Agreement.
9.07 Remedies Cumulative. The remedies of Landlord herein are
cumulative to and not in lieu of any other remedies available to Landlord at law
or in equity. The use of any one remedy shall not be taken to exclude or waive
the right to use any other remedy.
9.08 Escrows and Application of Payments. As security for the
performance of its obligations hereunder, Tenant hereby assigns to Landlord all
its right, title and interest in and to all monies escrowed with Landlord under
this Agreement or under any Lease and all deposits with utility companies,
taxing authorities, and insurance companies; provided, however, that Landlord
shall not exercise its rights hereunder until an Event of Default has occurred.
Any payments received by Landlord under any provisions of this Agreement or
under any Lease during the existence, or continuance of an Event of Default
shall be applied to Tenant's obligations in the order which Landlord may
determine.
9.09 Power of Attorney. Tenant hereby irrevocably and
unconditionally appoints Landlord, or Landlord's authorized officer, agent,
employee or designee, as Tenant's true and lawful attorney-in-fact, to act,
after an Event of Default, for Tenant in Tenant's name, place, and stead, and
for Tenant's and Landlord's use and benefit, to execute, deliver and file all
applications and any and all other necessary documents or things, to effect a
transfer, reinstatement, renewal and/or extension of any and all licenses and
other governmental authorizations issued to Tenant in connection with Tenant's
operation of any Leased Property, and to do any and all other acts incidental to
any of the foregoing. Tenant irrevocably and unconditionally grants to Landlord
as its attorney-in-fact full power and authority to do and perform, after an
Event of Default, every act necessary and proper to be done in the exercise of
any of the foregoing powers as fully as Tenant might or could do if
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personally present or acting, with full power of substitution, hereby ratifying
and confirming all that said attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and is
irrevocable prior to the full performance of the Tenant's obligations under this
Agreement and each Lease.
ARTICLE X
DAMAGE AND DESTRUCTION
10.01 General. Tenant shall notify Landlord if any of the Leased
Property is damaged or destroyed by reason of fire or any other cause. Tenant
shall promptly repair, rebuild, or restore the Leased Property, at Tenant's
expense, so as to make the Leased Property at least equal in value to the Leased
Property existing immediately prior to such occurrence and as nearly similar to
it in character as is practicable and reasonable. Before beginning such repairs
or rebuilding, or letting any contracts in connection with such repairs or
rebuilding, Tenant will submit for Landlord's approval, which approval Landlord
will not unreasonably withhold or delay, complete and detailed plans and
specifications for such repairs or rebuilding. Promptly after receiving
Landlord's approval of the plans and specifications, Tenant will begin such
repairs or rebuilding and will prosecute the repairs and rebuilding to
completion with diligence, subject, however, to strikes, lockouts, acts of God,
embargoes, governmental restrictions, and other causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the net proceeds of
any fire or other casualty insurance paid to Landlord for such repair or
rebuilding as the same progresses, after deduction of any costs of collection,
including attorneys' fees. Payment will be made against properly certified
vouchers of a competent architect in charge of the work and approved by
Landlord. Prior to commencing the repairing or rebuilding, Tenant shall deliver
to Landlord for Landlord's approval a schedule setting forth the estimated
monthly draws for such work. Landlord will contribute to such payments out of
the insurance proceeds an amount equal to the proportion that the total net
amount received by Landlord from insurers bears to the total estimated cost of
the rebuilding or repairing, multiplied by the payment by Tenant on account of
such work. Landlord may, however, withhold ten percent (10%) from each payment
until (i) the work of repairing or rebuilding is completed and proof has been
furnished to Landlord that no lien or liability has attached or will attach to
the Leased Property or to Landlord in connection with such repairing or
rebuilding, (ii) Tenant has obtained a certificate of use and occupancy (or its
functional equivalent) for the portion of the Leased Premises repaired
or rebuilt and (iii) if Tenant has an agreement with any governmental authority
for the detention of inmates at such Leased Property which requires such
governmental authority to approve such repairs or rebuilding, such approval
shall have been obtained. Upon the completion of rebuilding or repairing and the
furnishing of such proof, the balance of the net proceeds of such insurance
payable to Tenant on account of such repairing or rebuilding will be paid to
Tenant. Tenant will obtain and deliver to Landlord a temporary or final
certificate of occupancy before the Leased Property is reoccupied for any
purpose. Tenant shall complete such repairs or rebuilding free and clear of
mechanic's or other liens, and in accordance with the building codes and all
applicable laws, ordinances, regulations, or orders of any state, municipal, or
other public authority affecting the repairs or rebuilding, and also in
accordance with all requirements of the insurance rating
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organization, or similar body. Any remaining proceeds of insurance after such
restoration will be Tenant's property.
10.02 Landlord's Inspection. During the progress of such repairs or
rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications
available, and Landlord and its architects and engineers may examine them at all
reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications, Landlord will
give prompt notice in writing to Tenant, specifying in detail the particular
deficiency, omission, or other respect in which Landlord claims such repairs or
rebuilding do not accord with the approved plans and specifications. Upon the
receipt of any such notice, Tenant will cause corrections to be made to any
deficiencies, omissions, or such other respect. Tenant's obligations to supply
insurance, according to Article IV, will be applicable to any repairs or
rebuilding under this Section.
10.03 Landlord's Costs. Tenant shall, within thirty (30) days after
receipt of an invoice from Landlord, pay the reasonable costs, expenses, and
fees of any architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Agreement, or for any services performed by
Landlord's attorneys in connection therewith; provided, however, that Landlord
will consult with Tenant and notify Tenant of the estimated amount of such
expenses.
10.04 Rent Abatement. In the event that the provisions of Section
10.01 above shall become applicable, the Rent, real estate taxes and other
Impositions shall be abated or reduced proportionately during any period in
which, by reason of such damage or destruction, there is substantial
interference with the operation of the business of Tenant in the Leased
Property, having regard to the extent to which Tenant may be required to
discontinue its business in the Leased Property, and such abatement or reduction
shall continue for the period commencing with such destruction or damage and
ending with the substantial completion (defined below) by Tenant of such work or
repair and/or reconstruction. In the event that only a portion of any Leased
Property is rendered untenantable or incapable of such use, the Base Rent and
all real estate taxes and other Impositions payable hereunder shall be reduced
on a pro rata basis for the amount that the correctional or detention facility
at a particular Leased Property is rendered incapable of occupancy because of
such damage or destruction in proportion to the total size of the Leased
Property prior to such damage or destruction. For purposes of this paragraph,
substantial completion shall occur upon the earlier of (i) nine (9) months from
the date of the first disbursement of insurance proceeds, or (ii) the issuance
of a certificate of occupancy for the Leased Property. Notwithstanding any other
provision hereof, such rental abatement shall be limited to the amount of any
rental or business interruption insurance proceeds actually received by
Landlord.
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10.05 Substantial Damage During Lease Term. Provided Tenant has
fully complied with Section 4.01 hereof (including actually maintaining in
effect rental value insurance or business interruption insurance provided for in
clause (c) thereof) and has satisfied the conditions of the last sentence of
this Section 10.05, if, at any time during the Term of the particular Lease, the
Leased Property is so damaged by fire or otherwise that more than fifty percent
(50%) of the correctional or detention facility at the Leased Property is
rendered unusable, Tenant may, within thirty (30) days after such damage, give
notice of its election to terminate the Lease subject to the particular Leased
Property and, subject to the further provisions of this Section, such Lease will
cease on the tenth (10th ) day after the delivery of such notice. If the Lease
is so terminated, Tenant will have no obligation to repair, rebuild or replace
the Leased Property, and the entire insurance proceeds will belong to Landlord.
If the Lease is not so terminated, Tenant shall rebuild the Leased Property in
accordance with Section 10.01. If Tenant elects to terminate any Lease pursuant
to this Section 10.05, Tenant will pay (or cause to be paid) to Landlord, an
amount equal to the difference between the amount of all insurance proceeds
received by Landlord, and the net book value of such Leased Property as shown in
Landlord's financial statements as of the date of such termination.
10.06 Damage Near End of Term. Notwithstanding any provisions of
Section 10.01 to the contrary, if damage to or destruction of the Leased
Property occurs during the last twenty-four (24) months of the Term, and if such
damage or destruction cannot be fully repaired and restored within six (6)
months immediately following the date of loss, either party shall have the right
to terminate this Lease by giving notice to the other within thirty (30) days
after the date of damage or destruction, in which event Landlord shall be
entitled to retain the insurance proceeds and Tenant shall pay to Landlord on
demand the amount of any deductible or uninsured loss arising in connection
therewith; provided, however, that any such notice given by Landlord shall be
void and of no force and effect if Tenant exercises an available option to
extend the Term pursuant to provisions of the Lease for such Leased Property
within thirty (30) days following receipt of such termination notice.
ARTICLE XI
CONDEMNATION
11.01 Total Taking. If at any time during the Term any Leased
Property is totally and permanently taken by right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
("Condemnation"), the applicable Lease shall terminate on the Date of Taking
(which shall mean the date the condemning authority has the right to possession
of the property being condemned), and Tenant shall promptly pay all outstanding
rent and other charges through the date of termination, provided, however the
applicable Lease shall not so terminate if the Condemnation occurred due to the
failure of Tenant to maintain the Leased Property as required by Article VII of
this Agreement or other applicable provision of this Agreement, whether or not
such failure on the part of Tenant constituted an Event of Default under an
individual Lease at the time of the Condemnation.
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11.02 Partial Taking. If a portion of any Leased Property is taken
by Condemnation, the subject Lease shall remain in effect if such Leased
Property is not thereby rendered Unsuitable for its Primary Intended Use (which
shall mean that the Leased Property is in such a state or condition such that in
the good faith judgment of Tenant, reasonably exercised, the Leased Property
cannot be operated on a commercially practicable basis as a correctional or
detention facility), but if such Leased Property is thereby rendered Unsuitable
for its Primary Intended Use, such Lease shall terminate on the Date of Taking,
provided such Condemnation was not as a result of Tenant's failure to maintain
the Leased Property as provided for in Section 11.01.
11.03 Restoration. If there is a partial taking of any Leased
Property and the subject Lease remains in full force and effect pursuant to
Section 11.02, Landlord shall furnish to Tenant the amount of the Award payable
to Landlord, as provided herein, in order for Tenant to accomplish all necessary
restoration. If Tenant receives an Award under Section 11.05, Tenant shall
repair or restore any Tenant Improvements up to but not exceeding the amount of
the Award payable to Tenant therefor. Before beginning such restoration, or
letting any contracts in connection with such restoration, Tenant will submit
for Landlord's approval, which approval Landlord will not unreasonably withhold
or delay, complete and detailed plans and specifications for such restoration.
Promptly after receiving Landlord's approval of the plans and specifications,
Tenant will begin such restoration and will prosecute the repairs and rebuilding
to completion with diligence, subject, however, to strikes, lockouts, acts of
God, embargoes, governmental restrictions, and other causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the net proceeds of
any Award paid to Landlord for such restoration, after deduction of any costs of
collection, including attorneys' fees. Payment will be made against properly
certified vouchers of a competent architect in charge of the work and approved
by Landlord. Prior to commencing the restoration, Tenant shall deliver to
Landlord for Landlord's approval a schedule setting forth the estimated monthly
draws for such work. Landlord may, however, withhold ten percent (10%) from each
payment until the work of restoration is completed and proof has been furnished
to Landlord that no lien or liability has attached or will attach to the Leased
Property or to Landlord in connection with such restoration. Upon the completion
of restoration and the furnishing of such proof, the balance of the Award will
be paid to Tenant. Tenant will obtain and deliver to Landlord a temporary or
final certificate of occupancy before the Leased Property is reoccupied for any
purpose. Tenant shall complete such restoration free and clear of mechanic's or
other liens, and in accordance with the building codes and all applicable laws,
ordinances, regulations, or orders of any state, municipal, or other public
authority affecting the restoration, and also in accordance with all
requirements of the insurance rating organization, or similar body. Any
remaining proceeds of the Award after such restoration will be Tenant's
property.
11.04 Landlord's Inspection. During the progress of such
restoration, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such
restoration. Tenant will keep all plans, shop drawings, and specifications
available, and Landlord and its architects and engineers may examine them at all
reasonable times. If, during such restoration, Landlord and its architects and
engineers determine that the restoration is not being done in
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accordance with the approved plans and specifications, Landlord will give prompt
notice in writing to Tenant, specifying in detail the particular deficiency,
omission, or other respect in which Landlord claims such restoration does not
accord with the approved plans and specifications. Upon the receipt of any such
notice, Tenant will cause corrections to be made to any deficiencies, omissions,
or such other respect. Tenant's obligations to supply insurance, according to
Article IV, will be applicable to any restoration under this Section.
11.05 Award Distribution. The entire compensation, sums or anything
of value awarded, paid or received on a total or partial Condemnation (the
"Award") shall belong to and be paid to Landlord, except that, subject to the
rights of any mortgagee of Tenant, Tenant shall be entitled to receive from the
Award, if and to the extent such Award specifically includes such items, a sum
attributable to the value, if any, of: (i) any Tenant Improvements, and (ii) the
leasehold interest of Tenant under the subject Lease; provided, however, that if
the amount received by Landlord and said mortgagee is less than the Condemnation
Threshold (which shall mean, as of any given date, an amount equal to the net
book value of such Leased Property as shown on the financial statements of
Landlord as of the date of the Condemnation), then the amount of the Award
otherwise payable to Tenant for the value of its leasehold interest under this
Lease (and not any other funds of Tenant) shall instead be paid over to Landlord
up to the amount of the shortfall.
11.06 Temporary Taking. The taking of any Leased Property, or any
part thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of the subject Lease shall
remain in full force and effect with no abatement of rent payable by Tenant
hereunder. In the event of any such temporary taking, the entire amount of any
such Award made for such temporary taking allocable to the Term of such Lease,
whether paid by way of damages, rent or otherwise, shall be paid to Tenant.
ARTICLE XII
TENANT'S RIGHT OF FIRST REFUSAL
12.01 Rights of First Refusal. Subject to the terms and conditions
set forth in this Section 12.01 and provided that no Event of Default with
respect to the subject Leased Property has occurred and is continuing at such
time or at the expiration of this Agreement or the individual Lease, Tenant
shall have a right of first refusal (the "Purchase Refusal Right") to purchase
any Leased Property (including any Leased Property owned by an Affiliate [as
defined in Section 13.01 hereof] of Landlord). If during the Term or for a
period of ninety (90) days following termination of any Lease, Landlord or any
Affiliate of Landlord receives a bona fide third party offer to Transfer any
Leased Property, then, prior to accepting such third party offer, Landlord shall
send written notice and a copy thereof to Tenant ("Landlord's Notice"). Tenant
shall have ninety (90) days after receipt of Landlord's Notice to exercise
Tenant's Purchase Refusal Right, by giving Landlord written notice thereof.
Failure of Tenant to exercise the Purchase Refusal Right within such time period
set forth
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above shall be deemed to extinguish the Purchase Refusal Right for a period of
one hundred eighty (180) days. Thereafter, prior to the expiration of such one
hundred eighty (180) days, Landlord or its Affiliates may Transfer such Leased
Property provided however, that the Transfer of the Leased Property is at a
price equal to or greater than the price contained in the Landlord's Notice, and
otherwise consistent in all material respects with the terms and conditions set
forth in Landlord's Notice. Tenant's Purchase Refusal Right shall revive in the
event that Landlord fails to Transfer the Leased Property within said one
hundred eighty (180) days. In the event that Tenant elects to exercise the
Purchase Refusal Right and to acquire the Leased Property thereby, (a) Tenant
shall acquire such Leased Property on the same terms and conditions and subject
to all time periods and other limitations as provided in Landlord's Notice
(provided, however, Tenant shall in all events have not less than ninety (90)
days to close its acquisition of the Leased Property following its written
notice exercising its Purchase Refusal Right), and (b) concurrently with such
acquisition, the Lease of such Leased Property shall terminate (but Tenant shall
remain liable to pay any unpaid Rent with respect to such Leased Property and
all indemnifications and other provisions that survive the expiration of the
individual Lease or of this Agreement shall continue in effect), and this
Agreement shall be appropriately amended to reflect the termination of such
Lease.
Notwithstanding the foregoing provisions, the Purchase Refusal Right
shall not be applicable to any Transfer of a Leased Property to any Affiliate of
Landlord, so long as such Affiliate acquires such Leased Property subject to the
Purchase Refusal Right.
A "Transfer" is any direct or indirect sale, conveyance or other
disposition, including any transfer of a controlling ownership interest in any
owning partnership, limited liability company or corporation, and including any
lease with a term in excess of five (5) years.
12.02 Restriction on Exercise of Purchase Refusal Right.
Notwithstanding any other provision of this Article XII, Landlord shall not be
required to Transfer any Leased Property, or any portion thereof, which is a
real estate asset as defined in Section 856(c) (6) (B), or functionally
equivalent successor provision, of the Code, to Tenant if Landlord's counsel
advises Landlord that such Transfer may not be a sale of property described in
Section 857(b) (6) (C), or functionally equivalent successor provision of the
Code. If Landlord determines not to Transfer such property pursuant to the above
sentence, Tenant's right, if any, to acquire any or all of such property shall
continue and be exercisable, upon and subject to all applicable terms and
conditions set forth in this Lease, at such time as the transaction, upon the
advise of Landlord's tax counsel, would be a sale of property described in
Section 857(b) (6) (C) of the Code, or functionally equivalent successor
provision, and until such time Tenant shall lease the Leased Property for the
lesser of the rent otherwise called for in the Lease or fair market rental. If
the Transfer of the Leased Property is delayed pursuant to this section,
Landlord will use its reasonable best efforts to Transfer such Leased Property
to Tenant as soon as practicable in the next calendar year.
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ARTICLE XIII
ASSIGNMENT AND SUBLETTING; ATTORNMENT
13.01 Prohibition Against Subletting and Assignment. Subject to
Section 13.03, Tenant shall not, without the prior written consent of Landlord
(which consent Landlord may grant or withhold in its sole and absolute
discretion), assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant) (as defined) this Agreement or any
Lease or any interest herein or therein, or all or any part of the Leased
Property, or suffer or permit any Lease or the leasehold estate created thereby
or any other rights arising under any Lease to be assigned, transferred,
mortgaged, pledged, hypothecated or encumbered, in whole or in part, whether
voluntarily, involuntarily or by operation of law (except to an Affiliate of
Tenant). For purposes of this Section 13.01, an assignment of any Lease shall be
deemed to include any Change of Control of Tenant, as if such Change of Control
were an assignment of the Lease. No assignment shall in any way impair the
continuing primary liability of Tenant hereunder.
An "Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under common control with that Person.
A "Person" shall mean and include natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts, Indian tribes or other organizations, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
13.02 Changes of Control. A Change of Control requiring the consent
of Landlord shall mean:
(a) the issuance and/or sale by Tenant or the sale by
any stockholder of Tenant of a Controlling (which shall mean,
as applied to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise)
interest in Tenant to a Person other than an Affiliate of
Tenant, other than in either case a distribution to the public
pursuant to an effective registration statement under the
Securities Act of 1933, as amended (a "Registered Offering");
(b) the sale, conveyance or other transfer of all or
substantially all of the assets of Tenant (whether by
operation of law or otherwise); or
(c) any transaction pursuant to which Tenant is
merged with or consolidated into another entity (other than an
entity owned and Controlled by an Affiliate of Tenant), and
Tenant is not the surviving entity.
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13.03 Operating/Service Agreements.
13.03.01 Permitted Agreements. Tenant shall, without Landlord's prior
approval, be permitted to enter into certain operating/service agreements for
portions of any Leased Property to various licensees in connection with Tenant's
operation of correctional or detention facilities as is customarily associated
with or incidental to the operation of such Leased Property, which agreements
may be in the nature of a sublease agreement.
13.03.02 Terms of Agreements. Each operating/service agreement
concerning any of the Leased Property shall be subject and subordinate to the
provisions of the applicable Lease. No agreement made as permitted by Section
13.03.01 shall affect or reduce any of the obligations of Tenant hereunder, and
all such obligations shall continue in full force and effect as if no agreement
had been made. No agreement shall impose any additional obligations on Landlord
under the applicable Lease.
13.03.03 Copies. Tenant shall, within ten (10) days after the execution
and delivery of any operating/service agreement permitted by Section 13.03.01,
deliver a duplicate original thereof to Landlord.
13.03.04 Assignment of Rights in Agreements. As security for
performance of its obligations under each Lease, Tenant hereby grants, conveys
and assigns to Landlord all right, title and interest of Tenant in and to all
operating/service agreements now in existence or hereinafter entered into for
any or all of the applicable Leased Property, and all extensions, modifications
and renewals thereof and all rents, issues and profits therefrom, to the extent
the same are assignable by Tenant. Landlord hereby grants to Tenant a license to
collect and enjoy all rents and other sums of money payable under any such
agreement concerning any of such Leased Property; provided, however, that
Landlord shall have the absolute right at any time after the occurrence and
continuance of an Event of Default upon notice to Tenant and any vendors or
licensees to revoke said license and to collect such rents and sums of money and
to retain the same. Tenant shall not (i) after the occurrence and continuance of
an Event of Default, consent to, cause or allow any material modification or
alteration of any of the terms, conditions or covenants of any of the agreements
or the termination thereof, without the prior written approval of Landlord nor
(ii) accept any rents (other than customary security deposits) more than ninety
(90) days in advance of the accrual thereof nor permit anything to be done, the
doing of which, nor omit or refrain from doing anything, the omission of which,
will or could be a breach of or default in the terms of any of the agreements.
13.03.05 Licenses, Etc. For purposes of Section 13.03, the
operating/service agreements shall mean any licenses, concession arrangements,
or other arrangements relating to the possession or use of all or any part of
any Leased Property but specifically excluding any management agreement,
facility operating agreement or other agreement for the housing or detention of
inmates.
13.04 Assignment. No assignment shall in any way impair the
continuing primary liability of Tenant hereunder, and no consent to any
assignment in a particular instance shall be deemed to
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be a waiver of the prohibition set forth in Article XIII. Any assignment shall
be solely of Tenant's entire interest in the subject Lease. Any assignment or
other transfer of all or any portion of Tenant's interest in any Lease in
contravention of Article XIII shall be voidable at Landlord's option.
13.05 REIT Limitations. Anything contained in this Agreement to the
contrary notwithstanding, Tenant shall not (i) sublet or assign any Leased
Property or any Lease on any basis such that the rental or other amounts to be
paid by the sublessee or assignee thereunder would be based, in whole or in
part, on the income or profits derived by the business activities of the
sublessee or assignee; (ii) sublet or assign any Leased Property or any Lease to
any person that Landlord owns, directly or indirectly (by applying constructive
ownership rules set forth in Section 856(d) (5) of the Code), a ten percent
(10%) or greater interest; or (iii) sublet or assign any Leased Property or any
Lease in any other manner or otherwise derive any income which could cause any
portion of the amounts received by Landlord pursuant to any Lease or any
sublease to fail to qualify as "rents from real property" within the meaning of
Section 856(d) of the Code, or which could cause any other income received by
Landlord to fail to qualify as income described in Section 856(c) (2) of the
Code. The requirements of this Section 13.05 shall likewise apply to any further
subleasing by any subtenant.
13.06 Attornment. Tenant shall insert in each sublease permitted
under Section 13.03.01 provisions to the effect that (a) such sublease is
subject and subordinate to all of the terms and provisions of the applicable
Lease (including this Agreement) and to the rights of Landlord hereunder, (b) in
the event such Lease shall terminate before the expiration of such sublease, the
sublessee thereunder will, at Landlords' option, attorn to Landlord and waive
any right the sublessee may have to terminate the sublease or to surrender
possession thereunder, as a result of the termination of such Lease, and (c) in
the event the sublessee receives a written notice from Landlord or Landlord's
assignees, if any, stating that Tenant is in default under such Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such notice, or as such party may direct.
All rentals received from the sublessee by Landlord or Landlord's assignees, if
any, as the case may be, shall be credit against the amounts owing by Tenant
under such Lease.
14.01 Controversies. Except with respect to the payment of Rent
hereunder, which shall be subject to the provisions of Section 9.02, in the case
a controversy arises between the parties as to any of the requirements of this
Agreement or of any individual Lease or the performance thereunder which the
parties are unable to resolve, the parties agree to waive the remedy of
litigation (except for extraordinary relief in an emergency situation) and agree
that such controversy or controversies shall be determined by arbitration as
hereafter provided in this Article.
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ARTICLE XIV
ARBITRATION
14.02 Appointment of Arbitrators. The party or parties requesting
arbitration shall serve upon the other a demand therefor, in writing, specifying
in detail the controversy and matter(s) to be submitted to arbitration. The
selection of arbitrators shall be conducted pursuant to the rules for resolution
of commercial disputes promulgated by the American Arbitration Association. The
party or parties giving notice shall request a listing of available arbitrators
from the American Arbitration Association, and each party shall respond in the
selection process within fifteen (15) days after each receipt of such listings
until a panel of three (3) arbitrators has been designated. If either party
fails to respond within fifteen (15) days, it is agreed that the American
Arbitration Association may make such selections as are necessary to complete
the panel of three (3) arbitrators.
14.03 Arbitration Procedure. Within fifteen (15) days after the
selection of the arbitration panel, the arbitrators shall give written notice to
each party as to the time and the place of each meeting, which shall be held in
Nashville, Tennessee, at which the parties may appear and be heard, which shall
be no later than sixty (60) days after certification of the arbitration panel.
The parties specifically waive discovery, and further waive the applicability of
rules of evidence or rules of procedure in the proceedings. The applicable rules
shall be those in effect at the time for the resolution of commercial disputes
promulgated by the American Arbitration Association. Notwithstanding the
foregoing, the substantive law governing the arbitration shall be the laws of
the State of Tennessee. The arbitrators shall take such testimony and make such
examination and investigations as the arbitrators reasonably deem necessary. The
decision of the arbitrators shall be in writing signed by a majority of the
panel which decision shall be final and binding upon the parties to the
controversy. Provided, however, in rendering their decisions and making awards,
the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Agreement.
14.04 Expenses. The expenses of the arbitration shall be assessed by
the arbitrators and specified in the written decision. In the absence of a
determination or assessment of expenses of the arbitration procedure in the
award, all of the expenses of such arbitration shall be divided equally between
Landlord and Tenant. Each party in interest shall be responsible for and pay the
fees, costs and expenses of its own counsel, unless the arbitration award
provides for an assessment of reasonable attorneys' fees and costs.
14.05 Enforcement of the Arbitration Award. There shall be no appeal
from the decision of the arbitrators, and upon the rendering of an award, any
party thereto may file the arbitrators' decision in the United States District
Court for the Middle District of Tennessee for enforcement as provided by
applicable law.
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ARTICLE XV
QUIET ENJOYMENT, SUBORDINATION,
ATTORNMENT, ESTOPPEL CERTIFICATES
15.01 Quiet Enjoyment. So long as Tenant performs all of its
obligations under this Agreement and each Lease, Tenant's possession of the
Leased Property will not be disturbed by or through Landlord.
15.02 Landlord Mortgages; Subordination. Subject to Section 15.03,
without the consent of Tenant, Landlord may, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrances or title
retention agreement on the Leased Properties, or any portion thereof or any
interest therein, whether to secure any borrowing or other means of financing or
refinancing. This Agreement and each Lease and Tenant's rights under this
Agreement and each Lease are subordinate to any ground lease or underlying
lease, first mortgage, first deed of trust, or other first lien against any
Leased Property, together with any renewal, consolidation, extension,
modification or replacement thereof, which now or at any subsequent time affects
any Leased Property or any interest of Landlord in any Leased Property, except
to the extent that any such instrument expressly provides that this Agreement
and each Lease is superior. This provision will be self-operative, and no
further instrument or subordination will be required in order to effect it.
However, Tenant shall execute, acknowledge and deliver to Landlord, at any time
and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this Section, to confirm or effect any such
subordination. If Tenant fails or refuses to execute, acknowledge, and deliver
any such document within twenty (20) days after written demand, Landlord may
execute, acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
Section. This power of attorney is coupled with an interest and is irrevocable.
15.03 Attornment; Non-Disturbance. If any holder of any mortgage,
indenture, deed of trust, or other similar instrument described in Section 15.02
succeeds to Landlord's interest in any Leased Property, Tenant will pay to such
holder all Rent subsequently payable under the subject Lease. Tenant shall, upon
request of anyone succeeding to the interest of Landlord, automatically become
the tenant of, and attorn to, such successor in interest without changing such
Lease. The successor in interest will not be bound by (i) any payment of Rent
for more than one (1) month in advance; (ii) any amendment or modification of
such Lease made without its written consent; (iii) any claim against Landlord
arising prior to the date on which the successor succeeded to Landlord's
interest; or (iv) any claim or offset of Rent against the Landlord. Upon request
by Landlord or such successor in interest and without cost to Landlord or such
successor in interest, Tenant will execute, acknowledge and deliver an
instrument or instruments confirming the attornment. If Tenant fails or refuses
to execute, acknowledge and deliver any such instrument within twenty (20) days
after written demand, then Landlord or such successor in interest will be
entitled to execute, acknowledge,
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<PAGE> 44
and deliver any document on behalf of Tenant as Tenant's attorney-in-fact.
Tenant hereby constitutes and irrevocably appoints Landlord, its successors and
assigns, as Tenant's attorney-in-fact to execute, acknowledge, and deliver on
behalf of Tenant any such document. This power of attorney is coupled with an
interest and is irrevocable.
Landlord shall use reasonable efforts to obtain a non-disturbance
agreement from any such party referred to above which provides that in the event
such party succeeds to Landlord's interest under the Lease and provided that no
Event of Default by Tenant exists, such party will not disturb Tenant's
possession, use or occupancy of the Leased Property.
15.04 Estoppel Certificates. At the request of Landlord or any
mortgagee or purchaser of any Leased Property, Tenant shall execute,
acknowledge, and deliver an estoppel certificate, in recordable form, in favor
of Landlord or any mortgagee or purchaser of such Leased Property certifying the
following: (i) that the subject Lease is unmodified and in full force and
effect, or if there have been modifications that the same is in full force and
effect as modified and stating the modifications; (ii) the date to which Rent
and other charges have been paid; (iii) that neither Tenant nor Landlord is in
default nor is there any fact or condition which, with notice or lapse of time,
or both, would constitute a default, if that be the case, or specifying any
existing default; (iv) that Tenant has accepted and occupies such Leased
Property; (v) that Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord, if that be the case, or specifying such that
exist; (vi) that the Landlord has no outstanding construction or repair
obligations; and (vii) such other information as may reasonably be requested by
Landlord or any mortgagee or purchaser. Any purchaser or mortgagee may rely on
this estoppel certificate. If Tenant fails to deliver the estoppel certificates
to Landlord within ten (10) days after the request of the Landlord, then Tenant
shall be deemed to have certified that (a) such Lease is in full force and
effect and has not been modified, or that such Lease has been modified as set
forth in the certificate delivered to Tenant; (b) Tenant has not prepaid any
Rent or other charges except for the current month; (c) Tenant has accepted and
occupies such Leased Property; (d) neither Tenant nor Landlord is in default nor
is there any fact or condition which, with notice or lapse of time, or both,
would constitute a default; (e) Landlord has no outstanding construction or
repair obligation; and (f) Tenant has no defenses, set-offs, deductions,
credits, or counterclaims against Landlord. Tenant hereby irrevocably appoints
Landlord as Tenant's attorney-in-fact to execute, acknowledge and deliver on
Tenant's behalf any estoppel certificate which Tenant does not object to within
twenty (20) days after Landlord sends the certificate to Tenant. This power of
attorney is coupled with an interest and is irrevocable.
ARTICLE XVI
MISCELLANEOUS
16.01 Notices. Landlord and Tenant hereby agree that all notices,
demands, requests, and consents (hereinafter "Notices") required to be given
pursuant to the terms of this Lease shall be in writing and shall be addressed
as follows:
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<PAGE> 45
If to Tenant: Corrections Corporation of America
102 Woodmont Boulevard, Suite 800
Nashville, Tennessee 37205
Attention: Darrell K. Massengale
With a copy to: Stokes & Bartholomew, P.A.
424 Church Street, Suite 2800
Nashville, Tennessee 37219
Attention: Elizabeth E. Moore
If to Landlord: CCA Prison Realty Trust
2200 Abbott Martin Road
Nashville, Tennessee 37215
Attention: Michael W. Devlin
With a copy to: Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Attention: Kim A. Brown
and shall be served by (i) personal delivery, (ii) certified mail, return
receipt requested, postage prepaid, or (iii) nationally recognized overnight
courier. All notices shall be deemed to be given upon the earlier of actual
receipt or three (3) days after mailing, or one (1) business day after deposit
with the overnight courier. Any Notices meeting the requirements of this Section
shall be effective, regardless of whether or not actually received. Landlord or
Tenant may change its notice address at any time by giving the other party
Notice of such change.
16.02 Advertisement of Leased Property. In the event the parties
hereto have not executed a renewal lease of any Leased Property within one (1)
year prior to the expiration of the Term, then Landlord or its agent shall have
the right to enter such Leased Property at all reasonable times for the purpose
of exhibiting such Leased Property to others and to place upon such Leased
Property for and during the period commencing two hundred ten (210) days prior
to the expiration of the Term "for sale" or "for rent" notices or signs.
16.03 Landlord's Access. Landlord shall have the right to enter upon
the Leased Property, upon reasonable prior notice to Tenant, for purposes of
inspecting the same and assuring Tenant's compliance with this Agreement
provided, any such entry by Landlord shall be subject to all rules, guidelines
and procedures prescribed by Tenant in connection therewith. Landlord shall not
be allowed entry to the Leased Premises unless accompanied by such of Tenant's
personnel as Tenant shall require.
16.04 Entire Agreement. This Agreement and the individual Leases
contain the entire agreement between Landlord and Tenant with respect to the
subject matter hereof and thereof. No
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<PAGE> 46
representations, warranties, and agreements have been made by Landlord except as
set forth in this Agreement and the Leases.
16.05 Severability. If any term or provision of this Agreement or
any Lease is held or deemed by Landlord to be invalid or unenforceable, such
holding shall not affect the remainder of this Agreement or any Lease and the
same shall remain in full force and effect, unless such holding substantially
deprives Tenant of the use of the Leased Property or Landlord of the Rents
therefor, in which event the Lease for such Leased Property shall forthwith
terminate as if by expiration of the Term.
16.06 Captions and Headings. The captions and headings are inserted
only as a matter of convenience and for reference and in no way define, limit or
describe the scope of this Agreement or the intent of any provision hereof.
16.07 Governing Law. This Agreement and each of the Leases shall be
construed under the laws of the State of Tennessee.
16.08 Memorandum of Lease. Landlord and Tenant agree that a record
of this Agreement or any Lease may be recorded by either party in a memorandum
of lease approved by Landlord and Tenant with respect to each Leased Property.
16.09 Waiver. No waiver by Landlord of any condition or covenant
herein contained, or of any breach of any such condition or covenant, shall be
held or take to be a waiver of any subsequent breach of such covenant or
condition, or to permit or excuse its continuance or any future breach thereof
or of any condition or covenant, nor shall the acceptance of Rent by Landlord at
any time when Tenant is in default in the performance or observance of any
condition or covenant herein be construed as a waiver of such default, or of
Landlord's right to terminate this Agreement or any Lease or exercise any other
remedy granted herein on account of such existing default.
16.10 Binding Effect. This Agreement and each Lease will be binding
upon and inure to the benefit of the heirs, successors, personal
representatives, and permitted assigns of Landlord and Tenant.
16.11 Authority. The persons executing this Agreement or any Lease
on behalf of Tenant warrant that (i) Tenant has the power and authority to enter
into this Agreement or such Lease; (ii) Tenant is qualified to do business in
the state in which the Leased Property is located; and (iii) they are authorized
to execute this Agreement and each Lease on behalf of Tenant. Tenant shall, at
the request of Landlord, provide evidence satisfactory to Landlord confirming
these representation.
16.12 Transfer of Permits, Etc. Upon the expiration or earlier
termination of the Term of any Lease (whether pursuant to the provisions of this
Agreement or of such Lease), Tenant shall, at the option of Landlord, transfer
to and relinquish to Landlord or Landlord's nominee and to cooperate with
Landlord or Landlords' nominee in connection with the processing by Landlord or
such nominee
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<PAGE> 47
of all licenses, operating permits, and other governmental authorization and all
contracts, including without limitation, the correctional or detention facility
license, and any other contracts with governmental or quasi-governmental
entities which may be necessary or appropriate for the operation by Landlord or
such nominee of the subject Leased Property for the purposes of operating a
correctional or detention facility; provided that the costs and expenses of any
such transfer or the processing of any such application shall be paid by
Landlord or Landlord's nominee; and provided further that any management
agreement, facility operating agreement or other agreement for the housing or
detention of inmates shall be expressly excluded. Any such permits, licenses,
certificates and contracts which are held in Landlord's name now or at the
termination of such Lease shall remain the property of Landlord. To the extent
permitted by law, Tenant hereby irrevocably appoints Landlord, its successors
and assigns and any nominee or nominees specifically designated by Landlord or
any successor or assign as Tenant's attorney-in-fact to execute, acknowledge,
deliver and file all documents appropriate to such transfer or processing of any
such application on behalf of Tenant; this power of attorney is coupled with an
interest and is irrevocable.
16.13 Modification. This Agreement and any Lease may only be
modified by a writing signed by both Landlord and Tenant.
16.14 Incorporation by Reference. All schedules and exhibits
referred to in this Agreement are incorporated into this Agreement, and all
schedules and exhibits referred to in any Lease (as well as the provisions of
this Agreement, except to the extent specifically excluded from or inconsistent
with the terms of such Lease) are incorporated into such Lease.
16.15 No Merger. The surrender of this Agreement or of any Lease by
Tenant or the cancellation of this Agreement or of any Lease by agreement of
Tenant and Landlord or the termination of this Agreement or of any Lease on
account of Tenant's default will not work a merger, and will, at Landlord's
option, terminate any subleases or operate as an assignment to Landlord of any
subleases. Landlord's option under this paragraph will be exercised by notice to
Tenant and all known subtenants of any applicable Leased Property.
16.16 Laches. No delay or omission by either party hereto to
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.
16.17 Waiver of Jury Trial. To the extent that there is any claim by
one party against the other that is not to be settled by arbitration as provided
in Article XIV hereof, Landlord and Tenant waive trial by jury in any action,
proceeding or counterclaim brought by either of them against the other on all
matters arising out of this Agreement or the use and occupancy of the Leased
Property (except claims for personal injury or property damage). If Landlord
commences any summary proceeding for nonpayment of Rent, Tenant will not
interpose, and waives the right to interpose, any counterclaim in any such
proceeding.
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<PAGE> 48
16.18 Permitted Contests. Tenant, on its own or on Landlord's behalf
(or in Landlord's name), but at Tenant's expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any legal
requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that (i) in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; (ii) neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; (iii) in the case
of a legal requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such proceedings; (iv) in the event that any such contest shall involve a sum of
money or potential loss in excess of Fifty Thousand Dollars ($50,000.00), Tenant
shall deliver to Landlord and its counsel an opinion of Tenant's counsel to the
effect set forth in clauses (i), (ii) and (iii), to the extent applicable; (v)
in the case of a legal requirement and/or an Imposition, lien, encumbrance, or
charge, Tenant shall give such reasonable security as may be demanded by
Landlord to insure ultimate payment of the same and to prevent any sale or
forfeiture of the affected Leased Property or the Rent by reason of such
nonpayment or noncompliance; provided, however, the provisions of this Section
shall not be construed to permit Tenant to contest the payment of Rent (except
as to contests concerning the method of computation or the basis of levy of any
Imposition or the basis for the assertion of any other claim) or any other sums
payable by Tenant to Landlord hereunder; (vi) in the case of an insurance
requirement, the coverage required by Article IV shall be maintained; and (vii)
if such contest be finally resolved against Landlord or Tenant, Tenant shall, as
Other Additional Rent due hereunder, promptly pay the amount required to be
paid, together with all interest and penalties accrued thereon, or comply with
the applicable legal requirement or insurance requirement. Landlord, at Tenant's
expense, shall execute and deliver to Tenant such authorizations and other
documents as may be reasonably required in any such contest, and, if reasonably
requested by Tenant or if Landlord so desires, Landlord shall join as a party
therein. Tenant hereby agrees to indemnify and save Landlord harmless from and
against any liability, cost or expense of any kind that may be imposed upon
Landlord in connection with any such contest and any loss resulting therefrom.
16.19 Construction of Lease. This Agreement and each of the Leases
for Leased Properties have been reviewed by Landlord and Tenant and their
respective professional advisors. Landlord, Tenant, and their advisors believe
that this Agreement and such Leases are the product of all their efforts, that
they express their agreement, and agree that they shall not be interpreted in
favor of either Landlord or Tenant or against either Landlord or Tenant merely
because of any party's efforts in preparing such documents.
16.20 Counterparts. This Agreement and each Lease may be executed in
duplicate counterparts, each of which shall be deemed an original hereof or
thereof.
16.21 Relationship of Landlord and Tenant. The relationship of
Landlord and Tenant is the relationship of lessor and lessee. Landlord and
Tenant are not partners, joint venturers, or associates.
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<PAGE> 49
16.22 Landlord's Status as a REIT. Tenant acknowledges that Landlord
intends to elect to be taxed as a real estate investment trust ("REIT") under
the Code. Tenant shall not do anything which would adversely affect Landlord's
status as a REIT. Tenant hereby agrees to modifications of this Agreement which
do not materially adversely affect Tenant's rights and liabilities if such
modifications are required to retain or clarify Landlord's status as a REIT.
16.23 Sale of Real Estate Assets. Notwithstanding any other
provision of this Agreement or of any Lease, Landlord shall not be required to
sell or transfer Leased Property, or any portion thereof, which is a real estate
asset as defined in Section 856(c)(6) of the Code, to Tenant if Landlord's
counsel advises Landlord that such sale or transfer may not be a sale of
property described in Section 857(b)(6)(C) of the Code. If Landlord determines
not to sell such property pursuant to the above sentence, Tenant's right, if
any, to purchase the Leased Property shall continue and be exercisable at such
time as the transaction, upon the advice of Landlord's counsel, would be a sale
of property described in Section 857(b)(6)(C) of the Code.
ARTICLE XVII
NONDISCLOSURE AND RELATED MATTERS
17.01 Covenant Not to Disclose. Landlord agrees that, by virtue of
the relationship of trust and confidence between Landlord and Tenant, it
possesses and will possess certain data and knowledge of operations of the
Tenant which are proprietary in nature and confidential. Landlord covenants and
agrees that it will not knowingly, at any time, directly or indirectly, for
whatever reason, without Tenant's prior written consent, which may be given or
withheld in Tenant's sole discretion, reveal, divulge or make known to any
person or entity, any confidential or proprietary record, data, trade secret,
pricing policy, bid amount, pricing strategy, personnel policy, method or
practice of obtaining or doing business, or any other confidential or
proprietary information whatever (the "Confidential Information"), whether or
not obtained with the knowledge and permission of the Tenant and whether or not
developed, devised or otherwise created in whole or in part by the efforts of
Landlord, nor shall Landlord use such Confidential Information for its own
account. Confidential Information shall not include any information generally
available to the public other than as a result of a disclosure of such
information by Landlord. Notwithstanding anything to the contrary provided
herein, a disclosure of Confidential Information by Landlord will not be
considered a violation of this Article XVII in the event such disclosure is
involuntarily compelled by a final, non-appealable, order from a court of
competent jurisdiction.
17.02 Non-Interference Covenant. Landlord covenants and agrees that
it will not, at any time, directly or indirectly, for whatever reason, whether
for its own account or for the account of any other person, firm, corporation or
other organization, without Tenant's prior written consent, which may be given
or withheld in Tenant's sole discretion: (i) solicit, employ, deal with or
otherwise interfere with any of the Tenant's contracts or relationships with any
employee, officer, director or any independent contractor, whether the person is
employed by or associated with the Tenant on the date of this Agreement or at
any time hereafter; or (ii) solicit, accept, deal with or otherwise interfere
with any of the Tenant's contracts or relationships with any independent
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<PAGE> 50
contractor, customer, client or supplier. Notwithstanding the foregoing, (i)
Landlord may offer employment to the current employees of the Tenant who are
terminated by the Tenant subsequent to the date hereof, (ii) Landlord shall in
no way be liable for any actions by any entity leasing or managing any facility
owned by Landlord, and (iii) nothing provided herein shall prevent Landlord from
soliciting relationships with an entity or entities to lease, license, manage or
otherwise use any facility leased to the Tenant subsequent to the termination of
such lease with the Tenant.
17.03 Business Materials and Property Disclosure. All written
materials, records and documents made by Landlord or coming into its possession
concerning the business or affairs of the Tenant shall be the sole property of
the Tenant and, upon request by the Tenant, Landlord shall deliver the same to
the Tenant and shall retain no copies. The foregoing restrictions shall not be
applicable to any written materials, records and documents generally available
to the public other than as a result of a disclosure of such written materials,
records and documents by Landlord.
17.04 Breach by Landlord. It is expressly understood, acknowledged
and agreed by Landlord that: (i) the restrictions contained in this Article XVII
represent a reasonable and necessary protection of the legitimate interests of
the Tenant and that its failure to observe and comply with its covenants and
agreements in this Article XVII will cause irreparable harm to the Tenant; (ii)
it is and will continue to be difficult to ascertain the nature, scope and
extent of the harm; and (iii) a remedy at law for such failure by Landlord will
be inadequate. Accordingly, it is the intention of the parties that, in addition
to any other rights and remedies which the Tenant may have in the event of any
breach by Landlord of this Article XVII, the Tenant shall be entitled, and is
expressly and irrevocably authorized by Landlord, to demand and obtain specific
performance, including, without limitation, temporary and permanent injunctive
relief, and all other appropriate equitable relief against Landlord in order to
enforce against Landlord any of the covenants and agreements contained in this
Article XVII, and/or to prevent any breach or any threatened breach by Landlord
of the covenants and agreements of Landlord contained in this Article XVII.
Should the Tenant prevail in any action to enforce this Article XVII, the Tenant
shall be entitled to recover all of its costs and expenses relating thereto,
including reasonable attorney's fees and expenses.
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<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused the same to be executed by their respective duly authorized officers as
of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
---------------------------------------
Title: Chief Development Officer
------------------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
---------------------------------------
Title: Chief Executive Officer
------------------------------------
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<PAGE> 52
SCHEDULE A
THE FACILITIES
LOCATION
FACILITY NAME (CITY, STATE)
Bridgeport Pre-Parole Transfer Facility Bridgeport, Texas
Central Arizona Detention Center Florence, Arizona
Houston Processing Center Houston, Texas
Laredo Processing Center Laredo, Texas
Leavenworth Detention Center Leavenworth, Texas
Mineral Wells Pre-Parole Transfer Facility Mineral Wells, Texas
West Tennessee Detention Facility Mason, Tennessee
Eloy Detention Facility Eloy, Arizona
T. Don Hutto Correctional Facility Taylor, Texas
<PAGE> 53
SCHEDULE B
PERSONAL PROPERTY
All of those certain items of property described on the CCA - Master
Depreciation Schedule dated June 30, 1997, on file at the offices of Seller and
Purchaser.
<PAGE> 54
SCHEDULE C
EXCLUDED PERSONAL PROPERTY
Bridgeport
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
9404 Dury's Camera for Timeclock Avant
9964 Control Systems Timeclock Systems
</TABLE>
Central Arizona
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
12173 Control Systems Timeclock Systems
8463 Control Systems Timeclock Kronos 460F
8466 Control Systems Camera SSI 124E Die Cutter
</TABLE>
Eloy
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
9255 Control Systems Timeclock Kronos 460F Barcode
9403 Control Systems Timeclock Kronos 460F Barcode
12218 Dycam Inc. Camera Digital Model 4STD PC
13103 Control Systems Timeclock Kronos 480F 256K
</TABLE>
Houston
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
2619 Control Systems Timeclocks
12733 Digital Connections Wide Area Network - Wan
1026 Southern Time Timeclocks
</TABLE>
<PAGE> 55
Laredo
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
2620 Control Systems Timeclocks
4110 Control Systems Internal Commun. Board
7230 Control Systems Software Close Up Customer
12166 Digital Connections Wide Area Network - Wan
12607 Computer Discount
Warehouse Novell Groupwise 5 Mailbox 10
12608 Computer Discount
Warehouse Novell Groupwise 5 Mailbox 10
12609 Megabyte Business Printer ID Card Persona 2MB
1620 Simplex Timeclock and Card Racks
</TABLE>
Leavenworth
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
6729 Control Systems Timeclock System SS Barcode
12738 Digital Connections Wide Area Network - Wan
</TABLE>
Mineral Wells
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
9256 Control Systems Timeclock Kronos 460F Barcode
</TABLE>
West Tennessee
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
4184 Control Systems Timeclock - Kronos
10659 Control Systems Barcode Reader Kronos 460F
</TABLE>
<PAGE> 56
T. Don Hutto
<TABLE>
<CAPTION>
Asset Number Vendor Description
- ------------ ------ -----------
<S> <C> <C>
13024 Control Systems Timeclock Kronos 480F 256K
13266 Control Systems Software TKC250 V8B 1-User
</TABLE>
<PAGE> 1
Exhibit 10.168
TRADE NAME USE AGREEMENT
THIS AGREEMENT (the "Agreement") dated this 18 day of July, 1997, by and
among Corrections Corporation of America ("Grantor"), a Delaware corporation,
and CCA Prison Realty Trust ("Grantee"), a Maryland real estate investment
trust.
W I T N E S S E T H:
WHEREAS, Grantor is the sole and exclusive owner of the corporate name
Corrections Corporation of America and its abbreviation "CCA" (the Trade Name).
NOW, THEREFORE, in consideration of the premises and the mutual promises
and undertakings herein contained, and for other good and valuable
consideration, the parties agree as follows:
1. Grant of Trade Name by Grantor. Grantor grants to Grantee the
non-exclusive, non-transferrable right to use the Trade Name in its corporate
name as follows: CCA Prison Realty Trust, subject to the provisions of this
Agreement.
2. Term. This Agreement shall commence on the date above written and
terminate on the date which Grantee ceases to own any correctional or detention
facility managed by Grantor (the "Term").
3. Termination. This Agreement may be terminated upon ten (10) days'
written notice from Grantor to Grantee upon occurrence of any of the following
events:
(a) A change in control of Grantee;
(b) Grantee goes into liquidation or bankruptcy or has a receiver or
trustee appointed to administer either its property or affairs, or makes a
general assignment of its property for the benefit of creditors or in any other
manner takes advantage of the laws of bankruptcy or insolvency or the like.
4. Reservation of Rights. Except for the limited rights herein expressly
granted to Grantee, all rights in the Trade Name are reserved to Grantor
throughout the world for the sale and exclusive use or other disposition by
Grantor at anytime, and from time to time, without any obligation to Grantee.
5. Maintenance of Quality Standards. Grantee agrees that the nature and
quality of: all services rendered by Grantee hereunder; all goods sold by
Grantee hereunder; and all related advertising, promotional, and other related
uses of the Trade Name by Grantee shall conform to standards reasonably set by
Grantor. Grantee agrees to cooperate with Grantor in facilitating Grantor's
control of such nature and quality, and to supply Grantor with specimens of all
uses of the Trade Name upon request.
<PAGE> 2
6. Transfer Prohibited. The Trade Name granted hereunder shall not be
assigned, sublicensed, or otherwise transferred without the prior written
consent of Grantor. In the event of a prohibited transfer, Grantor shall have
the right to terminate this Agreement forthwith by written notice to Grantee.
7. Rights Upon Termination. Upon the termination (by expiration or
otherwise) of this Agreement, for any reason, all rights granted to Grantee
hereunder shall automatically revert to Grantor for its use or disposition. Upon
termination, Grantee shall promptly cease use of the Trade Name, and shall
promptly deliver to Grantor all materials previously supplied by Grantor to
Grantee and all copies thereof, in whole or in part. At Grantor's option,
Grantor may, in lieu of return, require that Grantee destroy said materials and
copies and provide to Grantor satisfactory evidence of destruction. Grantor
shall not be liable to Grantee for damages of any kind on account of the
termination or expiration of this Agreement. Without limiting the foregoing,
upon termination or expiration of this Agreement for any reason, Grantor shall
have no liability for reimbursement or for damages for loss of goodwill, or on
account of any expenditures, investments, leases, or commitments made by
Grantee. Grantee acknowledges and agrees that Grantee has no expectation and has
received no assurances that its business relationship with Grantor will continue
beyond the stated term of this Agreement or its earlier termination, that any
investment by Grantee in the will be recovered or recouped, or that Grantee
shall obtain any anticipated amount of profits by virtue of this Agreement.
8. No Franchise or Joint Venture. The parties expressly acknowledge that
this Agreement shall not be deemed to create an agency, partnership, franchise,
employment, or joint venture relationship between Grantor and Grantee. Nothing
in this Agreement shall be construed as a grant of authority to Grantee to waive
any right, incur any obligation or liability, enter into any agreement, grant
any release or otherwise purport to act in the name of Grantor.
9. Indemnification.
9.1 The Grantee shall indemnify and hold harmless Grantor, its
affiliates, directors, officers, employees, representatives, agents, successors
and assigns from and against any and all losses, damages, costs and expenses,
including attorney's fees, resulting from, arising out of Grantee's breach of
the promises, covenants, representations and warranties made by it herein.
9.2 The Grantor shall indemnify and hold harmless Grantee, its
affiliates, directors, officers, employees, representatives, agents, successors
and assigns from and against any and all losses, damages, costs and expenses,
including attorney's fees, resulting from, arising out of Grantor's breach of
the promises, covenants, representations and warranties made by it herein.
2
<PAGE> 3
10. Representations and Warranties.
10.1 Grantee hereby represents and warrants that (a) it is a real
estate investment trust duly organized and validly existing under the laws of
Maryland; (b) the execution and delivery by the Grantee of this Agreement, the
performance by Grantee of all the terms and conditions thereof to be performed
by it and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary action, and no other act or approval of any
person or entity is required to authorize such execution, delivery, and
performance; (c) the Agreement constitutes a valid and binding obligation of
Grantee, enforceable in accordance with its terms; (d) this Agreement and the
execution and delivery thereof by Grantee, does not, and the fulfillment and
compliance with the terms and conditions hereof and the consummation of the
transactions contemplated hereby will not, (i) conflict with any of, or require
the consent of any person or entity under, the terms, conditions or provisions
of the organizational documents of Grantee, (ii) violate any provision of, or
require any consent, authorization or approval under, any law or administrative
regulation or any judicial, administrative or arbitration order, award,
judgment, writ, injunction or decree applicable to Grantee, or (iii) conflict
with, result in a breach of, or constitute a default under, any material
agreement or obligation to which Grantee is a party.
10.2 Grantor hereby represents and warrants that (a) it is a
corporation duly organized and validly existing under the laws of Delaware; (b)
the execution and delivery by the Grantor of this Agreement, the performance by
Grantor of all the terms and conditions thereof to be performed by it and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action, and no other act or approval of any person or entity is
required to authorize such execution, delivery, and performance; (c) the
Agreement constitutes a valid and binding obligation of Grantor, enforceable in
accordance with its terms; (d) this Agreement and the execution and delivery
thereof by Grantor, does not, and the fulfillment and compliance with the terms
and conditions hereof and the consummation of the transactions contemplated
hereby will not, (i) conflict with any of, or require the consent of any person
or entity under, the terms, conditions or provisions of the organizational
documents of Grantor, (ii) violate any provision of, or require any consent,
authorization or approval under, any law or administrative regulation or any
judicial, administrative or arbitration order, award, judgment, writ, injunction
or decree applicable to Grantor, or (iii) conflict with, result in a breach of,
or constitute a default under, any material agreement or obligation to which
Grantor is a party; (e) to the best of Grantor's knowledge, it is the owner of
the Trade Name and has the right to grant the rights to use the Trade Name to
the Grantee under the terms of this Agreement; and (f) has not been subject to
any third party claims for infringement due to the use of the Trade Name.
11. Ownership; Form of Use. Grantee acknowledges that Grantor owns all
right, title, and interest in and to the Trade Name, agrees that it will do
nothing inconsistent with such ownership. Grantee agrees that nothing in this
Agreement shall give Grantee any right, title, or interest in the Trade Name
other than the right to use it in accordance with this Agreement, and Grantee
agrees that it will not attack the title of Grantor to the Trade Name or attack
the validity of this Agreement. Grantee agrees to use the Trade Name only in the
form and manner as prescribed from time to time by Grantor.
3
<PAGE> 4
12. Waiver; Modification. No wavier or modification of any of the terms of
this Agreement shall be valid unless in writing. No waiver by either party of a
breach hereof or a default hereunder shall be deemed a waiver by such party of a
subsequent breach or default of like or similar nature.
13. Separability. If any provision in this Agreement contravenes or is
otherwise invalid under the law of any country or subdivision thereof, then such
provision insofar as such country or subdivision is concerned shall be deemed
eliminated from this Agreement and the Agreement shall, as so modified, remain
valid and binding on the parties hereto and in full force and effect.
14. Disclaimer of Warranties. EXCEPT AS MAY BE EXPRESSLY PROVIDED IN THIS
AGREEMENT, GRANTOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IN
RESPECT OF THE TRADE NAME, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF
NON-INFRINGEMENT OR OF RESULTS TO BE OBTAINED FROM USE THEREOF.
15. Negation of Consequential Damages. IN NO EVENT SHALL GRANTOR BE LIABLE
FOR ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES WHATSOEVER HEREUNDER, REGARDLESS OF
WHETHER GRANTOR HAS BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES.
16. Governmental Licenses, Permits and Approvals. Grantee, at its expense,
shall be responsible for obtaining and maintaining all licenses, permits,
approvals, authorizations, and clearances which are required by governmental
authorities with respect to this Agreement, and for compliance with any
requirements of governmental authorities for the registration or recordation of
this Agreement and for making any payments required in connection therewith.
Grantee shall furnish to Grantor, promptly upon Grantor's request, written
evidence from such governmental authorities of the due issuance and continuing
validity of any such licenses, permits, clearances, authorizations, approvals,
registration or recordation.
17. Notices.
17.1 Notices and other communications required or permitted to the
given under this Agreement shall be in writing and delivered by hand or
overnight delivery, or placed in certified or registered mail, return receipt
requested, at the addresses specified below or such other address as either
party may, by notice to the other, designate:
If to Grantor: Corrections Corporation of America
102 Woodmont Blvd., Suite 800
Nashville, Tennessee 37205
Attn: Doctor R. Crants
4
<PAGE> 5
with a copy to: Elizabeth E. Moore, Esq.
Stokes & Bartholomew, P.A.
424 Church Street, Suite 2800
Nashville, Tennessee 37219
If to Grantee: CCA Prison Realty Trust
2200 Abbott Martin Road, Suite 201
Nashville, Tennessee 37215
Attn: D. Robert Crants, III
17.2 Notices and other communications shall be deemed given when
delivered by hand or overnight delivery to the proper address or the date of the
return receipt, as provided above.
18. Governing Laws. This Agreement shall be construed in accordance with
the laws of Tennessee, excluding the choice of law provisions thereof. The
parties hereby submit to the jurisdiction of the courts of Tennessee in respect
to all disputes arising out of or in connection with this Agreement.
19. Enforcement. It is expressly understood, acknowledged, and agreed by
Grantee that (a) the restrictions contained in this Agreement represent a
reasonable and necessary protection of the legitimate interests of Grantor and
its affiliates, and that Grantee's failure to observe and comply with the
covenants and agreements in this Agreement will cause irreparable harm to
Grantor and its affiliates; (b) it is and will continue to be difficult to
ascertain the nature, scope, and extent of the harm; and (c) a remedy at law for
such failure by Grantee will be inadequate. Accordingly, it is the intention of
the parties that, in addition to any other rights and remedies which Grantor and
its affiliates may have in the event of any breach or threatened breach of the
Agreement, Grantor and its affiliates shall be entitled, and are expressly and
irrevocably authorized by Grantee, to demand and obtain specific performance,
including, without limitation, temporary and permanent injunctive relief and all
other appropriate equitable relief against Grantee in order to enforce against
Grantee the covenants and agreements contained in this Agreement. Such right to
obtain injunctive relief may be exercised concurrently with, prior to, after, or
in lieu of, any other rights resulting from any such breach or threatened
breach. Grantee shall account for and pay over to Grantor all compensation,
profits, and other benefits, after taxes, enuring to Grantee's benefit, which
are derived or received by Grantee or any person or business entity controlled
by Grantee resulting from any action or transaction constituting breach of the
Agreement.
20. Entire Agreement. This Agreement contains the entire understanding of
the parties. There are no representations, warranties, promises, covenants, or
undertakings other than those hereinabove contained.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
signed by their duly authorized officers and their respective corporate seals to
be hereunto affixed on the date set forth above.
GRANTOR:
CORRECTIONS CORPORATION OF
AMERICA
By: /s/ Doctor R. Crants
-----------------------------------
Its: Chief Executive Officer
-----------------------------------
GRANTEE:
CCA PRISON REALTY TRUST
By: /s/ D. Robert Crants, III
-----------------------------------
Its: President
-----------------------------------
6
<PAGE> 1
EXHIBIT 10.174
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") for the convenience
of the parties hereto dated as of November 18, 1997, but effective upon the
Closing Date, is entered into by and among the HOLDENVILLE INDUSTRIAL AUTHORITY,
an Oklahoma Public Trust (the "Authority"), and CORRECTIONS CORPORATION OF
AMERICA, a Tennessee corporation ("CCA").
W I T N E S S E T H:
WHEREAS, CCA desires to purchase the Facility, and the Authority
desires to sell the Facility to CCA and to use the proceeds therefrom in
furtherance of its government purposes; and,
WHEREAS, the parties desire to set forth in this Agreement the terms
and provisions relating to said purchase and sale.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) cash in hand
paid by CCA to the Authority, receipt thereof is hereby acknowledged by the
Authority, and for other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
In each and every place in and throughout this Agreement, whenever the
following terms, or any of them are used, unless the context shall clearly
indicate another or different meaning or intent, they shall have the following
meanings:
"Bonds" or "1995 Bonds" shall mean the Holdenville Industrial Authority
Correctional Facility Revenue Bonds, Series 1995 in the aggregate principal
amount of $33,700,000 issued by the Authority pursuant to the terms and
provisions of that certain Bond Indenture, dated as of June 1, 1995, between the
Authority and Liberty Bank and Trust Company of Oklahoma City, National
Association, as Trustee (the "Trustee"), as supplemented and modified by that
certain 1996 Supplementary Bond Indenture, dated as of September 1, 1996,
between the Authority and the Trustee (collectively, the "Indenture").
"Closing" or "Closing Date" shall mean the date that the consideration
under Section 2.3(i) and (ii) is paid by CCA and the Authority conveys the
Facility to CCA, but in no event later than December 1, 1997, unless otherwise
mutually agreed to by the parties.
"Facility" shall mean the real property, easements, fixtures, personal
property and incorporeal hereditaments located on the Land, and any additions or
improvements thereto, including the Davis Correctional Facility, a 500-cell
medium security correctional facility constructed and placed thereon.
<PAGE> 2
"Land" shall mean the real property comprising approximately 75 acres
and located in the City of Holdenville, Hughes County, Oklahoma, described on
Exhibit A, attached hereto and incorporated herein, and upon which the Facility
is constructed.
"Management Agreement" shall mean the Management Services Agreement
dated as of June 1, 1995, by and between CCA and the Authority pertaining to the
operation and management of the Facility by CCA, including any amendments or
supplements thereto.
"Training Services Agreement" means the Training Services Agreement
dated as of June 1, 1995, by and between CCA and the Authority pertaining to the
pretraining and preparation relating to the Facility, including any amendments
or supplements thereto.
ARTICLE II
CONVEYANCE OF FACILITY
2.1 Conveyance. (a) On the Closing Date, and upon payment by CCA to or
on behalf of the Authority of the consideration set out in Section 2.3(i) and
(ii) below, the Authority will convey to CCA the Land, buildings and
improvements comprising the Facility by Warranty Deed, in the same form attached
hereto as Exhibit B, and the machinery, equipment and other items of personal
property comprising the Facility by Bill of Sale and Assignment, in the same
form attached hereto as Exhibit C. The Bill of Sale and Assignment will include
an assignment of all right, title and interest of the Authority under (i) the
Monitor Agreement, dated as of June 1, 1995, between the Authority and Norris &
Associates, Inc., and (ii) the Marketing Services Agreement, dated as of August
1, 1995, between the Authority and Capitol Consultants relating to the Facility,
and an assumption by CCA of all obligations of the Authority under said
agreements from and after the Closing.
(b) CCA may obtain, at its option and at its expense, (i) an
owner's title insurance commitment from a title insurance company of its choice
to issue a title insurance policy insuring marketable fee simple title to the
Facility to CCA, which will contain only those title exceptions described in the
Warranty Deed attached hereto as Exhibit B, (ii) an as-built survey for the
Facility prepared by an Oklahoma registered land surveyor of its choice, which
will disclose no matters affecting the Facility other than those described in
the Warranty Deed attached hereto as Exhibit B, (iii) a Phase I environmental
site assessment report for the Facility from an environmental engineer of its
choice, which will disclose no adverse or material environmental matters
affecting the Facility other than those matters caused or created by CCA, and/or
(iv) a going concern appraisal. The Authority agrees to execute and deliver to
the title company issuing said title insurance policy on or before the Closing
such resolutions, consents, notices and title affidavits and certifications
reasonably requested or customarily required by the title company in order to
enable the title company to issue its title policy to CCA, upon payment of the
premium therefor, without title exceptions or requirements other than those
title exceptions contained in the Warranty Deed attached hereto as Exhibit B and
with the standard preprinted title exceptions deleted therefrom.
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<PAGE> 3
2.2 Exclusions from Conveyance. It is specifically acknowledged and
agreed by the parties that CCA is not acquiring the rights to the Authority's
inmate pay telephone service agreement relating to the Facility, or to any
renewals or replacements thereof entered into by the Authority, as part of this
transaction. In consideration thereof, the Authority agrees to maintain the
grounds surrounding the Facility beyond the main security fence. CCA agrees to
allow the Authority and the vendor under the inmate pay telephone service
agreement with the Authority access to the inmate pay telephone equipment in the
Facility during normal business hours upon reasonable notice to operate,
maintain and repair the equipment.
2.3 Consideration. (i) On the Closing Date, CCA will pay to the
Authority the amount of One Million Five Hundred Thousand Dollars ($1,500,000)
by cashier's or certified check or wire transfer funds, subject to the
prorations set forth in Section 2.4.
(ii) As additional consideration to the Authority hereunder,
on the Closing Date, CCA will deposit in escrow with the Trustee an amount
sufficient to defease the 1995 Bonds as provided in the Indenture. The Trustee
shall hold, invest and disburse said funds as provided in the Indenture to
retire the 1995 Bonds on the earliest practicable date. On the Closing Date, the
Authority will provide written instructions to the Trustee directing the Trustee
to pay to CCA the amount of all surplus funds held by the Trustee under the
Indenture as an additional management fee to CCA under the Management Agreement.
(iii) The Authority and CCA each acknowledge and agree that
the consideration for the Facility set forth herein was negotiated by the
parties at arms length. CCA represents that the consideration for the Facility
is a fair price offered by CCA after examination of the cost of other like
facilities in the marketplace, and that CCA is under no obligation to purchase.
The Authority represents that the consideration for the Facility is a fair price
agreed to by the Authority after reasonable investigation and calculation, and
that the Authority is under no obligation to sell.
2.4 Prorations. Real estate taxes with respect to the Land shall be
prorated to the Closing Date. The Authority will pay any special assessments
maturing with respect to the Land to the date of Closing, and special
assessments, if any, maturing on or after the date of Closing shall be paid by
CCA.
2.5 Closing Costs. CCA will pay (i) the recording costs and transfer
taxes to record the Warranty Deed, (ii) the premium for the owner's title
insurance policy issued to CCA, (iii) the cost of the as-built survey, the Phase
I environmental site assessment report and the going concern appraisal obtained
by CCA, (iv) the legal expenses of J. Scott Brown, as counsel to the Authority
and as bond counsel, and (v) the expense to calculate as provided in the
Indenture the rebate amount of earnings, if any, due to the federal government,
and the rebate amount of earnings, if any, determined by such calculation to be
owed to the federal government.
2.6 Termination of Agreements. Upon and after the Closing, the
Management Agreement and the Training Services Agreement shall each terminate
and shall be of no further force or effect; provided, however, that (i) the fees
due to CCA under the Management Agreement for services provided by CCA prior to
the Closing shall be billed, collected and paid to CCA as provided in the
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<PAGE> 4
Management Agreement and (ii) the indemnification provisions contained in the
Management Agreement shall continue in full force and effect with respect to any
act or cause of action occurring or accruing prior to the Closing. Prior to the
Closing, the Authority agrees to authorize and direct the Trustee under the
Indenture to disburse to CCA the entire sum (approximately $958,000.00) in the
Revenue Fund (as defined in the Indenture), representing a portion of the fees
due to CCA under the Management Agreement for services provided by CCA during
the month of September 1997 that have been paid to the Trustee but have not been
disbursed to CCA as provided for in Section 6.08(B)(3) of the Indenture, which
shall be paid to CCA prior to the payment of the surplus funds held by the
Trustee as provided in Section 2.3(ii) hereof. The Authority further agrees to
authorize and direct the Trustee under the Indenture to pay to CCA any amounts
received by the Trustee subsequent to the Closing from any Transferring Entities
(as defined in the Management Agreement) for services provided by the Authority
or CCA prior to the Closing. The Authority agrees to assist and to cooperate in
good faith with CCA in connection with the billing, collection and payment of
all such fees, and agrees to promptly remit to CCA any payments it receives for
such fees. Notwithstanding the foregoing, CCA acknowledges and agrees that the
obligation of the Authority to make any payments under the Management Agreement
shall be limited and special obligations of the Authority payable solely from
the amounts received from the Transferring Entities (as defined in the
Management Agreement) and shall never become a debt or obligation of any
trustee, employee or officer of the Authority.
2.7 Further Assurances/Cooperation. CCA and the Authority each agree to
cooperate in good faith with each other and to execute and deliver in connection
with the Closing such other and further agreements, documents and instruments as
may be reasonably necessary or required in order to fully consummate the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS
3.1 Representations and Covenants by CCA. CCA makes the following
representations as the basis for the undertakings on its part herein contained
and hereby covenants and agrees:
(a) CCA is a corporation duly incorporated under the laws of
Tennessee and is qualified to do business in and is in good standing in
Oklahoma.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement conflict with or
result in a breach of any of the terms, conditions or provisions of any
corporate restriction or any agreement or instrument to which CCA is now a party
or by which it is bound, or constitute a default under any of the foregoing, or
result in the creation or imposition of any prohibited lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of CCA
under the terms of any instrument or agreement.
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<PAGE> 5
(c) CCA has full power and authority to execute and deliver
this Agreement and upon such execution and delivery, said document shall be
valid and legally binding against CCA in accordance with its terms.
3.2 Representations by the Authority. The Authority has been duly
created and is existing under the laws of the State of Oklahoma and under the
Trust Indenture creating the Authority it has the power to enter into the
transactions contemplated by, and to carry out its obligations under, this
Agreement and will do or cause to be done all things necessary to keep the
Authority in existence and in good standing so long as necessary for the
purposes thereof. The Authority is not in default under any of the provisions
contained in its Trust Indenture or in the laws of Oklahoma or in any other
instrument by which it is bound. By proper action of its Trustees, the Authority
has been duly authorized to execute, deliver and perform this Agreement, the
Warranty Deed attached hereto as Exhibit B, and the Bill of Sale and Assignment
attached hereto as Exhibit C.
ARTICLE IV
MISCELLANEOUS
4.1 Successors and Assigns. All terms, provisions, conditions,
covenants, warranties and agreements contained herein shall be binding upon the
successors and assigns of both the Authority and CCA and all such terms,
provisions, conditions, covenants, warranties and agreements shall likewise
inure to the benefit of everyone who may at any time be a beneficiary hereunder.
4.2 Preservation and Inspection of Documents. All documents received by
CCA or the Authority under the provisions of this Agreement shall be retained in
its possession and shall be subject at all reasonable times to the inspection of
CCA and the Authority and their agents and their representatives, any of whom
may make copies thereof under such reasonable terms and regulations as the
holder of such documents may set out.
4.3 Parties Interested Herein. Nothing in this Agreement expressed or
implied is intended or shall be construed to confer upon, or to give to, any
person or corporation, other than the Authority or CCA, any right, remedy or
claim under or by reason of this Agreement or any covenant, condition or
stipulation thereon.
4.4 Severability of Invalid Provisions. If any one or more of the
covenants or agreements provided in this Agreement on the part of the parties
hereto to be performed should be contrary to law, then such covenant or
covenants or agreement or agreements shall be deemed severable from the
remaining covenants and agreements, and shall in no way affect the validity of
the other provisions of this Agreement.
4.5 Successors. Whenever in this Agreement the Authority is named or
referred to, it shall be deemed to include any public trust or other entity
organized and existing for the benefit of and on behalf of the City of
Holdenville, which succeeds to the principal functions and powers of the
Authority, and all the covenants and agreements contained in the Agreement by or
in behalf of the Authority shall bind and inure to the benefit of said successor
whether so expressed or not.
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<PAGE> 6
4.6 Consents and Approvals. Whenever the written consent or approval of
any party hereto shall be required under the provisions of this Agreement, such
consent or approval shall not be unreasonably withheld or delayed.
4.7 Notices, Demands and Requests. All notices, demands and requests to
be given or made hereunder to or by the parties shall be in writing and shall be
properly made if delivered personally, or sent by registered or certified mail,
or by a nationally recognized express courier service, all charges prepaid, to
the other party at the address set forth below, or at such other address as may
hereafter be provided in writing. The date of personal delivery, or the date of
mailing or of delivery to such nationally recognized express courier service, as
the case may be, shall be the date of such notice, demand or request:
(a) AUTHORITY
Holdenville Industrial Authority
City Hall
Holdenville, Oklahoma 74848
Attn: Chairman
(b) CCA
Doctor R. Crants
Chairman and Chief Executive Officer
Corrections Corporation of America
10 Burton Hills Boulevard
Nashville, Tennessee 37215
4.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
4.9 Applicable Law. This Agreement shall be governed exclusively by
the applicable laws of the State of Oklahoma.
4.10 Section Headings Not Controlling. The headings of the several
sections of this Agreement have been prepared for convenience of reference only
and shall not control, affect the meaning of, or be taken as an interpretation
of any provision of this Agreement.
4.11 Amendment. This Agreement may only be amended by mutual agreement
in writing signed between the parties.
4.12 Entire Agreement. The foregoing represents the entire agreement
between the parties.
4.13 Survival. It is understood and agreed by the parties hereto that
whether or not it is specifically so provided herein, any term or provision of
this Agreement, which by its nature or effect is required to be kept, observed
or performed after the Closing and conveyance of title, shall
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<PAGE> 7
not be merged therein, but shall be and remain binding upon and for the benefit
of the parties hereto until fully kept, observed or performed.
4.14 Broker and Commission. CCA and the Authority each warrant to the
other than no broker has been involved in the transactions set forth in this
Agreement, and each will indemnify and hold the other party harmless from any
claims for broker commissions arising from such party's actions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by its duly authorized officers all as of the day and year first above
written.
(SEAL) HOLDENVILLE INDUSTRIAL AUTHORITY
ATTEST:
/s/ Jack Barrett
--------------------------------
Jack Barrett, Chairman
/s/ Frenola Caver
- ------------------------------
Secretary
CORRECTIONS CORPORATION OF
AMERICA
By: /s/ Darrell K. Massengale
----------------------------
Title: CFO
-------------------------
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<PAGE> 8
STATE OF OKLAHOMA )
) SS
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 19th day of
November, 1997, by Jack Barrett, Chairman of the Holdenville Industrial
Authority, a public trust, on behalf of said Authority.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Dana L. Gilchrist
------------------------------------
Notary Public
My Commission Expires:
3-25-98
- ----------------------
STATE OF TENNESSEE )
) SS
COUNTY OF DAVIDSON )
The foregoing instrument was acknowledged before me this 18th day of
November, 1997, by Darrell K. Massengale, the CFO of Corrections Corporation of
America, on behalf of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carole M. Maxson
------------------------------------
Notary Public
My Commission Expires:
9/23/2000
- ----------------------
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<PAGE> 9
EXHIBIT A
(Real Estate Description)
(Davis Correctional Facility)
A tract of land lying in the Southeast Quarter (SE/4) of Section 10, Township 7
North, Range 8 East, Indian Meridian, Hughes County, Oklahoma, further described
as a point of beginning at a point along the South line of said SE/4, S
89(degree)20'02" W, 469.25 feet from the Southeast corner of said SE/4; thence
along the South line of said SE/4, S 89(degree)20'02" W, 1030.75 feet; thence N
00(degree)57'37" W, 2323.20 feet and parallel to the East line of said SE/4;
thence N 89(degree)20'02" E, 1500.00 feet and parallel to the South line of said
SE/4; thence along said East line of the SE/4 S 00(degree)57'37" E, 1859.20
feet; thence S 89(degree)20'02" W, 469.25 feet; thence S 00(degree)57'37" E,
464.00 feet to the Point of Beginning, containing 75 acres, more or less.
<PAGE> 10
EXHIBIT B
WARRANTY DEED
THAT HOLDENVILLE INDUSTRIAL AUTHORITY, a duly formed Public Trust of
the State of Oklahoma, acting by and through its trustees, party of the first
part, in consideration of Ten Dollars ($10.00) and other valuable
considerations, in hand paid, the receipt which is hereby acknowledged, does
hereby grant, bargain, sell and convey unto CORRECTIONS CORPORATION OF AMERICA,
a Tennessee corporation, 10 Burton Hills Boulevard, Nashville, Tennessee 37215,
party of the second part, the following described real property and premises
situated in Hughes County, State of Oklahoma, to-wit:
A tract of land lying in the Southeast Quarter (SE/4) of Section 10,
Township 7 North, Range 8 East, Indian Meridian, Hughes County,
Oklahoma, further described as a point of beginning at a point along
the South line of said SE/4, S 89(degree)20'02" W, 469.25 feet from the
Southeast corner of said SE/4; thence along the South line of said
SE/4, S 89(degree)20'02" W, 1030.75 feet; thence N 00(degree)57'37" W,
2323.20 feet and parallel to the East line of said SE/4; thence N
89(degree)20'02" E, 1500.00 feet and parallel to the South line of said
SE/4; thence along said East line of the SE/4 S 00(degree)57'37" E,
1859.20 feet; thence S 89(degree)20'02" W, 469.25 feet; thence S
00(degree)57'37" E, 464.00 feet to the Point of Beginning, containing
75 acres, more or less.
RESTRICTION: Until March 31, 2013, no portion of the real property and
premises herein described shall be used for any purpose other than for
a private prison, correctional facility or work center. This covenant
shall run with the land and be binding upon the Grantee, and Grantee's
successors and assigns.
RIGHT OF USE: The party of the first part or the Oklahoma Department of
Corrections will have the right to use the lagoon located on said real
property until the work release center of the party of the first part
located adjacent to said real property is connected to the wastewater
treatment system of the City of Holdenville, Oklahoma.
together with all the improvements thereon and the appurtenances thereunto
belonging, and warrant the title to the same. SUBJECT TO: easements,
restrictions and rights-of-way of record as described on Exhibit A, attached
hereto and incorporated herein by reference.
TO HAVE AND TO HOLD said described premises unto the said party of the
second part, its successors and assigns forever, free and discharged of and from
all former grants, charges, taxes, judgments, mortgages and other liens and
encumbrances of whatsoever nature.
Exempt Documentary Stamp Tax 0S Title 68 Article 32 Section 3202, Paragraph 11.
Send Tax Statements:
Corrections Corporation of America
10 Burton Hills Boulevard
Nashville, Tennessee 37215
<PAGE> 11
Signed and delivered this _____ day of November, 1997.
HOLDENVILLE INDUSTRIAL AUTHORITY
--------------------------------
(SEAL) Jack Barrett, Chairman
ATTEST:
- ------------------------------
Secretary
STATE OF OKLAHOMA )
) SS
COUNTY OF ___________________ )
The foregoing instrument was acknowledge before me this _____ day of
November, 1997, by Jack Barrett, Chairman of the Holdenville Industrial
Authority, a public trust, on behalf of the trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year first above written.
(SEAL) ----------------------------------------
Notary Public
My Commission Expires:
- ----------------------
<PAGE> 12
EXHIBIT A
1. Taxes for the year 1997 and subsequent years, not yet due and payable.
2. Title to all minerals within and underlying the premises, together with all
mining rights, and other rights, privileges and immunities relating
thereto.
3. Right of Way in favor of General American Oil Company of Texas referred to
in Assignment of Pipe Lines recorded October 30, 1954 in Book 228 Misc.,
page 126. Assigned to Kerr-McGee Oil Industries, Inc. by Assignment
recorded June 4, 1956 in Book 255 Misc., page 160. Subsequently assigned to
BigHeart Pipe Line Corporation by Assignment and Bill of Sale recorded
January 17, 1973 in Book 462 Misc., page 115.
4. Right of Way in favor of Flow Production Company referred to in Assignment
and Bill of Sale recorded June 10, 1996 in Book 880 Misc., page 24.
5. Right of Way in favor of Oklahoma Gas and Electric Company recorded
November 19, 1980 in Book 588 Misc., page 533.
6. Right of Way in favor of Adams Petroleum Enterprises Corp. recorded March
18, 1981 in Book 597 Misc., page 559.
7. Easement for Public Highway in favor of County of Hughes recorded April 16,
1990 in Book 792 Misc., page 35.
8. Right of Way in favor of Oklahoma Natural Gas Company recorded September
18, 1995 in Book 870 Misc., page 702.
9. Right of Way in favor of Oklahoma Gas and Electric Company recorded July 1,
1996 in Book 880 Misc., page 568.
10. Lease and Operation Agreement, dated as of July 1, 1996, between
Holdenville Industrial Authority and Oklahoma Department of Corrections,
not shown of public record.
11. Restrictions and Right of Use contained in Warranty Deed recorded July 13,
1995 in Book 868 Misc., page 457.
12. Wewoka Creek Water and Soil Conservancy District No. 2 created by Judgment
recorded June 11, 1954 in Book 221 Misc., page 439.
13. Statutory Right of Way in favor of the State of Oklahoma 33 feet along all
section lines as shown on survey of James B. Marshall, dated July 12, 1995.
<PAGE> 13
14. Right of Way in favor of Sinclair Oil and Gas Company, recorded February 1,
1965, in Book 373 Misc., page 336. Assigned to Intersearch Gas Corporation
by Assignment and Bill of Sale recorded December 28, 1990 in Book 803
Misc., page 714. Subsequently assigned to Enerfin Resources I Limited
Partnership by Assignment recorded April 25, 1991 in Book 808 Misc., page
779.
15. Rights for Easement or claims of possession for 5" buried gas line as shown
on survey of James B. Marshall, dated July 12, 1995, not shown of public
record.
16. Rights for Easement or claims of possession for Arkla Gas Line as shown on
survey of James B. Marshall, dated July 12, 1995, not shown of public
record.
<PAGE> 14
EXHIBIT C
BILL OF SALE AND ASSIGNMENT
STATE OF OKLAHOMA ss.
ss. KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF ________________ ss.
THAT, HOLDENVILLE INDUSTRIAL AUTHORITY, a duly formed Public Trust of the State
of Oklahoma, acting by and through its trustees ("Grantor" or "Seller"), for and
in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good
and valuable consideration to it in hand paid by CORRECTIONS CORPORATION OF
AMERICA, a Tennessee corporation ("Grantee" or "Purchaser"), to the extent
legally permissible, has GRANTED, SOLD, ASSIGNED, TRANSFERRED, CONVEYED, and
DELIVERED and does by these presents GRANT, SELL, ASSIGN, TRANSFER, CONVEY, and
DELIVER unto the said Purchaser, all of Seller's right, title and interest in
and to the following described properties, rights, and interests (the "Personal
Property"), located on or about that certain land described on Exhibit A,
attached hereto and incorporated herein for all purposes, or the buildings,
improvements, structures and fixtures thereon (the "Real Property"), or used in
connection with the operation thereof:
All permits, licenses (but excluding Seller's business and
operating licenses), approvals, entitlements and other government,
quasi-government and non-government authorizations including,
without limitation, certificates of use and occupancy, required in
connection with the ownership, planning, development, construction,
use, operation or maintenance of the Real Property, to the extent the
same are assignable by Seller, any leases, contract rights, loan
agreements, mortgages, easements, covenants, restrictions or other
agreements or instruments affecting all or a portion of the Real
Property or Personal Property, to the extent the same are assignable by
Seller, and other intangible property or any interest therein owned or
held by Seller in connection with the Real Property, including all
water rights and reservations, rights to use the trade name applicable
to the Real Property, and zoning rights related to the Real Property,
or any part thereof, and Seller's accounts receivable relating to the
Real Property, to the extent the same are assignable by Seller;
provided, however, such Personal Property shall not include the general
corporate trademarks, trade names (except as set forth above), service
marks, logos or insignia or the books and records of Seller, and
Seller's business and operating licenses for the facilities on the Real
Property.
All warranties and guaranties with respect to the Real
Property or Personal Property, whether express or implied, which Seller
now holds or under which Seller is the beneficiary, to the extent the
same are assignable by Seller.
All site plans, surveys, soil and substrata studies,
architectural drawings, plans and specifications, engineering plans and
studies, floor plans, landscape plans, Americans with Disabilities Act
compliance reports, environmental reports and studies, professional
<PAGE> 15
inspection reports, construction and/or architect's reports or
certificates, feasibility studies, appraisals, and other similar plans
and studies that relate to the Real Property, to the extent the same
are assignable by Seller.
That certain Monitor Agreement, dated as of June 1, 1995,
between the Seller and Norris & Associates, Inc., and that certain
Marketing Services Agreement, dated as of August 1, 1995, between the
Seller and Capitol Consultants.
All furnishings, equipment, tools, machinery, fixtures,
appliances, and all other tangible personal property located on or
about the Real Property or used in connection with the operation
thereof which is owned by Seller including, but not limited to, all
those items of tangible personal property described on Exhibit B,
attached hereto and incorporated herein for all purposes.
THERE IS EXPRESSLY EXCLUDED FROM THE PERSONAL PROPERTY THE
FOLLOWING: (i) all those items of tangible and intangible personal property
described on Exhibit C, attached hereto and incorporated herein for all
purposes, (ii) personal property owned by employees of Seller and personal
property owned by inmates housed at the Real Property, and (iii) except as
otherwise specifically provided herein, all management, service and operating
agreements and contracts entered into by Seller with respect to the Real
Property or the Personal Property, including, but not limited to, agreements and
contracts to house inmates at the Real Property, and the inmate pay telephone
service agreement relating to the Real Property, including any renewals or
replacements thereof entered into by the Seller.
TO HAVE AND TO HOLD the Personal Property unto the said Purchaser, its
successors and assigns, forever, and Seller does hereby bind itself and its
successors to warrant and forever defend, all and singular, title to the said
Personal Property unto the said Purchaser, its successors and assigns, against
every person whomsoever lawfully claiming or to claim the same, or any part
thereof by, through or under Seller, but not further or otherwise.
Seller and its successors hereby warrants, represents, covenants and
agrees with Purchaser as follows:
(i) That Seller is the owner of the Personal Property, which Personal
Property is free and clear of any and all liens, security interests, or other
encumbrances except the exceptions shown on the schedule attached hereto as
Schedule A and incorporated herein by reference for all purposes, and this sale
and assignment is made and accepted expressly subject to the matters set forth
on Schedule A attached hereto;
(ii) That Seller shall indemnify and hold harmless Purchaser from and
against any and all liability, loss, damage, cost or expense, including
reasonable attorneys' fees, which Purchaser may suffer or incur by reason of any
act or cause of action occurring or accruing prior to the effective date hereof
and arising out of the ownership and/or operation of the Real Property or the
Personal Property, except for any liability, loss, damage, cost or expense
arising out of the actions or omissions of the Purchaser.
<PAGE> 16
Purchaser and its successors and assigns hereby warrant, represent,
covenant and agree with Seller that Purchaser shall indemnify and hold harmless
Seller from and against any and all liability, loss, damage, cost or expense,
including reasonable attorneys' fees, which Seller may suffer or incur by reason
of any act or cause of action occurring or accruing subsequent to the effective
date hereof and arising out of the ownership and/or operation of the Real
Property or the Personal Property, except any liability, loss, damage, cost or
expense arising out of the actions or omissions of the Seller and except for any
matters which Purchaser has agreed to indemnify and hold the Seller harmless
from and against as set forth in that certain Management Services Agreement
dated as of June 1, 1995, between the Seller and Purchaser.
The agreements, covenants, warranties and representations herein set
forth shall be binding upon and shall inure to the benefit of Seller and
Purchaser and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Bill of Sale
and Assignment to be executed by its duly authorized officers effective as of
November ___, 1997.
SELLER:
HOLDENVILLE INDUSTRIAL AUTHORITY
---------------------------------------
(SEAL) Jack Barrett, Chairman
ATTEST:
- --------------------------------
Secretary
PURCHASER:
CORRECTIONS CORPORATION OF AMERICA
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 17
STATE OF OKLAHOMA )
) SS
COUNTY OF ______________ )
The foregoing instrument was acknowledged before me this _____ day of
November, 1997, by Jack Barrett, Chairman of the Holdenville Industrial
Authority, a public trust, on behalf of said Authority.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-------------------------------------
Notary Public
My Commission Expires:
- ----------------------
STATE OF TENNESSEE )
) SS
COUNTY OF DAVIDSON )
The foregoing instrument was acknowledged before me this _____ day of
November, 1997, by ____________________________________, the
______________________________ of Corrections Corporation of America, on behalf
of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------------
Notary Public
My Commission Expires:
- ---------------------
<PAGE> 18
Exhibit A to Bill of Sale and Assignment
Property Description
A tract of land lying in the Southeast Quarter (SE/4) of Section 10,
Township 7 North, Range 8 East, Indian Meridian, Hughes County,
Oklahoma, further described as a point of beginning at a point along
the South line of said SE/4, S 89(degree)20'02" W, 469.25 feet from the
Southeast corner of said SE/4; thence along the South line of said
SE/4, S 89(degree)20'02" W, 1030.75 feet; thence N 00(degree)57'37" W,
2323.20 feet and parallel to the East line of said SE/4; thence N
89(degree)20'02" E, 1500.00 feet and parallel to the South line of said
SE/4; thence along said East line of the SE/4 S 00(degree)57'37" E,
1859.20 feet; thence S 89(degree)20'02" W, 469.25 feet; thence S
00(degree)57'37" E, 464.00 feet to the Point of Beginning, containing
75 acres, more or less.
<PAGE> 19
Exhibit B to Bill of Sale and Assignment
Items of Personal Property
See Exhibit B-1 to Bill of Sale and Assignment, attached hereto and
incorporated herein. Seller and Purchaser agree to attach as Exhibit B to this
Bill of Sale and Assignment an updated schedule of the items of tangible
personal property as soon as the same is completed, and when so attached such
schedule shall be deemed a part of this Bill of Sale and Assignment.
<PAGE> 20
Exhibit B-1 to Bill of Sale and Assignment
Items of Personal Property
<PAGE> 21
Exhibit C to Bill of Sale and Assignment
Seller's Excluded Personal Property
Asset Number Vendor Description
- ------------ ------ -----------
NONE
<PAGE> 22
Schedule A to Bill of Sale and Assignment
Permitted Exceptions
1. Taxes for the year 1997 and subsequent years, not yet due and payable.
2. Title to all minerals within and underlying the premises, together with all
mining rights, and other rights, privileges and immunities relating
thereto.
3. Right of Way in favor of General American Oil Company of Texas referred to
in Assignment of Pipe Lines recorded October 30, 1954 in Book 228 Misc.,
page 126. Assigned to Kerr-McGee Oil Industries, Inc. by Assignment
recorded June 4, 1956 in Book 255 Misc., page 160. Subsequently assigned to
BigHeart Pipe Line Corporation by Assignment and Bill of Sale recorded
January 17, 1973 in Book 462 Misc., page 115.
4. Right of Way in favor of Flow Production Company referred to in Assignment
and Bill of Sale recorded June 10, 1996 in Book 880 Misc., page 24.
5. Right of Way in favor of Oklahoma Gas and Electric Company recorded
November 19, 1980 in Book 588 Misc., page 533.
6. Right of Way in favor of Adams Petroleum Enterprises Corp. recorded March
18, 1981 in Book 597 Misc., page 559.
7. Easement for Public Highway in favor of County of Hughes recorded April 16,
1990 in Book 792 Misc., page 35.
8. Right of Way in favor of Oklahoma Natural Gas Company recorded September
18, 1995 in Book 870 Misc., page 702.
9. Right of Way in favor of Oklahoma Gas and Electric Company recorded July 1,
1996 in Book 880 Misc., page 568.
10. Lease and Operation Agreement, dated as of July 1, 1996, between
Holdenville Industrial Authority and Oklahoma Department of Corrections,
not shown of public record.
11. Restrictions and Right of Use contained in Warranty Deed recorded July 13,
1995 in Book 868 Misc., page 457.
12. Wewoka Creek Water and Soil Conservancy District No. 2 created by Judgment
recorded June 11, 1954 in Book 221 Misc., page 439.
13. Statutory Right of Way in favor of the State of Oklahoma 33 feet along all
section lines as shown on survey of James B. Marshall, dated July 12, 1995.
<PAGE> 23
14. Right of Way in favor of Sinclair Oil and Gas Company, recorded February 1,
1965, in Book 373 Misc., page 336. Assigned to Intersearch Gas Corporation
by Assignment and Bill of Sale recorded December 28, 1990 in Book 803
Misc., page 714. Subsequently assigned to Enerfin Resources I Limited
Partnership by Assignment recorded April 25, 1991 in Book 808 Misc., page
779.
15. Rights for Easement or claims of possession for 5" buried gas line as shown
on survey of James B. Marshall, dated July 12, 1995, not shown of public
record.
16. Rights for Easement or claims of possession for Arkla Gas Line as shown on
survey of James B. Marshall, dated July 12, 1995, not shown of public
record.
<PAGE> 1
Exhibit 10.175
EXERCISE AGREEMENT
(Holdenville)
THIS EXERCISE AGREEMENT is entered into effective as of January 5,
1998, by and between CCA PRISON REALTY TRUST, a Maryland real estate investment
trust (the "Company") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee
corporation ("CCA").
R E C I T A L S:
WHEREAS, the Company and CCA entered into a Right to Purchase Agreement
dated as of July 7, 1997 whereby, among other things, CCA granted the Company an
option to acquire any Future Facility under terms and conditions set forth
therein (the "Right to Purchase Agreement"); and
WHEREAS, CCA owns a correctional facility in Holdenville, Hughes
County, Oklahoma, on real estate described on Exhibit A, attached hereto (the
"Facility"); and
WHEREAS, the Company desires to exercise its option to acquire the
Facility; and
WHEREAS, the Right to Purchase Agreement provides that Future
Facilities will be acquired on terms and conditions generally consistent with
the terms and conditions of the Company's acquisition of certain other
facilities from CCA, one of which facilities was a certain facility in
Youngstown, Ohio, acquired by the Company pursuant to an Option Agreement dated
July 7, 1997 (the "Youngstown Option Agreement") which CCA and the Company have
agreed to partially incorporate by reference for the purpose of setting forth
certain of the terms and conditions of the Company's acquisition of the
Facility;
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the Company and CCA hereby agree as follows:
1. Exercise of Option. The Company hereby exercises its option to
acquire the Facility, pursuant to the terms of Paragraph 3 of the
Right to Purchase Agreement. The Facility will be transferred
subject to that certain Lease and Operation Agreement between the
Holdenville Industrial Authority (the "Authority") and the
Oklahoma Department of Corrections, dated as of July 1, 1996 (the
"L & O Agreement").
2. Terms. The purchase price for the Facility is $36,132,118.00:
The Facility will be leased to CCA pursuant to the Master
Agreement to Lease between the Company and CCA, dated July 18,
1997 on the following terms:
Term - Ten (10) years with three (3) five (5) year renewals
Rent - $3,974.533.00 per year, subject to adjustment
to fair market value for the first, second and third
extended terms.
The lease will be subject to the L & O Agreement.
<PAGE> 2
3. Additional Terms. (i) The conveyance of the Facility shall not
include the rights of CCA under (a) the Monitor Agreement dated
August 29, 1995 with Norris & Associates or (b) the Marketing
Services Agreement dated August 29, 1995 with Capitol
Consultants. Further, it is specifically acknowledged and agreed
by the parties that CCA does not own, and is not conveying to the
Company, any rights to the inmate pay telephone service
agreements relating to the Facility, or to any renewals or
replacements thereof. The Company acknowledges that the Authority
and the vendor under the inmate pay telephone service agreement
with the Authority may have access to the inmate pay telephone
equipment in the Facility during normal business hours upon
reasonable notice to operate, maintain and repair the equipment.
(ii) For convenience of reference, CCA and the Company agree
that the Company's acquisition of the Facility shall be
undertaken in accordance with the following provisions of the
Youngstown Option Agreement: Articles IV, V, VI, VII, VIII, IX,
X, XI and to the extent applicable, the definitions set forth in
Article I, all of which are incorporated herein by reference and
made a part hereof. The Effective Date of this Exercise Agreement
shall be the date first written above.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company and CCA have executed this Exercise
Agreement as of the day and date first set forth above.
CCA PRISON REALTY TRUST, a Maryland real
estate investment trust
By: /S/ Doctor R. Crants
---------------------------------
Title: President
---------------------------------
CORRECTIONS CORPORATION OF AMERICA,
a Tennessee corporation
By: /S/ Darrell K. Massengale
---------------------------------
Title: Vice President, Finance
---------------------------------
3
<PAGE> 4
EXHIBIT A
A tract of land lying in the Southeast Quarter (SE/4) of Section 10,
Township 7 North, Range 8 East, Indian Meridian, Hughes County, Oklahoma,
further described as a point of beginning at a point along the South line of
said SE/4, S 89(degree)20'02" W, 469.25 feet from the Southeast corner of said
SE/4; thence along the South line of said SE/4, S 89(degree)20'02" W, 1030.75
feet; thence N 00(degree)57'37" W, 2323.20 feet and parallel to the East line of
said SE/4; thence N 89(degree)20'02" E, 1500.00 feet and parallel to the South
line of said SE/4; thence along said East line of the SE/4 S 00(degree)57'37" E,
1859.20 feet; thence S 89(degree)20'02" W, 469.25 feet; thence S
00(degree)57'37" E, 464.00 feet to the Point of Beginning, containing 75 acres,
more or less.
4
<PAGE> 1
EXHIBIT 10.176
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") for the convenience
of the parties hereto dated as of November 26, 1997, but effective upon the
Closing Date, is entered into by and among the CUSHING MUNICIPAL AUTHORITY, an
Oklahoma Public Trust (the "Authority"), and CORRECTIONS CORPORATION OF AMERICA,
a Tennessee corporation ("CCA").
W I T N E S S E T H:
WHEREAS, CCA desires to purchase the Facility, and the Authority
desires to sell the Facility to CCA and to use the proceeds therefrom in
furtherance of its government purposes; and,
WHEREAS, the parties desire to set forth in this Agreement the terms
and provisions relating to said purchase and sale.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) cash in hand
paid by CCA to the Authority, receipt thereof is hereby acknowledged by the
Authority, and for other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
In each and every place in and throughout this Agreement, whenever the
following terms, or any of them are used, unless the context shall clearly
indicate another or different meaning or intent, they shall have the following
meanings:
"Bank" shall mean First Union National Bank of North Carolina, in its
capacity as issuer of the Letter of Credit.
"Bonds" or "1996 Bonds" shall mean the Cushing Municipal Authority
Correctional Facility Revenue Bonds, Series 1996 in the aggregate principal
amount of $36,070,000 issued by the Authority pursuant to the terms and
provisions of that certain Bond Indenture (the "Indenture"), dated as of October
1, 1996, between the Authority and Liberty Bank and Trust Company of Oklahoma
City, National Association, as Trustee (the "Trustee").
"Closing" or "Closing Date" shall mean the date that the consideration
under Section 2.3(i) and (ii) is paid by CCA and the Authority conveys the
Facility to CCA, but in no event later than December 1, 1997, unless otherwise
mutually agreed to by the parties.
"Facility" shall mean the real property, easements, fixtures, personal
property and incorporeal hereditaments located on the Land, and any additions or
improvements thereto, including the Cimarron Correctional Facility, a 500-cell
medium security correctional facility constructed and placed thereon.
<PAGE> 2
"Land" shall mean the real property comprising approximately 71 acres
and located in the City of Cushing, Payne County, Oklahoma, described on Exhibit
A, attached hereto and incorporated herein, and upon which the Facility is
constructed.
"Letter of Credit" shall mean that certain Letter of Credit dated the
date of issuance of the Bonds issued by the Bank in the maximum amount of
$36,761,753.42.
"Management Agreement" shall mean the Management Services Agreement
dated as of April 1, 1996, by and between CCA and the Authority pertaining to
the operation and management of the Facility by CCA, including any amendments or
supplements thereto.
"Reimbursement Agreement" shall mean the Reimbursement and Credit
Agreement dated as of October 1, 1996, between the Authority and CCA, and any
amendments and supplements thereto.
"Training Services Agreement" means the Training Services Agreement
dated as of October 1, 1996, by and between CCA and the Authority pertaining to
the pretraining and preparation relating to the Facility, including any
amendments or supplements thereto.
ARTICLE II
CONVEYANCE OF FACILITY
2.1 Conveyance. (a) On the Closing Date, and upon payment by CCA to or
on behalf of the Authority of the consideration set out in Section 2.3(i) and
(ii) below, the Authority will convey to CCA the Land, buildings and
improvements comprising the Facility by Warranty Deed, in the same form attached
hereto as Exhibit B, and the machinery, equipment and other items of personal
property comprising the Facility by Bill of Sale and Assignment, in the same
form attached hereto as Exhibit C. The Bill of Sale and Assignment will include
an assignment of all right, title and interest of the Authority under (i) the
Monitor Agreement, dated as of August 29, 1995, between the Authority and Norris
& Associates, Inc., and (ii) the Marketing Services Agreement, dated as of
August 29, 1995, between the Authority and Capitol Consultants relating to the
Facility, and an assumption by CCA of all obligations of the Authority under
said agreements from and after the Closing.
(b) CCA may obtain, at its option and at its expense, (i) an
owner's title insurance commitment from a title insurance company of its choice
to issue a title insurance policy insuring marketable fee simple title to the
Facility to CCA, which will contain only those title exceptions described in the
Warranty Deed attached hereto as Exhibit B, (ii) an as-built survey for the
Facility prepared by an Oklahoma registered land surveyor of its choice, which
will disclose no matters affecting the Facility other than those described in
the Warranty Deed attached hereto as Exhibit B, (iii) a Phase I environmental
site assessment report for the Facility from an environmental engineer of its
choice, which will disclose no adverse or material environmental matters
affecting the Facility other than those matters caused or created by CCA, and/or
(iv) a going concern appraisal. The
-2-
<PAGE> 3
Authority agrees to execute and deliver to the title company issuing said title
insurance policy on or before the Closing such resolutions, consents, notices
and title affidavits and certifications reasonably requested or customarily
required by the title company in order to enable the title company to issue its
title policy to CCA, upon payment of the premium therefor, without title
exceptions or requirements other than those title exceptions contained in the
Warranty Deed attached hereto as Exhibit B and with the standard preprinted
title exceptions deleted therefrom.
2.2 Exclusions from Conveyance. (i) It is specifically acknowledged and
agreed by the parties that CCA is not acquiring the rights to the Authority's
inmate pay telephone service agreement relating to the Facility, or to any
renewals or replacements thereof entered into by the Authority, as part of this
transaction. CCA agrees to allow the Authority and the vendor under the inmate
pay telephone service agreement with the Authority access to the inmate pay
telephone equipment in the Facility during normal business hours upon reasonable
notice to operate, maintain and repair the equipment.
(ii) On the Closing Date, CCA agrees to convey to the
Authority a Utility Easement and a Roadway Easement in the same forms attached
hereto as Exhibit D. It is specifically acknowledged and agreed by the parties
that CCA is not acquiring the electric poles, electric lines and appurtenances,
water lines and sewer lines which are physically located within such Utility
Easement or Roadway Easement.
2.3 Consideration. (i) On the Closing Date, CCA will pay to the
Authority the amount of One Million Five Hundred Thousand Dollars ($1,500,000)
by cashier's or certified check or wire transfer funds, subject to the
prorations set forth in Section 2.4.
(ii) As additional consideration to the Authority hereunder,
on the Closing Date, CCA will reimburse the Bank the amount paid by the Bank
under the Letter of Credit to the Trustee in order to prepay, in full, the
principal amount of the 1996 Bonds, without premium, plus accrued interest
through and including the Closing Date. The foregoing payment by CCA shall be
without any reimbursement by the Authority to CCA under the Reimbursement
Agreement, which reimbursement obligation of the Authority CCA forgives,
releases and forever discharges the Authority from and after the Closing. On the
Closing Date, the Authority will provide written instructions to the Trustee
directing the Trustee to pay to CCA the amount of all surplus funds held by the
Trustee under the Indenture as an additional management fee to CCA under the
Management Agreement.
(iii) As additional consideration to the Authority hereunder,
CCA agrees that the Authority shall be the sole provider of the following
utility services for the Facility: electric, water, sewer and gas; provided that
the amount charged by the Authority for gas shall not exceed the best applicable
rate published by Arkansas Louisiana Gas Company for customers of similar size
and usage; and provided further the amount charged by the Authority for
electric, water and sewer services shall not be greater than the rates charged
by the Authority to other commercial customers of similar size and usage.
-3-
<PAGE> 4
(iv) The Authority and CCA each acknowledge and agree that the
consideration for the Facility set forth herein was negotiated by the parties at
arms length. CCA represents that the consideration for the Facility is a fair
price offered by CCA after examination of the cost of other like facilities in
the marketplace, and that CCA is under no obligation to purchase. The Authority
represents that the consideration for the Facility is a fair price agreed to by
the Authority after reasonable investigation and calculation, and that the
Authority is under no obligation to sell.
2.4 Prorations. Real estate taxes with respect to the Land shall be
prorated to the Closing Date. The Authority will pay any special assessments
maturing with respect to the Land to the date of Closing, and special
assessments, if any, maturing on or after the date of Closing shall be paid by
CCA.
2.5 Closing Costs. CCA will pay (i) the recording costs and transfer
taxes to record the Warranty Deed, (ii) the premium for the owner's title
insurance policy issued to CCA, (iii) the cost of the as-built survey, the Phase
I environmental site assessment report and the going concern appraisal obtained
by CCA, (iv) the legal expenses of J. Stewart Arthurs, as counsel to the
Authority, and J. Scott Brown, as bond counsel, and (v) the expense to calculate
as provided in the Indenture the rebate amount of earnings, if any, due to the
federal government, and the rebate amount of earnings, if any, determined by
such calculation to be owed to the federal government.
2.6 Termination of Agreements. Upon and after the Closing, the
Management Agreement and the Training Services Agreement shall each terminate
and shall be of no further force or effect; provided, however, that (i) the fees
due to CCA under the Management Agreement for services provided by CCA prior to
the Closing shall be billed, collected and paid to CCA as provided in the
Management Agreement and (ii) the indemnification provisions contained in the
Management Agreement shall continue in full force and effect with respect to any
act or cause of action occurring or accruing prior to the Closing. The Authority
agrees to authorize and direct the Trustee under the Indenture to pay to CCA any
amounts received by the Trustee subsequent to the Closing from any Transferring
Entities (as defined in the Management Agreement) for services provided by the
Authority or CCA prior to the Closing. The Authority agrees to assist and to
cooperate in good faith with CCA in connection with the billing, collection and
payment of all such fees, and agrees to promptly remit to CCA any payments it
receives for such fees. Notwithstanding the foregoing, CCA acknowledges and
agrees that the obligation of the Authority to make any payments under the
Management Agreement shall be limited and special obligations of the Authority
payable solely from the amounts received from the Transferring Entities (as
defined in the Management Agreement) and shall never become a debt or obligation
of any trustee, employee or officer of the Authority.
2.7 Further Assurances/Cooperation. CCA and the Authority each agree to
cooperate in good faith with each other and to execute and deliver in connection
with the Closing such other and further agreements, documents and instruments as
may be reasonably necessary or required in order to fully consummate the
transactions contemplated by this Agreement.
-4-
<PAGE> 5
ARTICLE III
REPRESENTATIONS
3.1 Representations and Covenants by CCA. CCA makes the following
representations as the basis for the undertakings on its part herein contained
and hereby covenants and agrees:
(a) CCA is a corporation duly incorporated under the laws of
Tennessee and is qualified to do business in and is in good standing in
Oklahoma.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement conflict with or
result in a breach of any of the terms, conditions or provisions of any
corporate restriction or any agreement or instrument to which CCA is now a party
or by which it is bound, or constitute a default under any of the foregoing, or
result in the creation or imposition of any prohibited lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of CCA
under the terms of any instrument or agreement.
(c) CCA has full power and authority to execute and deliver
this Agreement and upon such execution and delivery, said document shall be
valid and legally binding against CCA in accordance with its terms.
3.2 Representations by the Authority. The Authority has been duly
created and is existing under the laws of the State of Oklahoma and under the
Trust Indenture creating the Authority it has the power to enter into the
transactions contemplated by, and to carry out its obligations under, this
Agreement and will do or cause to be done all things necessary to keep the
Authority in existence and in good standing so long as necessary for the
purposes thereof. The Authority is not in default under any of the provisions
contained in its Trust Indenture or in the laws of Oklahoma or in any other
instrument by which it is bound. By proper action of its Trustees, the Authority
has been duly authorized to execute, deliver and perform this Agreement, the
Warranty Deed attached hereto as Exhibit B, and the Bill of Sale and Assignment
attached hereto as Exhibit C.
ARTICLE IV
MISCELLANEOUS
4.1 Successors and Assigns. All terms, provisions, conditions,
covenants, warranties and agreements contained herein shall be binding upon the
successors and assigns of both the Authority and CCA and all such terms,
provisions, conditions, covenants, warranties and agreements shall likewise
inure to the benefit of everyone who may at any time be a beneficiary hereunder.
4.2 Preservation and Inspection of Documents. All documents received by
CCA or the Authority under the provisions of this Agreement shall be retained in
its possession and shall be subject at all reasonable times to the inspection of
CCA and the Authority and their agents and their
-5-
<PAGE> 6
representatives, any of whom may make copies thereof under such reasonable terms
and regulations as the holder of such documents may set out.
4.3 Parties Interested Herein. Nothing in this Agreement expressed or
implied is intended or shall be construed to confer upon, or to give to, any
person or corporation, other than the Authority or CCA, any right, remedy or
claim under or by reason of this Agreement or any covenant, condition or
stipulation thereon.
4.4 Severability of Invalid Provisions. If any one or more of the
covenants or agreements provided in this Agreement on the part of the parties
hereto to be performed should be contrary to law, then such covenant or
covenants or agreement or agreements shall be deemed severable from the
remaining covenants and agreements, and shall in no way affect the validity of
the other provisions of this Agreement.
4.5 Consents and Approvals. Whenever the written consent or approval of
any party hereto shall be required under the provisions of this Agreement, such
consent or approval shall not be unreasonably withheld or delayed.
4.6 Notices, Demands and Requests. All notices, demands and requests to
be given or made hereunder to or by the parties shall be in writing and shall be
properly made if delivered personally, or sent by registered or certified mail,
or by a nationally recognized express courier service, all charges prepaid, to
the other party at the address set forth below, or at such other address as may
hereafter be provided in writing. The date of personal delivery, or the date of
mailing or of delivery to such nationally recognized express courier service, as
the case may be, shall be the date of such notice, demand or request:
(a) AUTHORITY
Cushing Municipal Authority
City Hall
P. O. Box 311
Cushing, Oklahoma 74023-0311
Attn: Chairman
(b) CCA
Doctor R. Crants
Chairman and Chief Executive Officer
Corrections Corporation of America
10 Burton Hills Boulevard
Nashville, Tennessee 37215
4.7 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
-6-
<PAGE> 7
4.8 Applicable Law. This Agreement shall be governed exclusively by
the applicable laws of the State of Oklahoma.
4.9 Section Headings Not Controlling. The headings of the several
sections of this Agreement have been prepared for convenience of reference only
and shall not control, affect the meaning of, or be taken as an interpretation
of any provision of this Agreement.
4.10 Amendment. This Agreement may only be amended by mutual agreement
in writing signed between the parties.
4.11 Entire Agreement. The foregoing represents the entire agreement
between the parties.
4.12 Survival. It is understood and agreed by the parties hereto that
whether or not it is specifically so provided herein, any term or provision of
this Agreement, which by its nature or effect is required to be kept, observed
or performed after the Closing and conveyance of title, shall not be merged
therein, but shall be and remain binding upon and for the benefit of the parties
hereto until fully kept, observed or performed.
4.13 Broker and Commission. CCA and the Authority each warrant to the
other than no broker has been involved in the transactions set forth in this
Agreement, and each will indemnify and hold the other party harmless from any
claims for broker commissions arising from such party's actions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by its duly authorized officers all as of the day and year first above
written.
(SEAL) CUSHING MUNICIPAL AUTHORITY
ATTEST:
/s/ Joe R. Manning, Jr.
-----------------------------------
Joe R. Manning, Jr., Chairman
/s/ Albertein Flint
- -----------------------------
Secretary
CORRECTIONS CORPORATION OF
AMERICA
By: /s/ Doctor R. Crants
-------------------------------
Title: Chairman & CEO
----------------------------
-7-
<PAGE> 8
STATE OF OKLAHOMA )
) SS
COUNTY OF PAYNE )
The foregoing instrument was acknowledged before me this 1st day of
December, 1997, by Joe R. Manning, Jr., Chairman of Cushing Municipal Authority,
a public trust, on behalf of said Authority.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Brenda D. Butcher
---------------------------------
Notary Public
My Commission Expires:
9-9-2001
- ----------------------
STATE OF TENNESSEE )
) SS
COUNTY OF DAVIDSON )
The foregoing instrument was acknowledged before me this 26th day of
November, 1997, by Doctor R. Crants, the Chairman & CEO of Corrections
Corporation of America, on behalf of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Carole M. Maxson
-------------------------------------
Notary Public
My Commission Expires:
9/23/2000
- ----------------------
-8-
<PAGE> 9
EXHIBIT A
(Real Estate Description)
(Cimarron Correctional Facility)
A tract, piece or parcel of land in the Southwest Quarter (SW/4) of Section
Sixteen (16), Township Seventeen (17) North, Range Five (5) East of the Indian
Meridian, Payne County, State of Oklahoma, more particularly described as
follows: Beginning at a 40D nail for the SW corner of said SW/4; thence N
89(degree)17'22" E, along the South line of said SW/4 a distance of 2595.89 feet
to a 1/2 inch iron pin at the SE corner of said SW/4; thence N 01(degree)23'02"
W a distance of 986.67 feet to a 1/2 inch iron pin at the NE corner of the S1/2
of the NE/4, SE/4, SW/4; thence S 89(degree)25'49" W a distance of 646.01 feet
to a 1/2 inch iron pin at the NW corner of S/2, NE/4, SE/4, SW/4; thence N
01(degree)12'40" W a distance of 329.41 feet to a 1/2 inch iron pin at the NE
corner of the W/2, SE/4, SW/4; thence S 89(degree)28'39" W a distance of 645.02
feet to a 1/2 inch iron pin at the NE corner of the SW/4, SW/4; thence S
81(degree)44'00" W a distance of 1301.39 feet to a 40D nail on the West line of
said SW/4; thence S 00(degree)41'45" E, along the West line of said SW/4 a
distance of 1148.57 feet to the point or place of beginning.
<PAGE> 10
EXHIBIT B
WARRANTY DEED
<PAGE> 11
EXHIBIT C
BILL OF SALE AND ASSIGNMENT
STATE OF OKLAHOMA ss.
ss. KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF _________________ ss.
THAT, CUSHING MUNICIPAL AUTHORITY, a duly formed Public Trust of the State of
Oklahoma, acting by and through its trustees ("Grantor" or "Seller"), for and in
consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and
valuable consideration to it in hand paid by CORRECTIONS CORPORATION OF AMERICA,
a Tennessee corporation ("Grantee" or "Purchaser"), to the extent legally
permissible, has GRANTED, SOLD, ASSIGNED, TRANSFERRED, CONVEYED, and DELIVERED
and does by these presents GRANT, SELL, ASSIGN, TRANSFER, CONVEY, and DELIVER
unto the said Purchaser, all of Seller's right, title and interest in and to the
following described properties, rights, and interests (the "Personal Property"),
located on or about that certain land described on Exhibit A, attached hereto
and incorporated herein for all purposes, or the buildings, improvements,
structures and fixtures thereon (the "Real Property"), or used in connection
with the operation thereof:
All permits, licenses (but excluding Seller's business and
operating licenses), approvals, entitlements and other government,
quasi-government and non-government authorizations including,
without limitation, certificates of use and occupancy, required in
connection with the ownership, planning, development, construction,
use, operation or maintenance of the Real Property, to the extent the
same are assignable by Seller, any leases, contract rights, loan
agreements, mortgages, easements, covenants, restrictions or other
agreements or instruments affecting all or a portion of the Real
Property or Personal Property, to the extent the same are assignable by
Seller, and other intangible property or any interest therein owned or
held by Seller in connection with the Real Property, including all
rights to use the trade name applicable to the Real Property, and
zoning rights related to the Real Property, or any part thereof, and
Seller's accounts receivable relating to the Real Property, to the
extent the same are assignable by Seller; provided, however, such
Personal Property shall not include the general corporate trademarks,
trade names (except as set forth above), service marks, logos or
insignia or the books and records of Seller and Seller's business and
operating licenses for the facilities on the Real Property.
All warranties and guaranties with respect to the Real
Property or Personal Property, whether express or implied, which Seller
now holds or under which Seller is the beneficiary, to the extent the
same are assignable by Seller.
All site plans, surveys, soil and substrata studies,
architectural drawings, plans and specifications, engineering plans and
studies, floor plans, landscape plans, Americans with Disabilities Act
compliance reports, environmental reports and studies, professional
inspection reports, construction and/or architect's reports or
certificates, feasibility studies,
<PAGE> 12
appraisals, and other similar plans and studies that relate to the Real
Property, to the extent the same are assignable by Seller.
That certain Monitor Agreement, dated as of August 29, 1995,
between the Seller and Norris & Associates, Inc., and that certain
Marketing Services Agreement, dated as of August 29, 1995, between the
Seller and Capitol Consultants.
All furnishings, equipment, tools, machinery, fixtures,
appliances, and all other tangible personal property located on or
about the Real Property or used in connection with the operation
thereof which is owned by Seller including, but not limited to, all
those items of tangible personal property described on Exhibit B,
attached hereto and incorporated herein for all purposes.
THERE IS EXPRESSLY EXCLUDED FROM THE PERSONAL PROPERTY THE
FOLLOWING: (i) all those items of tangible and intangible personal property
described on Exhibit C, attached hereto and incorporated herein for all
purposes, (ii) personal property owned by employees of Seller and personal
property owned by inmates housed at the Real Property, and (iii) except as
otherwise specifically provided herein, all management, service and operating
agreements and contracts entered into by Seller with respect to the Real
Property or the Personal Property, including, but not limited to, agreements and
contracts to house inmates at the Real Property and the inmate pay telephone
service agreement relating to the Real Property, including any renewals or
replacements thereof entered into by the Seller.
TO HAVE AND TO HOLD the Personal Property unto the said Purchaser, its
successors and assigns, forever, and Seller does hereby bind itself and its
successors to warrant and forever defend, all and singular, title to the said
Personal Property unto the said Purchaser, its successors and assigns, against
every person whomsoever lawfully claiming or to claim the same, or any part
thereof by, through or under Seller, but not further or otherwise.
Seller and its successors hereby warrants, represents, covenants and
agrees with Purchaser as follows:
(i) That Seller is the owner of the Personal Property, which Personal
Property is free and clear of any and all liens, security interests, or other
encumbrances;
(ii) That Seller shall indemnify and hold harmless Purchaser from and
against any and all liability, loss, damage, cost or expense, including
reasonable attorneys' fees, which Purchaser may suffer or incur by reason of any
act or cause of action occurring or accruing prior to the effective date hereof
and arising out of the ownership and/or operation of the Real Property or the
Personal Property, except for any liability, loss, damage, cost or expense
arising out of the actions or omissions of the Purchaser and except for any
matters which Purchaser has agreed to indemnify and hold the Seller harmless
from and against as set forth in that certain Management Services Agreement
dated as of April 1, 1996, between the Seller and Purchaser.
<PAGE> 13
Purchaser and its successors and assigns hereby warrant, represent,
covenant and agree with Seller that Purchaser shall indemnify and hold harmless
Seller from and against any and all liability, loss, damage, cost or expense,
including reasonable attorneys' fees, which Seller may suffer or incur by reason
of any act or cause of action occurring or accruing subsequent to the effective
date hereof and arising out of the ownership and/or operation of the Real
Property or the Personal Property, except any liability, loss, damage, cost or
expense arising out of the actions or omissions of the Seller.
The agreements, covenants, warranties and representations herein set
forth shall be binding upon and shall inure to the benefit of Seller and
Purchaser and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Bill of Sale
and Assignment to be executed by its duly authorized officers effective as of
December 1, 1997.
SELLER:
CUSHING MUNICIPAL AUTHORITY
-------------------------------------
(SEAL) Joe R. Manning, Jr., Chairman
ATTEST:
- ------------------------------
Secretary
PURCHASER:
CORRECTIONS CORPORATION OF AMERICA
By:
----------------------------------
Title:
------------------------------
<PAGE> 14
STATE OF OKLAHOMA )
) SS
COUNTY OF______________ )
The foregoing instrument was acknowledged before me this _____ day of
_____________, 1997, by Joe R. Manning, Jr., Chairman of Cushing Municipal
Authority, a public trust, on behalf of said Authority.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-------------------------------------
Notary Public
My Commission Expires:
- ----------------------
STATE OF ________________ )
) SS
COUNTY OF _______________ )
The foregoing instrument was acknowledged before me this _____ day of
______________, 1997, by ____________________________, the
________________________________ of Corrections Corporation of America, on
behalf of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-------------------------------------
Notary Public
My Commission Expires:
- ---------------------
<PAGE> 15
Exhibit A to Bill of Sale and Assignment
Property Description
A tract, piece or parcel of land in the Southwest Quarter (SW/4) of
Section Sixteen (16), Township Seventeen (17) North, Range Five (5)
East of the Indian Meridian, Payne County, State of Oklahoma, more
particularly described as follows: Beginning at a 40D nail for the SW
corner of said SW/4; thence N 89(degree)17'22" E, along the South line
of said SW/4 a distance of 2595.89 feet to a 1/2 inch iron pin at the
SE corner of said SW/4; thence N 01(degree)23'02" W a distance of
986.67 feet to a 1/2 inch iron pin at the NE corner of the S1/2 of the
NE/4, SE/4, SW/4; thence S 89(degree)25'49" W a distance of 646.01 feet
to a 1/2 inch iron pin at the NW corner of S/2, NE/4, SE/4, SW/4;
thence N 01(degree)12'40" W a distance of 329.41 feet to a 1/2 inch
iron pin at the NE corner of the W/2, SE/4, SW/4; thence S
89(degree)28'39" W a distance of 645.02 feet to a 1/2 inch iron pin at
the NE corner of the SW/4, SW/4; thence S 81(degree)44'00" W a distance
of 1301.39 feet to a 40D nail on the West line of said SW/4; thence S
00(degree)41'45" E, along the West line of said SW/4 a distance of
1148.57 feet to the point or place of beginning, a tract to contain
70.926 acres more or less.
<PAGE> 16
Exhibit B to Bill of Sale and Assignment
Items of Personal Property
See Exhibit B-1 to Bill of Sale and Assignment, attached hereto and
incorporated herein. Seller and Purchaser agree to attach as Exhibit B to this
Bill of Sale and Assignment an updated schedule of the items of tangible
personal property as soon as the same is completed, and when so attached such
schedule shall be deemed a part of this Bill of Sale and Assignment.
<PAGE> 17
Exhibit B-1 to Bill of Sale and Assignment
Items of Personal Property
<PAGE> 18
Exhibit C to Bill of Sale and Assignment
Seller's Excluded Personal Property
Asset Number Vendor Description
- ------------ ------ -----------
NONE
<PAGE> 1
EXHIBIT 10.177
EXERCISE AGREEMENT
THIS EXERCISE AGREEMENT is entered into effective as of December 11,
1997, by and between CCA PRISON REALTY TRUST, a Maryland real estate investment
trust (the "Company") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee
corporation ("CCA").
R E C I T A L S:
WHEREAS, the Company and CCA entered into a Right to Purchase Agreement
dated as of July 7, 1997 whereby, among other things, CCA granted the Company an
option to acquire any Future Facility under terms and conditions set forth
therein (the "Right to Purchase Agreement"); and
WHEREAS, CCA owns a correctional or detention facility in Cushing,
Payne County, Oklahoma, as described on Exhibit A (the "Facility"); and
WHEREAS, the Company desires to exercise its option to acquire the
Facility; and
WHEREAS, the Right to Purchase Agreement provides that Future
Facilities will be acquired on terms and conditions generally consistent with
the terms and conditions of the Company's acquisition of certain other
facilities from CCA, one of which facilities was a certain facility in
Youngstown, Ohio, acquired by the Company pursuant to an Option Agreement dated
July 7, 1997 (the "Youngstown Option Agreement") which CCA and the Company have
agreed to partially incorporate by reference for the purpose of setting forth
certain of the terms and conditions of the Company's acquisition of the
Facility;
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the Company and CCA hereby agree as follows:
1. Exercise of Option. The Company hereby exercises its option to
acquire the Facility, pursuant to the terms of Paragraph 3 of the
Right to Purchase Agreement.
2. Terms. The purchase price for the Facility is $37,678,508.00.
Additionally, the Company shall reimburse CCA for certain costs
and expenses related to the Facility in the amount of
$618,217.00.
The Facility will be leased to CCA pursuant to the Master
Agreement to Lease between the Company and CCA, dated July 18,
1997 on the following terms:
Term - Ten (10) years with three (3) five (5) year renewals.
Rent - $4,212,640.00 per year, subject to adjustment to fair
market value for the first, second and third extended terms.
<PAGE> 2
3. Additional Terms. (i) The conveyance of the Facility shall not
include the rights of CCA under (a) the Monitor Agreement dated
August 29, 1995 with Norris & Associates or (b) the Marketing
Services Agreement dated August 29, 1995 with Capitol
Consultants. Additionally, the Company acknowledges that the
Cushing Municipal Authority ("Authority") shall be the sole
provider of the following utility services for the Facility:
electric, water, sewer and gas provided the amount charged by the
Authority for gas shall not exceed the best applicable rate
published by Arkansas Louisiana Gas Company for customers of
similar size and usage; and provided further the amount charged
by the Authority for electric, water and sewer services shall not
be greater than the rates charged by the Authority to other
commercial customers of similar size and usage. Further, it is
specifically acknowledged and agreed by the parties that CCA does
not own, and is not conveying to the Company, any rights to the
inmate pay telephone service agreements relating to the Facility,
or to any renewals or replacements thereof. The Company
acknowledges that the Authority and the vendor under the inmate
pay telephone service agreement with the Authority may have
access to the inmate pay telephone equipment in the Facility
during normal business hours upon reasonable notice to operate,
maintain and repair the equipment.
(ii) For convenience of reference, CCA and the Company agree
that the Company's acquisition of the Facility shall be
undertaken in accordance with the following provisions of the
Youngstown Option Agreement: Articles IV, V, VI, VII, VIII, IX,
X, XI and to the extent applicable, the definitions set forth in
Article I, all of which are incorporated herein by reference and
made a part hereof. The Effective Date of this Exercise Agreement
shall be the date first written above.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company and CCA have executed this Exercise
Agreement as of the day and date first set forth above.
CCA PRISON REALTY TRUST, a Maryland real
estate investment trust
By: /s/ D. Robert Crants, III
---------------------------------
Title: President
---------------------------------
CORRECTIONS CORPORATION OF AMERICA,
a Tennessee corporation
By: Darrell K. Massengale
---------------------------------
Title: Vice President, Finance
---------------------------------
3
<PAGE> 4
EXHIBIT A
A tract, piece or parcel of land in the Southwest Quarter (SW/4) of
Section Sixteen (16), Township Seventeen (17) North, Range Five (5) East of the
Indian Meridian, Payne County, State of Oklahoma, more particularly described as
follows: Beginning at a 40D nail for the SW corner of said SW/4; thence N
89(degree)17'22" E, along the South line of said SW/4 a distance of 2595.89 feet
to a 1/2 inch iron pin at the SE corner of said SW/4; thence N 01(degree)23'02"
W a distance of 986.67 feet to a 1/2 inch iron pin at the NE corner of the S1/2
of the NE/4, SE/4, SW/4; thence S 89(degree)25'49" W a distance of 646.01 feet
to a 1/2 inch iron pin at the NW corner of S/2, NE/4, SE/4, SW/4; thence N
01(degree)12'40" W a distance of 329.41 feet to a 1/2 inch iron pin at the NE
corner of the W/2, SE/4, SW/4; thence S 89(degree)28'39" W a distance of 645.02
feet to a 1/2 inch iron pin at the NE corner of the SW/4, SW/4; thence S
81(degree)44'00" W a distance of 1301.39 feet to a 40D nail on the West line of
said SW/4; thence S 00(degree)41'45" E, along the West line of said SW/4 a
distance of 1148.57 feet to the point or place of beginning, a tract to contain
70.926 acres more or less.
4
<PAGE> 1
EXHIBIT 10.178
STOCK REPURCHASE AGREEMENT
This Stock Repurchase Agreement is made and entered into this 30 day of
September, 1997, by and between Thomas W. Beasley, a resident of Burns,
Tennessee ("Seller") and Corrections Corporation of America, a Tennessee
corporation headquartered in Nashville, Tennessee ("Buyer").
FOR AND IN CONSIDERATION of the mutual covenants contained herein and
other good and valuable consideration, the parties hereto agree as follows:
1. Recitals. Seller desires to sell to Buyer, and Buyer is willing to
purchase from Seller, 122,500 shares of Common Stock (the "Shares") of Buyer
owned by Seller and represented by Buyer's certificate number CC 13573, all in
accordance with the terms of this Agreement.
2. Redemption of The Shares. Seller hereby agrees to sell and assign
all of the Shares to Buyer at the closing and agrees to execute such stock
powers and other instruments of conveyance as may be reasonably requested by
Buyer in order to effectuate the transfer of the Shares.
3. Payment of Purchase Price. Buyer agrees to pay to Seller the product
of 122,500 times the closing price of Buyer's Common Stock as reported on the
New York Stock Exchange on September 30, 1997 ($43.50), in complete payment for
the Shares sold by Seller to Buyer, such price to be payable in cash at the
closing or at such date as agreed to by the parties hereto.
4. Warranties and Representations of Seller. Seller represents and
warrants that he is the lawful owner of, and has good and marketable title to,
the Shares; the Shares are subject to no liens or encumbrances whatsoever; and
Seller has full power and authority to enter into this Agreement and to convey
the valid title of the Shares to Buyer free and clear of all liens, pledges and
encumbrances whatsoever. Buyer represents and warrants that he knows of no
reason why Seller cannot consummate this transaction. Neither the execution and
delivery of this Agreement nor the carrying out of the transactions contemplated
hereby will result in any violation of any term of any material agreement or
instrument to which the Buyer is a party or by which it is bound, or of any law
or government order, rule or regulation which is applicable to the Buyer. No
consents or approvals of any persons or entities, government or otherwise, are
required which have not been, or will not have been prior to the closing,
obtained in respect of the execution and delivery by the Buyer of this Agreement
and the carrying out of the transactions contemplated hereby on the part of the
Buyer.
5. Indemnification by Seller. Seller agrees to defend, indemnify and
hold harmless Buyer from, against in respect of any and all loss or damage to
Buyer in whole or in part resulting from:
(a) Any breach of any of the warranties by Seller contained
herein, or any misstatement or omission of fact, or failure to state the facts
necessary to make those statements made not misleading, in or under this
Agreement; and
<PAGE> 2
(b) Any liability or obligation arising out of any actions,
suits, proceedings, claims, demands, judgments, costs and expenses (including
court costs and reasonable legal and accounting fees) incident to any of the
foregoing.
6. Closing. The closing shall take place on September 30, 1997 or on
such other date as agreed to by the parties hereto.
7. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Tennessee, applicable
to contracts made and to be performed therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BUYER:
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Darrell K. Massengale
-----------------------------------
Title: Chief Financial Officer
--------------------------------
SELLER:
/s/ Thomas W. Beasley
---------------------------------------
THOMAS W. BEASLEY
<PAGE> 1
EXHIBIT 10.179
LEASE AGREEMENT
(HOUSTON)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Houston, Harris County, State of
Texas, described in Exhibit A hereto, and all Improvements, Fixtures, and
Personal Property thereon or thereto (each as defined in the Master Agreement,
and, together with said Land, the "Leased Property"); such Leased Property
collectively known and described at the date hereof as the Houston Processing
Center;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of twelve (12) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2009 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as
<PAGE> 2
the Fixed Term, as set forth in the Lease; and (iii) provided that Tenant gives
Landlord notice on or before the date which is six (6) months prior to the
expiration of the Second Extended Term, upon the mutual agreement of Landlord
and Tenant, the Lease shall be renewed for one (1) additional five (5) year term
(the "Third Extended Term") on the same terms and provisions (other than with
respect to renewal) as the Fixed Term, as set forth in the Lease. Tenant's right
to so extend the Term of the Lease is conditioned on Landlord's prior approval
of the Extended Term, Second Extended Term, or Third Extended Term, as the case
may be. The term "Term" used in this Agreement means the Fixed Term, Extended
Term, Second Extended Term and Third Extended Term, as appropriate. The term
"Lease Year" means each twelve (12) month period during the Term commencing on
January 1 and ending on December 31, except the first Lease Year of each Lease
shall be the period from the Commencement Date through the following December
31, and the last Lease Year shall end on the date of termination of the Lease if
a day other than December 31. Landlord may terminate this Lease prior to the
expiration of the Term hereof, at any time following the date which is five (5)
years from the date hereof, upon written notice to Tenant not less than eighteen
(18) months prior to the effective date of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
-----------------------------------------
Title: Chief Development Officer
--------------------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-----------------------------------------
Title: Chief Executive Officer
--------------------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
Metes and Bounds Description
5.843 Acres (254,531 Square Feet)
Portion of Reserve "C" Block One
World/Houston Section One International Business Center
William Lloyd Survey, A-1407
Harris County, Texas
Being a tract or parcel containing 5.843 acres (254,531 square feet) of land
situated in the William Lloyd Survey, Abstract No. 1407, Harris County, Texas,
being out of and a part of Reserve "C" Block One of World/Houston Section One
International Business Center, recorded in Volume 278, Page 25 of the Harris
County Map Records (H.C.M.R.) and being the same called 5.840 acre tract
described in deed recorded under Clerk's File Number J194317 of the Harris
County Official Public Records of Real Property (H.C.O.P.R.R.P.); said 5.843
acre tract being more particularly described by metes and bounds as follows with
all bearings referenced to said subdivision plat:
Beginning at a 5/8-inch iron rod found for the northeast corner of said Reserve
"C" and the herein described tract, being the southeast corner of that certain
called 6.6031 acre tract, described in deed recorded under Clerk's File Number
G291174 of said H.C.O.P.R.R.P. and being in the west line of Lot 10 of Block
One, Greenlee Addition, a subdivision in Harris County of record in Volume 40,
Page 32 of said H.C.M.R.:
THENCE, South 02 degrees 51 minutes 21 seconds East, 485.42 feet along the line
common to said Reserve "C" and said Greenlee Addition to a 3/4-inch galvanized
iron pipe found for the northeast corner of that certain called 5.50 acre tract
described in deed recorded under Clerk's File Number H038206 of said
H.C.O.P.R.R.P., and being the southeast corner of the herein described tract;
THENCE, South 89 degrees 07 minutes 09 seconds West, departing the west line of
said Block 1 of Greenlee Addition and along the north line of said 5.50 acre
tract, 500.50 feet to a 3/4-inch galvanized iron pipe found for the common west
corner of said 5.50 acre tract and the herein described tract, and being in the
existing east right-of-way line of Export Plaza Drive (80 feet wide);
THENCE, North 02 degrees 51 minutes 27 seconds West, 104.37 feet along the
existing east right-of-way line of said Export Plaza Drive to a 3/4-inch
galvanized iron pipe found for the beginning of a tangent curve to the left;
THENCE, Northwesterly, 172.82 feet along the existing east right-of-way line of
said Export Plaza Drive, the existing north right-of-way line of Consulate Plaza
Drive (80 feet wide) and along the arc of said curve to the left (Central Angle
= 70 degrees 43 minutes 34 seconds, Radius = 140.00 feet, Chord Bearing and
Distance = North 38 degrees 13 minutes 14 seconds West, 162.05 feet) to a 5/8-
<PAGE> 5
inch iron rod found for a common south corner of Reserves "B" and "C" of said
World/Houston Section One International Business Center;
THENCE, North 16 degrees 24 minutes 59 seconds East, 246.82 feet departing the
existing north right-of-way line of said Consulate Plaza Drive and along the
common line between said Reserve "B" and "C" to a 5/8-inch iron rod found for
the common corner of Reserves "A", "B" and "C" of said World/Houston Section One
International Business Center, being the southwest corner of said 6.6031 acre
tract and being the northwest corner of the herein described tract from which a
found 8-inch square cross-tie fence corner post bears South 52 degrees 12
minutes 39 seconds East, 0.74 feet;
THENCE, North 87 degrees 17 minutes 38 seconds East, 512.53 feet along the
common line between the herein described tract, Reserve "C" and said 6.6031 acre
tract to the POINT OF BEGINNING containing 5.843 acres (254,531 square feet) of
land, more or less.
Compiled by:
SURVCON INC.
Job No. 5980-01
April 14, 1997
D-2
Houston Processing Center
Houston, Harris County Texas
<PAGE> 6
EXHIBIT B
Mortgage Debt
Property: Houston Processing Center
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of Tennessee,
as Administrative Agent, dated July 18, 1997.
<PAGE> 7
EXHIBIT C
Permitted Exceptions
Property: Houston Processing Center
1. Standby fees, taxes and assessments by any taxing authority for the
year 1997, and subsequent years.
2. The following restrictive covenants of record itemized below: Volume
278, page 25 of the Map Records of Harris County, Texas and those
Restrictions filed for record under Clerk's File No. F934983, as
corrected and refiled under Clerk's File No. F944735, and as amended by
instrument filed under Clerk's File No. G698447, all of the Official
Records of Real Property of Harris County, Texas.
3. A water line easement 10 feet wide along the westerly line of subject
property, which abuts Consulate Plaza Drive, and/or Export Plaza Drive,
as reflected on the map or plat thereof, recorded in Volume 278, page
25 of the Map Records of Harris County, Texas.
4. An unobstructed easement 16 feet wide, together with an unobstructed
aerial easement 5 feet, 6 inches wide, beginning at a height of 16 feet
3 inches above the ground, and extending upwards and outwards on an
inclined plane, to a height of 18 feet 6 inches above the ground,
located south and west of and adjoining the heretofore cited 16 feet
wide easement, all located along the north and east lines of subject
property, as granted to Houston Lighting and Power Company by
instrument filed under Clerk's File No. F941406, and as corrected by
instrument filed under Clerk's File No. G120555, and as further
ratified by instrument filed under Clerk's File No. G769967, all of the
Official Records of Real Property of Harris County, Texas.
5. Blanket easements for ingress and egress, for installation,
maintenance, repair and removal of public utilities, as set out in the
Declaration filed under Clerk's File No. F934983, and as refiled under
Clerk's File No. F944735, and as amended by instrument filed under
Clerk's File No. G698447, all of the Official Public Records of Real
Property of Harris County, Texas.
6. An easement for drainage purposes extending a distance of 15 feet on
each side of the center line of all natural water courses, as reflected
by the map or plat thereof, recorded in Volume 278, page 25 of the Map
Records of Harris County, Texas.
7. A water line and meter easement, as granted to the City of Houston by
instrument filed under Clerk's File No. J546727 of the Official Public
Records of Real Property of Harris County, Texas, and being more
particularly described by metes and bounds therein.
8. Agreement by and between Warner Cable Communications, Inc. and
Corrections Corporation of America for the installation, operation and
maintenance of a Cable Television
<PAGE> 8
System as reflected by instrument filed under Clerk's File No. N216013
of the Official Public Records of Harris County, Texas.
9. An unobstructed easement 10 feet wide, together with an unobstructed
aerial easement 10 feet wide, beginning at a plane of 16 feet above the
ground and extending upwards, located on both sides of and adjoining
the said 10 feet wide easement, as granted to Houston Lightening and
Power Company by instrument filed under Clerk's File No. J445703 of the
Official Public Records of Real Property of Harris County, Texas; said
easement(s) being further reflected and defined on Sketch No. N84-041
attached to said instrument.
10. A 1/16th non-participating royalty interest in and to all the oil, gas
and other minerals in, on, under or that may be produced from subject
property is excepted herefrom as the same is set forth in instrument
recorded in Volume 5812, page 576 of the Deed Records of Harris County,
Texas.
11. All oil, gas and other minerals, the royalties, bonuses, rentals and
all other rights in connection with same are excepted herefrom as set
forth in instrument filed under Clerk's File No. G296822 of the
Official Public Records of Harris County, Texas. Waiver of surface
rights contained therein.
12. All oil, gas and other minerals, the royalties, bonuses, rentals and
all other rights in connection with same are excepted herefrom as set
forth in instrument filed under Clerk's File No. F934983, and as
refiled under Clerk's File No. F944735, and as amended by instrument
filed under Clerk's File No. G698447, all of the Official Public
Records of Harris County, Texas. Waiver of surface rights contained
therein.
13. Building set back line of 20 feet along that portion of the west
property line abutting Consulate Plaza Drive and/or Export Plaza Drive,
as set out on plat recorded in Volume 278, page 25 of the Map Records
of Harris County, Texas.
14. The subject property lies within the area designated and zoned by the
City of Houston as the "Jetero Airport Hazard Area" (Houston
Intercontinental Airport) and is subject to the restrictions and
regulations imposed by Ordinance of the City of Houston, a certified
copy of which is recorded in Volume 5448, page 421, Deed Records,
Harris County, Texas, as amended by Ordinance No. 83-861, filed for
record under Clerk's File No. J040968 of the Official Public Records,
Harris County, Texas.
15. Annual Maintenance Charge payable to World/Houston International
Business Center Improvement Association, as set forth in instrument
filed under Clerk's File No. F934983, and as refiled under Clerk's File
No. F944735, and as amended by instrument filed under Clerk's File No.
G698447, all of the Official Public Records of Real Property of Harris
County, Texas and additionally secured by a separate, valid and
subsisting lien, as set forth therein.
<PAGE> 9
16. The subject property is located within the City of Houston or within
its extra territorial jurisdiction (within 5 miles of the city limits
but outside another municipality). It is subject to the terms,
conditions, and provisions of City of Houston Ordinance No. 85-1878,
pertaining to, among other things, the platting and re-platting of real
property and to the establishment of building lines (25 feet along
major thoroughfares and 10 feet along other streets). A certified copy
of said ordinance was filed for record on August 1, 1991, under Harris
County Clerk's File No. N 253886.
17. All matters shown on the Plat of Asbuilt Survey, dated April 15, 1997,
as revised June 17, 1997, prepared by William H. Smith, Jr., R.P.L.S.
No. 3982, Survcon Inc., 5757 Woodway, Houston, Texas 77057, Job Number
5980-01.
<PAGE> 10
EXHIBIT D
Base Rent Schedule
Property: Houston Processing Center
Tenant will pay to Landlord annual Base Rent of $1,474,000.00, payable
in equal monthly installments of $122,833.33.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.180
LEASE AGREEMENT
(LAREDO)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Laredo, Webb County, State of
Texas, described in Exhibit A hereto, and all Improvements, Fixtures, and
Personal Property thereon or thereto (each as defined in the Master Agreement,
and, together with said Land, the "Leased Property"); such Leased Property
collectively known and described at the date hereof as the Laredo Processing
Center;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of twelve (12) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2009 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as
<PAGE> 2
the Fixed Term, as set forth in the Lease; and (iii) provided that Tenant gives
Landlord notice on or before the date which is six (6) months prior to the
expiration of the Second Extended Term, upon the mutual agreement of Landlord
and Tenant, the Lease shall be renewed for one (1) additional five (5) year term
(the "Third Extended Term") on the same terms and provisions (other than with
respect to renewal) as the Fixed Term, as set forth in the Lease. Tenant's right
to so extend the Term of the Lease is conditioned on Landlord's prior approval
of the Extended Term, Second Extended Term, or Third Extended Term, as the case
may be. The term "Term" used in this Agreement means the Fixed Term, Extended
Term, Second Extended Term and Third Extended Term, as appropriate. The term
"Lease Year" means each twelve (12) month period during the Term commencing on
January 1 and ending on December 31, except the first Lease Year of each Lease
shall be the period from the Commencement Date through the following December
31, and the last Lease Year shall end on the date of termination of the Lease if
a day other than December 31. Landlord may terminate this Lease prior to the
expiration of the Term hereof, at any time following the date which is five (5)
years from the date hereof, upon written notice to Tenant not less than eighteen
(18) months prior to the effective date of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
-------------------------------
Title: Chief Development Officer
----------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-------------------------------
Title: Chief Executive Officer
----------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
THE SURFACE ONLY TO:
A 4.0 ACRE TRACT OF LAND, MORE OR LESS, BEING PARTLY OUT OF THE ROBERT HAYNES
22.43 ACRE TRACT, BEING OF RECORD IN VOLUME 295, PAGES 238-241, WEBB COUNTY DEED
RECORDS AND PARTLY OUT OF THE HAYNES TRACT BEING OF RECORD IN VOLUME 207, PAGE
161, WEBB COUNTY DEED RECORDS; THIS 4.0 ACRE TRACT ALSO KNOWN AS LOT 2A, BLOCK
1, OUT OF THE CASA BLANCA SUBDIVISION, AS RE-PLATTED AND RECORDED IN VOLUME 8,
PAGE 50, OF THE WEBB COUNTY PLAT RECORDS, ALL SAID PROPERTY BEING OUT OF PORCION
28, WEBB COUNTY, TEXAS;
COMMENCING from the southeast corner of said Haynes tract, same being a point on
the northeasterly right-of-way line of U.S. Highway No. 59, and same being at
approximately highway station 194 + 86;
THENCE, North 87 degrees 21 minutes 00 seconds West, 862 feet, along said
right-of-way line, to the southwest corner of Lot No. 1, out of the Casa Blanca
Subdivision Plat as Recorded in Volume 3, Page 100, of the Webb County Plat
Records, to the southeast corner of this tract and the POINT OF BEGINNING.
THENCE, North 02 degrees 39 minutes 00 seconds East, 200 feet, with the common
boundary line of this tract and said Lot No. 1, to the northwest corner of said
Lot No. 1 and an exterior corner of this tract;
THENCE, North 87 degrees 21 minutes 00 seconds West, 25.76 feet, with the common
boundary line of the Juan Moreno 1.9261 acre tract, recorded in Volume 1414,
Pages 805-811, of the Webb County Deed Records, to the most westerly, southwest
corner of the said Juan Moreno tract, and an interior corner of this tract;
THENCE, North 02 degrees 39 minutes 00 seconds East, 250 feet, with the common
boundary line of this tract and said Juan Moreno tract, to the northwest corner
of said Juan Moreno tract and the northeast corner of this tract;
THENCE, North 87 degrees 21 minutes 00 seconds West, 375.75 feet, to the
northeast corner of Lot No. 3, out of the aforesaid Casa Blanca Subdivision Plat
and the northwest corner of this tract;
THENCE, South 02 degrees 39 minutes 00 seconds West, 450 feet, with the common
boundary line of this tract, and said Lot No. 3, to the southeast corner of said
Lot No. 3, a point on the aforesaid northeasterly right-of-way line of U. S.
Highway 59, to the southwest corner of this tract;
<PAGE> 5
THENCE, South 87 degrees 21 minutes 00 seconds East, 401.51 feet, along the
southwesterly boundary line of this tract, being in common with the
northeasterly right-of-way line of said U.S. Highway 59, to the POINT OF
BEGINNING.
Laredo Processing Center
Laredo, Webb County, Texas
<PAGE> 6
EXHIBIT B
Mortgage Debt
Property: Laredo Processing Center
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of
Tennessee, as Administrative Agent, dated July 18, 1997.
<PAGE> 7
EXHIBIT C
Permitted Exceptions
Property: Laredo Processing Center
1. Standby fees, taxes and assessments by any taxing authority for the
year 1997, and subsequent years.
2. Easement and right of way for electric transmission lines dated
November 6, 1984, executed by Richard E. Haynes to Central Power and
Light Company, recorded in Volume 1083, pages 817-820, Webb County Real
Property Records.
3. All oil, gas and other minerals reserved in Deed dated November 30,
1984, executed by Richard E. Haynes, Trustee to Corrections Corporation
of America, recorded in Volume 1087, Pages 781-783, Webb County Real
Property Records, and containing the waiver of any right of ingress and
egress and surface rights.
4. Easement and right of way for electric transmission lines dated May 11,
1983, executed by Victor M. Solis and Gloria Solis to Central Power and
Light Company, recorded in Volume 1025, pages 792-793, Webb County Real
Property Records.
5. All oil, gas and other minerals reserved in Deed dated May 28, 1987,
executed by Richard E. Haynes to Corrections Corporation of America,
recorded in Volume 1236, pages 490-493, Webb County Real Property
Records, in which the Surface Rights only were conveyed.
6. All utility easements reflected on Subdivision Replat recorded in
Volume 8, page 50, Webb County Plat Records.
7. Subject to Order of Joint Airport Zoning Board of the City of Laredo
and Webb County recorded in Volume 655, page 277, Webb County Real
Property Records.
8. Rights of Webb County, Texas, to flood spillway along the Eastern
boundaries of Chacon Creek, as reflected on Plat prepared by J. Limon
on July 15, 1961, as set out in Deed dated January 18, 1962, from
Adelaide G. Bunn, individually and as Independent Executrix of the
Estate of T. B. Bunn, Deceased to Veterans Land Board of the State of
Texas, recorded in Volume 295, pages 238-241, Webb County, Records.
9. All matters shown on the Survey, dated November 15, 1990, last revised
_______________, 1997, prepared by Cesareo R. Porras, P.L.S. No. 3481,
Porras Engineering Company, 304 E. Calton Road, Laredo, Texas 78044,
Drawing Number F.B. #94.
<PAGE> 8
EXHIBIT D
Base Rent Schedule
Property: Laredo Processing Center
Tenant will pay to Landlord annual Base Rent of $1,254,000.00, payable
in equal monthly installments of $104,500.00.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.181
LEASE AGREEMENT
(BRIDGEPORT)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Bridgeport, Wise County, State of
Texas, described in Exhibit A hereto, and all Improvements, Fixtures, and
Personal Property thereon or thereto (each as defined in the Master Agreement,
and, together with said Land, the "Leased Property"); such Leased Property
collectively known and described at the date hereof as the Bridgeport Pre-Parole
Transfer Facility;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of twelve (12) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2009 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as
<PAGE> 2
the Fixed Term, as set forth in the Lease; and (iii) provided that Tenant gives
Landlord notice on or before the date which is six (6) months prior to the
expiration of the Second Extended Term, upon the mutual agreement of Landlord
and Tenant, the Lease shall be renewed for one (1) additional five (5) year term
(the "Third Extended Term") on the same terms and provisions (other than with
respect to renewal) as the Fixed Term, as set forth in the Lease. Tenant's right
to so extend the Term of the Lease is conditioned on Landlord's prior approval
of the Extended Term, Second Extended Term, or Third Extended Term, as the case
may be. The term "Term" used in this Agreement means the Fixed Term, Extended
Term, Second Extended Term and Third Extended Term, as appropriate. The term
"Lease Year" means each twelve (12) month period during the Term commencing on
January 1 and ending on December 31, except the first Lease Year of each Lease
shall be the period from the Commencement Date through the following December
31, and the last Lease Year shall end on the date of termination of the Lease if
a day other than December 31. Landlord may terminate this Lease prior to the
expiration of the Term hereof, at any time following the date which is five (5)
years from the date hereof, upon written notice to Tenant not less than eighteen
(18) months prior to the effective date of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
-----------------------------------------
Title: Chief Development Officer
-------------------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-----------------------------------------
Title: Chief Executive Officer
--------------------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
THE SURFACE ESTATE ONLY, IN AND TO:
Being a 4.26 acre tract in the Edward Stephens Survey, Abstract Number 755, Wise
County, Texas and also being the same tract of land deeded to Concept, Inc.,
described in instruments recorded in Volume 255, page 523, Real Records, Wise
County, Texas and Volume 382, page 17, Real Records, Wise County, Texas and
being described as one tract by metes and bounds as follows:
Beginning at a 5/8" iron rod found in the North Right-of-Way of F.M. #1658 for
the Southeast corner of said tract described in Volume 255, page 523;
THENCE North 73 degrees 31 minutes 34 seconds West with the North Right-of-Way
line of said F.M. #1658 a distance of 335.92 feet to a 3" steel fence post found
for the Southwest corner of the tract herein described;
THENCE North 01 degrees 32 minutes 30 seconds East a distance of 697.88 feet to
a 3" steel fence post found for the Northwest corner of the tract herein
described;
THENCE North 89 degrees 03 minutes 36 seconds East a distance of 164.69 feet to
a 1/2" iron pipe found for a corner;
THENCE South 89 degrees 38 minutes 04 seconds East a distance of 57.10 feet to a
5/8" iron rod found for the most North Northeast corner of the tract herein
described;
THENCE South 01 degrees 30 minutes 36 seconds West a distance of 551.24 feet to
a 3" steel fence post found for a ell corner of the tract herein described;
THENCE South 88 degrees 01 minutes 24 seconds East a distance of 102.37 feet to
a 5/8" iron rod found for the most East Northeast corner of the tract herein
described;
THENCE South 01 degrees 28 minutes 34 seconds West a distance of 240.72 feet to
the point of beginning and containing 4.26 acres of land, more or less.
Bridgeport Pre-Parole Transfer Facility
Bridgeport, Wise County, Texas
<PAGE> 5
EXHIBIT B
Mortgage Debt
Property: Bridgeport Pre-Parole Transfer Facility
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of Tennessee,
as Administrative Agent, dated July 18, 1997.
<PAGE> 6
EXHIBIT C
Permitted Exceptions
Property: Bridgeport Pre-Parole Transfer Facility
1. Standby fees, taxes and assessments by any taxing authority for the
year 1997, and subsequent years.
2. Reservation of all oil, gas and other minerals contained in deed dated
January 3, 1975, from A. J. Whelan, et al. to Robert Goode, recorded in
Volume 340, page 181, Deed Records of Wise County, Texas.
3. Reservation of all oil, gas and other minerals contained in deed dated
March 10, 1977, from A. J. Whelan, et al to Gordon E. Taylor, recorded
in Volume 362, page 442, Deed Records of Wise County, Texas.
4. Right-of-Way to West Wise Rural Water Supply Corp., dated July 15,
1993, recorded in Volume 541, page 586, Real Records of Wise County,
Texas.
5. Water and sewer lines across subject property as shown on survey dated
April 15, 1997, as revised June 18, 1997, prepared by Roger C.
Steadham, R.P.L.S. No. 4281.
6. Overhead electric and telephone lines as shown on survey dated April
15, 1997, as revised June 18, 1997, prepared by Roger C. Steadham,
R.P.L.S. No. 4281.
7. Fence inset along the North and East property lines as shown on survey
dated April 15, 1997, as revised June 18, 1997, prepared by Roger C.
Steadham, R.P.L.S. No. 4281.
8. Rights of the Wise County Water Control and Improvement District #1 to
issue bonds.
9. All matters shown on the Survey, dated April 15, 1997, as revised June
18, 1997, prepared by Roger C. Steadham, R.P.L.S. No. 4281, Steadham
Surveying, 608 13th Street, Bridgeport, Texas 76426.
<PAGE> 7
EXHIBIT D
Base Rent Schedule
Property: Bridgeport Pre-Parole Transfer Facility
Tenant will pay to Landlord annual Base Rent of $374,000.00, payable in
equal monthly installments of $31,166.67.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.182
LEASE AGREEMENT
(MINERAL WELLS)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Mineral Wells, Parker County,
State of Texas, described in Exhibit A hereto, and all Improvements, Fixtures,
and Personal Property thereon or thereto (each as defined in the Master
Agreement, and, together with said Land, the "Leased Property"); such Leased
Property collectively known and described at the date hereof as the Mineral
Wells Pre-Parole Transfer Facility;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of twelve (12) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2009 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the
<PAGE> 2
"Second Extended Term") on the same terms and provisions (other than with
respect to renewal) as the Fixed Term, as set forth in the Lease; and (iii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Second Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Third Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as set forth
in the Lease. Tenant's right to so extend the Term of the Lease is conditioned
on Landlord's prior approval of the Extended Term, Second Extended Term, or
Third Extended Term, as the case may be. The term "Term" used in this Agreement
means the Fixed Term, Extended Term, Second Extended Term and Third Extended
Term, as appropriate. The term "Lease Year" means each twelve (12) month period
during the Term commencing on January 1 and ending on December 31, except the
first Lease Year of each Lease shall be the period from the Commencement Date
through the following December 31, and the last Lease Year shall end on the date
of termination of the Lease if a day other than December 31. Landlord may
terminate this Lease prior to the expiration of the Term hereof, at any time
following the date which is five (5) years from the date hereof, upon written
notice to Tenant not less than eighteen (18) months prior to the effective date
of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
-------------------------------
Title: Chief Development Officer
----------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-------------------------------
Title: Chief Executive Officer
----------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
Being a 25.08 acre tract in the T. & P. Railroad Co. Survey East of the Brazos
River, Abstract Number 1549, Parker County, Texas and also being a certain tract
conveyed to Mineral Wells R.E. Holding Corp. recorded in instrument recorded in
Volume 1581, page 85, Deed Records, Parker County, Texas, being described by
metes and bounds as follows:
Beginning at a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM
R.P.L.S. 4281 set in the East R.O.W. of Reynolds Road and the North R.O.W. of
Shurtz Road for the Southwest corner of said Mineral Wells R.E. Holding Corp.
Tract, said point being by previous description 7241.98 feet South 65 degrees 05
minutes 59 seconds East from the Northwest corner of the T. & P. Railroad Co.
Survey East of the Brazos River, Abstract Number 869, Palo Pinto County, Deed
Records;
THENCE North 12 degrees 49 minutes 41 seconds East a distance of 117.14 feet to
a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
in the East R.O.W of said Reynolds Road for the Southwest corner of a certain
0.31 acre tract described in instrument recorded in Volume 1646, Page 651, Deed
Records, Parker County, Texas;
THENCE South 77 degrees 10 minutes 26 seconds East a distance of 150.00 feet to
a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
for the Southeast corner of said 0.31 acre tract;
THENCE North 12 degrees 49 minutes 41 seconds East a distance of 90.00 feet to a
1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
for the Northeast corner of said 0.31 acre tract;
THENCE North 77 degrees 10 minutes 26 seconds West a distance of 150.00 feet to
a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
in the East R.O.W. of said Reynolds Road for the Northwest corner of said 0.31
acre tract;
THENCE North 12 degrees 49 minutes 41 seconds East a distance of 348.86 feet to
a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
in the East R.O.W. of said Reynolds Road for the Southwest corner of a certain
0.44 acre tract described in instrument recorded in Volume 1554, page 1635, Deed
Records, Parker County, Texas;
THENCE South 77 degrees 10 minutes 31 seconds East a distance of 110.00 feet to
a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
for the Southeast corner of said 0.44 acre tract;
THENCE North 12 degrees 49 minutes 41 seconds East a distance of 175.00 feet to
a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
for the Northeast corner of said 0.44 acre tract;
<PAGE> 5
THENCE North 77 degrees 10 minutes 31 seconds West a distance of 110.00 feet to
a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
in the East R.O.W. of said Reynolds Road for the Northwest corner of said 0.44
acre tract;
THENCE North 12 degrees 49 minutes 41 seconds East a distance of 710.91 feet to
a 3/4 inch iron rod found in the East R.O.W. of said Reynolds Road for the
Northwest corner of said Mineral Wells R.E. Holding Corp. tract;
THENCE South 77 degrees 01 minutes 31 seconds East a distance of 780.78 feet to
a 3/4 inch iron rod found in the West R.O.W. of Heintzelman Road for the
northeast corner of said Mineral Wells R.E. Holding Corp. tract;
THENCE South 12 degrees 51 minutes 11 seconds West a distance of 1441.93 feet to
a 1/2 inch iron rod with a yellow plastic cap stamped STEADHAM R.P.L.S. 4281 set
in the West R.O.W. of said Heintzelman Road and in the North R.O.W. of said
Shurtz Road for the southeast corner of said Mineral Wells R.E. Holding Corp.
tract;
THENCE North 77 degrees 01 minutes 25 seconds West a distance of 780.15 feet to
the POINT OF BEGINNING and containing 25.08 acres of land, more or less.
Mineral Wells Pre-Parole Transfer Facility
Mineral Wells, Parker County, Texas
<PAGE> 6
EXHIBIT B
Mortgage Debt
Property: Mineral Wells Pre-Parole Transfer Facility
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of
Tennessee, as Administrative Agent, dated July 18, 1997.
<PAGE> 7
EXHIBIT C
Permitted Exceptions
Property: Mineral Wells Pre-Parole Transfer Facility
1. Standby fees, taxes and assessments by any taxing authority for the
year 1997, and subsequent years.
2. Easements created in instrument executed by United States of America to
City of Mineral Wells, Texas for joint usage of existing sewer lines
and appurtenances, dated September 30, 1975, filed October 7, 1975,
recorded in Volume 620, page 89, Deed Records, Parker County, Texas.
3. Easements created in instrument executed by United States of America to
City of Mineral Wells, Texas for joint usage of existing water lines
and appurtenances, dated September 30, 1975, filed October 7, 1975,
recorded in Volume 622, page 502, Deed Records, Parker County, Texas.
4. Easements created in instrument executed by United States of America to
Texas Power & Light Company for all existing electrical transmission
lines and systems, dated November 5, 1975, filed December 24, 1975,
recorded in Volume 626, page 1, Deed Records, Parker County, Texas.
5. Easements created in instrument by United States of America to Brazos
River Gas Company for all existing gas distribution lines and systems,
dated March 12, 1976, filed March 25, 1976, recorded in Volume 634,
page 1, Deed Records, Parker County, Texas.
6. Oil, Gas and Mineral Lease executed by and between Carl Kessler and
Richard F. Williamson, Trustee, dated June 23, 1981, filed August 4,
1981, recorded in Volume 1115, page 1121, Real Records, Parker County,
Texas.
7. Terms, provisions, and conditions of Lease Agreement by and between
Mineral Wells R.E. Holding Corp., a Delaware corporation, as Lessor,
and Concept Incorporated, a Delaware corporation, as Lessee, as
evidenced by Memorandum of Lease, dated November 17, 1993, filed
November 18, 1993, recorded in Volume 1581, page 91, Real Records,
Parker County, Texas.
8. Reservation of subsurface mineral estate, including oil, gas and other
minerals in and under subject property, including royalty interests,
royalties, bonuses, rentals and all other rights in connection
therewith, including all easements or rights-of-way owned or held by
any lessee or mineral owner, on, over, or across the said lands for the
purpose of producing or transporting any of said minerals together with
the rights of ingress and egress, as set forth in deed from Concept
Incorporated, a Delaware corporation to Mineral Wells R.E. Holding
<PAGE> 8
Corp., a Delaware corporation, dated November 17, 1993, filed November
18,1 993, recorded in Volume 1581, page 85, Real Records, Parker
County, Texas.
9. That portion of the premises located within the boundaries of any road
or roadway.
10. All matters shown on the Survey, dated April 17, 1997, as revised June
18, 1997, prepared by Roger C. Steadham, R.P.L.S. No. 4281, Steadham
Surveying, 608 13th Street, Bridgeport, Texas 76426, including, but not
limited to, the following: (a) asphalt roadway (50' r.o.w.) crossing
West to East at Northern side of subject property; (b) fences not on
property lines; and (c) overhead electric lines which enter property
from various points and cross from East to West at North side of
subject property.
<PAGE> 9
EXHIBIT D
Base Rent Schedule
Property: Mineral Wells Pre-Parole Transfer Facility
Tenant will pay to Landlord annual Base Rent of $2,948,000.00, payable
in equal monthly installments of $245,666.00.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.183
LEASE AGREEMENT
(MASON)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Mason, Tipton County, State of
Tennessee, described in Exhibit A hereto, and all Improvements, Fixtures, and
Personal Property thereon or thereto (each as defined in the Master Agreement,
and, together with said Land, the "Leased Property"); such Leased Property
collectively known and described at the date hereof as the West Tennessee
Detention Facility;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of ten (10) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2007 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as
<PAGE> 2
set forth in the Lease; and (iii) provided that Tenant gives Landlord notice on
or before the date which is six (6) months prior to the expiration of the Second
Extended Term, upon the mutual agreement of Landlord and Tenant, the Lease shall
be renewed for one (1) additional five (5) year term (the "Third Extended Term")
on the same terms and provisions (other than with respect to renewal) as the
Fixed Term, as set forth in the Lease. Tenant's right to so extend the Term of
the Lease is conditioned on Landlord's prior approval of the Extended Term,
Second Extended Term, or Third Extended Term, as the case may be. The term
"Term" used in this Agreement means the Fixed Term, Extended Term, Second
Extended Term and Third Extended Term, as appropriate. The term "Lease Year"
means each twelve (12) month period during the Term commencing on January 1 and
ending on December 31, except the first Lease Year of each Lease shall be the
period from the Commencement Date through the following December 31, and the
last Lease Year shall end on the date of termination of the Lease if a day other
than December 31. Landlord may terminate this Lease prior to the expiration of
the Term hereof, at any time following the date which is five (5) years from the
date hereof, upon written notice to Tenant not less than eighteen (18) months
prior to the effective date of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of this initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
-------------------------------
Title: Chief Development Officer
----------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-------------------------------
Title: Chief Executive Officer
----------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
Beginning at a 1/2 inch rebar found the right-of-way line of Finde Naifeh Jr.
Drive (Mason Gainsville Road - 60 ft. R.O.W.) a distance of 1612.95 feet
(C=1615.56 ft.) Southwestwardly, as measured along said southerly right-of-way
line from its intersection with the westerly right-of-way line of U. S. Highway
#70, said point being the northwesterly corner of the William Liles Tract
(DB.568, PG. 42); thence South 03 degrees 45 minutes 00 seconds East along the
westerly line of said Liles Tract and the Cecil Bright Tract (DB. 701, PG. 664)
a distance of 1601.22 feet to point; thence South 80 degrees 00 minutes 00
seconds West a distance of 53.65 feet to a point; thence South 81 degrees 00
minutes 00 seconds West a distance of 105.60 feet to a point; thence South 86
degrees 00 minutes 00 seconds West a distance of 110.20 feet to a point; thence
South 00 degrees 15 minutes 00 seconds East a distance of 39.60 feet to a point;
thence South 68 degrees 00 minutes 00 seconds West a distance of 112.20 feet to
a point; thence South 01 degrees 15 minutes 00 seconds East a distance of 138.00
feet to a point; thence South 25 degrees 00 minutes 00 seconds East a distance
of 141.90 feet to a point; thence South 50 degrees 15 minutes 00 seconds West a
distance of 135.30 feet to a point; thence North 62 degrees 45 minutes 00
seconds West a distance of 110.20 feet to a point; thence South 73 degrees 45
minutes 00 seconds West a distance of 117.50 feet to a point; thence South 86
degrees 45 minutes 00 seconds West, a distance of 67.30 feet to a point; thence
South 73 degrees 00 minutes 00 seconds West a distance of 130.70 feet to a
point; thence South 10 degrees 45 minutes 00 seconds West a distance of 240.90
feet to a point; thence South 43 degrees 45 minutes 00 seconds West a distance
of 104.90 feet to a point; thence North 03 degrees 45 minutes 00 seconds West
along the easterly line of the Robert Marshall Tract (DB. 235, PG. 85) a
distance of 2369.40 feet to a 1/2 inch rebar set in the southerly right-of-way
line of said Finde Naifeh Jr. Drive; thence North 87 degrees 45 minutes 00
seconds East along said southerly right-of-way line a distance of 983.40 feet to
the point of beginning, containing 43.186 acres or 1881168.086 square feet, more
or less, described according to the ALTA Boundary Survey, dated April 16, 1997,
as revised June 19, 1997, prepared by John Wesley Ashworth, III, Tennessee No.
1344, Ashworth-Vaughan, Inc., 195 Center Street, Collierville, Tennessee 38017,
Job Number 3989.00
Being the same property conveyed to Corrections Partners, Inc., a Delaware
corporation, by deed from Corrections Corporation of America, a Tennessee
corporation, of record in Record Book _____, page _____, Register's Office for
Tipton County, Tennessee.
West Tennessee Detention Facility
Mason, Tipton County, Tennessee
<PAGE> 5
EXHIBIT B
Mortgage Debt
Property: West Tennessee Detention Facility
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of
Tennessee, as Administrative Agent, dated July 18, 1997.
<PAGE> 6
EXHIBIT C
Permitted Exceptions
Property: West Tennessee Detention Facility
1. 1997 Taxes, a lien, which are not yet due and payable.
2. Easement(s) in favor of Memphis CATV, Inc. (Cablevision), as set forth
in instrument recorded in Record Book 666, page 666, Register's Office
for Tipton County, Tennessee.
3. Easement(s) for the flow of Beaver Creek Canal.
4. All matters shown on ALTA Boundary Survey, dated April 16, 1997, as
revised June 19, 1997, prepared by John Wesley Ashworth, III, Tennessee
No. 1344, Ashworth-Vaughan, Inc., 195 Center Street, Collierville,
Tennessee 38017, Job Number 3989.00.
<PAGE> 7
EXHIBIT D
Base Rent Schedule
Property: West Tennessee Detention Facility
Tenant will pay to Landlord annual Base Rent of $3,696,000, payable
in equal monthly installments of $308,000.00.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.184
LEASE AGREEMENT
(LEAVENWORTH)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Leavenworth, Leavenworth County,
State of Kansas, described in Exhibit A hereto, and all Improvements, Fixtures,
and Personal Property thereon or thereto (each as defined in the Master
Agreement, and, together with said Land, the "Leased Property"); such Leased
Property collectively known and described at the date hereof as the Leavenworth
Detention Center;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of ten (10) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2007 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as
<PAGE> 2
set forth in the Lease; and (iii) provided that Tenant gives Landlord notice on
or before the date which is six (6) months prior to the expiration of the Second
Extended Term, upon the mutual agreement of Landlord and Tenant, the Lease shall
be renewed for one (1) additional five (5) year term (the "Third Extended Term")
on the same terms and provisions (other than with respect to renewal) as the
Fixed Term, as set forth in the Lease. Tenant's right to so extend the Term of
the Lease is conditioned on Landlord's prior approval of the Extended Term,
Second Extended Term, or Third Extended Term, as the case may be. The term
"Term" used in this Agreement means the Fixed Term, Extended Term, Second
Extended Term and Third Extended Term, as appropriate. The term "Lease Year"
means each twelve (12) month period during the Term commencing on January 1 and
ending on December 31, except the first Lease Year of each Lease shall be the
period from the Commencement Date through the following December 31, and the
last Lease Year shall end on the date of termination of the Lease if a day other
than December 31. Landlord may terminate this Lease prior to the expiration of
the Term hereof, at any time following the date which is five (5) years from the
date hereof, upon written notice to Tenant not less than eighteen (18) months
prior to the effective date of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
--------------------------------
Title: Chief Development Officer
-----------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
--------------------------------
Title: Chief Executive Officer
-----------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
SURFACE ONLY AS TO ALL TRACTS:
Tract 1:
Lots 2, 3, 4, 5, 6, 7, and 8, Block 5, LEAVENWORTH INDUSTRIAL PARK,
City of Leavenworth, Leavenworth County, Kansas.
Tract 2:
Lots 2, 4, and 6, Block 4, BREWER PLACE, REPLAT OF BLOCKS 3 AND 4,
LEAVENWORTH INDUSTRIAL PARK, City of Leavenworth, Leavenworth County, Kansas.
Tract 3:
Vacated Highway Terrace bounded by the above tracts.
All being more particularly described as follows:
Beginning at the Southeast corner of Lot 8, Block 5, of said "LEAVENWORTH
INDUSTRIAL PARK";
THENCE North 89 degrees 40 minutes 56 seconds West, 410.31 feet along the South
line of said Lot 8, also being the North line of Astro Way, to a point on the
West line of vacated Highway Terrace, also being on the East line of Lot 6,
Block 4, of said "BREWER PLACE REPLAT";
THENCE, South 00 degrees 19 minutes 04 seconds West, 60.00 feet to the Southeast
corner of said Lot 6;
THENCE North 89 degrees 40 minutes 56 seconds West, 321.00 feet to the Southwest
corner of said Lot 6;
THENCE, North 00 degrees 19 minutes 04 seconds East, 1,278.78 feet to the
Northwest corner of Lot 2, Block 5, of said "LEAVENWORTH INDUSTRIAL PARK";
THENCE, along the North line of said Lot 2, also being the South line of Kansas
Highway No. 5, South 89 degrees 50 minutes 26 seconds East, 236.60 feet to a
point of curvature;
THENCE along a curve to the right, having a delta of 90 degrees 51 minutes 00
seconds a radius of 501.95 feet, an arc length of 795.91 feet;
<PAGE> 5
THENCE continuing along the West line of said Kansas Highway No.5, also being
the East line of said "LEAVENWORTH INDUSTRIAL PARK", South 01 degrees 00 minutes
34 seconds West, 711.48 feet to the "Point of Beginning", NET AREA: 863,056.076
square feet or 19.813 acres, more or less.
Leavenworth Detention Center
Leavenworth, Leavenworth County, Kansas
<PAGE> 6
EXHIBIT B
Mortgage Debt
Property: Leavenworth Detention Center
This property is subject to the following Mortgage Debt:
That certain mortgage of First Union National Bank of Tennessee, as
Administrative Agent, dated July 18, 1997.
<PAGE> 7
EXHIBIT C
Permitted Exceptions
Property: Leavenworth Detention Center
1. General taxes and special assessments for 1997 and subsequent years,
not yet due or payable.
2. Restrictive covenants appearing in Book 484, page 37, and as amended in
Book 484, page 670 and Book 503, page 1867 and Book 505, page 724, and
Book 650, page 1847, and Book 651, page 317.
3. Restrictions, reservations and covenants, if any, as shown on the Plat
of Leavenworth Industrial Park, recorded in Plat Book 7, page 99.
4. Restrictive covenants appearing in Book 475, page 61.
5. Restrictions, reservations and covenants, if any, as shown on the Plat
of Brewer Place, Replat of Blocks 3 and 4, Leavenworth Industrial Park,
recorded in Plat Book 10, page 41.
6. Building set-back line(s) 40 feet from the unvacated portion of Highway
Terrace, Astrow Way and Kansas Highway #5 on Lots 2 through 8, Block 5,
Leavenworth Industrial Park.
7. Building set-back line(s) across the 40 feet from Astrow Way and the
unvacated portion of Highway Terrace on Lots 2, 4 and 6, Block 4,
Brewer Place Replat.
8. License Agreement, dated November 10, 1947, to Cities Service Gas
Company recorded January 6, 1948 in Book 357, page 141.
9. All of the coal underlying the subject property was conveyed to Carr
Coal Mining and Manufacturing Company in Deed recorded March 23, 1925
in Book 278, page 47.
10. All matters shown on ALTA/ACSM Land Title Survey, dated April 16, 1997,
as revised June 20, 1997, prepared by David L. King, Ks. L.S. No. 782,
Schmitz, King & Associates, Inc., 3202-B Parallel Parkway, Kansas City,
Kansas 66104, Job No. 97046.
<PAGE> 8
EXHIBIT D
Base Rent Schedule
Property: Leavenworth Detention Center
Tenant will pay to Landlord annual Base Rent of $3,322,000.00, payable
in equal monthly installments of $276,833.33.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.185
LEASE AGREEMENT
(ELOY)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Eloy, Pinal County, State of
Arizona, described in Exhibit A hereto, and all Improvements, Fixtures, and
Personal Property thereon or thereto (each as defined in the Master Agreement,
and, together with said Land, the "Leased Property"); such Leased Property
collectively known and described at the date hereof as the Eloy Detention
Center;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of twelve (12) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2009 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as
<PAGE> 2
the Fixed Term, as set forth in the Lease; and (iii) provided that Tenant gives
Landlord notice on or before the date which is six (6) months prior to the
expiration of the Second Extended Term, upon the mutual agreement of Landlord
and Tenant, the Lease shall be renewed for one (1) additional five (5) year term
(the "Third Extended Term") on the same terms and provisions (other than with
respect to renewal) as the Fixed Term, as set forth in the Lease. Tenant's right
to so extend the Term of the Lease is conditioned on Landlord's prior approval
of the Extended Term, Second Extended Term, or Third Extended Term, as the case
may be. The term "Term" used in this Agreement means the Fixed Term, Extended
Term, Second Extended Term and Third Extended Term, as appropriate. The term
"Lease Year" means each twelve (12) month period during the Term commencing on
January 1 and ending on December 31, except the first Lease Year of each Lease
shall be the period from the Commencement Date through the following December
31, and the last Lease Year shall end on the date of termination of the Lease if
a day other than December 31. Landlord may terminate this Lease prior to the
expiration of the Term hereof, at any time following the date which is five (5)
years from the date hereof, upon written notice to Tenant not less than eighteen
(18) months prior to the effective date of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
-----------------------------------------
Title: Chief Development Officer
--------------------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-----------------------------------------
Title: Chief Executive Officer
--------------------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
PARCEL "A" - PRISON COMPOUND
A portion of the Northeast Quarter of Section 16, Township 7 South, Range 8
East, of the Gila and Salt River Base and Meridian, Pinal County, Arizona; using
a basis of bearing the East line of the Northeast corner of said Section 16,
using a bearing of North 00 degrees 00 minutes 07 seconds East and being more
particularly described as follows:
Commencing at the East quarter corner of said Section 16, being a brass cap in
handhole; thence South 89 degrees 47 minutes 31 seconds West, along the
East/West mid-section line of said Section 16, a distance of 735.00 feet to the
point of beginning; thence continuing South 89 degrees 47 minutes 31 seconds
West along said mid-section line 1907.59 feet to the center of said Section 16,
being a 3 inch aluminum monument; thence North 00 degrees 02 minutes 32 seconds
West along the North/South mid-section line of said Section 16, a distance of
2648.25 feet to the North quarter corner of said Section 16, being a G.L.O brass
cap; thence North 89 degrees 56 minutes 55 seconds East, along the north line of
said northeast quarter 1909.62 feet; thence South 00 degrees 00 minutes 07
seconds West, parallel to the East line of said Northeast quarter 2643.03 feet
to the point of beginning.
Except all coal, oil, gas and mineral deposits as reserved in instrument
recorded September 20, 1944 in Book 71 of Deeds, page 511.
Said parcel contains approximately 120 acres, more or less. This legal
description is recorded in Docket 1958, page 755, Records of Pinal County,
Arizona.
PARCEL "B" - WELL SITE AND INGRESS/EGRESS EASEMENT
A parcel of land situated in the Northeast Quarter of Section 16, Township 7
South, Range 8 East of the Gila and Salt River Base and Meridian, Pinal County,
Arizona; more particularly described as follows:
Beginning at the East quarter corner of said Section 16, measure westerly along
the mid-section line bearing South 89 degrees 47 minutes 31 seconds West, a
distance of 452.00 feet to the true point of beginning; thence continuing
westerly along the mid-section line bearing South 89 degrees 47 minutes 31
seconds West, a distance of 208.00 feet; thence northerly bearing North 00
degrees 00 minutes 07 seconds East, a distance of 208.00 feet; thence easterly
bearing North 89 degrees 47 minutes 31 seconds East, a distance of 208.00 feet;
thence southerly bearing South 00 degrees 00 minutes 07 seconds West, a distance
of 208.00 feet to the true point of beginning.
Except all coal, oil, gas and mineral deposits as reserved in instrument
recorded September 20, 1944 in Book 71 of Deeds, page 511.
<PAGE> 5
Said parcel contains approximately 1.0 acres more or less.
Together with and subject to an easement for ingress and egress more
particularly described as follows:
A 30 foot strip of land lying to the North of the following described line;
beginning at the East quarter corner of said Section 16, measuring westerly
along the mid-section line bearing South 89 degrees 47 minutes 31 seconds West,
a distance of 40.00 feet to the true point of beginning; thence continuing
westerly along the mid-section line bearing South 89 degrees 47 minutes 31
seconds West, a distance of 412.00 feet.
Except all gas, oil, metals and mineral rights as reserved in patent from State
of Arizona recorded in Book 32 of Deeds, page 325, Records of Pinal County,
Arizona.
This legal description is recorded in Docket 1999, page 997, Records of Pinal
County, Arizona.
PARCEL "C" - SEWAGE DISPOSAL BEDS
A parcel of land situated in the northwest corner of Section 16, Township 7
South, Range 8 East, of the Gila and Salt River Base and Meridian, Pinal County,
Arizona, more particularly described as follows:
Beginning at the North quarter corner of said Section 16, measure southerly
along the mid-section line bearing South 00 degrees 02 minutes 32 seconds East,
a distance of 600.00 feet to the true point of beginning; thence continuing
southerly along the mid-section line bearing South 00 degrees 02 minutes 32
seconds East, a distance of 600.00 feet; thence westerly bearing South 89
degrees 57 minutes 28 seconds West, a distance of 1815.00 feet; thence northerly
bearing North 00 degrees 02 minutes 32 seconds West, a distance of 600.00 feet;
thence Easterly bearing North 89 degrees 57 minutes 28 seconds East, a distance
of 1815.00 feet to the true point of beginning.
Except all gas, oil, metals and mineral rights as reserved in patent from State
of Arizona Recorded in Book 32 of Deeds, page 325, Records of Pinal County,
Arizona.
Said parcel contains approximately 25 acres, more or less. This legal
description is recorded in Docket 1999, page 997, Records of Pinal County,
Arizona.
Eloy Detention Center
Eloy, Pinal County, Arizona
<PAGE> 6
EXHIBIT B
Mortgage Debt
Property: Eloy Detention Center
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of Tennessee,
as Administrative Agent, dated July 18, 1997.
6
<PAGE> 7
EXHIBIT C
Permitted Exceptions
Property: Eloy Detention Center
1. Taxes and assessments collectible by the County Treasurer not yet due
and payable for the year 1997.
2. Assessments, obligations and liabilities by reason of the property
described herein being included in any existing or proposed sewer
system, street, lighting or other assessment and/or improvement
district of the City of Eloy, if any.
3. Liabilities and obligations existing or which may arise against the
property by reason of its inclusion within Central Arizona Water
Conservation District, Pinal County Flood Control District and Central
Arizona Water Irrigation District.
4. Reservations contained in State of Arizona patent recorded in Book 32
of Deeds, page 325, reading as follows: The State of Arizona reserves
all rights to any and all minerals, ores, and metals of every kind and
character and all coal, asphaltum, oil, gases, fertilizers, fossils and
other like substances in or under said land and all the right of
ingress and egress for the purpose of mining, together with enough of
the surface of the land as may be necessary for the proper and
convenient working and extraction of such minerals and substances.
5. Water rights, claims or title to water, whether or not shown by the
public records.
6. The right of entry to prospect for, mine and remove the oil, gas and
other mineral deposits in said land as reserved in Deed recorded in
Book 71 of Deeds, Page 511.
7. Liabilities and obligations imposed upon said land by reason of its
inclusion within the Central Arizona Water Irrigation and Drainage
District as disclosed by instrument recorded on January 20, 1990, in
Docket 1580, page 919.
8. Easement for public highway purposes and rights incident thereto, as
set forth in instrument recorded in Book 85 of Deeds, page 243. (Parcel
A)
9. Resolution by the Board of Supervisors of Pinal County Arizona
purporting to establish a county roadway, 33 feet on each side of all
section lines, recorded February 21, 1964, in Docket 375, page 572.
(Parcel A)
10. Easement for electric transmission lines and rights incident thereto,
as set forth in instrument recorded in Docket 1301, page 452. (Parcel
A)
11. Easement for water distribution system canals, laterals and ditches and
rights incident thereto, as set forth in instrument recorded in Docket
1515, page 195. (Parcels A and B)
12. Easement for ingress, egress and irrigation purposes and rights
incident thereto, as set forth in instrument recorded in Docket 1568,
page 482. (Parcels A and C)
13. Easement for electric lines and appurtenant facilities and rights
incident thereto, as set forth in instrument recorded in Docket 2026,
page 456. (Parcel A)
<PAGE> 8
14. Easement for electric lines and appurtenant facilities and rights
incident thereto, as set forth in instrument recorded in Docket 2026,
page 458. (Parcel B)
15. Agreement for the operation, maintenance, repair and financing of an
irrigation distribution system according to the terms and conditions
contained therein, dated June 13,1984, between Central Arizona
Irrigation and Drainage District, an irrigation district, and B.K.W.
Farms, Inc., an Arizona corporation, recorded June 26,1985, in Docket
1295, page 47.
16. Agreement for irrigation and water use according to the terms and
conditions contained therein, dated December 1, 1989, between Central
Arizona Irrigation and Drainage District, an irrigation district, and
Lin & Sons, Enterprises, Inc., a California corporation, recorded March
26, 1990, in Docket 1665, page 684.
17. All matters shown on ALTA/ACSM Land Title Survey, dated June 20, 1997,
prepared by Robert B. Atherton, R.L.S. No. 16490, Atherton Engineering
Inc., 4620 N. 16th Street, Suite 108, Phoenix, AZ 85016-5148, Job No.
97-26.
<PAGE> 9
EXHIBIT D
Base Rent Schedule
Property: Eloy Detention Center
Tenant will pay to Landlord annual Base Rent of $6,006,000.00, payable
in equal monthly installments of $500,500.00.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.186
LEASE AGREEMENT
(FLORENCE)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Florence, Pinal County, State of
Arizona, described in Exhibit A hereto, and all Improvements, Fixtures, and
Personal Property thereon or thereto (each as defined in the Master Agreement,
and, together with said Land, the "Leased Property"); such Leased Property
collectively known and described at the date hereof as the Central Arizona
Detention Center;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of ten (10) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2007 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as
<PAGE> 2
set forth in the Lease; and (iii) provided that Tenant gives Landlord notice on
or before the date which is six (6) months prior to the expiration of the Second
Extended Term, upon the mutual agreement of Landlord and Tenant, the Lease shall
be renewed for one (1) additional five (5) year term (the "Third Extended Term")
on the same terms and provisions (other than with respect to renewal) as the
Fixed Term, as set forth in the Lease. Tenant's right to so extend the Term of
the Lease is conditioned on Landlord's prior approval of the Extended Term,
Second Extended Term, or Third Extended Term, as the case may be. The term
"Term" used in this Agreement means the Fixed Term, Extended Term, Second
Extended Term and Third Extended Term, as appropriate. The term "Lease Year"
means each twelve (12) month period during the Term commencing on January 1 and
ending on December 31, except the first Lease Year of each Lease shall be the
period from the Commencement Date through the following December 31, and the
last Lease Year shall end on the date of termination of the Lease if a day other
than December 31. Landlord may terminate this Lease prior to the expiration of
the Term hereof, at any time following the date which is five (5) years from the
date hereof, upon written notice to Tenant not less than eighteen (18) months
prior to the effective date of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
-----------------------------------------
Title: Chief Development Officer
--------------------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-----------------------------------------
Title: Chief Executive Officer
--------------------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
A parcel of land located in the Northeast Quarter of Section 36, Township 4
South, Range 9 East of the Gila and Salt River Base and Meridian, Pinal County,
Arizona, more particularly described as follows:
The North 1100.00 feet of the Northeast Quarter of Section 36, Township 4 South,
Range 9 East of the Gila and Salt River Base and Meridian, Pinal County,
Arizona.
Central Arizona Detention Center
Florence, Pinal County, Arizona
<PAGE> 5
EXHIBIT B
Mortgage Debt
Property: Central Arizona Detention Center
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of Tennessee,
as Administrative Agent, dated July 18, 1997.
<PAGE> 6
EXHIBIT C
Permitted Exceptions
Property: Central Arizona Detention Center
1. Taxes and assessments collectible by the County Treasurer not yet due
and payable for the year 1997.
2. Taxes, assessments, obligations and liabilities on the subject property
by reason of the City of Florence Sewer System, Revenue and General
Obligation Bonds.
3. Liabilities and obligations existing or which may arise against the
property by reason of its inclusion within COUNTY FIRE CONTRIBUTIONS
DISTRICT; ELECTRICAL DISTRICT NUMBER TWO; CENTRAL ARIZONA WATER
CONSERVATION DISTRICT; PINAL COUNTY LIBRARY DISTRICT; PINAL COUNTY
FLOOD CONTROL DISTRICT; FLORENCE FLOOD CONTROL DISTRICT; and SAN CARLOS
IRRIGATION DISTRICT.
4. Reservations contained in the Patent from the United States of America,
reading as follows:
"Subject to any vested and accrued water rights for mining,
agricultural, manufacturing, or other purposes, and rights to ditches
and reservoirs used in connection with such water rights, as may be
recognized and acknowledged by the local customs, laws, and decisions
of courts; and there is reserved from the lands hereby granted, a
right-of-way thereon for ditches or canals constructed by the authority
of the United States".
5. Water rights, claims or title to water, whether or not shown by the
public records.
6. Roadway right-of-way, 33 feet in width, along the section lines of said
section, as set forth in Minute Book 7, page 386, of the office of the
Board of Supervisors of Pinal County, Arizona, a certificate copy of
which was recorded February 21, 1964 in Docket 375, page 572.
7. An easement for highway and rights incident thereto as set forth in
instrument recorded January 12, 1931 in Book 49 of Deeds, page 187.
8. An easement for telephone and telegraph lines and rights incident
thereto as set forth in instrument recorded March 21, 1952 in Docket
58, page 227.
9. An easement for electrical transmission line and rights incident
thereto as set forth in instrument recorded November 12, 1980 in Docket
1035, page 607.
<PAGE> 7
10. The effect of a Map, Plat or Survey filed in Book 2 of Surveys, page
90, evidenced by a Notice of Recording Map or Plat recorded December
18, 1989, in Docket 1646, page 605.
11. The effect of a Map, Plat or Survey filed in Book 2 of Surveys, page
102, evidenced by a Notice of Recording Map or Plat recorded April 2,
1990, in Docket 1667, page 223.
12. The effect of a Map, Plat or Survey filed in Book 2 of Surveys, page
131, evidenced by a Notice of Recording Map or Plat recorded November
25, 1991, in Docket 1786, page 144.
13. The effect of a Map, Plat or Survey filed in Book 2 of Surveys, page
103.
14. An easement and rights incident thereto for installation of pipeline
and appurtenances over the property, as set forth in instrument
recorded September 28, 1994, in Docket 2045, page 192.
15. An easement and rights incident thereto for utility purposes over the
property, as set forth in instrument recorded February 22, 1995, in
Docket 2082, page 215.
16. An easement and rights incident thereto for utility purposes over the
property, as set forth in instrument recorded February 22, 1995, in
Document No. 1996-029763.
17. That portion of the premises located within the boundaries of any road
or roadway.
18. All matters shown on the ALTA/ACSM Land Title Survey, dated June 20,
1997, prepared by Robert B. Atherton, R.L.S. No. 16490, Atherton
Engineering Inc., 4620 N. 16th Street, Suite 108, Phoenix, Arizona
85016-5148, Job No. 97-25.
19. Canal and Irrigation Ditch within San Carlos Irrigation District Right
of Way.
<PAGE> 8
EXHIBIT D
Base Rent Schedule
Property: Central Arizona Detention Center
Tenant will pay to Landlord annual Base Rent of $12,276,000.00, payable
in equal monthly installments of $1,023,000.00.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.187
LEASE AGREEMENT
(TAYLOR)
THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant
leases from Landlord the Land located in the City of Taylor, Williamson County,
State of Texas, described in Exhibit A hereto, and all Improvements, Fixtures,
and Personal Property thereon or thereto (each as defined in the Master
Agreement, and, together with said Land, the "Leased Property"); such Leased
Property collectively known and described at the date hereof as the T. Don Hutto
Correctional Center;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of twelve (12) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2009 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as
<PAGE> 2
the Fixed Term, as set forth in the Lease; and (iii) provided that Tenant gives
Landlord notice on or before the date which is six (6) months prior to the
expiration of the Second Extended Term, upon the mutual agreement of Landlord
and Tenant, the Lease shall be renewed for one (1) additional five (5) year term
(the "Third Extended Term") on the same terms and provisions (other than with
respect to renewal) as the Fixed Term, as set forth in the Lease. Tenant's right
to so extend the Term of the Lease is conditioned on Landlord's prior approval
of the Extended Term, Second Extended Term, or Third Extended Term, as the case
may be. The term "Term" used in this Agreement means the Fixed Term, Extended
Term, Second Extended Term and Third Extended Term, as appropriate. The term
"Lease Year" means each twelve (12) month period during the Term commencing on
January 1 and ending on December 31, except the first Lease Year of each Lease
shall be the period from the Commencement Date through the following December
31, and the last Lease Year shall end on the date of termination of the Lease if
a day other than December 31. Landlord may terminate this Lease prior to the
expiration of the Term hereof, at any time following the date which is five (5)
years from the date hereof, upon written notice to Tenant not less than eighteen
(18) months prior to the effective date of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
-------------------------------
Title: Chief Development Officer
----------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
-------------------------------
Title: Chief Executive Officer
----------------------------
3
<PAGE> 4
EXHIBIT A
Legal Description of Leased Property
Metes and Bounds Description
64.513 Acres
Wm. R. Williams Survey, A-665
James C. Eaves Survey, A-214
Williamson County, Texas
Being a tract containing 64.513 acres of land situated in the Wm. R. Williams
Survey, Abstract No. 665 and the James C. Eaves Survey, Abstract No. 214 in the
City of Taylor, Williamson County, Texas and being all of a called 64.537 acre
parcel described in deed to Corrections Corporation of America recorded in
Document Number 9639935 of the Official Records Williamson County, Texas
(O.R.W.C.T.). Said 64.513 acre tract being more particularly described by metes
and bounds with all bearings referenced to the aforementioned deed of record:
BEGINNING at a 1/2-inch iron rod found in a south right-of-way line of Welch
Street being the northwest corner of said Tract 1 and the northeast corner of a
called 16.16 acre tract described in deed to Our Lady of Gaudalupe Church
recorded in Volume 1482, page 866 of said O.R.W.C.T.;
THENCE, North 87 degrees 11 minutes 00 seconds East, along said Welch Street
right-of-way line, a distance of 1,623.43 feet to a 1/2-iron rod found in the
west right-of-way line of Park Street (60.00 feet wide) per the plat of Doak's
Addition to the Town of Taylor, a subdivision of record in Volume 56, page 483
of the Williamson County Deed Records (W.C.D.R.) and being the northeast corner
of said Tract 1;
THENCE, South 05 degrees 17 minutes 10 seconds East, departing said Welch Street
and along said Park Street right-of-way line, a distance of 1,708.31 feet to a
1/2-inch iron rod found for the northeast corner of a called 9.0 acre tract
described in deed to Mary Rundell and J. Sorenson recorded in Volume 270, page
54 of the Williamson County Probate Records and being the southeast corner of
said Tract 1;
THENCE, South 85 degrees 12 minutes 10 seconds West (called South 85 degrees 11
minutes 13 seconds West), departing said Park Street and along the north line of
said 9.00 acre tract and along the north line of a called 31.60 acre tract
described as Sixth Tract in deed to Wilhemie Sorenson recorded in Volume 1967,
page 117 of said O.R.W.C.T, a distance of 1,618.76 feet (called 1,618.44 feet)
to a 1/2-inch iron rod found for an interior corner of said 31.60 acre tract and
being the southwest corner of said Tract 1;
THENCE, North 04 degrees 48 minutes 00 seconds West (called North 04 degrees 55
minutes 32 seconds West), along the most northerly easterly line of said 31.60
acre tract, at a distance of 305.77 feet pass a found 3/4-inch iron rod, 0.12
feet left and continuing for a total distance of 355.87 feet
<PAGE> 5
(called 306.32 feet) to a 1/2-inch iron rod found for the most northerly corner
of said 31.60 acre tract and being the southeast corner of the aforementioned
16.16 acre tract;
THENCE, North 05 degrees 32 minutes 24 seconds West (called North 05 degrees 30
minutes 03 seconds West), along the easterly line of said 16.16 acre tract, a
distance of 1,408.61 feet (called 1,458.59 feet) to the POINT OF BEGINNING and
containing a computed area of 64.513 acres of land, more or less.
Prepared by:
SURVCON INC.
400 West 15th, Suite 500
Austin, Texas 78701
Job No. 4775-01
April 1997
Revised: June 1997
T. Don Hutto Correctional Center
Taylor, Williamson County, Texas
<PAGE> 6
EXHIBIT B
Mortgage Debt
Property: T. Don Hutto Correctional Center
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of
Tennessee, as Administrative Agent, dated July 18, 1997.
6
<PAGE> 7
EXHIBIT C
Permitted Exceptions
Property: T. Don Hutto Correctional Center
1. Standby fees, taxes and assessments by any taxing authority for the
year 1997, and subsequent years.
2. An easement dated February 28, 1928, granted to Texas Power & Light
Company of Dallas, Texas by Nellie G. Bowers, individually and as
executrix of the Estate of A. L. Bowers, Deceased, et al., recorded in
Volume 235, page 534, Deed Records, Williamson County, Texas.
3. An undivided 1/8th interest in all oil, gas and other minerals on, in,
under or that may be produced from the subject property as set forth in
instrument recorded in Volume 238, Page 363, Deed Records, Williamson
County, Texas.
4. An undivided 1/8th interest of all oil, gas and other minerals on, in,
under or that may be produced from the subject property as set forth in
instrument recorded in Volume 299, Page 572, Deed Records, Williamson
County, Texas.
5. An undivided 1/2 interest in all oil, gas and other minerals on, in,
under or that may be produced from the subject property as set forth in
instrument recorded in Volume 544, Page 97, Deed Records, Williamson
County, Texas.
6. An undivided 1/6 interest in all oil, gas and other minerals on, in,
under or that may be produced from the subject property as set forth in
instrument recorded in Volume 544, Page 99, Deed Records, Williamson
County, Texas.
7. An undivided 1/2 interest in all oil, gas and other minerals on, in,
under or that may be produced from the subject property as set forth in
instrument recorded in Volume 1088, Page 309, Official Records,
Williamson County, Texas.
8. An undivided 1/2 interest in all oil, gas and other minerals on, in,
under or that may be produced from the subject property as set forth in
instrument recorded in Volume 1133, Page 880, Official Records,
Williamson County, Texas.
9. All matters shown on the ALTA/ACSM Land Title Survey, dated April 17,
1997, as revised June 24, 1997, prepared by Arthur W. Girts, Jr.,
R.P.L.S. No. 4741, Survcon Inc., 400 W. 15th, Suite 500, Austin, Texas
78701, Job #4775-01.
<PAGE> 8
EXHIBIT D
Base Rent Schedule
Property: T. Don Hutto Correctional Center
Tenant will pay to Landlord annual Base Rent of $2,541,000.00, payable
in equal monthly installments of $211,750.00.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.188
LEASE AGREEMENT
(YOUNGSTOWN)
THIS LEASE AGREEMENT ("Lease") dated as of the 28th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Youngstown, Mahoning County, State
of Ohio, described in Exhibit A hereto, and all Improvements, Fixtures, and
Personal Property thereon or thereto (each as defined in the Master Agreement,
and, together with said Land, the "Leased Property"); such Leased Property
collectively known and described at the date hereof as the Northeast Ohio
Correctional Center;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of ten (10) years commencing on July 28, 1997 (the "Commencement
Date") and expiring on July 27, 2007 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and
E-1
<PAGE> 2
Tenant, the Lease shall be renewed for one (1) additional five (5) year term
(the "Second Extended Term") on the same terms and provisions (other than with
respect to renewal) as the Fixed Term, as set forth in the Lease; and (iii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Second Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Third Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as set forth
in the Lease. Tenant's right to so extend the Term of the Lease is conditioned
on Landlord's prior approval of the Extended Term, Second Extended Term, or
Third Extended Term, as the case may be. The term "Term" used in this Agreement
means the Fixed Term, Extended Term, Second Extended Term and Third Extended
Term, as appropriate. The term "Lease Year" means each twelve (12) month period
during the Term commencing on January 1 and ending on December 31, except the
first Lease Year of each Lease shall be the period from the Commencement Date
through the following December 31, and the last Lease Year shall end on the date
of termination of the Lease if a day other than December 31. Landlord may
terminate this Lease prior to the expiration of the Term hereof, at any time
following the date which is five (5) years from the date hereof, upon written
notice to Tenant not less than eighteen (18) months prior to the effective date
of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of this initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
E-2
<PAGE> 3
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
---------------------------------------
Title: Chief Development Officer
------------------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
---------------------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
E-3
<PAGE> 4
EXHIBIT A
PARCEL I
Situated in the City of Youngstown, County of Mahoning and State of Ohio: And
known as being all of Youngstown City Lot Number 62018 as shown on Consolidation
Plat recorded at Plat Book 92, page 194, Mahoning County Records.
PARCEL II
Situated in Section No. 4 and Section No. 5 Liberty Township, Trumbull County,
State of Ohio: And being more fully described as follows:
Beginning at the intersection of the centerline of Youngstown-Hubbard Road (U.S.
62 & S.R. 7) with the southerly line of Trumbull County; thence North
eighty-nine degrees fifty-five minutes six seconds West (S. 89 degrees 55' 06"
W.), along the line between Trumbull and Mahoning County, for a distance of one
thousand one hundred seventy-eight and 28/100 (1178.28) feet to an iron pin set
at the True Place of Beginning for the tract of land described herein; thence
continuing South eighty-nine degrees fifty-five minutes six seconds West (S. 89
degrees 55' 06" W.) along said County line, for a distance of one thousand seven
hundred seventy-seven and 93/100 (1777.93) feet to an iron pin set on the
easterly line of the Consolidated Rail Corporation; thence along the easterly
line of the Consolidated Rail Corporation by the arc of a curve to the right
having a radius of one thousand one hundred sixteen and 28/100 (1116.28) feet, a
central angle of twenty-two degrees sixteen minutes seventeen seconds (22
degrees 16' 17"), a chord bearing of North seventeen degrees thirty-eight
minutes thirty-one seconds East (N. 17 degrees 38' 31" E.), and a chord length
of four hundred thirty-one and 18/100 (431.18) feet, for an arc distance of four
hundred thirty-three and 91/100 (433.91) feet to a 5/8" rebar found; thence
North twenty-eight degrees forty-six minutes thirty-nine seconds East (N 28
degrees 46' 39" E.), and continuing along said easterly Consolidated Rail
Corporation line, for a distance of eight hundred ninety-one and 3/100 (891.03)
feet to a railroad rail on end found on the southerly line of a tract of land
conveyed to Edward C. Margala and Charles E. Margala by instrument of record in
Deed Book O.R. 431 at Page 678 of the Deed Records of Trumbull County; thence
South sixty-nine degrees four minutes forty-six seconds East (S. 69 degrees 04'
46" E.), along the southerly line of said Margala, for a distance of eight
hundred forty-six and 45/100 (846.45) feet to a point which is located North
sixty-nine degrees four minutes forty-six seconds West (N. 69 degrees 04' 46"
W.), a distance of 12/100 (0.12) feet from a 5/8" iron pin found; thence South
one degree four minutes fifty-seven seconds East (S. 01 degrees 04' 57" E.), and
continuing along said Margala line, for a distance of five hundred thirty-six
and 58/100 (536.58) feet to point which is located North eighty-six degrees
sixteen minutes twenty-seven seconds East (N. 86 degrees 16' 27" E.), a distance
of three and 22/100 (3.22) feet from a 2" pipe found; thence South seventy-seven
degrees thirty-nine minutes fifty-six seconds East (S. 77 degrees 39' 56" E.),
and continuing along said Margala southerly line, for a distance of four hundred
twenty-three and 24/100 (423.24) feet to an iron pin set; thence South zero
degrees fifty-three minutes twenty-three seconds East (S. 00 degrees 53' 23"
E.), for a distance of two hundred sixty and 24/100 (260.24) feet to the
E-4
<PAGE> 5
True Place of Beginning, and containing thirty and 566/1000 (30.566) acres, more
or less, and being three and 963/1000 (3.963) acres in Section No. 4 and
twenty-six and 603/1000 (26.603) acres in Section 5, in the Township of Liberty,
County of Trumbull.
"North" for this description is based on the deed from G.F. Corporation and G.F.
Furniture Systems, Inc. to the City of Youngstown, as recorded in Deed Book O.R.
753 at Page 113 of the Deed Records of Trumbull County, and is assumed to be
correct.
All iron pins noted as being set throughout this description are 5/8" x 30"
rebar with plastic I.D. cap.
Northeast Ohio Correctional Center
Youngstown, Mahoning County, Ohio
E-5
<PAGE> 6
EXHIBIT B
Mortgage Debt
Property: Northeast Ohio Correctional Center
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of Tennessee, as
Administrative Agent, dated July 28, 1997.
E-6
<PAGE> 7
EXHIBIT C
Permitted Exceptions
Property: Northeast Ohio Correctional Center
Mahoning County:
1. All legal highways.
2. All taxes and assessments for the year 1997, a lien but not
yet due and payable.
3. Easement and/or Right-of-Way granted to Ohio Edison Company,
by instrument recorded in OR 3039, page 285, Mahoning County
Records.
4. Easement and/or Right-of-Way granted to The East Ohio Gas
Company, by instrument recorded in OR 3106, page 95, Mahoning
County Records.
5. Easement and/or Right-of-Way granted to Ohio Edison Company,
by instrument recorded in OR 3169, page 267, Mahoning County
Records.
6. Dedicated Right-of-Way as shown on Consolidation Plat
recorded at Plat Book 92, page 194, Mahoning County Records.
7. Restrictions, rights, covenants set forth in Development
Agreement (unrecorded), and Rights of Reverter, all as
contained in Deed recorded at OR 2842, page 57, Mahoning
County Records.
8. All matters shown on the ALTA Survey, dated April 28, 1997,
as revised July 24, 1997, by Robert J. Warner, R.P.S. No.
6931, Environmental Design Group, 450 Grant Street, Akron,
Ohio 44311-1183, Proj. No. 424001.
Trumbull County:
1. All legal highways.
2. All taxes and assessments for the year 1997, a lien but not
yet due and payable.
3. Restrictions, rights, covenants set forth in Development
Agreement (unrecorded), and Rights of Reverter, all as
contained in Deed recorded at OR 1007, page 342, Trumbull
County Records.
E-7
<PAGE> 8
4. All matters shown on the ALTA Survey, dated April 28, 1997,
as revised July 24, 1997, by Robert J. Warner, R.P.S.
No. 6931, Environmental Design Group, 450 Grant Street,
Akron, Ohio 44311-1183, Proj. No. 424001.
E-8
<PAGE> 9
EXHIBIT D
Base Rent Schedule
Property: Northeast Ohio Correctional Center
Tenant will pay to Landlord annual Base Rent of $7,717,160.00, payable
in equal monthly installments of $643,096.66.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
E-9
<PAGE> 1
EXHIBIT 10.189
LEASE AGREEMENT
(TORRANCE COUNTY)
THIS LEASE AGREEMENT ("Lease") dated as of the 1st day of October,
1997, by and between CCA PRISON REALTY TRUST, a Maryland real estate investment
trust ("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee
corporation ("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease dated July 18, 1997 (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in Torrance County, New Mexico, described in
Exhibit A hereto, and all Improvements, Fixtures, and Personal Property thereon
or thereto (each as defined in the Master Agreement, and, together with said
Land, the "Leased Property"); such Leased Property collectively known and
described at the date hereof as the Torrance County Detention Facility;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of ten (10) years commencing on October 1, 1997 (the "Commencement
Date") and expiring on September 30, 2007 (the "Expiration Date"). The Term of
this Lease may be renewed on the mutual agreement of Landlord and Tenant as
follows: (i) provided that Tenant gives Landlord notice on or before the date
which is six (6) months prior to the Expiration Date, upon the mutual agreement
of Landlord and Tenant, the Lease shall be renewed for one (1) additional five
(5) year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as set forth
in the Lease; and (iii) provided that Tenant gives Landlord notice on or before
the date which is six (6) months prior to the expiration of the Second Extended
Term, upon the mutual agreement of Landlord and Tenant, the Lease shall be
renewed for one (1)
<PAGE> 2
additional five (5) year term (the "Third Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as set forth
in the Lease. Tenant's right to so extend the Term of the Lease is conditioned
on Landlord's prior approval of the Extended Term, Second Extended Term, or
Third Extended Term, as the case may be. The term "Term" used in this Agreement
means the Fixed Term, Extended Term, Second Extended Term and Third Extended
Term, as appropriate. The term "Lease Year" means each twelve (12) month period
during the Term commencing on January 1 and ending on December 31, except the
first Lease Year of each Lease shall be the period from the Commencement Date
through the following December 31, and the last Lease Year shall end on the date
of termination of the Lease if a day other than December 31. Landlord may
terminate this Lease prior to the expiration of the Term hereof, at any time
following the date which is five (5) years from the date hereof, upon written
notice to Tenant not less than eighteen (18) months prior to the effective date
of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of this initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By: /s/ Michael W. Devlin
--------------------------------
Title: Chief Development Officer
-----------------------------
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Doctor R. Crants
--------------------------------
Title: Chief Executive Officer
------------------------------
EXHIBIT A
[legal description]
<PAGE> 4
EXHIBIT B
Mortgage Debt
Property: Torrance County Detention Facility
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of
Tennessee, as Administrative Agent, dated October 1, 1997.
<PAGE> 5
EXHIBIT C
Permitted Exceptions
Property: Torrance County Detention Facility
<PAGE> 6
EXHIBIT D
Base Rent Schedule
Property: Torrance County Detention Facility
Tenant will pay to Landlord annual Base Rent of $4,235,000.00, payable
in equal monthly installments of $352,916.67.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.192
EXCHANGE AGREEMENT
This Exchange Agreement (the "Agreement") is made as of October 2,
1997, among CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation ("CCA"),
AMERICAN CORRECTIONS TRANSPORT, INC., a Tennessee corporation ("ACT"), MICHAEL
D. SHMERLING, L.M. COMPANY, TOM LOVENTHAL, J. THOMAS MARTIN, PETER WEISS,
KENNETH ANCHOR, and BERNARD GOLDSTEIN (collectively, the "ACT Majority
Shareholders"), and LEON MAY, an individual resident of the State of Tennessee
("Mr. May").
RECITALS
ACT currently owns 759,764 shares of CCA common stock, $1.00 par value
(the "Exchange Shares"). The Exchange Shares were acquired by ACT pursuant to
that certain Share Exchange Agreement dated December 1994 by and among CCA,
Transcor America, Inc. and the shareholders of Transcor America, Inc. (the
"Transcor Share Exchange Agreement"). CCA has proposed to acquire from ACT 100%
of the Exchange Shares in exchange for 379,882 shares of CCA's newly authorized
Series B Convertible Preferred Stock (the "Series B Preferred Stock"), the terms
and conditions of which are set forth in the Articles of Amendment to the
Charter of CCA attached hereto as Exhibit A (the "Series B Preferred Stock
Designation"). Immediately following the Exchange, ACT will liquidate and
distribute its assets to its shareholders (the "ACT Liquidation").
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
SECTION 1. THE EXCHANGE
SECTION 1.1. THE EXCHANGE. On the date of Closing (as defined in
Section 1.2 below), CCA shall exchange one (1) share of Series B Preferred Stock
for every two (2) shares of Exchange Shares held by ACT (the "Exchange").
Accordingly, ACT shall receive 379,882 shares of Series B Preferred Stock in
exchange for 759,764 shares of the Exchange Shares. The parties acknowledge and
agree that 24,745 shares of the Exchange Shares are being held in escrow (the
"Transcor Escrow Shares") by an escrow agent for CCA (the "Transcor Escrow
Agent") pursuant to the terms of Section 1.3(b) of the Transcor Share Exchange
Agreement, and that each such Transcor Escrow Share shall be exchanged in
accordance with the first sentence of this Section 1.1. The Exchange is intended
to be a tax-free reorganization within the meaning of Section 368(a)(1)(C) of
the Internal Revenue Code of 1986, as amended (the "Code"). The parties agree
that CCA shall assume no liabilities of ACT as a result of the Exchange.
SECTION 1.2. CLOSING. The consummation of the Exchange and the related
transactions described in Section 1.1 of this Agreement shall take place at the
corporate offices of CCA or at the offices of Stokes & Bartholomew, P.A.,
attorneys for CCA, on the date hereof (the "Closing").
SECTION 1.3. FRACTIONAL SHARES. No scrip or fractional shares of Series
B Preferred Stock shall be issued in the Exchange. ACT shall be entitled to
receive a cash payment with respect to any
1
<PAGE> 2
fractional share in an amount equal to the reported closing sales price on the
Closing date of one share of CCA common stock, $1.00 par value (as reported in
the Wall Street Journal) multiplied by two, the product of which is multiplied
by such percentage of whole share. Promptly after the Closing, CCA shall pay ACT
a cash payment equal to the value of any such fractional share as so determined.
SECTION 1.4. TRANSFER AGENT. The parties hereto agree that The Bank of
Nashville shall be appointed as the Transfer Agent for the Series B Preferred
Stock.
SECTION 1.5. SURRENDER OF CERTIFICATES. At the Closing, (a) ACT shall
surrender the certificates representing 735,019 shares of the Exchange Shares,
accompanied by duly executed stock powers in favor of CCA; (b) the Transcor
Escrow Agent shall surrender the Transcor Escrow Shares, accompanied by duly
executed stock powers in favor of CCA; (c) CCA shall deliver certificates
representing 12,373 shares of the Series B Preferred Stock to the Transcor
Escrow Agent (in such names and denominations as ACT shall have instructed CCA
in writing, which writing shall be delivered no fewer than two (2) days prior to
Closing) to be held in accordance with the terms of the Transcor Share Exchange
Agreement and the documents contemplated therein, and (d) CCA shall deliver to
ACT certificates representing the remaining 177,560 shares of the Series B
Preferred Stock to be exchanged pursuant to the terms of this Agreement in such
names and denominations as ACT shall have instructed CCA in writing, which
writing shall be delivered no fewer than two (2) business days prior to Closing.
SECTION 1.6. ESCROW OF SHARES. At the Closing, all of the shareholders
of ACT (collectively, the "ACT Shareholders") shall deliver certificates
representing 189,949 shares of the Series B Preferred Stock (the "Escrowed
Shares") to The Bank of Nashville ("Escrow Agent") to hold in escrow pursuant to
the terms of Section 5 hereof. The precise number of shares of the Series B
Preferred Stock to be delivered to the Escrow Agent by each ACT Shareholder
shall be listed on Schedule 2.13 attached hereto.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ACT
ACT and each of the ACT Majority Shareholders jointly and severally
represent and warrant to CCA as of the date of this Agreement as follows:
SECTION 2.1. ORGANIZATION; CORPORATE AUTHORITY; COMPLIANCE WITH LAW.
ACT is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Tennessee and in all such other jurisdictions in
which it conducts business operations. ACT has all requisite power and authority
to own, operate, and lease its properties and assets and to carry on its
business as now conducted. ACT is not in violation of any order of any court,
government authority, or arbitration board or tribunal, or any law, ordinance,
government rule or regulation to which ACT or any of its properties or assets
is subject. ACT has obtained all licenses, permits, and other authorizations and
has taken all action required by applicable law or government regulations in
connection with its business as now conducted.
SECTION 2.2. AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT. ACT has
the full corporate power and authority to execute and deliver this Agreement and
all agreements and documents contemplated hereby. The consummation by ACT and
the ACT Shareholders of the transactions
2
<PAGE> 3
contemplated hereby has been duly authorized by all requisite corporate actions,
including, but not limited to, appropriate shareholder approval. This Agreement
and all agreements and documents contemplated hereby (i) have been duly and
validly executed and delivered by ACT and each of the ACT Majority Shareholders,
(ii) constitute, and will constitute, the valid and legally binding obligations
of ACT and the ACT Shareholders, and (iii) are enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, moratorium
and other similar laws relating to creditors' rights and general principles of
equity.
SECTION 2.3. NO VIOLATION. Neither the execution and delivery by ACT
and the ACT Shareholders of this Agreement, nor the consummation by ACT and the
ACT Shareholders of the transactions contemplated hereby in accordance with the
terms hereof, will: (i) conflict with or result in a breach of any provisions of
the Charter or Bylaws of ACT, or (ii) conflict with, result in a breach of any
provision of or the modification or termination of, constitute a default under,
or result in the creation or imposition of any lien, security interest, charge,
or encumbrance upon any of the assets of ACT pursuant to any material
commitment, lease, contract, or other material agreement or instrument to which
ACT is a party (including, but not limited to the Transcor Share Exchange
Agreement and the documents related thereto); or (iii) violate any order,
arbitration award, judgment, writ, injunction, decree statute, rule, or
regulation applicable to ACT or the ACT Shareholders.
SECTION 2.4. FINANCIAL STATEMENTS OF ACT. Attached hereto as Schedule
2.4 is a copy of the unaudited balance sheet of ACT as of June 30, 1997 (the
"Balance Sheet"). The Balance Sheet is accurate, true, and complete in all
material respects, is prepared in accordance with the books and records of the
Corporation, and fairly reflect the financial condition, assets, and liabilities
(whether accrued, absolute, contingent, or otherwise) of ACT on such date. The
Balance Sheet does not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements contained in this Section or therein not misleading. There have been
no changes in the business of ACT between June 30, 1997 and the Closing Date
which would have a materially adverse effect on the accuracy of the Balance
Sheet.
SECTION 2.5. ASSETS. ACT owns the assets reflected on the Balance
Sheet, including but not limited to the Exchange Shares. ACT possesses good and
marketable title to such assets, free and clear of any and all claims, liens,
mortgages, options, charges, conditional sale or title retention agreements,
security interests, restrictions, easements, or encumbrances whatsoever and free
and clear of any rights or privileges capable of becoming claims, liens,
mortgages, options, charges, security interests, restrictions, easements or
encumbrances, except as set forth on Schedule 2.5 of this Agreement. Except with
respect to the Transcor Escrow Shares which are subject to the terms of the
Transcor Share Exchange Agreement, at the Closing, CCA shall receive the
Exchange Shares free and clear of any and all claims, liens, mortgages, options,
charges, security interests, or encumbrances whatsoever.
SECTION 2.6. TAX MATTERS. ACT has timely filed (taking into account
extensions) all federal, state, and local tax returns required to be filed by
it, and has paid in full or made adequate provision by the establishment of
reserves for all taxes which have become due or will become due with respect to
any period or partial period ending on or before the Closing. All such tax
returns are true, complete, and accurate in all material respects. There is no
tax deficiency proposed or, to the knowledge of ACT or the ACT Majority
Shareholders, threatened against ACT.
3
<PAGE> 4
SECTION 2.7. FAIR MARKET VALUE. The fair market value of the Series B
Preferred Stock and other considerations received by each ACT Shareholder will
be approximately equal to the fair market value of the Exchange Shares
surrendered by each ACT Shareholder in the Exchange.
SECTION 2.8. SUBSTANTIALLY ALL ASSETS TO BE EXCHANGED. The Exchange
Shares to be exchanged with CCA constitute not less than ninety percent (90%) of
the fair market value of the net assets and at least seventy percent (70%) of
the fair market value of the gross assets held by ACT immediately prior to the
transaction. For purposes of this representation, amounts paid by ACT to
dissenters, amounts used by ACT to pay its reorganization expenses, amounts paid
by ACT to shareholders who received cash or other property, and all redemptions
and distributions (except for regular, normal dividends) made by ACT immediately
preceding the Exchange will be included as assets of ACT held immediately prior
to the Exchange.
SECTION 2.9. INTENTIONS. Except in connection with the proposed ACT
Liquidation, to the knowledge of ACT and the ACT Majority Shareholders there is
no plan or intention by the shareholders of ACT to sell, exchange, or otherwise
dispose of any shares of the Series B Preferred Stock received in the Exchange.
SECTION 2.10. INDEBTEDNESS. There is no intercorporate indebtedness
existing between CCA and ACT that was issued, acquired or will be settled at a
discount in connection with this Agreement.
SECTION 2.11. COURT PROCEEDING. ACT is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
SECTION 2.12. LIQUIDATION AND DISTRIBUTION. ACT shall promptly
distribute the securities it receives in the transaction, and its other
properties to the ACT Shareholders pursuant to the terms of a Plan of
Liquidation and Dissolution attached hereto as Schedule 2.12.
SECTION 2.13. ACT SHAREHOLDERS. Schedule 2.13 correctly sets forth all
of the name and address of each ACT Shareholder, together with the percentage of
Exchange Shares owned by each such shareholder.
SECTION 2.14. FULL DISCLOSURE. All the information provided by ACT, the
ACT Shareholders, and their respective representatives herein and in the
Schedules attached hereto and made a part hereof are true, correct, and complete
in all material respects and no representation, warranty, or statement made by
ACT or any of the ACT Shareholders in or pursuant to this Agreement contains any
untrue statement of a material fact or omits to state any material fact
necessary to make such representation, warranty, or statement not misleading.
4
<PAGE> 5
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CCA.
CCA hereby represents and warrants to ACT and the ACT Shareholders as
of the date of this Agreement as follows:
SECTION 3.1. ORGANIZATION; CORPORATE AUTHORITY; COMPLIANCE WITH LAW.
CCA is a corporation duly incorporated, validly existing, and in good standing
under the laws of the State of Tennessee. CCA has all requisite corporate power
and authority to own, operate, and lease its respective properties and assets
and to carry on its businesses as now conducted. CCA is not in violation of any
order of any court, government authority, or arbitration board or tribunal, or
any law, ordinance, government rule, or regulation to which CCA or any of its
properties or assets are subject, the violation of which could have a materially
adverse effect upon CCA. CCA has obtained all licenses, permits, and other
authorizations and has taken all actions required by applicable law or
government regulations in connection with its business as now conducted.
SECTION 3.2. AUTHORIZATION, VALIDITY, AND EFFECT OF AGREEMENT. CCA has
the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. The consummation
by CCA of the transactions contemplated hereby have been duly authorized by all
requisite corporate action. This Agreement constitutes, and all agreements and
documents contemplated hereby will constitute, the valid and legally binding
obligations of CCA, enforceable and in accordance with its respective terms,
subject to applicable bankruptcy, insolvency, moratorium, or other similar laws
relating to creditors' rights and general principles of equity.
SECTION 3.3. NO VIOLATION. Neither the execution and delivery by CCA of
this Agreement, nor the consummation by CCA of the transactions contemplated
hereby and in accordance with the terms hereof, will: (i) conflict with or
result in a breach of any provisions of the Charter or Bylaws of CCA, (ii)
conflict with, result in a breach of, any material provisions of or the
modification or termination of, constitute a default under, or result in the
creation or imposition of any lien, security interest, charge, or encumbrance
upon any of the assets of CCA pursuant to any material commitment, lease,
contract, or other material agreement or instrument to which CCA is a party
(including, but not limited to the Transcor Share Exchange Agreement and the
documents related thereto); or (iii) violate any material order, arbitration
award, judgment, writ, injunction, decree, statute, rule, or regulation
applicable to CCA.
SECTION 3.4. REACQUISITION OF SERIES B PREFERRED STOCK. As of the date
of Closing, CCA has no plan or intention to reacquire any shares of the Series B
Preferred Stock to be issued in the Exchange. In addition, as of the date of
Closing, CCA has no plan or intention to exercise a mandatory conversion of any
shares of the Series B Preferred Stock pursuant to Section E.1. of the Series B
Preferred Stock Designation.
SECTION 3.5. DISPOSITION OF ASSETS ACQUIRED. As of the date of Closing,
CCA has no plan or intention to sell or otherwise dispose of the Exchange Shares
of CCA acquired from ACT in the Exchange, except for such dispositions made in
the ordinary course of business or transfers described in Section 368(a)(2)(C)
of the Code.
5
<PAGE> 6
SECTION 3.6. INTERCORPORATE INDEBTEDNESS. There is no intercorporate
indebtedness existing between CCA and ACT that was issued, acquired, or will be
settled at a discount in connection with this Agreement.
SECTION 3.7. INVESTMENT COMPANIES. CCA is not an investment company as
defined in Section 368(a)(2)(F)(iii) of the Code.
SECTION 3.8. OWNERSHIP OF ACT CAPITAL STOCK. CCA does not own, directly
or indirectly, nor has it owned during the preceding five years, directly or
indirectly, any capital stock of ACT.
SECTION 3.9. AUTHORIZATION OF SERIES B PREFERRED STOCK. CCA represents
that all shares of Series B Preferred Stock that shall be issuable pursuant to
this Agreement and in accordance with the Series B Preferred Stock Designation,
have been duly authorized and are reserved for issuance and, when issued, shall
be validly issued, fully paid, and nonassessable.
SECTION 3.10. ISSUANCE OF COMMON STOCK UPON CONVERSION. CCA represents
that all shares of CCA Common Stock, $1.00 par value (the "CCA Common Stock")
that shall be issuable upon conversion of the Series B Preferred Stock pursuant
to and in accordance with the Series B Preferred Stock Designation, have been
duly authorized and are reserved for issuance and, when issued upon such
conversion, shall be validly issued, fully paid, and nonassessable.
SECTION 4. COVENANTS
SECTION 4.1. CERTAIN LEGAL PROCEEDINGS. In the event of any claim,
action, suit, investigation, or other proceedings by any government entity or
other person is commenced against CCA which questions the validity or legality
of the Exchange or any of the other transactions contemplated hereby or seeks
damages in connection therewith, the ACT Shareholders agree to cooperate with
CCA and use their reasonable efforts to defend against such claim, action, suit,
investigation, or other proceeding, and if an injunction or other order is
issued in any such action, suit or other proceedings, to use their reasonable
efforts to have such injunction or such order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of the
transactions contemplated by this Agreement.
SECTION 4.2. EXPENSES. ACT and the ACT Shareholders covenant that all
out-of-pocket costs and expenses (including, but not limited to, attorneys'
fees) incurred by ACT in connection with this Agreement and the transactions
contemplated hereby shall be paid by ACT, and the ACT Shareholders, jointly and
severally, agree to pay all such expenses not paid by ACT prior to the ACT
Liquidation. CCA covenants that all out-of-pocket costs and expenses (including,
but not limited to, attorneys' fees and financial advisor fees) incurred by CCA
in connection with this Agreement and the transactions contemplated hereby shall
be paid by CCA.
SECTION 4.3. RESERVATION OF CCA COMMON STOCK. CCA shall at all times
reserve such number of shares of CCA Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series B Preferred Stock.
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SECTION 4.4. USE OF EXCHANGE SHARES. CCA shall use the Exchange Shares
acquired hereunder in a manner consistent with its capitalization needs in the
ordinary course of its business.
SECTION 4.5. AMENDMENT OF SERIES B PREFERRED STOCK DESIGNATION. For so
long as shares of Series B Preferred Stock are issued and outstanding, CCA shall
not amend, or cause to be amended, the Series B Preferred Stock Designation and
shall not take any other action or fail to take any action, the result of which
will, or with the passage of time could reasonably be deemed to, have a
materially adverse affect on the holders of the Series B Preferred Stock
SECTION 5. INDEMNIFICATION
SECTION 5.1. INDEMNIFICATION BY ACT AND THE ACT SHAREHOLDERS. ACT, the
ACT Shareholders, and Mr. May, jointly and severally (the "Indemnitors"), hereby
agree to defend, indemnify, and hold harmless CCA, its directors, officers,
agents, affiliates, representatives, successors, and assigns (the "Indemnified
Persons") and, subject to the terms of Sections 5.3 and 5.4 hereof, shall
reimburse the 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 this Agreement and consummation of the transactions contemplated
hereby in accordance with the terms hereof, except for Losses directly resulting
from the gross negligence or willful misconduct of the Indemnified Persons.
SECTION 5.2. PROCEDURE. The Indemnified Persons shall promptly notify
the Indemnitors of any claim, demand, action, or proceeding for which
indemnification will be sought under 5.1 of this Agreement, and if such claim,
demand, action, or proceeding is a third-party claim, demand, action, or
proceeding, the Indemnitors will have the right, at their expense, to assume the
defense thereof using counsel reasonably acceptable to the Indemnified Persons.
The Indemnified Persons shall have the right to participate, at their own
expense, with respect to any third-party claim, demand, action, or proceeding.
In connection with any such third-party claim, demand, action, or proceeding,
ACT, the Indemnitors, and the Indemnified Persons shall cooperate with each
other and provide each other with access to relevant books and records in their
possession. No such third-party claim, demand, action, or proceeding shall be
settled by the Indemnitors or the Indemnified Persons without the prior written
consent of the Indemnified Persons, on the one hand, or the Indemnitors, on the
other hand. If a written offer is made to settle any such third-party claim,
demand, action, or proceeding and the Indemnitors propose to accept such offer
of settlement and the Indemnified Persons refuse to consent to such settlement,
then (i) the Indemnitors shall be excused from, and the Indemnified Persons
shall be solely responsible for all further defense of such third-party claim,
demand, action, or proceeding; and (ii) the maximum liability of the Indemnitors
relating to such third-party claim, demand, action, or proceeding shall be the
amount of the proposed settlement if the amount thereafter recovered from the
Indemnified Persons upon such third-party claim, demand, action, or proceeding
is greater than the amount of the proposed settlement.
SECTION 5.3. RIGHT OF SETOFF OF ESCROWED SHARES. At any time, or from
time to time, when CCA is entitled to indemnification from the ACT Shareholders,
before seeking payment of Losses directly from one or more ACT Shareholders, CCA
first shall offset the amount of Losses incurred by
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<PAGE> 8
it as a result of such breach against the Escrowed Shares. For purposes of
determining the number of Escrowed Shares subject to offset pursuant to the
preceding sentence, CCA may offset the number of shares resulting from dividing
(i) the total Losses incurred by CCA (and for which CCA is entitled to
indemnification pursuant to this Section 5), by (ii) the per share, fair market
value of one share of Series B Preferred Stock (on an as if converted basis) on
the date of Closing. In the event that the Escrowed Shares are insufficient to
satisfy the Losses incurred by the Indemnified Persons, then the Indemnified
Persons shall be entitled to seek reimbursement for such Losses from the ACT
Majority Shareholders. In no event, however, shall the terms of this Section 5.3
be deemed to be a waiver by any ACT Shareholder of the right to seek
contribution from any other ACT Shareholder for any Losses paid by an ACT
Shareholder in excess of his or her pro rata share of Losses.
SECTION 5.4. RELEASE OF ESCROWED SHARES. Fifty percent (50%) of the
Escrowed Shares will be released from escrow on the eighteen (18) month
anniversary of the date on which ACT files its final federal income tax return
(the "Filing Date"). ACT shall provide Escrow Agent with written notice
confirming the date on which ACT files its final tax return. The balance of the
Escrowed Shares shall be released to the ACT Shareholders on the third
anniversary of the Filing Date. All Escrowed Shares released from escrow shall
be delivered on a pro rata basis to the ACT Shareholders in accordance with each
shareholder's ownership percentage as reflected on Schedule 2.13. At least
thirty (30) days prior to the date shares are to be released from escrow
pursuant to this Section 5.4, each ACT Shareholder may notify Escrow Agent in
writing of the specific denominations of the shares to be delivered to such
shareholder pursuant to this Section 5.4. Any ACT Shareholder who fails to so
notify Escrow Agent will receive one (1) certificate representing all of his or
her shares.
SECTION 5.5. CONDITIONS TO INDEMNIFICATION OBLIGATION OF L.M. COMPANY
AND MR. MAY. The parties hereto acknowledge and agree that (i) the obligation of
L.M. Company to provide indemnification pursuant to this Section 5 shall not
exceed the number of Escrowed Shares held at any given time by the Escrow Agent
in the name of L.M. Company, and (ii) on behalf of L.M. Company, Mr. May
personally shall indemnify the Indemnified Persons for any Losses payable by
L.M. Company pursuant to the terms of this Section 5 which Losses exceed the
number of Escrowed Shares held at any given time by the Escrow Agent in the name
of L.M. Company. In no event, however, shall the terms of this Section 5.5 be
deemed to be a waiver by L.M. Company or Mr. May of the right to seek
contribution from any other ACT Shareholder for any Losses paid by or on behalf
of L.M. Company in excess of its pro rata share of Losses.
SECTION 5.6. CONDITION TO INDEMNIFICATION OBLIGATION OF BERNARD
GOLDSTEIN. The parties hereto acknowledge and agree that Bernard Goldstein shall
be severally, and not jointly (with the remaining ACT Shareholders), liable to
provide indemnification pursuant to this Section 5.
SECTION 6. SURVIVAL OF REPRESENTATIONS
SECTION 6.1. SURVIVAL OF REPRESENTATIONS. All representations,
warranties, covenants, and agreements by the parties contained in this Agreement
shall survive for a period of one year from the date of Closing; provided,
however, that the representation and warranty made pursuant to Section 2.6
hereof shall survive for the maximum time permitted by law.
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<PAGE> 9
SECTION 6.2. STATEMENTS AS REPRESENTATIONS. All statements contained in
any certificate, schedule, list, document, or other writing delivered pursuant
hereto or in connection with the transactions contemplated hereby shall be
deemed representations and warranties for purposes of this Agreement.
SECTION 6.3. REMEDIES CUMULATIVE. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereof of any other
rights or the seeking of any other remedies against the other parties hereto.
SECTION 7. MISCELLANEOUS
SECTION 7.1. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, including
the exhibits, schedules, lists, and other documents and writing referred to
herein or delivered pursuant hereto, which form a part hereof, contains the
entire understanding of the parties with respect to the subject matter. There
are no restrictions, agreements, promises, warranties, covenants, or
undertakings other than those expressly set forth herein or therein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to the subject matter. This Agreement may be amended only by a
written instrument duly executed by all parties or their respective heirs,
successors, assigns, or legal personal representatives. Any condition to a
party's obligations hereunder may be waived but only by a written instrument
signed by the party entitled to the benefits thereof. Failure or delay of any
party at any time or times to require performance of any provision or to
exercise its rights with respect to any provision hereof, shall in no manner
operate as a waiver of or affect such party's right at a later time to enforce
the same.
SECTION 7.2. HEADINGS. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
SECTION 7.3. SEVERABILITY. The invalidity of any term or terms of this
Agreement shall not affect any other term of this Agreement which shall remain
in full force and effect.
SECTION 7.4. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed (registered or certified mail, postage
prepaid, return receipt requested) as follows:
If to CCA:
Corrections Corporation of America
102 Woodmont Blvd.
Nashville, Tennessee 37205
Attention: Doctor R. Crants, Chief Executive Officer
Copy to:
Stokes & Bartholomew, P.A.
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<PAGE> 10
424 Church Street, Suite 2800
Nashville, Tennessee 37219
Attention: Elizabeth E. Moore, Esq.
If to ACT:
American Corrections Transport, Inc.
1900 Church Street, Suite 300
Nashville, Tennessee 37203
Attention: Michael D. Shmerling, President
Copy to:
Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Attention: Thomas J. Sherrard, Esq.
If to ACT Shareholders:
To the addresses set forth on Schedule 2.13 hereof.
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
SECTION 7.5. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Tennessee,
without regard to its conflict of laws rules.
SECTION 7.6. COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, with the same effect as if the
signatories executing the several counterparts had executed one counterpart,
provided, however, that the several executed counterparts shall have been signed
by CCA and ACT. Also, its counterparts together shall constitute one and the
same instrument.
[Remainder of page intentionally blank]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of CCA, ACT, and by the ACT Majority
Shareholders on the date first above written.
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Darrell K. Massengale
--------------------------------------
Title: Chief Financial Officer
-----------------------------------
AMERICAN CORRECTIONS TRANSPORT, INC.
By: /s/ Michael D. Shmerling
--------------------------------------
Title: President
-----------------------------------
THE "MAJORITY SHAREHOLDERS" OF
AMERICAN CORRECTIONS TRANSPORT, INC.:
/s/ Michael D. Shmerling
------------------------------------------
Michael D. Shmerling
/s/ Tom Loventhal
------------------------------------------
Tom Loventhal
/s/ J. Thomas Martin
------------------------------------------
J. Thomas Martin
/s/ Peter Weiss
------------------------------------------
Peter Weiss
/s/ Kenneth Anchor
------------------------------------------
Kenneth Anchor
/s/ Bernard Goldstein
------------------------------------------
Bernard Goldstein
L.M. Company
/s/ Leon May
------------------------------------------
Leon May, President
11
<PAGE> 12
CONTINUATION OF SIGNATURE PAGE
TO
EXCHANGE AGREEMENT
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of CCA, ACT, the ACT Majority Shareholders, and
Leon May on the date first above written.
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Darrell K. Massengale
--------------------------------------
Title: /s/ Chief Financial Officer
-----------------------------------
/s/ Leon May
------------------------------------------
Leon May, individually
12
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EXHIBIT 10.193
STOCK REPURCHASE AGREEMENT
This Stock Repurchase Agreement is made and entered into this 2nd day
of March, 1998, by and between Doctor R. Crants, a resident of Nashville,
Tennessee ("Seller") and Corrections Corporation of America, a Tennessee
corporation headquartered in Nashville, Tennessee ("Buyer").
FOR AND IN CONSIDERATION of the mutual covenants contained herein and
other good and valuable consideration, the parties hereto agree as follows:
1. Recitals. Seller desires to sell to Buyer, and Buyer is willing to
purchase from Seller, 200,000 shares of Common Stock (the "Shares") of Buyer
owned by Seller, represented by certificate number(s) cc10244, all in accordance
with the terms of this Agreement.
2. Redemption of The Shares. Seller hereby agrees to sell and assign
all of the Shares to Buyer at the closing and agrees to execute such stock
powers and other instruments of conveyance as may be reasonably requested by
Buyer in order to effectuate the transfer of the Shares.
3. Payment of Purchase Price. Buyer agrees to pay to Seller the product
of 200,000 times the closing price of Buyer's Common Stock as reported on the
New York Stock Exchange on March 2, 1998 ($38.00), in complete payment for the
Shares sold by Seller to Buyer, such price to be payable in cash at the closing
or at such date as agreed to by the parties hereto.
4. Warranties and Representations of Seller. Seller represents and
warrants that he is the lawful owner of, and has good and marketable title to,
the Shares; the Shares are subject to no liens or encumbrances whatsoever; and
Seller has full power and authority to enter into this Agreement and to convey
the valid title of the Shares to Buyer free and clear of all liens, pledges and
encumbrances whatsoever. Buyer represents and warrants that he knows of no
reason why Seller cannot consummate this transaction. Neither the execution and
delivery of this Agreement nor the carrying out of the transactions contemplated
hereby will result in any violation of any term of any material agreement or
instrument to which the Buyer is a party or by which it is bound, or of any law
or government order, rule or regulation which is applicable to the Buyer. No
consents or approvals of any persons or entities, government or otherwise, are
required which have not been, or will not have been prior to the closing,
obtained in respect of the execution and delivery by the Buyer of this Agreement
and the carrying out of the transactions contemplated hereby on the part of the
Buyer.
5. Indemnification by Seller. Seller agrees to defend, indemnify and
hold harmless Buyer from, against in respect of any and all loss or damage to
Buyer in whole or in part resulting from:
(a) Any breach of any of the warranties by Seller contained
herein, or any misstatement or omission of fact, or failure to state the facts
necessary to make those statements made not misleading, in or under this
Agreement; and
<PAGE> 2
(b) Any liability or obligation arising out of any actions,
suits, proceedings, claims, demands, judgments, costs and expenses (including
court costs and reasonable legal and accounting fees) incident to any of the
foregoing.
6. Closing. The closing shall take place on March 6, 1998 or on such
other date as agreed to by the parties hereto.
7. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Tennessee, applicable to
contracts made and to be performed therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BUYER:
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Darrell K. Massengale
--------------------------------------
Title: Chief Financial Officer
-----------------------------------
SELLER:
/s/ Doctor R. Crants
------------------------------------------
DOCTOR R. CRANTS
2
<PAGE> 1
EXHIBIT 10.194
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into this ____ day of March, 1998, by and
between CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation with its
principal place of business at 10 Burton Hills Boulevard, Nashville, Tennessee
37215 ("Company") and DOCTOR R. CRANTS, JR., a resident of Nashville, Tennessee
("Crants").
W I T N E S S E T H:
1. Employment. Company employs Crants and Crants hereby accepts
employment under the terms and conditions hereinafter set forth.
2. Duties. Crants is engaged as Chief Executive Officer of the Company.
His powers and duties in that capacity shall be those normally associated with
the position of Chief Executive Officer. During the term of this Agreement,
Crants shall also serve without additional compensation in such other offices of
the Company to which he may be elected or appointed by the Board of Directors.
3. Term. Subject to provisions of termination as hereinafter provided,
the initial term of Crants' employment under this Agreement shall begin on April
1, 1998 and shall terminate on March 31, 2001 (the "Initial Term"). Unless the
Company notifies Crants that his employment under this Agreement will not be
extended, the term of his employment under this Agreement shall automatically be
extended for an additional three (3) year period on the same terms and
conditions as set forth herein (the "Renewal Term").
If Company elects not to extend Crants' employment under this
Agreement, it shall do so by notifying Crants in writing not less than ninety
(90) days prior to the expiration of the Initial Term. If Company does not elect
to extend Crants' employment under this Agreement, Crants shall be considered to
have been terminated without just cause upon the expiration of his employment,
and Crants will receive the payments and benefits set forth in Section 7 hereof.
Crants' date of termination, for the purposes of Section 7 hereof, shall be the
date of the Company's last payment to Crants.
4. Compensation.
4.1. Base Salary. For all duties rendered by Crants, the
Company shall pay Crants a minimum salary of $350,000 per year, payable
according to the customary payroll practices of the Company, but in no event
less frequently than once each month. During each year of this Agreement,
Crants' compensation will be reviewed by the Board of Directors of the Company,
or such subcommittee to which compensation review has been delegated, and after
taking into consideration both Company and personal performance, the Committee
may increase Crants' compensation to any amount it may deem appropriate.
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4.2. Bonus. The Company will pay Crants annual incentive
compensation awards, in cash and/or in equity, as may be granted by the Board of
Directors, or such subcommittee to which incentive compensation awards have been
delegated, under any executive bonus plan or incentive plan in effect from time
to time.
4.3. Benefits.
4.3.1. General. Crants shall be entitled to an annual paid
vacation as established by the Board of Directors of the Company. In addition,
Crants shall be entitled to participate in all compensation or employee benefit
plans or programs and receive all benefits and perquisites for which any
salaried employees are eligible under any existing or future plan or program
established by the Company for salaried employees. Crants will participate to
the extent permissible under the terms and provisions of such plans or programs
in accordance with program provisions. These may include group hospitalization,
health, dental care, life or other insurance, tax qualified pension, savings,
thrift and profit sharing plans, termination pay programs, sick leave plans,
travel or accident insurance, disability insurance, and contingent compensation
plans including stock purchase programs and stock option plans. Except as may be
provided for in Section 4.3.2. herein, nothing in this Agreement shall preclude
the Company from amending or terminating any of the plans or programs applicable
to salaried or senior executives as long as such amendment or termination is
applicable to all salaried employees or senior executives.
4.3.2. Life, Health and DisabilityInsurance. Notwithstanding
the benefit provisions of Section 4.3.1. herein, and in addition to the benefit
provision contained therein, the Company agrees to the following:
(i) To provide and maintain term life insurance on Crants'
life in the amount of a minimum of $3,000,000, such policy being payable, upon
Crants' death, to Crants' designated beneficiary;
(ii) To provide and maintain, during the term of this
Agreement and thereafter, if Crants is terminated without just cause or the
Agreement naturally expires upon the completion of the Renewal Term and no
subsequent extensions are entered into, until Crants and his spouse reach the
age of sixty-five (65) or become otherwise eligible to receive coverage by
Medicare or another similar government program, health insurance on Crants and
his spouse in such amounts as are customary for or available to executives of
the Company; and
(iii) To provide and maintain, through insurance or on its own
account, coverage for Crants, relating to illness or incapacity resulting in
Crants being unable to perform his services, that will provide payment of Crants
full salary and benefits for twelve (12) months. For the period beyond twelve
(12) months, the Company shall provide and maintain, through insurance or on its
own account, coverage for Crants that will provide salary at seventy percent
(70%) of Crants' current level plus full benefits to age sixty-five (65). To the
extent that payments are received from any
2
<PAGE> 3
worker's compensation or other Company paid plans, Company's obligations will be
reduced by amounts so received.
4.4. Expenses. The Company shall promptly reimburse Crants for
all reasonable travel and other business expenses incurred by Crants in the
performance of his duties under this Agreement upon evidence of receipt.
4.5. Withholdings. All compensation payable hereunder shall be
subject to withholding for federal income taxes, FICA and all other applicable
federal, state and local withholding requirements.
5. Termination by Crants. Crants' employment hereunder may be
terminated by Crants upon ninety (90) days written notice to the Company.
Subject to the Company's continuing obligations under Section 4.3.2. of this
Agreement, Crants' death or disability shall constitute termination of Crants'
employment hereunder.
6. Termination by Company for Just Cause. The Company may terminate
Crants' employment pursuant to the terms hereunder for just cause. For the
purposes of this Agreement, Company shall have "cause" upon (i) theft or
dishonesty in the conduct of the Company's business, (ii) conviction of a felony
or of a misdemeanor involving moral turpitude, or (iii) willful and continued
neglect or gross negligence by Crants after a written demand for substantial
performance is delivered to Crants by the Board of Directors of Company, which
demand specifies and identifies the manner in which Crants was willfully
neglectful or grossly negligent, and Crants fails to comply with such demand
within a reasonable time as established by the Company's Board of Directors. For
purposes of this section, "willful" shall be determined in the exclusive
discretion of the Board of Directors of Company. In making such determination,
the Board of Directors of Company shall not act unreasonably or arbitrarily.
Notwithstanding the foregoing, Crants shall not be deemed to have been
terminated for cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board of Directors of Company at a
meeting of the Board called and held for that purpose (after reasonable notice
to Crants, and an opportunity for Crants, together with counsel of his choice,
to be heard before the Board), finding that Crants was, in the good faith
opinion of the Board, guilty of conduct set forth above in clauses (i) or (ii)
of this section, and specifying the particulars thereof in reasonable detail.
7. Termination by Company Without Just Cause. Crants' employment under
this Agreement may be terminated by the Company at any time without just cause
provided the Company shall pay Crants on a monthly basis for a total period of
three (3) years from the date of termination, the amount due to Crants as his
compensation, based upon the annual rate payable as of the date of termination,
without any cost of living adjustments, subject to the following:
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<PAGE> 4
(i) Crants shall continue to be covered, for the three year period,
under health, life and disability insurance plans of Company as may be
set forth in Section 4.3.2. herein. Crants' benefits shall be reduced,
however, by any such coverage that Crants receives incident to any
employment during said three year period;
(ii) The Company shall be entitled to receive as off-set and thereby
reduce its payments, the amount earned by Crants in any active
employment that he may receive during the three year period from any
other source whatsoever, except said sums shall not include income from
dividends, investments or passive income. As a condition for Crants
receiving his compensation from the Company, he agrees to furnish
Company annually with full information regarding such other employment
and to permit inspection of his records at any such employment and copy
of his federal income tax returns;
(iii) The Company shall receive credit for unemployment insurance,
social security insurance or like amounts received by Crants during the
three year period; and
(iv) The payments will cease upon death of Crants regardless of term
remaining.
8. Restrictive Covenants.
8.1. Confidential Information. Crants agrees not to disclose,
either during the time he is employed by Company or following the termination of
his employment by him or the Company, any confidential information concerning
the Company or its business, including, but not limited to contract terms,
financial information, operating data, or business plans or models, whether for
existing, new or developing businesses.
8.2. Non-Compete. During the term of Crants' employment with
the Company, Crants agrees not to enter into or engage in the business of a
competitor of the Company operating or managing private correctional or
detention facilities, either as an individual for his own account, as a partner
or joint venturer, or as an employee, agent, officer, director, or substantial
shareholder of a corporation or otherwise. Upon Crants' voluntary termination of
employment, upon termination of Crants' employment by the Company for just
cause, or upon termination of Crants' employment without just cause as long as
Crants is receiving payments or benefits from Company under Section 7 hereof,
Crants agrees not to enter into or engage in the business of operating or
managing private correctional or detention facilities, either as an individual
for his own account, as a partner or joint venturer, or as an employee, agent,
officer, director, or substantial shareholder of a corporation or otherwise for
a period of one (1) year following the date of Crants' termination of employment
with the Company. Notwithstanding the foregoing, in the event Crants is
terminated for just cause, if Crants reasonably shows that his proposed
employment is not directly competitive with the Company's business, Crants may
enter into such employment.
8.3. Non-Solicitation. Upon termination or expiration of his
employment, whether voluntary or involuntary, Crants agrees not to directly or
indirectly solicit business from any entity,
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<PAGE> 5
organization or person which has contracted with the Company, which has been
doing business with the Company, from which the Company was soliciting business
at the time of Crants' termination, or from which Crants knew or had reason to
know that Company was going to solicit business at the time of Crants'
termination, for a one year period from the date of Crants' termination of his
employment with Company.
8.4. Enforcement. Crants and the Company hereby expressly
acknowledge and agree that the covenants contained in this Section 9 may be
specifically enforced through injunctive relief, but such right to injunctive
relief shall not preclude Company from other remedies which may be available to
it by law.
8.5. Termination. Notwithstanding any provision to the
contrary otherwise contained in this Agreement, the agreements and covenants
contained in this Section 9 shall not terminate upon Crants' termination of his
employment with the Company or upon the termination of this Agreement under any
other provision of this Agreement.
9. Notices. Any notice required or permitted to be given under this
Agreement shall be deemed given if in writing, sent by registered or certified
mail to his current residence in the case of Crants, or to its principal office
in the case of the Company.
10. Waiver of Breach. The waiver by either party of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by the other party.
11. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. Crants acknowledges that the services to be rendered
by him are unique and personal, and Crants may not assign any of his rights or
delegate any of his duties or obligations under this Agreement.
12. Entire Agreement. This instrument contains the entire agreement of
the parties. It may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
13. Controlling Law. This Agreement shall be governed and interpreted
under the laws of the State of Tennessee.
14. Headings. The sections, subjects and headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written.
CRANTS:
-----------------------------------------
DOCTOR R. CRANTS, JR.
COMPANY:
CORRECTIONS CORPORATION OF AMERICA
By:
------------------------------------
Its:
------------------------------------
6
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Exhibit 10.195
AMENDMENT AND WAIVER
THIS AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this "Amendment") is made
and entered into as of this 18th day of July, 1997 by and among CORRECTIONS
CORPORATION OF AMERICA, a corporation organized under the laws of Tennessee
("CCA"), the financial institutions who are or may become party to the Credit
Agreement referenced below (the "Lenders"), and FIRST UNION NATIONAL BANK OF
TENNESSEE, a national banking association ("First Union"), as Administrative
Agent for the Lenders (the "Administrative Agent").
Statement of Purpose
The Lenders agreed to extend certain credit facilities to CCA pursuant to
the Credit Agreement dated as of September 6, 1996 by and among the Borrower,
the Lenders and the Administrative Agent (as amended, restated, modified or
otherwise supplemented from time to time, the "Credit Agreement").
CCA intends to enter into a series of transactions, as described below
(collectively, the "Sale-Leaseback Transactions"), with CCA Prison Realty Trust,
a Maryland real estate investment trust ("CCA Prison Realty Trust"), pursuant to
which CCA will sell (or grant an option to purchase or a right of first refusal
with respect to the purchase of) its interest in certain correctional and
detention facilities and related real property (the "Facilities") to CCA Prison
Realty Trust and lease such Facilities back from CCA Prison Realty Trust. CCA
Prison Realty Trust intends to sell shares of its common stock in a public
offering registered with the Securities and Exchange Commission (the "Offering")
to finance the initial acquisition of Facilities under the Sale-Leaseback
Transactions.
In connection with the Sale-Leaseback Transactions, CCA and CCA Prison
Realty Trust will enter into the following agreements (collectively, the
"Sale-Leaseback Agreements," such definition to include any amendment or
modification of any such documents to which, if such amendment or modification
could reasonably be expected to be adverse to the interests of the Lenders, the
Administrative Agent has consented in writing): (i) the Agreement of Sale and
Purchase providing for the sale by CCA of nine Facilities to CCA Prison Realty
Trust (the "Agreement of Sale and Purchase"), (ii) the Option Agreement granting
CCA Prison Realty Trust the option to acquire five additional Facilities (the
"Option Facilities") from CCA on terms substantially similar to the Agreement of
Sale and Purchase (the "Option Agreement"), (iii) the Right to Purchase
Agreement granting CCA Prison Realty Trust the option and the right of first
refusal to acquire certain other Facilities owned by CCA (the "Right to Purchase
Agreement"), (iv) a Lease Agreement providing for the lease-back by CCA of each
Facility sold to CCA Prison Realty Trust pursuant to the Sale-Leaseback
Transactions (each, a "Lease Agreement") and (vi) a Master Agreement of Lease
providing certain terms for incorporation into each such Lease Agreement (the
"Master Agreement").
<PAGE> 2
On April 18, 1997, the Credit Agreement was modified by execution of a
letter agreement which waived certain provisions of the Credit Agreement in
order to permit the Sale-Leaseback Transactions, subject to the execution of
this Amendment.
The Borrower has requested and the Administrative Agent and the Required
Lenders have agreed (i) to certain waivers of the Credit Agreement in order to
permit the closing of the Sale-Leaseback Transactions evidenced by the
Sale-Leaseback Agreements and (ii) to waive and amend the Credit Agreement in
certain other respects, in each case on the terms and conditions set forth
below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Capitalized Terms. All capitalized undefined terms used in this
Amendment shall have the meanings assigned thereto in the Credit Agreement.
2. Modification of Credit Agreement. The Credit Agreement is hereby
modified as follows:
(a) Section 1.1 is hereby modified by adding the following defined terms in
the correct alphabetical order:
"'Amendment' means the Amendment and Waiver to Credit Agreement dated
as of July 18, 1997 by and among the Borrower, the Lenders and the
Administrative Agent."
"'CCA Prison Realty Trust' shall have the meaning given thereto in the
Amendment."
"'Operating Lease' means with respect to the Borrower and its
Subsidiaries any lease of any property that should, in accordance with
GAAP, be classified and accounted for as an operating lease on a
Consolidated balance sheet of the Borrower and its Subsidiaries."
"'Operating Lease Payments' means, with respect to the Borrower and
its Subsidiaries at any date, the amount, calculated on a Consolidated
basis, of the rental and other lease payments due or payable under any
Operating Lease."
"'Sale-Leaseback Agreements' shall have the meaning given thereto in
the Amendment."
"'Sale-Leaseback Transactions' shall have the meaning given thereto in
the Amendment."
2
<PAGE> 3
"'Total Available Cash' means, with respect to the Borrower and its
Subsidiaries at any date, an amount equal to the Consolidated sum of cash
plus cash equivalents, including without limitation money market
investments, less $10,000,000; provided, however, in no event shall the
amount be less than zero (0)."
"'Weighted Operating Lease Payments' means, with respect to the
Borrower and its Subsidiaries at any date, the product of (a) the aggregate
of all Operating Lease Payments due and payable for the period of four (4)
full consecutive fiscal quarters following such date times (b) eight (8)."
(b) Article IX of the Credit Agreement is hereby amended by deleting
Sections 9.2 and 9.4 in its entirety and substituting the following Sections 9.2
and 9.4 in lieu thereof:
"SECTION 9.2. Leverage Ratio. As of the end of any fiscal quarter, permit
the ratio of (a) the sum for the Borrower and its Subsidiaries as of such
fiscal quarter end of (i) Consolidated Debt plus (ii) Weighted Operating
Lease Payments less (iii) Total Available Cash to (b) the sum for the
Borrower and its Subsidiaries as of such fiscal quarter end of (i)
Consolidated Net Worth plus (ii) Consolidated Debt plus (iii) Weighted
Operating Lease Payments less (iv) Total Available Cash, to exceed 0.65 to
1.00.
SECTION 9.4. Coverage Ratio. As of the end of any fiscal quarter, permit
the ratio of (a) the sum for the period of four (4) consecutive fiscal
quarters ending on such fiscal quarter end of (i) Consolidated EBIT of the
Borrower and its Subsidiaries, (ii) Consolidated depreciation and
amortization (excluding amortization of gain on the sale of assets to CCA
Prison Realty Trust) of the Borrower and its Subsidiaries and (iii)
Operating Lease Payments to (b) the sum for such period of four (4)
consecutive fiscal quarters ending on such fiscal quarter end of (i)
Interest Expense and (ii) Operating Lease Payments, to be less than 2.25 to
1.00; provided that, (a) for the fiscal quarter ending on September 30,
1997, Operating Lease Payments shall be calculated by multiplying the
amount of the Operating Lease Payments for such fiscal quarter by four (4),
(b) for the two consecutive fiscal quarter periods ending on December 31,
1997, Operating Lease Payments shall be calculated by multiplying the
amount of the Operating Lease Payments for such periods by two (2); (c) for
the three consecutive fiscal quarter periods ending on March 31, 1998,
Operating Lease Payments shall be calculated by multiplying Operating Lease
Payments for such periods by four-thirds (4/3)."
(c) Section 10.1 of the Credit Agreement is hereby amended by deleting the
word "and (j)" immediately prior to clause (j) of such Section and inserting in
lieu thereof the following:
"; (j) unsecured Debt in favor of CCA Prison Realty Trust; provided
that, (i) the aggregate principal amount of such Debt does not exceed
$40,000,000, (ii) such Debt is used solely for the construction and
development of Option Facilities and (iii) such Debt is repaid
3
<PAGE> 4
in full on the earlier of the closing of the sale of such Option Facility
to CCA Prison Realty Trust or January 31, 1998;
(k)"
(d) Section 10.3 of the Credit Agreement is hereby amended by deleting the
word "and" immediately prior to clause (g) of such Section and deleting the
punctuation mark at the end of such Section and inserting in lieu thereof the
following:
"; and (h) Any option, or right of first refusal, to acquire from the
Borrower or its Subsidiary any correctional or detention facility and
related real property operated by the Borrower or its Subsidiary granted by
the Borrower to CCA Prison Realty Trust or any Subsidiary or Affiliate
thereof."
4. Waiver of the Credit Agreement and Loan Documents. The Administrative
Agent and the Required Lenders, pursuant to the terms set forth herein, hereby
waive the provisions of Sections 10.6 and 10.8 of the Credit Agreement solely to
permit the Sale-Leaseback Transactions pursuant to the Sale-Leaseback
Agreements.
5. Conditions. The effectiveness of this Amendment shall be conditioned
upon delivery to the Agent of the following items:
(a) Sale-Leaseback Agreements. CCA shall have delivered to the
Administrative Agent complete executed copies of the Sale-Leaseback
Agreements, in form and substance reasonably satisfactory to the
Administrative Agent.
(b) Certificate of Secretary of the Borrower. The Administrative Agent
shall have received a certificate of the secretary or assistant secretary
of the Borrower (i) certifying that the articles of incorporation, bylaws
and resolutions of the Borrower delivered to the Administrative Agent on
September 6, 1996 have not been repealed, revoked, rescinded or amended in
any respect or (ii) attaching thereto true and correct copies of the
articles of incorporation bylaws and resolutions of the Borrower in effect
as of the date hereof; and as to the incumbency and genuineness of the
signature of each officer of the Borrower executing Loan Documents.
(c) Opinions of Counsel. The Administrative Agent shall have received
opinions of counsel to CCA with respect to the Sale-Leaseback Agreements
reasonably satisfactory to the Administrative Agent and on which the
Administrative Agent and the Lenders are expressly authorized to rely.
(d) Other Documents. The Administrative Agent shall have received any
other documents or instruments reasonably requested by it in connection
with the execution of this Amendment.
4
<PAGE> 5
6. Representations and Warranties; No Default. By its execution hereof, CCA
hereby certifies that each of the representations and warranties set forth in
the Credit Agreement and the other Loan Documents is true and correct as of the
date hereof as if fully set forth herein (other than representations and
warranties which speak as of a specific date pursuant to the Credit Agreement,
which representations and warranties shall have been true and correct as of such
specific dates) and that as of the date hereof no Default or Event of Default
has occurred and is continuing.
7. Expenses. The Borrower shall pay all reasonable out-of-pocket expenses
of the Administrative Agent in connection with the preparation, execution and
delivery of this Amendment, including without limitation, the reasonable fees
and disbursements of counsel for the Administrative Agent.
8. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of North Carolina.
9. Effect of Amendment. Except as expressly amended hereby, the Credit
Agreement and Loan Documents shall be and remain in full force and effect. The
waivers granted in this letter are specific and limited and shall not (a)
constitute an amendment of the Credit Agreement or a modification, acceptance or
waiver of any other provision of or default under the Credit Agreement or any
other document or instrument entered into in connection therewith or a future
modification, acceptance or waiver of the provisions set forth therein or (b)
prejudice any other right or rights which the Administrative Agent or Lenders
may now have or may have in the future under or in connection with the Credit
Agreement or the Loan Documents or any instruments or agreements referred to
therein.
10. Counterparts. This Amendment may be executed in separate counterparts,
each of which when executed and delivered is an original but all of which taken
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date and year first above written.
[CORPORATE SEAL] CORRECTIONS CORPORATION OF
AMERICA
By: /s/ Darrell K. Massengale
--------------------------------
Name: Darrell K. Massengale
--------------------------------
Title: Chief Financial Officer
--------------------------------
[SIGNATURES OF AGENTS AND LENDERS FOLLOW]
5
<PAGE> 6
FIRST UNION NATIONAL BANK OF
TENNESSEE, as Administrative Agent,
Issuing Lender, Swingline Lender and Lender
By: /s/ J. Gregory Bowers
------------------------------------
Name: J. Gregory Bowers
------------------------------------
Title: Senior Vice President
------------------------------------
FIRST UNION NATIONAL BANK
(f/k/a FIRST UNION NATIONAL BANK OF
NORTH CAROLINA), as Issuing Lender
By: /s/ Gregory D. Jardine
------------------------------------
Name: Gregory D. Jardine
------------------------------------
Title: Senior Vice President
------------------------------------
THE SUMITOMO BANK, LIMITED
By: /s/ E.B. Buchanan
------------------------------------
Name: E.B. Buchanan
------------------------------------
Title: Vice President
------------------------------------
By: /s/ Sybil H. Weldon
------------------------------------
Name: Sybil H. Weldon
------------------------------------
Title: Vice President & Manager
------------------------------------
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Myra Jhetten
------------------------------------
Name: Myra Jhetten
------------------------------------
Title: Vice President
------------------------------------
6
<PAGE> 7
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By: /s/ Kenneth E. Webb
-----------------------------------------
Name: Kenneth E. Webb
-----------------------------------------
Title: Senior Vice President
-----------------------------------------
CIBC INC.
By: /s/ Roger Colden
-----------------------------------------
Name: Roger Colden
-----------------------------------------
Title: Director, CIBS Wood Gundy
Securities Corp. AS AGENT
-----------------------------------------
MERCANTILE BANK OF ST. LOUIS, N.A.
By: /s/ Donald A. Adams
-----------------------------------------
Name: Donald A. Adams
-----------------------------------------
Title: Vice President
-----------------------------------------
FUJI BANK, LIMITED, ATLANTA AGENCY
By: /s/ Toshihiro Mitsui
-----------------------------------------
Name: Toshihiro Mitsui
-----------------------------------------
Title: Senior Vice President & Senior Manager
-----------------------------------------
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By: /s/ James M. Sloan, Jr.
-----------------------------------------
Name: James M. Sloan, Jr.
-----------------------------------------
Title: Vice President
-----------------------------------------
7
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Annual Report on Form 10-K of Corrections Corporation
of America and Subsidiaries into the Company's previously filed Registration
Statement File Numbers 33-12503, 33-30825, 33-30826, 33-42068, 33-42614,
33-61173, 333-31711, 333-31743 and 333-45193.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CORRECTIONS CORPORATION OF AMERICA FOR THE YEAR ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 136,147
<SECURITIES> 0
<RECEIVABLES> 89,822
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 233,422
<PP&E> 266,493
<DEPRECIATION> 0
<TOTAL-ASSETS> 697,940
<CURRENT-LIABILITIES> 96,660
<BONDS> 127,075
0
380
<COMMON> 80,230
<OTHER-SE> 267,466
<TOTAL-LIABILITY-AND-EQUITY> 697,940
<SALES> 0
<TOTAL-REVENUES> 462,249
<CGS> 0
<TOTAL-COSTS> 379,272
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,119)
<INCOME-PRETAX> 87,096
<INCOME-TAX> 33,141
<INCOME-CONTINUING> 53,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,955
<EPS-PRIMARY> .70
<EPS-DILUTED> .61
</TABLE>
