Document/Exhibit Description Pages Size
1: 8-K Prison Realty Trust 9 42K
2: EX-2.1 Agreement and Plan of Merger Dated 12/26/99 95 394K
3: EX-10.1 Securities Purchase Agreement Dated 12/26/99 205 734K
4: EX-99.1 Company Press Release Dated December 27,1999 6 19K
EX-2.1 — Agreement and Plan of Merger Dated 12/26/99
Exhibit Table of Contents
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 26, 1999,
BY AND AMONG
PRISON REALTY TRUST, INC., CCA ACQUISITION SUB, INC.,
PMSI ACQUISITION SUB, INC. AND JJFMSI ACQUISITION SUB, INC.;
AND
CORRECTIONS CORPORATION OF AMERICA;
AND
PRISON MANAGEMENT SERVICES, INC.;
AND
JUVENILE AND JAIL FACILITY MANAGEMENT
SERVICES, INC.
TABLE OF CONTENTS
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ARTICLE I
THE MERGER....................................................................................................2
SECTION 1.01 The Merger....................................................................................2
SECTION 1.02 Closing.......................................................................................2
SECTION 1.03 Effective Time................................................................................3
SECTION 1.04 Effects of the Merger.........................................................................3
SECTION 1.05 Constituent Documents.........................................................................3
SECTION 1.06 Directors.....................................................................................3
SECTION 1.07 Officers......................................................................................3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL SHARES, INDEBTEDNESS AND
AGREEMENTS OF THE CONSTITUENT ENTITIES; EXCHANGE
OF CERTIFICATES............................................................................................3
SECTION 2.01 Effect on Capital Shares, Indebtedness and Agreements.........................................3
SECTION 2.02 Exchange of Certificates......................................................................6
SECTION 2.03 Qualified Plans...............................................................................7
SECTION 2.04 Restricted Stock Plans . . ...................................................................7
SECTION 2.05 Warrants to Purchase CCA Common Stock.........................................................8
SECTION 2.06 Fractional Shares.............................................................................8
SECTION 2.07 Lost Certificates.............................................................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES................................................................................9
SECTION 3.01 Representations and Warranties of Prison Realty...............................................9
SECTION 3.02 Representations and Warranties of the Acquisition Companies..................................27
SECTION 3.03 Representations and Warranties of CCA........................................................29
SECTION 3.04 Representations and Warranties of PMSI.......................................................40
SECTION 3.05 Representations and Warranties of JJFMSI.....................................................50
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS....................................................................61
SECTION 4.01 Covenants of Prison Realty...................................................................61
SECTION 4.02 Covenants of the Acquisition Companies.......................................................62
SECTION 4.03 Covenants of CCA.............................................................................62
SECTION 4.04 Covenants of PMSI............................................................................64
SECTION 4.05 Covenants of JJFMSI..........................................................................67
SECTION 4.06 No Solicitation by Prison Realty.............................................................69
SECTION 4.07 No Solicitation by Target Companies..........................................................71
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ARTICLE V
ADDITIONAL AGREEMENTS........................................................................................72
SECTION 5.01 Preparation of the Proxy Statement-Prospectus................................................72
SECTION 5.02 Access to Information........................................................................72
SECTION 5.03 Shareholders Meeting.........................................................................73
SECTION 5.04 Reasonable Best Efforts......................................................................73
SECTION 5.05 Benefits Matters.............................................................................73
SECTION 5.06 Fees and Expenses............................................................................74
SECTION 5.07 Indemnification, Exculpation and Insurance...................................................74
SECTION 5.08 Transfer Taxes...............................................................................74
SECTION 5.09 Resignation of Directors and Officers........................................................75
SECTION 5.10 Stock Exchange Listing.......................................................................75
SECTION 5.11 Tax-Free Reorganization......................................................................75
SECTION 5.12 Shareholders' Agreements.....................................................................75
SECTION 5.13 Lock-Up Agreement............................................................................75
SECTION 5.14 Equity Incentive Plan........................................................................75
SECTION 5.15 Change of Corporate Name.....................................................................76
ARTICLE VI
CONDITIONS PRECEDENT.........................................................................................76
SECTION 6.01 Conditions to Each Party's Obligation To Effect the Merger...................................76
SECTION 6.02 Conditions to Obligation of Prison Realty and Acquisition
Companies To Effect the Merger..............................................................77
SECTION 6.03 Conditions to Obligation of PMSI To Effect the Merger........................................78
SECTION 6.04 Conditions to Obligation of JJFMSI To Effect the Merger......................................79
SECTION 6.05 Conditions to Obligation of CCA To Effect the Merger.........................................79
SECTION 6.06 Frustration of Closing Conditions............................................................80
ARTICLE VII
TERMINATION AND AMENDMENT....................................................................................80
SECTION 7.01 Termination..................................................................................80
SECTION 7.02 Effect of Termination........................................................................82
SECTION 7.03 Amendment....................................................................................82
SECTION 7.04 Extension; Waiver............................................................................82
SECTION 7.05 Procedure for Termination, Amendment, Extension or Waiver....................................82
ARTICLE VIII
GENERAL PROVISIONS...........................................................................................83
SECTION 8.01 Nonsurvival of Representations and Warranties................................................83
SECTION 8.02 Notices......................................................................................83
SECTION 8.03 Definitions; Interpretation..................................................................84
SECTION 8.04 Counterparts.................................................................................85
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SECTION 8.05 Entire Agreement; No Third-Party Beneficiaries; Rights of Ownership..........................85
SECTION 8.06 Governing Law................................................................................86
SECTION 8.07 Publicity....................................................................................86
SECTION 8.08 Assignment...................................................................................86
SECTION 8.09 Enforcement..................................................................................86
EXHIBITS TO MERGER AGREEMENT
EXHIBIT A Form of Lock-Up Agreement
SCHEDULES TO MERGER AGREEMENT
Schedule 1.06 Directors of Surviving Companies
Schedule 1.07 Officers of Surviving Companies
Schedule 3.01 Prison Realty Disclosure Schedule
Schedule 3.03 CCA Disclosure Schedule
Schedule 3.04 PMSI Disclosure Schedule
Schedule 3.05 JJFMSI Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of December 26, 1999 (the
"Agreement"), is by and among PRISON REALTY TRUST, INC., a Maryland corporation
("Prison Realty"); CCA ACQUISITION SUB, INC. ("CCA Sub"), PMSI ACQUISITION SUB,
INC. ("PMSI Sub") and JJFMSI ACQUISITION SUB, INC. ("JJFMSI Sub"), each a
Tennessee corporation and a wholly-owned subsidiary of Prison Realty;
CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation ("CCA"); PRISON
MANAGEMENT SERVICES, INC., a Tennessee corporation ("PMSI"); and JUVENILE AND
JAIL FACILITY MANAGEMENT SERVICES, INC., a Tennessee corporation ("JJFMSI").
(Each of CCA Sub, PMSI Sub and JJFMSI Sub is sometimes referred to herein as an
"Acquisition Company," and collectively as the "Acquisition Companies." Each of
CCA, PMSI and JJFMSI is sometimes referred to herein as a "Target Company," and
collectively as the "Target Companies.")
W I T N E S S E T H:
WHEREAS, (i) the Boards of Directors of CCA, CCA Sub and Prison Realty
have approved the merger of CCA with and into CCA Sub (the "CCA Merger"); (ii)
the Boards of Directors of PMSI, PMSI Sub and Prison Realty have approved the
merger of PMSI with and into PMSI Sub (the "PMSI Merger"); and (iii) the Boards
of Directors of JJFMSI, JJFMSI Sub and Prison Realty have approved the merger of
JJFMSI with and into JJFMSI Sub (the "JJFMSI Merger," and collectively with the
CCA Merger and the PMSI Merger, the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the Merger requires the approval by: (i) the affirmative vote
of the holders of eighty percent (80%) of the Class A common stock, $0.01 par
value per share (the "CCA Class A Common Stock") and the Class B common stock,
$0.01 par value per share (the "CCA Class B Common Stock," and, together with
the CCA Class A Common Stock, the "CCA Common Stock") of CCA, voting together as
a single class, as well as the separate consent of Baron Asset Fund ("Baron"), a
Massachusetts business trust and holder of approximately sixteen and nine-tenths
percent (16.9%) of the CCA Class A Common Stock (collectively, the "CCA
Shareholder Approval"); (ii) the affirmative vote of the holders of a majority
of the outstanding shares of Class A common stock, $0.01 par value per share, of
PMSI (the "PMSI Class A Common Stock")(the "PMSI Shareholder Approval"); and
(iii) the affirmative vote of the holders of a majority of the outstanding
shares of the Class A common stock, $0.01 par value per share, of JJFMSI (the
"JJFMSI Class A Common Stock")(the "JJFMSI Shareholder Approval");
WHEREAS, in connection with the Merger, Prison Realty intends to amend
and restate its charter and intends to alter its operating structure such that
Prison Realty will not qualify as a real estate investment trust (a "REIT") as
defined by the Internal Revenue Code of 1986, as amended (the "Code"),
commencing with its taxable year ending December 31, 1999, which actions require
approval by the affirmative vote of the holders of two-thirds (2/3) of the
outstanding shares of common stock, $0.01 par value per share, of Prison Realty
(the "Prison Realty Common Stock") (the "Prison Realty Stockholder Approval");
WHEREAS, Prison Realty, the Acquisition Companies, CCA, PMSI and JJFMSI
desire to make certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various conditions to the
Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368(a) of the
Code, and this Agreement is intended to be and is adopted as a plan of
reorganization with respect to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. At the Effective Time (as defined in Section
1.03 herein) and subject to and upon the terms and conditions of this Agreement,
and in accordance with the Tennessee Business Corporation Act (the "TBCA"):
(a) CCA shall be merged with and into CCA Sub, whereupon the separate
corporate existence of CCA shall cease and CCA Sub shall continue as the
surviving company;
(b) PMSI shall be merged with and into PMSI Sub, whereupon the separate
corporate existence of PMSI shall cease and PMSI Sub shall continue as the
surviving company; and
(c) JJFMSI shall be merged with and into JJFMSI Sub, whereupon the
separate corporate existence of JJFMSI shall cease and JJFMSI Sub shall continue
as the surviving company.
Following the Merger, CCA Sub, PMSI Sub and JJFMSI Sub (each a "Surviving
Company" and collectively, the "Surviving Companies") shall succeed to and
assume all the rights and obligations of CCA, PMSI and JJFMSI, respectively, in
accordance with the TBCA.
SECTION 1.02 Closing. Unless this Agreement shall have been terminated
and the transactions contemplated herein abandoned pursuant to Section 7.01, and
subject to the satisfaction or waiver of the conditions set forth in Article VI,
the closing of the Merger (the "Closing") will take place at 10:00 a.m., local
time, on a date to be specified by the parties, which shall be no later than the
fifth business day following the satisfaction or waiver of all the conditions
set forth in Article VI herein which by their terms are capable of being
satisfied prior to the Closing (the "Closing Date"), at the offices of Stokes &
Bartholomew, P.A. in Nashville, Tennessee, unless another time, date or place is
agreed to by the parties hereto.
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SECTION 1.03 Effective Time. Subject to the provisions of this
Agreement, as promptly as practicable on the Closing Date, articles of merger
and all other appropriate documents (in any such case, the "Articles of Merger")
shall be duly prepared, executed, acknowledged and filed by the parties in
accordance with the relevant provisions of the TBCA with the Secretary of State
of the State of Tennessee (the "Tennessee Secretary of State"). The Merger shall
become effective on the Closing Date at the time of day specified in the
Articles of Merger filed with the Tennessee Secretary of State (the "Effective
Time").
SECTION 1.04 Effects of the Merger. At the Effective Time, the Merger
shall have the effects set forth in Section 48-21-108 of the TBCA. Without
limiting the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Target Companies and
the Acquisition Companies shall vest in the Surviving Companies, and all debts,
liabilities and duties of the Target Companies and the Acquisition Companies
shall become the debts, liabilities and duties of the Surviving Companies.
SECTION 1.05 Constituent Documents.
(a) Charter. The charter of each Acquisition Company as in effect
immediately prior to the Effective Time shall continue to be the charter of each
respective Surviving Company (with such amendments as may be set forth in the
Articles of Merger in accordance with this Agreement) until thereafter changed
or amended as provided therein or by applicable law.
(b) Bylaws. The bylaws of each Acquisition Company as in effect
immediately prior to the Effective Time shall continue to be the bylaws of each
respective Surviving Company until thereafter changed or amended as provided
therein or by applicable law.
SECTION 1.06 Directors. The persons named in Schedule 1.06 attached
hereto shall be the directors of each respective Surviving Company, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.07 Officers. The persons named in Schedule 1.07 attached
hereto shall be the officers of each respective Surviving Company, serving in
such capacity as is set forth on Schedule 1.07 until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL SHARES, INDEBTEDNESS AND
AGREEMENTS OF THE CONSTITUENT ENTITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 Effect on Capital Shares, Indebtedness and Agreements. By
virtue of the Merger and without any action on the part of Prison Realty, the
Acquisition Companies, the Target Companies or the holders of the Constituent
Capital Stock (as defined herein):
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(a) Cancellation of Certain Shares, Indebtedness and Agreements. As of
the Effective Time: (i) each share of Constituent Capital Stock that is owned by
any of the parties hereto or their Subsidiaries (as defined in Section 8.03)
(except for any shares of Prison Realty Stock (as defined in Section 3.01(c)
herein) owned by the Acquisition Companies which are to be delivered as the CCA
Merger Consideration, the PMSI Merger Consideration or the JJFMSI Merger
Consideration) shall automatically be canceled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor; (ii) any
indebtedness between any of the parties hereto shall be canceled and shall cease
to exist and no consideration shall be delivered therefor; and (iii) all
agreements between any of the parties hereto shall be canceled and shall cease
to exist. For purposes hereof, the term "Constituent Capital Stock" means
collectively the Prison Realty Stock, the CCA Common Stock, the PMSI Common
Stock and the JJFMSI Common Stock.
(b) Conversion of CCA Common Stock. As of the Effective Time, each
issued and outstanding share of CCA Common Stock (other than shares canceled
pursuant to subparagraph (a) above) shall be converted into the right to receive
that number of shares of Prison Realty Common Stock (collectively, the "CCA
Merger Consideration") determined by: (i) multiplying $20 million by a fraction,
the numerator of which shall be the total number of shares of CCA Common Stock
outstanding immediately prior to the Effective Time which are not to be canceled
pursuant to subparagraph (a) above, and the denominator of which shall be the
total number of shares of CCA Common Stock outstanding immediately prior to the
Effective Time, inclusive of shares which are to be canceled pursuant to
subparagraph (a) above; (ii) dividing the amount determined under clause (i) by
the Prison Realty Closing Price (as herein defined); and (iii) dividing the
amount determined under clause (ii) by the total number of shares of CCA Common
Stock outstanding immediately prior to the Effective Time which are not to be
canceled pursuant to subparagraph (a) above. All computations made in accordance
with the preceding sentence shall be rounded to two decimal places. As of the
Effective Time, each issued and outstanding share of CCA Common Stock converted
into Prison Realty Common Stock in accordance herewith shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of CCA
Common Stock shall cease to have any rights with respect thereto except the
right to receive the CCA Merger Consideration, without interest thereon. Shares
of Prison Realty Common Stock that are issued in exchange for shares of CCA
Common Stock which are subject to forfeiture under the CCA Restricted Stock Plan
(as defined in Section 2.04 herein) shall become subject to the terms and
restrictions of the Prison Realty Restricted Stock Plan (as defined in Section
2.04 herein) in accordance with Section 2.04. All remaining shares of Prison
Realty Common Stock issued in the CCA Merger shall be subject to the terms and
conditions of the Lock-Up Agreement (as defined in Section 5.13 herein). For
purposes hereof, the term "Prison Realty Closing Price" means the average
closing price of Prison Realty Common Stock over the five trading days ending
two trading days prior to the Closing Date.
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(c) Conversion of PMSI Common Stock. As of the Effective Time, each
issued and outstanding share of Class B common stock, $0.01 par value per share,
of PMSI (the "PMSI Class B Common Stock" and together with the PMSI Class A
Common Stock, the "PMSI Common Stock") shall be canceled in accordance with
subparagraph (a) above, and each issued and outstanding share of PMSI Class A
Common Stock (other than shares canceled pursuant to subparagraph (a) above)
shall be converted into the right to receive that number of shares of Prison
Realty Common Stock (collectively, the "PMSI Merger Consideration") determined
by: (i) dividing $1,023,000 by the Prison Realty Closing Price; and (ii)
dividing the amount determined under clause (i) by the total number of shares of
PMSI Class A Common Stock outstanding immediately prior to the Effective Time
which are not to be canceled pursuant to subparagraph (a) above. All
computations made in accordance with the preceding sentence shall be rounded to
two decimal places. As of the Effective Time, each issued and outstanding share
of PMSI Class A Common Stock converted into Prison Realty Common Stock in
accordance herewith shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of PMSI Class A Common Stock shall cease to have
any rights with respect thereto except the right to receive the PMSI Merger
Consideration, without interest thereon. Shares of Prison Realty Common Stock
that are issued in exchange for shares of PMSI Class A Common Stock which are
subject to forfeiture under the PMSI Restricted Stock Plan (as defined in
Section 2.04 herein) shall become subject to the terms and restrictions of the
Prison Realty Restricted Stock Plan in accordance with Section 2.04 herein.
(d) Conversion of JJFMSI Common Stock. As of the Effective Time, each
issued and outstanding share of Class B common stock, $0.01 par value per share,
of JJFMSI (the "JJFMSI Class B Common Stock," and, together with the JJFMSI
Class A Common Stock, the "JJFMSI Common Stock") shall be canceled in accordance
with subparagraph (a) above, and each issued and outstanding share of JJFMSI
Class A Common Stock (other than shares canceled pursuant to subparagraph (a)
above) shall be converted into the right to receive that number of shares of
Prison Realty Common Stock (collectively, the "JJFMSI Merger Consideration")
determined by: (i) dividing $847,000 by the Prison Realty Closing Price; and
(ii) dividing the amount determined under clause (i) by the total number of
shares of JJFMSI Class A Common Stock outstanding immediately prior to the
Effective Time which are not to be canceled pursuant to subparagraph (a) above.
All computations made in accordance with the preceding sentence shall be rounded
to two decimal places. As of the Effective Time, each issued and outstanding
share of JJFMSI Class A Common Stock converted into Prison Realty Common Stock
in accordance herewith shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of JJFMSI Class A Common Stock shall cease to have
any rights with respect thereto except the right to receive the JJFMSI Merger
Consideration, without interest thereon. Shares of Prison Realty Common Stock
that are issued in exchange for shares of JJFMSI Class A Common Stock which are
subject to forfeiture under the JJFMSI Restricted Stock Plan (as defined in
Section 2.04 herein) shall become subject to the terms and restrictions of the
Prison Realty Restricted Stock Plan in accordance with Section 2.04 herein.
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SECTION 2.02 Exchange of Certificates.
(a) Exchange. Immediately after the Effective Time, Prison Realty shall
exchange (i) certificates representing CCA Common Stock (the "CCA Certificates"
and each a "CCA Certificate") for the CCA Merger Consideration; (ii)
certificates representing PMSI Common Stock (the "PMSI Certificates" and each a
"PMSI Certificate") for the PMSI Merger Consideration; and (iii) certificates
representing JJFMSI Common Stock (the "JJFMSI Certificates" and each a "JJFMSI
Certificate") for the JJFMSI Merger Consideration. Promptly after the Effective
Time, Prison Realty shall send to each holder of shares of CCA Common Stock,
PMSI Common Stock or JJFMSI Common Stock (other than Prison Realty or any of its
Subsidiaries) at the Effective Time a letter of transmittal for use in such
exchange (which shall specify that the delivery shall be effected, and risk of
loss and title shall pass, only upon proper delivery of the CCA Certificates,
PMSI Certificates and JJFMSI Certificates to Prison Realty) and instructions for
use in effecting the surrender of the CCA Certificates, PMSI Certificates and
JJFMSI Certificates for payment therefor.
(b) Exchange of CCA Certificates. Each holder of shares of CCA Common
Stock that have been converted into the right to receive the CCA Merger
Consideration will be entitled to receive, upon surrender to Prison Realty of a
CCA Certificate, together with a properly completed letter of transmittal, the
CCA Merger Consideration in respect of each share of CCA Common Stock
represented by such CCA Certificate. Until so surrendered, each such CCA
Certificate shall, after the Effective Time, represent for all purposes only the
right to receive such CCA Merger Consideration.
(c) Exchange of PMSI Certificates. Each holder of shares of PMSI Common
Stock that have been converted into the right to receive the PMSI Merger
Consideration will be entitled to receive, upon surrender to Prison Realty of a
PMSI Certificate, together with a properly completed letter of transmittal, the
PMSI Merger Consideration in respect of each share of PMSI Common Stock
represented by such PMSI Certificate. Until so surrendered, each such PMSI
Certificate shall, after the Effective Time, represent for all purposes only the
right to receive such PMSI Merger Consideration.
(d) Exchange of JJFMSI Certificates. Each holder of shares of JJFMSI
Common Stock that have been converted into the right to receive the JJFMSI
Merger Consideration will be entitled to receive, upon surrender to Prison
Realty of a JJFMSI Certificate, together with a properly completed letter of
transmittal, the JJFMSI Merger Consideration in respect of each share of JJFMSI
Common Stock represented by such JJFMSI Certificate. Until so surrendered, each
such JJFMSI Certificate shall, after the Effective Time, represent for all
purposes only the right to receive such JJFMSI Merger Consideration.
(e) Form of Certain Transfers. If any portion of the CCA Merger
Consideration, PMSI Merger Consideration or JJFMSI Merger Consideration is to be
paid to a person (as defined in Section 8.03 herein) other than the person in
whose name a CCA Certificate, PMSI
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Certificate or JJFMSI Certificate is registered, it shall be a condition to such
payment that the CCA Certificate, PMSI Certificate or JJFMSI Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay to Prison Realty
any transfer or other taxes required as a result of such payment to a person
other than the registered holder of such CCA Certificate, PMSI Certificate or
JJFMSI Certificate or establish to the satisfaction of Prison Realty that such
tax has been paid or is not payable.
(f) Transfers After the Effective Time. After the Effective Time, there
shall be no further registration of transfers of shares of CCA Common Stock,
PMSI Common Stock or JJFMSI Common Stock. If, after the Effective Time, CCA
Certificates, PMSI Certificates or JJFMSI Certificates are presented to Prison
Realty or the Surviving Companies, they shall be canceled and promptly exchanged
for the consideration provided for, in accordance with the procedures set forth
in this Article.
(g) Unclaimed Shares. Neither Prison Realty nor any of the Surviving
Companies shall be liable to any holder of CCA Common Stock, PMSI Common Stock
or JJFMSI Common Stock for any amount paid to a public official pursuant to
applicable abandoned property laws.
(h) Dividends. No dividends, interest or other distributions with
respect to securities of Prison Realty constituting part of the CCA Merger
Consideration, PMSI Merger Consideration or JJFMSI Merger Consideration shall be
paid to the holder of any unsurrendered CCA Certificates, PMSI Certificates or
JJFMSI Certificates until such CCA Certificates, PMSI Certificates or JJFMSI
Certificates are surrendered as provided in this Section. Upon such surrender,
there shall be paid, without interest, to the person in whose name the
securities of Prison Realty have been registered, all dividends, interest and
other distributions payable in respect of such securities on a date subsequent
to, and in respect of a record date after, the Effective Time.
SECTION 2.03 Qualified Plans. As of the Effective Time, Prison Realty
shall adopt the Corrections Corporation of America 401(k) Savings and Retirement
Plan (the "CCA 401(k) Plan"), and shall cause benefits under the Prison Realty
401(k) Savings and Retirement Plan (the "Prison Realty 401(k) Plan") to cease to
accrue, but shall not cause the Prison Realty 401(k) Plan to be terminated. As
soon as practicable after the Effective Time, the Prison Realty 401(k) Plan and
the CCA Prison Realty Trust Employee Savings and Stock Ownership Plan (the
"Prison Realty ESOP")(the benefits under which ceased to accrue as of December
31, 1998) shall be merged into the CCA 401(k) Plan. Prior to the Effective Time,
Prison Realty and the Target Companies shall take all actions (including, if
appropriate, amending the terms of the CCA 401(k) Plan, the Prison Realty 401(k)
Plan and the Prison Realty ESOP) that are necessary to give effect to the
transactions contemplated by this Section.
SECTION 2.04 Restricted Stock Plans. As of the Effective Time, each of
the Correctional Management Services Corporation 1998 Restricted Stock Plan (the
"CCA
7
Restricted Stock Plan"), the Prison Management Services, Inc. 1998 Restricted
Stock Plan (the "PMSI Restricted Stock Plan"), and the Juvenile and Jail
Facility Management Services, Inc. 1998 Restricted Stock Plan (the "JJFMSI
Restricted Stock Plan" and collectively with the CCA Restricted Stock Plan and
the PMSI Restricted Stock Plan, the "Target Companies' Restricted Stock Plans")
shall be merged into a single restricted stock plan (the "Prison Realty
Restricted Stock Plan") with terms and conditions similar to those of the Target
Companies' Restricted Stock Plans, except that any shares forfeited under the
new restricted stock plan shall be forfeited to all plan participants. Prison
Realty, the Acquisition Companies and the Target Companies shall take all
actions that are necessary to give effect to the transactions contemplated by
this Section.
SECTION 2.05 Warrants to Purchase CCA Common Stock. At the Effective
Time, each warrant to purchase shares of CCA Common Stock (the "CCA Warrants"),
whether or not exercisable, shall be deemed to constitute a warrant to acquire,
on substantially the same terms and conditions as were applicable to the
original warrant to which it relates (a "Substitute Warrant"), the same number
of shares of Prison Realty Common Stock as the holder of such warrant would have
been entitled to receive pursuant to the Merger had such holder exercised such
CCA Warrant in full immediately prior to the Effective Time, at a price per
share of Prison Realty Common Stock computed in compliance with the terms of
such CCA Warrant; provided, however, that the number of shares of Prison Realty
Common Stock that may be purchased upon exercise of such Substitute Warrant
shall not include any fractional share. Prior to the Effective Time, CCA will
use its best efforts to obtain such consents, if any, as may be necessary to
give effect to the transactions contemplated by this Section. In addition, prior
to the Effective Time, CCA will use its best efforts to make any amendments to
the terms of the CCA Warrants that are necessary to give effect to the
transactions contemplated by this Section. Except as contemplated by this
Section, CCA will not, after the date hereof, without the written consent of
Prison Realty, amend any outstanding CCA Warrants. Prison Realty, the
Acquisition Companies and the Target Companies shall take all actions that are
necessary to give effect to the transactions contemplated by this Section,
including without limitation such actions, if any, as are described in the CCA
Warrants.
SECTION 2.06 Fractional Shares. No fractional shares of Prison Realty
Common Stock shall be issued to shareholders of CCA, PMSI or JJFMSI in
connection with the Merger, but in lieu thereof each holder of shares of CCA
Common Stock, PMSI Common Stock or JJFMSI Common Stock otherwise entitled to
receive as a result of the Merger a fractional share of Prison Realty Common
Stock shall be entitled to receive a cash payment (without interest), rounded to
the nearest cent, representing such holder's proportionate interest in the net
proceeds resulting from the sale (after deduction of all expenses resulting from
such sale) on the New York Stock Exchange ("NYSE") through one or more of its
member firms of the fractional shares of Prison Realty Common Stock all holders
of shares of CCA Common Stock, PMSI Common Stock or JJFMSI Common Stock would
otherwise be entitled to receive as a result of the Merger.
8
SECTION 2.07 Lost Certificates. If any CCA Certificate, PMSI
Certificate or JJFMSI Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such CCA
Certificate, PMSI Certificate or JJFMSI Certificate to be lost, stolen or
destroyed and, if required by the respective Surviving Company, the posting by
such person of a bond, in such reasonable amount as the respective Surviving
Company may direct, as indemnity against any claim that may be made against it
with respect to such CCA Certificate, PMSI Certificate or JJFMSI Certificate,
Prison Realty (or its duly appointed transfer agent) will issue in exchange for
such lost, stolen or destroyed CCA Certificate, PMSI Certificate or JJFMSI
Certificate the CCA Merger Consideration, PMSI Merger Consideration or JJFMSI
Merger Consideration to be paid in respect of the shares represented by such CCA
Certificates, PMSI Certificates or JJFMSI Certificates as contemplated by this
Article.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of Prison Realty. Except as
set forth in Prison Realty SEC Documents (as defined in Section 3.01(e) herein)
filed with the Securities and Exchange Commission (the "SEC") and publicly
available prior to the date hereof (the "Prison Realty Filed SEC Documents") or
on the Disclosure Schedule delivered by Prison Realty to CCA, PMSI and JJFMSI
prior to the execution of this Agreement (the "Prison Realty Disclosure
Schedule"), which Prison Realty Disclosure Schedule constitutes a part hereof
and is true and correct in all material respects, Prison Realty hereby
represents and warrants to each of CCA, PMSI and JJFMSI as follows:
(a) Organization and Authority. Prison Realty is a corporation duly
incorporated and validly existing and in good standing under the laws of the
State of Maryland with full corporate power and authority to own its properties
and conduct its business as now conducted and is duly qualified or authorized to
do business and is in good standing in all jurisdictions where the failure to so
qualify could have a material adverse effect (as defined in Section 8.03(a)
herein). Prison Realty has all requisite corporate power and authority, and has
been duly authorized by all necessary consents, approvals, authorizations,
orders, registrations, qualifications, licenses and permits of and from all
public, regulatory or governmental agencies and bodies, to own, lease and
operate its assets and properties and to conduct its business as it is now being
conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to do so could have a
material adverse effect upon the conduct of its business or the ownership or
leasing of property by it in such jurisdiction.
(b) Subsidiaries.
(i) Except for the Acquisition Companies, the only direct or
indirect Subsidiaries of Prison Realty are those listed in Section 3.01(b) of
the Prison Realty Disclosure Schedule. Except for Prison Realty's ownership of
all of the issued and outstanding common
9
stock of the Acquisition Companies and except for the ownership interests set
forth in Section 3.01(b) of the Prison Realty Disclosure Schedule, Prison Realty
does not own or control, directly or indirectly, a 50% or greater capital stock
interest in a corporation, a general partnership interest or a 50% or greater
limited partnership interest in a partnership, or a managing membership interest
or a 50% or greater membership interest in a limited liability company,
association or other entity or project.
(ii) Except for the Acquisition Companies or the entities
listed in Section 3.01(b) of the Prison Realty Disclosure Schedule, Prison
Realty does not hold, directly or indirectly, any equity interest or equity
investment in any corporation, partnership, association or other entity.
(iii) Except as set forth in Section 3.01(b) of the Prison
Realty Disclosure Schedule, all of the issued and outstanding shares of capital
stock of, or other equity interests in, each Subsidiary of Prison Realty have
been validly issued, are fully paid and nonassessable and are owned, directly or
indirectly, by Prison Realty free and clear of any Liens (as hereinafter
defined) and there are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating any
Subsidiary of Prison Realty to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or obligating it to
grant, extend or enter into any such agreement or commitment.
(c) Capital Structure of Prison Realty. The authorized stock of Prison
Realty consists of 300,000,000 shares of Prison Realty Common Stock and
20,000,000 shares of preferred stock, $0.01 par value per share, of Prison
Realty, of which 4,300,000 shares have been designated Series A Preferred Stock
(the "Prison Realty Series A Preferred Stock" and collectively with the Prison
Realty Common Stock, the "Prison Realty Stock"). At the close of business on
September 30, 1999, (A) 118,251,082 shares of Prison Realty Common Stock were
outstanding, (B) 4,300,000 shares of Prison Realty Series A Preferred Stock were
outstanding, (C) options ("Prison Realty Options") to acquire 3,208,966 shares
of Prison Realty Common Stock from Prison Realty pursuant to Prison Realty's
equity incentive plans ("Prison Realty Stock Plans") listed on the Prison Realty
Disclosure Schedule were outstanding, (D) 294,897 deferred share awards ("Prison
Realty Deferred Share Awards") granted pursuant to Prison Realty Stock Plans
were outstanding, and (E) subordinated notes ("Prison Realty Notes") convertible
into 2,962,336 shares of Prison Realty Common Stock were outstanding. Other than
as set forth above, at the close of business on September 30, 1999, there were
outstanding no shares of Prison Realty Stock or any other class or series of
stock of Prison Realty or options, warrants or other rights to acquire Prison
Realty Stock or any other class or series of stock of Prison Realty from Prison
Realty. No bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into or exchangeable for securities having the right to
vote) on any matters on which stockholders of Prison Realty may vote are issued
or outstanding, except the Prison Realty Notes.
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All outstanding shares of Prison Realty Stock are, and any shares of
Prison Realty Common Stock which may be issued upon the exercise of Prison
Realty Options or conversion of the Prison Realty Notes when issued will be,
duly authorized, validly issued, fully paid and nonassessable, and will be
delivered free and clear of all claims, mortgages, deeds of trust, charges,
liens, encumbrances, pledges or security interests of any kind or nature
whatsoever (collectively, "Liens") and not now in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities and
conform to the description thereof in the Prison Realty Filed SEC Documents.
Other than as set forth above, and except for this Agreement, the Securities
Purchase Agreement (as defined herein), the Prison Realty Stock Plans, the
Prison Realty Options, the Prison Realty Deferred Share Awards and the Prison
Realty Notes, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements or undertakings of any kind to which Prison
Realty or any of its Subsidiaries is a party or by which Prison Realty or any of
its Subsidiaries is bound obligating Prison Realty or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity or voting securities of Prison Realty or
of any Subsidiary of Prison Realty or obligating Prison Realty or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement or undertaking. There are no
outstanding obligations of Prison Realty or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of Prison
Realty or any of its Subsidiaries and, to the knowledge of the executive
officers of Prison Realty, as of the date hereof, no irrevocable proxies have
been granted with respect to shares of Prison Realty Common Stock or equity of
Subsidiaries of Prison Realty.
(d) Authorization. Prison Realty has all requisite corporate power and
authority to enter into this Agreement and, subject to obtaining the Prison
Realty Stockholder Approval, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Prison Realty, subject to obtaining the Prison
Realty Stockholder Approval. This Agreement has been duly executed and delivered
by Prison Realty and constitutes a valid and binding obligation of Prison
Realty, enforceable against Prison Realty in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, fraudulent transfer and other similar laws from time to time in
effect. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any breach or violation of, or default (with or without notice or
lapse of time or both) under, or result in the termination of, or accelerate the
performance required by, or give rise to a right of termination, cancellation or
acceleration of any obligation under, or the creation of a Lien pursuant to, (i)
any provision of the charter (or similar organizational documents) or bylaws of
Prison Realty or any of its Subsidiaries or (ii) subject to obtaining or making
the consents, approvals, orders, authorizations, registrations, declarations and
filings referred to in the following sentence, any loan or credit agreement,
note, mortgage, indenture, lease, Prison Realty Stock Plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute,
11
law, ordinance, rule or regulation applicable to Prison Realty or any of its
Subsidiaries or their respective properties or assets, in any case under this
clause (ii) which would, individually or in the aggregate, have a material
adverse effect on Prison Realty. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality (a
"Governmental Entity") is required by or with respect to Prison Realty or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by Prison Realty or the consummation by Prison Realty of the transactions
contemplated hereby, the failure of which to be obtained or made would,
individually or in the aggregate, have a material adverse effect on Prison
Realty or would prevent or materially delay the consummation of the transactions
contemplated hereby, except for (A) the filing with the SEC of (i) a proxy
statement relating to the consideration of the Prison Realty Stockholder
Approval at a meeting of the stockholders of Prison Realty (the "Prison Realty
Stockholders' Meeting") duly called and convened to consider the approval of
this Agreement (such proxy statement, which shall also relate to the
consideration of the CCA Shareholder Approval, PMSI Shareholder Approval and the
JJFMSI Shareholder Approval at meetings of the shareholders of CCA, PMSI and
JJFMSI (the "CCA Shareholders' Meeting," the "PMSI Shareholders' Meeting" and
the "JJFMSI Shareholders' Meeting", respectively) duly called and convened to
consider the approval of this Agreement and a prospectus with regard to the
issuance of Prison Realty Stock in the Merger, as amended or supplemented from
time to time, the "Proxy Statement-Prospectus") and (ii) such reports under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), as may be required in connection
with this Agreement and the Merger and the other transactions contemplated
hereby, (B) the filing of the Articles of Merger with the Tennessee Secretary of
State and appropriate documents with the relevant authorities of other states in
which Prison Realty is qualified to do business, (C) filings required pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act"), (D) filings
necessary to satisfy the applicable requirements of state securities or "blue
sky" laws, (E) filings required under the rules and regulations of the New York
Stock Exchange (the "NYSE") and (F) filings required pursuant to Prison Realty's
leases and related agreements with Governmental Entities, which are set forth on
the Prison Realty Disclosure Schedule (collectively, the "Required Filings").
(e) SEC Documents; Financial Statements. Prison Realty has timely filed
all forms, reports, schedules, registration statements, definitive proxy
statements and other documents required to be filed by Prison Realty with the
SEC since January 1, 1999 (the "Prison Realty SEC Documents"). As of their
respective dates, the Prison Realty SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities Act") and the
Exchange Act, as the case may be, applicable to such Prison Realty SEC
Documents. None of the Prison Realty SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Prison
Realty and its Subsidiaries are not parties to or otherwise subject to any
contracts or other agreements that were
12
or are required to be filed as exhibits to, or otherwise disclosed in, the
Prison Realty Filed SEC Documents and have not been so filed or disclosed. The
financial statements of Prison Realty included in the Prison Realty SEC
Documents (the "Prison Realty Financial Statements") comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP") during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-Q of the SEC, or for normal year-end adjustments) and fairly present in all
material respects the consolidated financial position of Prison Realty and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. Except as set
forth in the Prison Realty Filed SEC Documents (including any item accounted for
in the financial statements contained in the Prison Realty Filed SEC Documents
or set forth in the notes thereto) and except for the effect of the contemplated
transactions under this Agreement and related agreements, since September 30,
1999, (i) neither Prison Realty nor any of its Subsidiaries has incurred any
claims, liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the aggregate, would have a
material adverse effect on Prison Realty (other than claims, liabilities or
obligations contemplated by this Agreement or expressly permitted to be incurred
pursuant to this Agreement), and (ii) Prison Realty and each of its Subsidiaries
have conducted their respective businesses only in the ordinary course
consistent with past practice.
(f) Information Supplied. None of the information supplied or to be
supplied by Prison Realty specifically for inclusion or incorporation by
reference in the Proxy Statement-Prospectus will, at the date it is first mailed
to stockholders of Prison Realty or at the time of the Prison Realty
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that in each case no representation or
warranty is made by Prison Realty with respect to statements made or
incorporated by reference therein based on information supplied by CCA, PMSI or
JJFMSI specifically for inclusion or incorporation by reference therein. The
Proxy Statement-Prospectus will comply as to form in all material respects with
the requirements of the Exchange Act and the Securities Act, except that in each
case no representation or warranty is made by Prison Realty with respect to
statements made or incorporated by reference therein based on information
supplied by CCA, PMSI or JJFMSI for inclusion or incorporation by reference
therein. If at any time prior to the date of the Prison Realty Stockholders'
Meeting, any event with respect to Prison Realty, or with respect to information
supplied by Prison Realty specifically for inclusion in the Proxy
Statement-Prospectus, shall occur which is required to be described in an
amendment of, or supplement to, the Proxy Statement-Prospectus, such event shall
be so described by Prison Realty.
(g) Registration Statement. The registration statement of Prison Realty
to be filed with the SEC with respect to the offering of Prison Realty Stock in
connection with the Merger
13
(the "Registration Statement") and any amendments or supplements thereto will,
when filed, comply as to form in all material respects with the applicable
requirements of the Securities Act. At the time the Registration Statement or
any amendment or supplement thereto becomes effective and at the Effective Time,
the Registration Statement, as amended or supplemented, if applicable, shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
contained therein not misleading. The foregoing representations and warranties
will not apply to statements or omissions included in the Registration Statement
or any amendment or supplement thereto based upon information furnished by CCA,
PMSI or JJFMSI for use therein.
(h) Absence of Certain Changes or Events. Except for the effect of the
contemplated transactions under this Agreement and related agreements,
subsequent to September 30, 1999, neither Prison Realty nor any Subsidiary has
sustained any material loss or interference with its business or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, which is not disclosed in the Prison Realty Disclosure Schedule; and
subsequent to the respective dates as of which information is given in the
Prison Realty Filed SEC Documents, (i) neither Prison Realty nor any Subsidiary
has incurred any material liabilities or obligations, direct or contingent, or
entered into any transactions not in the ordinary course of business consistent
with past practice, and (ii) there has not been any issuance of options,
warrants or rights to purchase Prison Realty Stock or any interests therein, or
any adverse change, in the general affairs, management, business, prospects,
financial position, net worth or results of operations of Prison Realty or any
Subsidiary.
(i) Compliance with Laws; Litigation. Except as described in the Prison
Realty Disclosure Schedule or the Prison Realty Filed SEC Documents, there are
no claims, actions, suits, arbitration, grievances, proceedings or
investigations pending or, to Prison Realty's knowledge, threatened, against
Prison Realty or any Subsidiary, or any properties or rights of Prison Realty or
any Subsidiary, or any officers or directors of Prison Realty or any Subsidiary
in their capacity as such, by or before any Governmental Entity which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on Prison Realty or prevent, materially delay or intentionally
delay the ability of Prison Realty to consummate the transactions contemplated
hereby. Neither Prison Realty nor its Subsidiaries is subject to any judgment,
order or decree which could reasonably be expected to result in a material
adverse effect.
Prison Realty and its Subsidiaries have at all times operated and
currently operate their business in conformity in all material respects with all
applicable statutes, common laws, ordinances, decrees, orders, rules and
regulations of Governmental Entities. Prison Realty and each of its Subsidiaries
has all licenses, approvals or consents to operate its businesses in all
locations in which such businesses are currently being operated, and to its
knowledge is not aware of any existing or imminent matter which may materially
adversely impact its operations or business prospects other than as specifically
disclosed in the Prison Realty Filed SEC
14
Documents or the Prison Realty Disclosure Schedule. None of Prison Realty or its
Subsidiaries have failed to file with the applicable regulatory authorities any
material statements, reports, information or forms required by all applicable
laws, regulations or orders; all such filings or submissions were in material
compliance with applicable laws when filed, and no material deficiencies have
been asserted by any regulatory commission, agency or authority with respect to
such filings or submissions. None of Prison Realty or its Subsidiaries have
failed to maintain in full force and effect any material licenses, registrations
or permits necessary or proper for the conduct of its business, or received any
notification that any revocation or limitation thereof is threatened or pending,
and there is not to the knowledge of Prison Realty pending any change under any
law, regulation, license or permit which would materially adversely affect the
business, operations, property or business prospects of Prison Realty. None of
Prison Realty or its Subsidiaries have received any notice of violation of or
been threatened with a charge of violating or are under investigation with
respect to a possible violation of any provision of any law, regulation or
order. Neither Prison Realty nor any of its Subsidiaries has at any time (i)
made any unlawful contribution to any candidate for domestic or foreign office
or failed to disclose fully any contribution in violation of law or (ii) made
any payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
(j) Taxes.
(i) Prison Realty has timely filed (or there have been filed
on its behalf) all Tax Returns required to be filed by it under applicable law,
and all such Tax Returns were and are true, complete and correct in all material
respects. Except to the extent adequately reserved for in accordance with GAAP
and reflected on the most recent balance sheets of Prison Realty contained in
the Prison Realty Filed SEC Documents, all Taxes due and payable by Prison
Realty have been timely paid in full.
(ii) There are no Tax liens upon the assets of Prison Realty
except liens for Taxes not yet due.
(iii) Prison Realty has complied with the provisions of the
Code relating to the withholding of Taxes, as well as similar provisions under
any other laws, and has, within the time and in the manner prescribed by law,
withheld, collected and paid over to the proper governmental authorities all
amounts required.
(iv) No audits or other administrative proceedings or court
proceedings are presently pending or, to the knowledge of Prison Realty,
asserted with regard to any Taxes or Tax Returns of Prison Realty.
15
(v) Prison Realty has not received a written ruling of a
taxing authority relating to Taxes or entered into a written and legally binding
agreement with a taxing authority relating to Taxes with any taxing authority.
(vi) Prison Realty has not requested any extension of time
within which to file any Tax Return, which Tax Return has not since been filed.
(vii) Prison Realty has not agreed to and is not required to
make any adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision) by reason of any change in any accounting method of Prison Realty,
and there is no application pending with any taxing authority requesting
permission for any changes in any accounting method of Prison Realty. To the
knowledge of Prison Realty, the Internal Revenue Service (the "IRS") has not
proposed any such adjustment or change in accounting method.
(viii) Prison Realty has not joined in the filing of a
consolidated return for federal income tax purposes. Prison Realty is not and
has never been subject to the provisions of Section 1503(f) of the Code.
(ix) Prison Realty is not a party to any agreement providing
for the allocation or sharing of Taxes or indemnification by Prison Realty of
any other person in respect of Taxes.
(x) Prison Realty is not a party to any agreement, contract,
or arrangement that would result, individually or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code.
(xi) To the knowledge of Prison Realty, Prison Realty does not
have, nor has it ever had, any income which is includable in computing the
taxable income of a United States person (as determined under Section 7701 of
the Code) under Section 951 of the Code. To the knowledge of Prison Realty, none
of the Subsidiaries of Prison Realty is or has ever been a "passive foreign
investment company" within the meaning of Section 1297 of the Code. To the
knowledge of Prison Realty, Prison Realty is not and never has been a "personal
holding company" within the meaning of Section 542 of the Code. To the knowledge
of Prison Realty, there are no gain recognition agreements, within the meaning
of Treasury Regulation 1.367(a)-8 or any predecessor provision, between Prison
Realty, on one hand, and a stockholder of Prison Realty, on the other. There is
no pending or, to the knowledge of Prison Realty, threatened, action, proceeding
or investigation by any taxing authority for assessment or collection of Taxes
with respect to Prison Realty in any jurisdiction where Prison Realty has not
filed a Tax Return. All dealings and arrangements between and among Prison
Realty and its Subsidiaries are at arm's length and consistent with arm's length
dealings and arrangements between or among unrelated, uncontrolled taxpayers.
(xii) Each Subsidiary which is a partnership, joint venture or
limited liability company has been treated since its formation, and continues to
be treated for federal income tax
16
purposes, as a partnership or as a disregarded entity, and not as a corporation
or as an association taxable as a corporation.
(xiii) For purposes of this Section 3.01(j), other than
Section 3.01(j)(xii), all representations and warranties with respect to Prison
Realty are deemed to include and to apply to each of its Subsidiaries and
predecessors (and the Subsidiaries of such predecessors). For purposes of this
Section 3.01(j), the term "predecessors" shall include, without limitation,
Corrections Corporation of America, a Tennessee corporation, and CCA Prison
Realty Trust, a Maryland real estate investment trust ("Old Prison Realty"),
which entities merged with and into Prison Realty on December 31, 1998 and
January 1, 1999, respectively.
(xiv) For each of its taxable years, Old Prison Realty was
organized, operated and duly qualified as a REIT under Section 856 of the Code.
(xv) As used in this Agreement, (A) the term "Taxes" means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal property, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties (civil or criminal) on or additions to any such
taxes, and (B) the term "Tax Return" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, combined or consolidated returns.
(k) No Defaults. Except for violations or defaults which, individually
or in the aggregate, would not have a material adverse effect, neither Prison
Realty nor any of its Subsidiaries is in violation or default under any
provision of its charter, by-laws, partnership agreements or other governing or
organizational documents, or is in breach of or default with respect to any
provision of any note, bond, agreement, judgment, decree, order, mortgage, deed
of trust, lease, franchise, license, indenture, permit or other instrument to
which it is a party or by which it or any of its properties are bound; and there
does not exist any state of facts which would constitute an event of default on
the part of any of Prison Realty or its Subsidiaries as defined in such
documents which, with notice or lapse of time or both, would constitute a
default. Neither Prison Realty nor any of its Subsidiaries is a party to any
contract (other than leases) containing any covenant restricting its ability to
conduct its business as currently conducted except for any such covenants that
would not, individually or in the aggregate, have a material adverse effect on
Prison Realty.
(l) Properties.
(i) Prison Realty Real Property. For purposes of this
Agreement, "Prison Realty Permitted Liens" means (a) mechanics', carriers',
workers', repairers', materialmen's, warehousemen's and other similar Liens
arising or incurred in the ordinary course of business for
17
sums not yet due and payable and such Liens as are being contested by Prison
Realty in good faith, (b) Liens for current Taxes not yet due or payable, (c)
any covenants, conditions, restrictions, reservations, rights, Liens, easements,
encumbrances, encroachments and other matters affecting title which are shown as
exceptions on Prison Realty's title insurance policies and/or title commitments
or reports which have been made available to the Target Companies, and (d) any
other covenants, conditions, restrictions, reservations, rights, non-monetary
Liens, easements, encumbrances, encroachments and other matters affecting title
which would not individually or in the aggregate, be reasonably expected to have
a material adverse effect. "Prison Realty Leases" means the real property
leases, subleases, licenses and use or occupancy agreements pursuant to which
Prison Realty or any of its Subsidiaries is the lessee, sublessee, licensee,
user or occupant of real property other than the Prison Realty Owned Real
Property, or interests therein necessary for the conduct of, or otherwise
material to, the business of Prison Realty and its Subsidiaries as it is
currently conducted. "Prison Realty Leased Real Property" means all interests in
real property pursuant to the Prison Realty Leases. "Prison Realty Owned Real
Property" means the real property owned in fee by Prison Realty and its
Subsidiaries necessary for the conduct of, or otherwise material to, the
business of Prison Realty and its Subsidiaries as it is currently conducted.
"Prison Realty Real Property" means, collectively, the Prison Realty Owned Real
Property and the Prison Realty Leased Real Property. The Prison Realty Filed SEC
Documents describe all material Prison Realty Real Property. Except as disclosed
therein, or in the title insurance policies relating to the Prison Realty Real
Property or in the Prison Realty Disclosure Schedule, each of Prison Realty and
its Subsidiaries has good, valid and marketable title to the Prison Realty Real
Property free of all Liens, in each case except Prison Realty Permitted Liens.
Except as set forth in Section 3.01(l)(i) of the Prison Realty Disclosure
Schedule, there are no outstanding contracts for the sale of any of the Prison
Realty Real Property, except those contracts relating to Prison Realty Real
Property the value in respect of which does not exceed $5,000,000 individually
or $15,000,000 in the aggregate. Except for such exceptions as would not, in the
aggregate, have a material adverse effect, (a) each Prison Realty Lease is valid
and binding upon Prison Realty and its Subsidiaries and in full force and effect
and grants the lessee under the Prison Realty Lease the exclusive right to use
and occupy the premises, and (b) either Prison Realty or its Subsidiaries has
good and valid title to the leasehold estate or other interest created under the
Prison Realty Leases. No non-monetary defaults exist under the Prison Realty
Leases which, individually or in the aggregate, would have a material adverse
effect. The use and operation of the Prison Realty Real Property in the conduct
of the business of Prison Realty and its Subsidiaries does not violate any
instrument of record or agreement affecting the Prison Realty Real Property,
except for such violations that, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect. Valid policies of
title insurance have been issued insuring Prison Realty's or, if applicable, its
Subsidiary's, fee simple title to the Prison Realty Owned Real Property owned by
it, subject only to Prison Realty Permitted Liens, except where the failure of
such policies to be in full force and effect would not reasonably be expected,
in the aggregate, to have a material adverse effect. To the best knowledge of
Prison Realty, such policies are, at the date hereof, in full force and effect,
except where the failure to have such valid policies of title insurance would
not reasonably be expected, in the aggregate, to have a material adverse effect.
To the best
18
knowledge of Prison Realty, no material claim has been made against any such
policy. Except as provided in Schedule 3.01(l) of the Prison Realty Disclosure
Schedule, Prison Realty and its Subsidiaries have no knowledge (a) that any
certificate, permit or license from any Governmental Entity having jurisdiction
over any of the Prison Realty Real Property or any agreement, easement or other
right which is necessary to permit the lawful use and operation of the buildings
and improvements on any of the Prison Realty Real Property or which is necessary
to permit the lawful use and operation of all driveways, roads and other means
of egress and ingress to and from any of the Prison Realty Real Property has not
been obtained and is not in full force and effect, or of any pending threat of
modification or cancellation of any of the same which would have a material
adverse effect, (b) of any written notice of any violation of any federal, state
or municipal law, ordinance, order, regulation or requirement having a material
adverse effect issued by any Governmental Entity, (c) of any structural defects
relating to any Prison Realty Real Property which would have a material adverse
effect, (d) of any Prison Realty Real Property whose building systems are not in
working order so as to have a material adverse effect, or (e) of any physical
damage to any Prison Realty Real Property which would have a material adverse
effect for which there is no insurance in effect covering the cost of the
restoration. "Prison Realty Space Lease" means each lease or other right of
occupancy affecting or relating to a property in which Prison Realty or its
Subsidiaries (or an entity in which it directly or indirectly has an interest)
is the landlord, either pursuant to the terms of a lease agreement or as
successor to any prior landlord. No default exists under any Prison Realty Space
Lease, except for such defaults as would, individually or in the aggregate, not
reasonably be expected to have a material adverse effect.
(ii) Improvements Under Construction. With respect to those
Improvements (as defined herein) being constructed or under development and
located on any Prison Realty Real Property as set forth in the Prison Realty
Disclosure Schedule, to the knowledge of Prison Realty: (a) the budget for the
construction of the Improvements fairly and accurately reflects Prison Realty's
good faith estimate of the costs and expenses shown thereon reasonably necessary
to develop and construct the Improvements in accordance with the plans and
specifications therefor, and Prison Realty has strictly adhered to said budget
in all material respects and has permitted no material deviations from said
budget or the plans and specifications for the Improvements; (b) the plans and
specifications for the Improvements have been approved by all applicable
Governmental Entities having jurisdiction over the Prison Realty Real Property,
the development and construction of the Improvements and the use and occupancy
thereof for its intended purposes, and/or any utility services to the Prison
Realty Real Property; (c) all utility services necessary for the development and
construction of the Improvements and the use and occupancy thereof for its
intended purposes are available through public or private easements or
rights-of-way at the boundaries of the Prison Realty Real Property, including,
without limitation, sanitary sewer, electricity, gas, water, telephone, and
storm water drainage; (d) all roads necessary for ingress and egress to the
Prison Realty Real Property, and for the full utilization of the Prison Realty
Real Property for its intended purposes, have either been completed pursuant to
public or private easements, or the necessary rights-of-way therefor have been
dedicated to public use and accepted by the appropriate
19
Governmental Entity; (e) all building permits, curb cuts, sewer and water taps,
and other permits, licenses, approvals, authorizations and consents required for
the development and construction of the Improvements have been obtained; (f) the
plans and specifications for the Improvements, the development and construction
of the Improvements pursuant thereto, and the use and occupancy of the
Improvements for their respective intended purposes comply and will comply with
all applicable zoning ordinances, building regulations, restrictive covenants
and governmental laws, rules, regulations and ordinances, and comply and will
comply with all applicable requirements, standards and regulations of
appropriate supervising boards of fire underwriters and similar agencies,
authorities or boards; (g) Prison Realty has: (A) diligently pursued the
development, construction and installation of the Improvements; and (B)
performed such duties as may be necessary to complete the development,
construction and installation of the Improvements in accordance with the plans
and specifications and without Liens, claims or assessments, actual or
contingent, asserted against Prison Realty Real Property for any material, labor
or other items furnished in connection therewith, and all in full compliance
with all construction, use, building, zoning and other similar laws, ordinances,
rules, regulations, codes and restrictions of any applicable Governmental
Entities or authorities or otherwise applicable thereto; (h) Prison Realty has
complied with all laws, ordinances, rules, regulations, judgments, orders,
injunctions, writs and decrees of any government or political subdivision or
agency thereof, or any court or similar entity established by any of them,
applicable to the construction of the Improvements, and has paid when due all
taxes and assessments upon the Improvements or Prison Realty Real Property, and
all claims for labor or materials, rents, and other obligations that, if unpaid,
will or might become a Lien against the Improvements or the Prison Realty Real
Property; (i) Prison Realty has maintained, in sufficient amount, and in
satisfactory form and substance, and with satisfactory insurers: (A) builder's
risk insurance, all-risk nonreporting completed value form, insuring the
Improvements against fire, theft, extended coverage, vandalism, and such other
hazards in full force and effect at all times until the completion of
construction of all of the Improvements; and (B) such other insurance, in such
amounts and for such terms, as may from time to time be reasonably required
insuring against such other casualties or losses which at the time are commonly
insured against in the case of premises similarly situated; and (j) the
Improvements have been constructed in accordance with the plans and
specifications therefor, and in compliance with all laws, ordinances, rules and
regulations applicable thereto, and in a good and workmanlike manner. For the
purposes of this Agreement "Improvements" shall mean all buildings,
improvements, structures and fixtures now or on the Closing Date located on the
Prison Realty Real Property, including, without limitation, landscaping, parking
lots and structures, roads, drainage and all above ground and underground
utility structures, equipment systems and other so-called "infrastructure"
improvements.
(m) Environmental Matters.
(i) To the knowledge of Prison Realty, the Prison Realty Real
Property and the Improvements thereon (the "Prison Realty Facilities") are
presently operated in compliance in all material respects with all Environmental
Laws (as defined below).
20
(ii) There are no Environmental Laws requiring any material
remediation, clean up, repairs, constructions or capital expenditures (other
than normal maintenance) with respect to the Prison Realty Facilities.
(iii) There are no (A) notices of any violation or alleged
violation of any Environmental Laws relating to the Prison Realty Facilities or
their uses that have been received by Prison Realty, or (B) writs, injunctions,
decrees, orders or judgments outstanding, or any actions, suits, claims,
proceedings or investigations pending, or, to the knowledge of Prison Realty,
threatened, relating to the ownership, use, maintenance or operation of the
Prison Realty Facilities.
(iv) To the knowledge of Prison Realty, there are no past,
present or anticipated future events, conditions, circumstances, activities,
practices, incidents, actions, or plans relating to Prison Realty and its
Subsidiaries that may interfere with or prevent compliance or continued
compliance with applicable Environmental Laws or which may give rise to any
liability under the Environmental Laws.
(v) All material permits and licenses required under any
Environmental Laws in respect of the operations of the Prison Realty Facilities
have been obtained, and the Prison Realty Facilities and Prison Realty are in
compliance, in all material respects, with the terms and conditions of such
permits and licenses.
(vi) For purposes of this Agreement, "Environmental Laws" mean
all applicable statutes, regulations, rules, ordinances, codes, licenses,
permits, orders, demands, approvals, authorizations and similar items of all
governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial, administrative and regulatory decrees,
judgments and orders relating to the protection of human health, the
environment, or worker or public health and safety as in effect as of the date
hereof, including but not limited to those pertaining to reporting, licensing,
permitting, investigation and remediation of emissions, discharges, releases or
threatened releases of Hazardous Materials (as defined herein), substances,
pollutants, contaminants or hazardous or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water, ground
water or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, including by way of illustration and not by
way of limitation, (A) the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Sections 960111 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Sections 69011 et seq.), the
Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. Sections 1251), the Safe Drinking Water
Act (42 U.S.C. Sections 300f et seq.), the Toxic Substances Control Act
(15 U.S.C. Sections 2601 et seq.), the Endangered Species Act (16 U.S.C.
Sections 1531 et seq.), the Emergency Planning and Community Right-to-Know
Act of 1986 (42 U.S.C. Sections 11001 et seq.) and (B) analogous state and
local provisions.
21
(vii) For purposes of this Agreement, "Hazardous Material"
means any chemical substance:
(A) the presence of which requires investigation or
remediation under any federal, state or local statute, regulation, ordinance,
order, action or policy, administrative request or civil complaint under any of
the foregoing or under common law; or
(B) which is defined as a "hazardous waste" or
"hazardous substance" under any federal, state or local statute, regulation or
ordinance or amendments thereto as in effect as of the date hereof, or as
hereafter amended, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections
9601 et seq.) and/or the Resource Conservation and Recovery Act (42 U.S.C.
Sections 6901 et seq.); or
(C) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of the United States, or any state or any political
subdivision thereof having or asserting jurisdiction over any of the Prison
Realty Facilities; or
(D) the presence of which on any of the Prison Realty
Facilities causes a nuisance upon such facilities or to adjacent properties or
poses a hazard to the health or safety of persons on or about any of the Prison
Realty Facilities; or
(E) the presence of which on adjacent properties
constitutes a trespass by any owner or operator of the Prison Realty Facilities;
or
(F) which contains gasoline, diesel fuel or other
petroleum hydrocarbons, polychlorinated biphenyls (PCBs) or asbestos or
asbestos-containing materials or urea formaldehyde foam insulation, or
lead-based paint, solder or other building materials; or
(G) radon gas.
(n) Benefit Plans.
(i) All "employee benefit plans" (as defined in Section 3(3)
of ERISA) and all other compensation, bonus, pension, profit sharing, deferred
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, employment, change-in-control, welfare, collective bargaining,
severance, disability, death benefit, hospitalization and medical plans,
agreements, arrangements or understandings that are maintained or contributed to
(or previously contributed to) for the benefit of any current or former
employee, officer or director of Prison Realty or any of its Subsidiaries and
with respect to which Prison Realty or any of its Subsidiaries would reasonably
be expected to have direct or contingent liability are defined as
22
the "Prison Realty Benefit Plans." Prison Realty has heretofore delivered or
made available to CCA, PMSI and JJFMSI true and complete copies of all Prison
Realty Benefit Plans and, with respect to each Prison Realty Benefit Plan, true
and complete copies of the following documents: the most recent actuarial
report, if any; the most recent annual report, if any; any related trust
agreement, annuity contract or other funding instrument, if any; the most recent
determination letter, if any; and the most recent summary plan description, if
any.
(ii) Except as disclosed in Section 3.01(n) of the Prison
Realty Disclosure Schedule: (A) none of the Prison Realty Benefit Plans is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA or is
otherwise subject to Title IV of ERISA; (B) none of the Prison Realty Benefit
Plans promises or provides retiree medical or life insurance benefits to any
person; (C) neither Prison Realty nor any of its Subsidiaries has any obligation
to adopt or has taken any corporate action to adopt, any new Prison Realty
Benefit Plan or, except as required by law, to amend any existing Prison Realty
Benefit Plan; (D) Prison Realty and its Subsidiaries are in compliance in all
material respects with and each Prison Realty Benefit Plan is and has been
administered in all material respects in compliance with its terms and the
applicable provisions of ERISA, the Code and all other applicable laws, rules
and regulations except for any failures to so administer any Prison Realty
Benefit Plan as would not have a material adverse effect on Prison Realty; (E)
each Prison Realty Benefit Plan that is intended to be qualified within the
meaning of Section 401(a) of the Code, to Prison Realty's knowledge, has been
determined by the IRS to be so qualified, and no circumstances exist that could
reasonably be expected to result in the revocation of any such determination;
(F) each Prison Realty Benefit Plan intended to provide for the deferral of
income, the reduction of salary or other compensation, or to afford other income
tax benefits, complies with the requirements of the applicable provisions of the
Code or other laws, rules and regulations required to provide such income tax
benefits; (G) no prohibited transactions (as defined in Section 406 or 407 of
ERISA or Section 4975 of the Code) have occurred for which a statutory exemption
is not available with respect to any Prison Realty Benefit Plan, and which could
give rise to liability on the part of Prison Realty, any of its Subsidiaries,
any Prison Realty Benefit Plan, or any fiduciary, party in interest or
disqualified person with respect thereto that would be material to Prison Realty
or would be material to Prison Realty if it were its liability; (H) neither
Prison Realty nor any entity required to be treated as a single employer with
Prison Realty under Section 414 of the Code has any unsatisfied liability under
Title IV of ERISA that would have a material adverse effect on Prison Realty;
(I) other than funding obligations and benefits claims payable in the ordinary
course, to Prison Realty's knowledge, no event has occurred and no circumstance
exists with respect to any Prison Realty Benefit Plan that could give rise to
any material liability arising under the Code, ERISA or any other applicable
law, or under any indemnity agreement to which Prison Realty or any of its
Subsidiaries is a party, excluding liability relating to benefit claims and
funding obligations payable in the ordinary course, whether directly or by
reason of its affiliation with any entity required to be treated as a single
employer with Prison Realty under Section 414 of the Code; (J) as of the date
hereof there are no pending or, to the knowledge of the executive officers of
Prison Realty, threatened investigations, claims or lawsuits in respect of any
Prison Realty Benefit Plan that would have a material adverse effect on Prison
Realty; (K) other than continuation coverage
23
required to be provided under Section 4980B of the Code or Part 6 of Title I of
ERISA or otherwise as provided by state law, none of the Prison Realty Benefit
Plans that are "welfare plans," within the meaning of Section 3(1) of ERISA,
provides for any benefits with respect to current or former employees for
periods extending beyond their retirement or other termination of service; (L)
no amount payable pursuant to a Prison Realty Benefit Plan or any other plan,
contract or arrangement of Prison Realty would be considered an "excess
parachute payment" under Section 280G of the Code; and (M) no Prison Realty
Benefit Plan exists that could result in the payment to any current or former
employee, officer or director of Prison Realty any money or other property or
accelerate or provide any other rights or benefits as a result of the
transactions contemplated by this Agreement which would constitute an excess
parachute payment within the meaning of Section 280G of the Code.
(o) Material Contracts. There are no contracts or other documents
required by the Securities Act to be described in or to be filed as exhibits to
the Prison Realty Filed SEC Documents which have not been described or filed as
required. All such contracts to which Prison Realty or any of its Subsidiaries
is a party have been duly authorized, executed and delivered by Prison Realty or
such Subsidiary, constitute valid and binding agreements of Prison Realty or
such Subsidiary and are enforceable against Prison Realty or such Subsidiary in
accordance with the terms thereof. Each of Prison Realty and its Subsidiaries
has performed all material obligations required to be performed by it, and is
neither in default in any material respect nor has it received notice of any
default or dispute under, any such contract or other material instrument to
which it is a party or by which its property is bound or affected. To the best
knowledge of Prison Realty, no other party under any such contract or other
material instrument to which it or any of its Subsidiaries is a party is in
default in any material respect thereunder.
(p) No Undisclosed Liabilities. Except (a) as set forth in the Prison
Realty Filed SEC Documents, (b) as set forth in Section 3.01(p) of the Prison
Realty Disclosure Schedule, (c) as incurred in the ordinary course of the
business of Prison Realty subsequent to September 30, 1999 which would,
individually or in the aggregate, not have, or be reasonably expected not to
have, a material adverse effect, (d) for any expenses incurred in connection
with transactions contemplated by this Agreement or for liabilities or
obligations relating to contractual obligations, indebtedness, litigation or
other matters which are covered by other representations and warranties in this
Agreement or otherwise identified in the Prison Realty Disclosure Schedule,
neither Prison Realty nor any of its Subsidiaries has any liabilities or
obligations (direct or indirect, contingent or fixed, known or unknown, matured
or unmatured accrued or unaccrued), whether arising out of contract, tort,
statute or otherwise, and whether or not required by GAAP to be reflected on or
in footnotes to the Prison Realty Financial Statements.
(q) Investment Company Act. Neither Prison Realty nor any of the
Subsidiaries is (i) an "investment company" or a company "controlled" by an
investment company within the meaning of the Investment Company Act of 1940, as
amended, (ii) a "holding company" or a "subsidiary company" of a holding company
or an "affiliate" thereof within the meaning of the
24
Public Utility Holding Company Act of 1935, as amended, or (iii) subject to
regulation under the Federal Power Act or the Interstate Commerce Act.
(r) Reporting. Prison Realty is subject to Section 13 of the Exchange
Act and is in compliance in all material respects with the provisions of such
section.
(s) Labor Matters. Except as set forth in Section 3.01(s) of the Prison
Realty Disclosure Schedule: (i) neither Prison Realty nor its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization; (ii) to the
knowledge of Prison Realty, no union claims to represent the employees of Prison
Realty and its Subsidiaries currently exist; (iii) none of the employees of
Prison Realty or its Subsidiaries is represented by any labor organization and
Prison Realty has no knowledge of any current union organizing activities among
the employees of Prison Realty or its Subsidiaries, nor does any question
concerning representation exist concerning such employees; neither Prison Realty
nor its Subsidiaries is the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it to bargain with any
labor organization as to wages or conditions of employment; (iv) there is no
strike, work stoppage, lockout or other labor dispute involving Prison Realty or
its Subsidiaries pending or threatened; (v) no action, suit, complaint, charge,
arbitration, inquiry, proceeding or investigation by or before any Governmental
Entity brought by or on behalf of any employee, prospective employee, former
employee, retiree, labor organization or other representative of its employees
is pending or, to the knowledge of Prison Realty, threatened, against Prison
Realty or its Subsidiaries; (vi) to the knowledge of Prison Realty, no grievance
is threatened against Prison Realty or its Subsidiaries; (vii) neither Prison
Realty nor its Subsidiaries is a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Entity relating to employees or
employment practices; (viii) there are no written personnel policies, rules or
procedures applicable to employees of Prison Realty or its Subsidiaries, other
than those set forth in Section 3.01(s) of the Prison Realty Disclosure
Schedule, true and correct copies of which have heretofore been delivered or
made available to CCA, PMS and JJFMSI; (ix) Prison Realty and its Subsidiaries
are, and have at all times been, in material compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, and are not
engaged in any unfair labor practices as defined in the National Labor Relations
Act or other applicable law, ordinance or regulation; (x) since the enactment of
the Worker Adjustment and Retraining Notification Act (the "WARN Act"), neither
Prison Realty nor its Subsidiaries has effectuated (A) a "plant closing" (as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of any
of Prison Realty or its Subsidiaries; or (B) a "mass layoff" (as defined in the
WARN Act) affecting any site of employment or facility of any of Prison Realty
or its Subsidiaries, in either case, other than in substantial compliance with
the WARN Act; nor has Prison Realty or its Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state, local or foreign law or
regulation; and
25
(xi) neither Prison Realty nor any of its Subsidiaries is aware that it has any
liability or potential liability under the Multi-Employer Pension Plan Act.
(t) Insurance. Prison Realty and its Subsidiaries maintain primary,
excess and umbrella insurance of types and amounts customary for their business
against general liability, fire, workers' compensation, products liability,
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect and with
respect to property insurance for assets for which it is customary to have
replacement cost coverage or there are coinsurance provisions, the amount of
such insurance is sufficient to provide for such coverage or to prevent the
application of the coinsurance provision. Section 3.01(t) of the Prison Realty
Disclosure Schedule sets forth a complete list of the insurance policies
maintained by Prison Realty and its Subsidiaries.
(u) Affiliate Transactions. Except as set forth in Section 3.01(u) of
the Prison Realty Disclosure Schedule, there is no transaction and no
transaction is now proposed, to which Prison Realty or its Subsidiaries is or is
to be a party in which any current stockholder (holding in excess of 5% of the
Prison Realty Common Stock or any securities convertible into or exchangeable
for Prison Realty Common Stock), general partner, limited partner (holding in
excess of 5% of the limited partnership interests), director or executive
officer of Prison Realty or its Subsidiaries has a direct or indirect interest.
(v) Internal Accounting Controls. Prison Realty's system of internal
accounting controls is sufficient to meet the broad objectives of internal
accounting controls insofar as those objectives pertain to the prevention or
detection of errors or irregularities in amounts that would be material in
relation to Prison Realty's financial statements.
(w) Board Recommendation. Prior to the date hereof with respect to this
Agreement, the Board of Directors of Prison Realty, at a meeting duly called and
held, by the majority vote of the directors present at such meeting and voting,
(i) determined that such Agreement and the Merger and the other transactions
contemplated hereby or thereby are fair to and in the best interests of the
shareholders of Prison Realty, (ii) adopted such Agreement and approved the
Merger and (iii) approved the delivery of the CCA Merger Consideration, PMSI
Merger Consideration and the JJFMSI Merger Consideration to the holders of CCA
Certificates, PMSI Certificates and JJFMSI Certificates, respectively, pursuant
to the terms and conditions of this Agreement.
(x) Maryland Law on Business Combinations and Control Shares. None of
the parties to the Merger is an interested stockholder (as defined in Section
3-601 of the Maryland General Corporation Law (the "MGCL")) of Prison Realty or
an affiliate (as defined in Section 3-601 of the MGCL) of an interested
stockholder who was not exempted from the provisions of Section 3-602 of the
MGCL prior to the most recent date on which such person became an interested
stockholder. None of the shares of Prison Realty Stock issued in the Merger
constitute "control shares" as such term is defined in Section 3-701 of the
MGCL. The approval of the
26
Merger, and the issuance of the Prison Realty Stock in connection therewith, by
the Board of Directors of Prison Realty referred to in Section 3.01(w)
constitutes approval of the Merger and the issuance of the Prison Realty Stock
and related transactions for purposes of Sections 3-602 and 3-702 of the MGCL.
(y) Brokers. No broker, investment banker, financial advisor or other
person, other than Merrill Lynch & Co. ("Merrill Lynch") and Wasserstein Perella
& Co., Inc. ("Wasserstein Perella"), the fees and expenses of which will be paid
by Prison Realty, are entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Prison Realty.
Prison Realty's arrangements with Merrill Lynch and Wasserstein Perella have
been disclosed to CCA, PMSI and JJFMSI prior to the date hereof.
(z) Opinion of Financial Advisor. Prison Realty has received the
opinion of Merrill Lynch, dated as of the date hereof, to the effect that the
sale by Prison Realty of its securities to a third-party investor, is fair to
Prison Realty and the stockholders of Prison Realty from a financial point of
view (the "Merrill Lynch Prison Realty Opinion").
(aa) Share Ownership. Prison Realty owns 981,393 shares of the issued
and outstanding Class B Common Stock of CCA, 100,000 shares of the issued and
outstanding PMSI Class B Common Stock and 100,000 shares of the issued and
outstanding JJFMSI Class B Common Stock. All of such shares shall be canceled in
connection with the Merger as set forth in Section 2.01 (a) hereof.
SECTION 3.02 Representations and Warranties of the Acquisition
Companies. Each of the Acquisition Companies hereby represents and warrants,
severally and not jointly and with respect to itself only, to each of CCA, PMSI
and JJFMSI as follows:
(a) Organization and Authority. The Acquisition Company is a
corporation duly incorporated and validly existing in good standing under the
laws of the State of Tennessee with full corporate power and authority to own
its properties and conduct its business as now conducted and is duly qualified
or authorized to do business and is in good standing in all jurisdictions where
the failure to so qualify could have a material adverse effect. The Acquisition
Company does not have a direct or indirect ownership interest in any subsidiary
corporation, joint venture, partnership or other entity. The Acquisition Company
has made available to CCA, PMSI and JJFMSI complete and correct copies of its
charter and bylaws, in each case as amended to the date of this Agreement. The
Acquisition Company is a newly-formed entity and, except for activities incident
to the Merger and the transactions contemplated hereby, the Acquisition Company
has not engaged in any business activity of any type or kind whatsoever prior to
the date hereof.
27
(b) Capital Structure. The authorized capital stock of the Acquisition
Company consists of 10,000 shares of common stock, no par value per share, of
which 1,000 shares are issued and outstanding.
(c) Authorization. The Acquisition Company has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Acquisition
Company. This Agreement has been duly executed and delivered by the Acquisition
Company and constitutes a valid and binding obligation of the Acquisition
Company, enforceable against the Acquisition Company in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, fraudulent transfer and other similar laws from time to
time in effect. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any breach or violation of, or default (with or without notice or
lapse of time or both) under, or result in the termination of, or accelerate the
performance required by, or give rise to a right of termination, cancellation or
acceleration of any obligation under, or the creation of a Lien pursuant to, (i)
any provision of the charter (or similar organizational documents) or bylaws of
the Acquisition Company or (ii) subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in the following sentence, any loan or credit agreement, note,
mortgage, indenture, lease, or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Acquisition Company or its
respective properties or assets, in any case under this clause (ii) which would,
individually or in the aggregate, have a material adverse effect on the
Acquisition Company. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to the Acquisition Company in connection with the execution and
delivery of this Agreement by the Acquisition Company or the consummation by the
Acquisition Company of the transactions contemplated hereby, the failure of
which to be obtained or made would, individually or in the aggregate, have a
material adverse effect on the Acquisition Company or would prevent or
materially delay the consummation of the transactions contemplated hereby,
except for (A) the filing of the Articles of Merger with the Tennessee Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Acquisition Company is qualified to do business, (B) filings
required pursuant to the HSR Act, and (C) filings necessary to satisfy the
applicable requirements of state securities or "blue sky" laws.
(d) Information Supplied. None of the information supplied or to be
supplied by the Acquisition Company for inclusion or incorporation by reference
in the Proxy-Statement Prospectus will, at the date it is first mailed to
stockholders of Prison Realty or at the time of the Prison Realty Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that in
28
each case no representation or warranty is made by the Acquisition Company with
respect to statements made or incorporated by reference therein based on
information supplied by CCA, PMSI or JJFMSI specifically for inclusion or
incorporation by reference therein.
(e) Certain Agreements. The Acquisition Company is not in default under
any material agreement, commitment, lease or other instrument to which it or any
of its properties is subject, and there has not occurred any event that, with
the giving of notice or the lapse of time or both, would constitute such a
default by the Acquisition Company or, to the knowledge of the executive
officers of the Acquisition Company, a default thereunder by any other party
thereto, except in all cases where such defaults, individually or in the
aggregate, would not have a material adverse effect on the Acquisition Company.
The Acquisition Company is not in breach in any material respect under its
charter, bylaws or other organizational documents.
(f) Board Recommendation. Prior to the date hereof with respect to this
Agreement, the Board of Directors of the Acquisition Company, at a meeting duly
called and held, by the majority vote of the directors present at such meeting
and voting, (i) determined that such Agreement and the Merger and the other
transactions contemplated hereby or thereby are fair to and in the best
interests of the shareholders of the Acquisition Company, (ii) adopted such
Agreement and approved the Merger and (iii) resolved to recommend that its
shareholders approve the Agreement and the Merger.
(g) Tennessee Business Combination Act. The approval of the Merger by
the Board of Directors of the Acquisition Company referred to in Section 3.02(f)
constitutes approval of the Merger for purposes of the TBCA and represents all
the actions necessary to ensure that Sections 48-103-201, et seq., of the TBCA
do not apply to the Merger.
SECTION 3.03 Representations and Warranties of CCA. Except as set forth
in the Prison Realty Filed SEC Documents or on the Disclosure Schedule delivered
by CCA to Prison Realty, PMSI and JJFMSI prior to the execution of this
Agreement (the "CCA Disclosure Schedule"), which CCA Disclosure Schedule
constitutes a part hereof and is true and correct in all material respects, CCA
represents and warrants to Prison Realty, the Acquisition Companies, PMSI and
JJFMSI as follows:
(a) Organization and Authority. CCA is duly formed and validly existing
and in good standing under the laws of the State of Tennessee with full power
and authority to own its properties and conduct its business as now conducted
and is duly qualified or authorized to do business and is in good standing in
all jurisdictions where the failure to so qualify could have a material adverse
effect on CCA. CCA has all requisite corporate power and authority, and has been
duly authorized by all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits of and from all public,
regulatory or governmental agencies and bodies, to own, lease and operate its
assets and properties and to conduct its business as it is now being conducted
and is duly qualified or licensed to do business in each jurisdiction in
29
which the failure to do so could have a material adverse effect upon the conduct
of its business or the ownership or leasing of property by it in such
jurisdiction.
(b) Subsidiaries.
(i) The only direct or indirect Subsidiaries of CCA are those
listed in Section 3.03(b) of the CCA Disclosure Schedule. Except for the
ownership interests set forth in Section 3.03(b) of the CCA Disclosure Schedule,
CCA does not own or control, directly or indirectly, a 50% or greater capital
stock interest in a corporation, a general partnership interest or a 50% or
greater limited partnership interest in a partnership, or a managing membership
interest or a 50% or greater membership interest in a limited liability company,
association or other entity or project.
(ii) Except for the entities listed in Section 3.03(b) of the
CCA Disclosure Schedule, CCA does not hold, directly or indirectly, any equity
interest or equity investment in any corporation, partnership, association or
other entity.
(iii) Except as set forth in Section 3.03(b) of the CCA
Disclosure Schedule, all of the issued and outstanding shares of capital stock
of, or other equity interests in, each Subsidiary of CCA have been validly
issued, are fully paid and nonassessable and are owned, directly or indirectly,
by CCA free and clear of any Liens and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating any Subsidiary of CCA to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
(iv) CCA's Subsidiaries do not own or operate or possess any
material assets, licenses, management contracts, or franchises or other rights
nor are such Subsidiaries liable with respect to any material indebtedness,
obligations, liabilities, or claims. For purposes of this section, "material"
means with respect to assets, licenses, management contracts, franchises or
rights of the Subsidiaries that the aggregate value of such items for the
Subsidiaries taken as a whole does not exceed 5.0% of the aggregate value of
such items for CCA and its Subsidiaries taken as a whole; and with respect to
indebtedness, obligations, liabilities, and claims of the Subsidiaries, that the
aggregate amount of such items for the Subsidiaries taken as a whole does not
exceed 5.0% of the aggregate amount of such items for CCA and its Subsidiaries
taken as a whole.
(c) Capital Structure. The authorized capital stock of CCA consists of
100,000,000 shares of CCA Class A Common Stock, 100,000,000 shares of CCA Class
B Common Stock and 50,000,000 shares of preferred stock, $0.01 par value per
share. At the close of business on November 30, 1999, (A) 9,349,061 shares of
CCA Class A Common Stock were outstanding,
30
(B) 981,393 shares of CCA Class B Common Stock were outstanding, (C) no shares
of preferred stock were outstanding and (D) warrants to acquire 546,729 shares
of CCA Class A Common Stock were outstanding. Other than as set forth above, at
the close of business on November 30, 1999, there were outstanding no shares of
CCA Common Stock or any other class or series of stock of CCA or options,
warrants or other rights to acquire shares of CCA Common Stock or any other
class or series of stock of CCA from CCA. No bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into or exchangeable for
securities having the right to vote) on any matters on which shareholders of CCA
may vote are issued or outstanding.
All outstanding shares of CCA Common Stock are duly authorized, validly
issued, fully paid and nonassessable, and will be delivered free and clear of
Liens and will not be in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities. Other than as set forth
above, and except for this Agreement and for certain contractual preemptive
rights granted to each of Prison Realty, Sodexho (as defined herein) and Baron,
there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements or undertakings of any kind to which CCA or any
Subsidiary of CCA is a party or by which CCA or any Subsidiary of CCA is bound
obligating CCA or any Subsidiary of CCA to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of CCA Common Stock or other
equity or voting securities of CCA or of any Subsidiary of CCA or obligating CCA
or any Subsidiary of CCA to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement or undertaking.
There are no outstanding obligations of CCA or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of CCA Common Stock or any of
its Subsidiaries and, to the knowledge of the executive officers of CCA, as of
the date hereof, no irrevocable proxies have been granted with respect to shares
of CCA Common Stock or equity of Subsidiaries of CCA.
(d) Authorization. CCA has all requisite power and authority to enter
into this Agreement and, subject to obtaining the CCA Shareholder Approval with
respect to the Merger, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of CCA, subject to obtaining CCA Shareholder Approval with
respect to the Merger. This Agreement has been duly executed and delivered by
CCA and constitutes a valid and binding obligation of CCA, enforceable against
CCA in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer and other
similar laws from time to time in effect. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any breach or violation of, or default
(with or without notice or lapse of time or both) under, or result in the
termination of, or accelerate the performance required by, or give rise to a
right of termination, cancellation or acceleration of any obligation under, or
the creation of a Lien pursuant to, (i) any provision of the charter (or similar
organizational documents) or bylaws of CCA or any Subsidiary of CCA or (ii)
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations,
31
declarations and filings referred to in the following sentence, any loan or
credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to CCA or any
Subsidiary of CCA or their respective properties or assets, in any case under
this clause (ii) which would, individually or in the aggregate, have a material
adverse effect on CCA. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to CCA or any Subsidiary of CCA in connection with the execution
and delivery of this Agreement by CCA or the consummation by CCA of the
transactions contemplated hereby, the failure of which to be obtained or made
would, individually or in the aggregate, have a material adverse effect on CCA
or would prevent or materially delay the consummation of the transactions
contemplated hereby, except for (A) the filing of the Articles of Merger with
the Tennessee Secretary of State and appropriate documents with the relevant
authorities of other states in which CCA is qualified to do business, (B)
filings required pursuant to the HSR Act, (C) filings necessary to satisfy the
applicable requirements of state securities or "blue sky" laws, and those
required pursuant to CCA's agreements or management contracts with Governmental
Entities.
(e) Information Supplied. None of the information supplied or to be
supplied by CCA specifically for inclusion or incorporation by reference in the
Proxy Statement-Prospectus will, at the date it is first mailed to shareholders
of CCA or at the time of the CCA Shareholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that in
each case no representation or warranty is made by CCA with respect to
statements made or incorporated by reference therein based on information
supplied by Prison Realty, PMSI or JJFMSI specifically for inclusion or
incorporation by reference therein. The Proxy Statement-Prospectus will comply
as to form in all material respects with the requirements of the Exchange Act
and the Securities Act, except that in each case no representation or warranty
is made by CCA with respect to statements made or incorporated by reference
therein based on information supplied by Prison Realty, PMSI or JJFMSI
specifically for inclusion or incorporation by reference therein. If at any time
prior to the date of the CCA Shareholders' Meeting, any event with respect to
CCA, or with respect to information supplied by CCA specifically for inclusion
in the Proxy Statement-Prospectus, shall occur which is required to be
described in an amendment of, or supplement to, the Proxy Statement-Prospectus,
such event shall be so described by CCA.
(f) Absence of Certain Changes or Events. Subsequent to September 30,
1999, neither CCA nor any Subsidiary has sustained any material loss or
interference with its business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, which is not
disclosed; and subsequent to September 30, 1999 (i) neither CCA nor any
Subsidiary has incurred any material liabilities or obligations, direct or
contingent, or entered into any transactions not in the ordinary course of
business consistent with past practice, and (ii) there has not been any issuance
of options, warrants or rights to purchase CCA Common Stock, or any
32
interests therein, or any adverse change, or any development involving a
prospective adverse change, in the general affairs, management, business,
prospects, financial position, net worth or results of operations of CCA or any
Subsidiary.
(g) Compliance with Laws; Litigation. Except as described in the CCA
Disclosure Schedule or in the Prison Realty Filed SEC Documents, there are no
claims, actions, suits, arbitration, grievances, proceedings or investigations
pending or, to CCA's knowledge, threatened, against CCA or any Subsidiary, or
any properties or rights of CCA or any Subsidiary, or any officers or directors
of CCA or any Subsidiary in their capacity as such, by or before any
Governmental Entity which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on CCA or prevent, materially delay or
intentionally delay the ability of CCA to consummate the transactions
contemplated hereby. Neither CCA nor its Subsidiaries is subject to any
judgment, order or decree which could reasonably be expected to result in a
material adverse effect.
Each of CCA and its Subsidiaries has at all times operated and
currently operates its business in conformity in all material respects with all
applicable statutes, common laws, ordinances, decrees, orders, rules and
regulations of Governmental Entities. Each of CCA and its Subsidiaries has all
licenses, approvals or consents to operate its businesses in all locations in
which such businesses are currently being operated, and to its knowledge is not
aware of any existing or imminent matter which may materially adversely impact
its operations or business prospects other than as specifically disclosed in the
CCA Disclosure Schedule. CCA and each Subsidiary have not failed to file with
the applicable regulatory authorities any material statements, reports,
information or forms required by all applicable laws, regulations or orders, all
such filings or submissions were in material compliance with applicable laws
when filed, and no material deficiencies have been asserted by any regulatory
commission, agency or authority with respect to such filings or submissions. CCA
and each Subsidiary have not failed to maintain in full force and effect any
material licenses, registrations or permits necessary or proper for the conduct
of its or their business, or received any notification that any revocation or
limitation thereof is threatened or pending, and there is not to the knowledge
of CCA pending any change under any law, regulation, license or permit which
would materially adversely affect the business, operations, property or business
prospects of CCA. CCA and each Subsidiary have not received any notice of
violation of or been threatened with a charge of violating and are not under
investigation with respect to a possible violation of any provision of any law,
regulation or order. Neither CCA nor any of its Subsidiaries has at any time (i)
made any unlawful contribution to any candidate for domestic or foreign office
or failed to disclose fully any contribution in violation of law or (ii) made
any payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
33
(h) Taxes.
(i) CCA has timely filed (or there have been filed on its
behalf) all Tax Returns required to be filed by it under applicable law, and all
such Tax Returns were and are true, complete and correct in all material
respects. Except to the extent adequately reserved for in accordance with GAAP
and reflected on the most recent balance sheets of CCA, all Taxes due and
payable by CCA have been timely paid in full.
(ii) There are no Tax liens upon the assets of CCA except
liens for Taxes not yet due.
(iii) CCA has complied with the provisions of the Code
relating to the withholding of Taxes, as well as similar provisions under any
other laws, and has, within the time and in the manner prescribed by law,
withheld, collected and paid over to the proper governmental authorities all
amounts required.
(iv) No audits or other administrative proceedings or court
proceedings are presently pending or, to the knowledge of CCA, asserted with
regard to any Taxes or Tax Returns of CCA.
(v) CCA has not received a written ruling of a taxing
authority relating to Taxes or entered into a written and legally binding
agreement with a taxing authority relating to Taxes with any taxing authority.
(vi) CCA has not requested any extension of time within which
to file any Tax Return, which Tax Return has not since been filed.
(vii) CCA has not agreed to and is not required to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor provision)
by reason of any change in any accounting method of CCA, and there is no
application pending with any taxing authority requesting permission for any
changes in any accounting method of CCA. To the knowledge of CCA, the IRS has
not proposed any such adjustment or change in accounting method.
(viii) CCA has not joined in the filing of a consolidated
return for federal income tax purposes. CCA is not and has never been subject to
the provisions of Section 1503(f) of the Code.
(ix) CCA is not a party to any agreement providing for the
allocation or sharing of Taxes or indemnification by CCA of any other person in
respect of Taxes.
(x) CCA is not a party to any agreement, contract, or
arrangement that would result, individually or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code.
34
(xi) To the knowledge of CCA, CCA does not have, nor has it
ever had, any income which is includable in computing the taxable income of a
United States person (as determined under Section 7701 of the Code) under
Section 951 of the Code. To the knowledge of CCA, none of the Subsidiaries of
CCA is or has ever been a "passive foreign investment company" within the
meaning of Section 1297 of the Code. To the knowledge of CCA, CCA is not and
never has been a "personal holding company" within the meaning of Section 542 of
the Code. To the knowledge of CCA, there are no gain recognition agreements,
within the meaning of Treasury Regulation 1.367(a)-8 or any predecessor
provision, between CCA, on one hand, and a stockholder of the CCA, on the other.
There is no pending or, to the knowledge of CCA, threatened, action, proceeding
or investigation by any taxing authority for assessment or collection of Taxes
with respect to CCA in any jurisdiction where CCA has not filed a Tax Return.
All dealings and arrangements between and among CCA and its Subsidiaries are at
arm's length and consistent with arm's length dealings and arrangements between
or among unrelated, uncontrolled taxpayers.
(xii) For purposes of this Section 3.03(h), all
representations and warranties with respect to CCA are deemed to include and to
apply to each of its Subsidiaries and predecessors.
(i) No Defaults. Except for violations or defaults which, individually
or in the aggregate, would not have a material adverse effect, neither CCA nor
any of its Subsidiaries is in violation or default under any provision of its
charter, by-laws, partnership agreements or other organizational documents, or
is in breach of or default with respect to any provision of any note, bond,
agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and there does not exist any state
of facts which would constitute an event of default on the part of any of CCA or
its Subsidiaries as defined in such documents which, with notice of lapse of
time or both, would constitute a default. Neither CCA nor any of its
Subsidiaries is a party to any contract (other than leases) containing any
covenant restricting its ability to conduct its business as currently conducted
except for any such covenants that would not, individually or in the aggregate,
have a material adverse effect on CCA.
(j) Environmental Matters.
(i) To the knowledge of CCA, the correctional and detention
facilities operated or managed by CCA (the "CCA Facilities") are presently
operated in compliance in all material respects with all Environmental Laws.
(ii) There are no Environmental Laws requiring any material
remediation, clean up, repairs, constructions or capital expenditures (other
than normal maintenance) with respect to the CCA Facilities.
35
(iii) There are no (A) notices of any violation or alleged
violation of any Environmental Laws relating to the CCA Facilities or their uses
that have been received by CCA, or (B) writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits, claims, proceedings or
investigations pending, or, to the knowledge of CCA, threatened, relating to the
ownership, use, maintenance or operation of the CCA Facilities.
(iv) To the knowledge of CCA, there are no past, present or
anticipated future events, conditions, circumstances, activities, practices,
incidents, actions, or plans relating to CCA and its Subsidiaries that may
interfere with or prevent compliance or continued compliance with applicable
Environmental Laws or which may give rise to any liability under the
Environmental Laws.
(v) All material permits and licenses required under any
Environmental Laws in respect of the operations of the CCA Facilities have been
obtained, and the CCA Facilities and CCA are in compliance, in all material
respects, with the terms and conditions of such permits and licenses.
(k) Benefit Plans.
(i) All "employee benefit plans" (as defined in Section 3(3)
of ERISA) and all other compensation, bonus, pension, profit sharing, deferred
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, employment, change-in-control, welfare, collective bargaining,
severance, disability, death benefit, hospitalization and medical plans,
agreements, arrangements or understandings that are maintained or contributed to
(or previously contributed to) for the benefit of any current or former
employee, officer or director of CCA or any of its Subsidiaries and with respect
to which CCA or any of its Subsidiaries would reasonably be expected to have
direct or contingent liability are defined as the "CCA Benefit Plans." CCA has
heretofore delivered or made available to Prison Realty, PMSI and JJFMSI true
and complete copies of all CCA Benefit Plans and, with respect to each CCA
Benefit Plan, true and complete copies of the following documents: the most
recent actuarial report, if any; the most recent annual report, if any; any
related trust agreement, annuity contract or other funding instrument, if any;
the most recent determination letter, if any; and the most recent summary plan
description, if any.
(ii) Except as disclosed in Section 3.03(k) of the CCA
Disclosure Schedule: (A) none of the CCA Benefit Plans is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA or is otherwise subject to Title IV
of ERISA; (B) none of the CCA Benefit Plans promises or provides retiree medical
or life insurance benefits to any person; (C) neither CCA nor any of its
Subsidiaries has any obligation to adopt or has taken any corporate action to
adopt, any new CCA Benefit Plan or, except as required by law, to amend any
existing CCA Benefit Plan; (D) CCA and its Subsidiaries are in compliance in all
material respects with and each CCA Benefit Plan is and has been administered in
all material respects in compliance with its terms and the applicable provisions
of ERISA, the Code and all other applicable laws, rules and
36
regulations except for any failures to so administer any CCA Benefit Plan as
would not have a material adverse effect on CCA; (E) each CCA Benefit Plan that
is intended to be qualified within the meaning of Section 401(a) of the Code, to
CCA's knowledge, has been determined by the IRS to be so qualified, and no
circumstances exist that could reasonably be expected to result in the
revocation of any such determination; (F) each CCA Benefit Plan intended to
provide for the deferral of income, the reduction of salary or other
compensation, or to afford other income tax benefits, complies with the
requirements of the applicable provisions of the Code or other laws, rules and
regulations required to provide such income tax benefits; (G) no prohibited
transactions (as defined in Section 406 or 407 of ERISA or Section 4975 of the
Code) have occurred for which a statutory exemption is not available with
respect to any CCA Benefit Plan, and which could give rise to liability on the
part of CCA, any of its Subsidiaries, any CCA Benefit Plan, or any fiduciary,
party in interest or disqualified person with respect thereto that would be
material to CCA or would be material to CCA if it were its liability; (H)
neither CCA nor any entity required to be treated as a single employer with CCA
under Section 414 of the Code has any unsatisfied liability under Title IV of
ERISA that would have a material adverse effect on CCA; (I) other than funding
obligations and benefits claims payable in the ordinary course, to CCA's
knowledge, no event has occurred and no circumstance exists with respect to any
CCA Benefit Plan that could give rise to any liability arising under the Code,
ERISA or any other applicable law, or under any indemnity agreement to which CCA
or any of its Subsidiaries is a party, excluding liability relating to benefit
claims and funding obligations payable in the ordinary course, whether directly
or by reason of its affiliation with any entity required to be treated as a
single employer with CCA under Section 414 of the Code; (J) as of the date
hereof there are no pending or, to the knowledge of the executive officers of
CCA, threatened investigations, claims or lawsuits in respect of any CCA Benefit
Plan that would have a material adverse effect on CCA; (K) other than
continuation coverage required to be provided under Section 4980B of the Code or
Part 6 of Title I of ERISA or otherwise as provided by state law, none of the
CCA Benefit Plans that are "welfare plans," within the meaning of Section 3(1)
of ERISA, provides for any benefits with respect to current or former employees
for periods extending beyond their retirement or other termination of service;
(L) no amount payable pursuant to a CCA Benefit Plan or any other plan, contract
or arrangement of CCA would be considered an "excess parachute payment" under
Section 280G of the Code; and (M) no CCA Benefit Plan exists that could result
in the payment to any current or former employee, officer or director of CCA any
money or other property or accelerate or provide any other rights or benefits as
a result of the transactions contemplated by this Agreement which would
constitute an excess parachute payment within the meaning of Section 280G of the
Code.
(l) Material Contracts. All contracts to which CCA or any Subsidiary is
a party have been duly authorized, executed and delivered by CCA or any
Subsidiary, constitute valid and binding agreements of CCA or any Subsidiary and
are enforceable against CCA or any Subsidiary in accordance with the terms
thereof. Each of CCA and each Subsidiary has performed all material obligations
required to be performed by it, and is neither in default in any material
respect nor has it received notice of any default or dispute under, any such
contract or other material instrument to which it is a party or by which its
property is bound or affected. To
37
the best knowledge of CCA, no other party under any such contract or other
material instrument to which it is a party is in default in any material respect
thereunder.
(m) No Undisclosed Liabilities. Except (a) as set forth in the Prison
Realty Filed SEC Documents, (b) as set forth in Section 3.03(m) of the CCA
Disclosure Schedule, (c) as incurred in the ordinary course of the business of
CCA subsequent to September 30, 1999 which would, individually or in the
aggregate, not have, or be reasonably expected not to have, a material adverse
effect, (d) for any expenses incurred in connection with transactions
contemplated by this Agreement or for liabilities or obligations relating to
contractual obligations, indebtedness, litigation or other matters which are
covered by other representations and warranties in this Agreement or otherwise
identified in the CCA Disclosure Schedule, neither CCA nor any of its
Subsidiaries has any liabilities or obligations (direct or indirect, contingent
or fixed, known or unknown, matured or unmatured accrued or unaccrued), whether
arising out of contract, tort, statute or otherwise, and whether or not required
by GAAP to be reflected on or in footnotes to the financial statements of CCA.
(n) Labor Matters. Except as set forth in Section 3.03(n) of the CCA
Disclosure Schedule: (i) neither CCA nor its Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (ii) to the knowledge of
CCA, no union claims to represent the employees of CCA and its Subsidiaries;
(iii) none of the employees of CCA or its Subsidiaries is represented by any
labor organization and CCA has no knowledge of any current union organizing
activities among the employees of CCA or its Subsidiaries, nor does any question
concerning representation exist concerning such employees; neither CCA nor its
Subsidiaries is the subject of any proceeding asserting that it has committed an
unfair labor practice or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment; (iv) there is no strike,
work stoppage, lockout or other labor dispute involving CCA or its Subsidiaries
pending or threatened; (v) no action, suit, complaint, charge, arbitration,
inquiry, proceeding or investigation by or before any Governmental Entity
brought by or on behalf of any employee, prospective employee, former employee,
retiree, labor organization or other representative of its employees is pending
or, to the knowledge of CCA, threatened against CCA or its Subsidiaries; (vi) to
the knowledge of CCA, no grievance is threatened against CCA or its
Subsidiaries; (vii) neither CCA nor its Subsidiaries is a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental Entity
relating to employees or employment practices; (viii) there are no written
personnel policies, rules or procedures applicable to employees of CCA or its
Subsidiaries, other than those set forth in Section 3.03(n) of the CCA
Disclosure Schedule, true and correct copies of which have heretofore been
delivered or made available to Prison Realty, PMSI and JJFMSI; (ix) CCA and its
Subsidiaries are, and have at all times been, in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or regulation;
(x) since the enactment of the WARN Act, neither CCA nor its Subsidiaries has
effectuated (A) a "plant closing" (as defined in the WARN Act) affecting any
site of employment
38
or one or more facilities or operating units within any site of employment or
facility of any of CCA or its Subsidiaries; or (B) a "mass layoff" (as defined
in the WARN Act) affecting any site of employment or facility of any of CCA or
its Subsidiaries, in either case, other than in substantial compliance with the
WARN Act; nor has CCA or its Subsidiaries been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign law or regulation; and (xi)
neither CCA nor any of its Subsidiaries is aware that it has any liability or
potential liability under the Multi-Employer Pension Plan Act.
(o) Insurance. CCA and its Subsidiaries maintain primary, excess and
umbrella insurance of types and amounts customary for their business against
general liability, fire, workers' compensation, products liability, theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect and with respect to
property insurance for assets for which it is customary to have replacement cost
coverage or there are coinsurance provisions, the amount of such insurance is
sufficient to provide for such coverage or to prevent the application of the
coinsurance provision. Section 3.03(o) of the CCA Disclosure Schedule sets forth
a complete list of the insurance policies maintained by CCA and its
Subsidiaries.
(p) Affiliate Transactions. Except as set forth in Section 3.03(p) of
the CCA Disclosure Schedule, there is no transaction and no transaction is now
proposed, to which CCA or its Subsidiaries is or is to be a party in which any
current stockholder (holding in excess of 5% of the CCA's Common Stock or any
securities convertible into or exchangeable for Common Stock), general partner,
limited partner (holding in excess of 5% of the limited partnership interests),
director or executive officer of CCA or its Subsidiaries has a direct or
indirect interest.
(q) Internal Accounting Controls. CCA's system of internal accounting
controls is sufficient to meet the broad objectives of internal accounting
controls insofar as those objectives pertain to the prevention or detection of
errors or irregularities in amounts that would be material in relation to CCA's
financial statements.
(r) Vote Required. The CCA Shareholder Approval is the only vote of the
holders of any class or series of CCA's securities necessary to approve this
Agreement and the transactions contemplated hereby.
(s) Board Recommendation. On the date hereof with respect to this
Agreement, the Board of Directors of CCA, at a meeting duly called and held, by
the majority vote of the directors present at such meeting, (i) determined that
such Agreement and the Merger and the other transactions contemplated hereby and
thereby are fair to and in the best interests of the shareholders of CCA, (ii)
adopted such Agreement and approved the Merger and (iii) resolved to recommend
that the holders of CCA Common Stock approve such Agreement and the Merger.
39
(t) Tennessee Business Combination Act. CCA has received the opinion of
Sherrard & Roe, PLC, counsel to CCA, that the approval of the Merger by the
Board of Directors of CCA referred to in Section 3.03(s) constitutes approval of
the Merger for purposes of the TBCA and represents all the actions necessary to
ensure that Sections 48-103-201, et seq., of the TBCA do not apply to the
Merger.
(u) Brokers. No broker, investment banker, financial advisor or other
person, other than Merrill Lynch, the fees and expenses of which will be paid by
Prison Realty, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Merrill Lynch.
(v) Opinion of Financial Advisor. CCA has received the opinion of
Merrill Lynch, dated as of the date hereof, to the effect that the CCA Merger
Consideration to be paid by Prison Realty is fair to CCA and the holders of the
CCA Common Stock from a financial point of view (the "Merrill Lynch CCA
Opinion").
(w) Stock Ownership. CCA does not, directly or indirectly, own any
shares of Prison Realty Stock other than shares, if any, held in CCA Benefit
Plans.
SECTION 3.04 Representations and Warranties of PMSI. Except as set
forth in the Prison Realty Filed SEC Documents on the Disclosure Schedule
delivered by PMSI to Prison Realty, CCA and JJFMSI prior to the execution of
this Agreement (the "PMSI Disclosure Schedule"), which PMSI Disclosure Schedule
constitutes a part hereof and is true and correct in all material respects, PMSI
represents and warrants to Prison Realty, the Acquisition Companies, CCA and
JJFMSI as follows:
(a) Organization and Authority. PMSI is duly formed and validly
existing and in good standing under the laws of the State of Tennessee with full
power and authority to own its properties and conduct its business as now
conducted and is duly qualified or authorized to do business and is in good
standing in all jurisdictions where the failure to so qualify could have a
material adverse effect on PMSI. PMSI has all requisite corporate power and
authority, and has been duly authorized by all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits of
and from all public, regulatory or governmental agencies and bodies, to own,
lease and operate its assets and properties and to conduct its business as it is
now being conducted and is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the failure to do so could have a
material adverse effect upon the conduct of its business or the ownership or
leasing of property by it in such jurisdiction.
(b) Subsidiaries.
(i) The only direct or indirect Subsidiaries of PMSI are those
listed in Section 3.04(b) of the PMSI Disclosure Schedule. Except for the
ownership interests set forth in Section
40
3.04(b) of the PMSI Disclosure Schedule, PMSI does not own or control, directly
or indirectly, a 50% or greater capital stock interest in a corporation, a
general partnership interest or a 50% or greater limited partnership interest in
a partnership, or a managing membership interest or a 50% or greater membership
interest in a limited liability company, association or other entity or project.
(ii) Except for the entities listed in Section 3.04(b) of the
PMSI Disclosure Schedule, PMSI does not hold, directly or indirectly, any equity
interest or equity investment in any corporation, partnership, association or
other entity.
(iii) Except as set forth in Section 3.04(b) of the PMSI
Disclosure Schedule, all of the issued and outstanding shares of capital stock
of, or other equity interests in, each Subsidiary of PMSI have been validly
issued, are fully paid and nonassessable and are owned, directly or indirectly,
by PMSI free and clear of any Liens and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating any Subsidiary of PMSI to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
(c) Capital Structure. The authorized capital stock of PMSI consists of
100,000,000 shares of PMSI Class A Common Stock, 100,000,000 shares of PMSI
Class B Common Stock and 50,000,000 shares of preferred stock, $0.01 par value
per share. At the close of business on November 30, 1999, (A) 100,004 shares of
PMSI Class A Common Stock were outstanding, (B) 100,000 shares of PMSI Class B
Common Stock were outstanding and (C) no shares of preferred stock were
outstanding. Other than as set forth above, at the close of business on November
30, 1999, there were outstanding no shares of PMSI Common Stock or any other
class or series of stock of PMSI or options, warrants or other rights to acquire
shares of PMSI Common Stock or any other class or series of stock of PMSI from
PMSI. No bonds, debentures, notes or other indebtedness having the right to vote
(or convertible into or exchangeable for securities having the right to vote) on
any matters on which shareholders of PMSI may vote are issued or outstanding.
All outstanding shares of PMSI Common Stock are duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free and
clear of Liens and will not be in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities. Other than as
set forth above, and except for this Agreement and for certain preemptive rights
granted to Prison Realty and set forth in the charter of PMSI, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements or undertakings of any kind to which PMSI or any Subsidiary of PMSI
is a party or by which PMSI or any Subsidiary of PMSI is bound obligating PMSI
or any Subsidiary of PMSI to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of PMSI Common Stock, preferred stock or
other equity or voting securities of PMSI or of any Subsidiary of PMSI or
obligating PMSI or any Subsidiary of
41
PMSI to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement or undertaking. There are no outstanding
obligations of PMSI or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of PMSI Common Stock or any of its Subsidiaries
and, to the knowledge of the executive officers of PMSI, as of the date hereof,
no irrevocable proxies have been granted with respect to shares of PMSI Common
Stock or equity of Subsidiaries of PMSI.
(d) Authorization. PMSI has all requisite power and authority to enter
into this Agreement and, subject to obtaining the PMSI Shareholder Approval with
respect to the Merger, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of PMSI, subject to obtaining PMSI Shareholder Approval with
respect to the Merger. This Agreement has been duly executed and delivered by
PMSI and constitutes a valid and binding obligation of PMSI, enforceable against
PMSI in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer and other
similar laws from time to time in effect. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any breach or violation of, or default
(with or without notice or lapse of time or both) under, or result in the
termination of, or accelerate the performance required by, or give rise to a
right of termination, cancellation or acceleration of any obligation under, or
the creation of a Lien pursuant to, (i) any provision of the charter (or similar
organizational documents) or bylaws of PMSI or any Subsidiary of PMSI or (ii)
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in the following sentence,
any loan or credit agreement, note, mortgage, indenture, lease, or other
agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to PMSI or any Subsidiary of PMSI or their respective properties or assets, in
any case under this clause (ii) which would, individually or in the aggregate,
have a material adverse effect on PMSI. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to PMSI or any Subsidiary of PMSI in
connection with the execution and delivery of this Agreement by PMSI or the
consummation by PMSI of the transactions contemplated hereby, the failure of
which to be obtained or made would, individually or in the aggregate, have a
material adverse effect on PMSI or would prevent or materially delay the
consummation of the transactions contemplated hereby, except for (A) the filing
of the Articles of Merger with the Tennessee Secretary of State and appropriate
documents with the relevant authorities of other states in which PMSI is
qualified to do business, (B) filings required pursuant to the HSR Act, (C)
filings necessary to satisfy the applicable requirements of state securities or
"blue sky" laws, and those required pursuant to PMSI's agreements or management
contracts with Governmental Entities.
(e) Information Supplied. None of the information supplied or to be
supplied by PMSI specifically for inclusion or incorporation by reference in the
Proxy Statement-Prospectus will, at the date it is first mailed to shareholders
of PMSI or at the time of the PMSI Shareholders'
42
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that in each case no representation or warranty is made
by PMSI with respect to statements made or incorporated by reference therein
based on information supplied by Prison Realty, the Acquisition Companies, CCA
or JJFMSI specifically for inclusion or incorporation by reference therein. The
Proxy Statement-Prospectus will comply as to form in all material respects with
the requirements of the Exchange Act and the Securities Act, except that in each
case no representation or warranty is made by PMSI with respect to statements
made or incorporated by reference therein based on information supplied by
Prison Realty, the Acquisition Companies, CCA or JJFMSI specifically for
inclusion or incorporation by reference therein. If at any time prior to the
date of the PMSI Shareholders' Meeting, any event with respect to PMSI, or with
respect to information supplied by PMSI specifically for inclusion in the Proxy
Statement-Prospectus, shall occur which is required to be described in an
amendment of, or supplement to, the Proxy Statement-Prospectus, such event shall
be so described by PMSI.
(f) Absence of Certain Changes or Events. Subsequent to September 30,
1999, neither PMSI nor any Subsidiary has sustained any material loss or
interference with its business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, which is not
disclosed; and subsequent to September 30, 1999 (i) neither PMSI nor any
Subsidiary has incurred any material liabilities or obligations, direct or
contingent, or entered into any transactions not in the ordinary course of
business consistent with past practice, and (ii) there has not been any issuance
of options, warrants or rights to purchase PMSI Common Stock or preferred stock,
or interests therein, or any adverse change, or any development involving a
prospective adverse change, in the general affairs, management, business,
prospects, financial position, net worth or results of operations of PMSI or any
Subsidiary.
(g) Compliance with Laws; Litigation. Except as described in the PMSI
Disclosure Schedule or in the Prison Realty Filed SEC Documents, there are no
claims, actions, suits, arbitration, grievances, proceedings or investigations
pending or, to PMSI's knowledge, threatened against PMSI or any Subsidiary, or
any properties or rights of PMSI or any Subsidiary, or any officers or directors
of PMSI or any Subsidiary in their capacity as such, by or before any
Governmental Entity which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on PMSI or prevent, materially delay or
intentionally delay the ability of PMSI to consummate the transactions
contemplated hereby. Neither PMSI nor its Subsidiaries is subject to any
judgment, order or decree which could reasonably be expected to result in a
material adverse effect.
Each of PMSI and its Subsidiaries has at all times operated and
currently operates its business in conformity in all material respects with all
applicable statutes, common laws, ordinances, decrees, orders, rules and
regulations of Governmental Entities. Each of PMSI and its Subsidiaries has all
licenses, approvals or consents to operate its businesses in all locations in
43
which such businesses are currently being operated, and to its knowledge is not
aware of any existing or imminent matter which may materially adversely impact
its operations or business prospects other than as specifically disclosed in the
PMSI Disclosure Schedule. PMSI and each Subsidiary have not failed to file with
the applicable regulatory authorities any material statements, reports,
information or forms required by all applicable laws, regulations or orders, all
such filings or submissions were in material compliance with applicable laws
when filed, and no material deficiencies have been asserted by any regulatory
commission, agency or authority with respect to such filings or submissions.
PMSI and each Subsidiary have not failed to maintain in full force and effect
any material licenses, registrations or permits necessary or proper for the
conduct of its business, or received any notification that any revocation or
limitation thereof is threatened or pending, and there is not to the knowledge
of PMSI pending any change under any law, regulation, license or permit which
would materially adversely affect the business, operations, property or business
prospects of PMSI. PMSI and each Subsidiary have not received any notice of
violation of or been threatened with a charge of violating and are not under
investigation with respect to a possible violation of any provision of any law,
regulation or order. Neither PMSI nor any of its Subsidiaries has at any time
(i) made any unlawful contribution to any candidate for domestic or foreign
office or failed to disclose fully any contribution in violation of law or (ii)
made any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(h) Taxes.
(i) PMSI has timely filed (or there have been filed on its
behalf) all Tax Returns required to be filed by it under applicable law, and all
such Tax Returns were and are true, complete and correct in all material
respects. Except to the extent adequately reserved for in accordance with GAAP
and reflected on the most recent balance sheets of PMSI, all Taxes due and
payable by PMSI have been timely paid in full.
(ii) There are no Tax liens upon the assets of PMSI except
liens for Taxes not yet due.
(iii) PMSI has complied with the provisions of the Code,
relating to the withholding of Taxes, as well as similar provisions under any
other laws, and has, within the time and in the manner prescribed by law,
withheld, collected and paid over to the proper governmental authorities all
amounts required.
(iv) No audits or other administrative proceedings or court
proceedings are presently pending or, to the knowledge of PMSI, asserted with
regard to any Taxes or Tax Returns of PMSI.
44
(v) PMSI has not received a written ruling of a taxing authority
relating to Taxes or entered into a written and legally binding agreement with a
taxing authority relating to Taxes with any taxing authority.
(vi) PMSI has not requested any extension of time within which to
file any Tax Return, which Tax Return has not since been filed.
(vii) PMSI has not agreed to and is not required to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor provision)
by reason of any change in any accounting method of PMSI, and there is no
application pending with any taxing authority requesting permission for any
changes in any accounting method of PMSI. To the knowledge of PMSI, the IRS has
not proposed any such adjustment or change in accounting method.
(viii) PMSI has not joined in the filing of a consolidated return
for federal income tax purposes. PMSI is not and has never been subject to the
provisions of Section 1503(f) of the Code.
(ix) PMSI is not a party to any agreement providing for the
allocation or sharing of Taxes or indemnification by PMSI of any other person in
respect of Taxes.
(x) PMSI is not a party to any agreement, contract, or
arrangement that would result, individually or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code.
(xi) To the knowledge of PMSI, PMSI does not have, nor has it
ever had, any income which is includable in computing the taxable income of a
United States person (as determined under Section 7701 of the Code) under
Section 951 of the Code. To the knowledge of PMSI, none of the Subsidiaries of
PMSI is or has ever been a "passive foreign investment company" within the
meaning of Section 1297 of the Code. To the knowledge of PMSI, PMSI is not and
never has been a "personal holding company" within the meaning of Section 542 of
the Code. To the knowledge of PMSI, there are no gain recognition agreements,
within the meaning of Treasury Regulation 1.367(a)-8 or any predecessor
provision, between PMSI, on one hand, and a stockholder of the PMSI, on the
other. There is no pending or, to the knowledge of PMSI, threatened, action,
proceeding or investigation by any taxing authority for assessment or collection
of Taxes with respect to PMSI in any jurisdiction where PMSI has not filed a Tax
Return. All dealings and arrangements between and among PMSI and its
Subsidiaries are at arm's length and consistent with arm's length dealings and
arrangements between or among unrelated, uncontrolled taxpayers.
(xii) For purposes of this Section 3.04(h), all representations
and warranties with respect to PMSI are deemed to include and to apply to each
of its Subsidiaries and predecessors.
45
(i) No Defaults. Except for violations or defaults which, individually
or in the aggregate, would not have a material adverse effect, neither PMSI nor
any of its Subsidiaries is in violation or default under any provision of its
charter, by-laws, partnership agreements or other organizational documents, or
is in breach of or default with respect to any provision of any note, bond,
agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and there does not exist any state
of facts which would constitute an event of default on the part of any of PMSI
or its Subsidiaries as defined in such documents which, with notice of lapse of
time or both, would constitute a default. Neither PMSI nor any of its
Subsidiaries is a party to any contract (other than leases) containing any
covenant restricting its ability to conduct its business as currently conducted
except for any such covenants that would not, individually or in the aggregate,
have a material adverse effect on PMSI.
(j) Environmental Matters.
(i) To the knowledge of PMSI, the correctional and detention
facilities operated or managed by PMSI (the "PMSI Facilities") are presently
operated in compliance in all material respects with all Environmental Laws.
(ii) There are no Environmental Laws requiring any material
remediation, clean up, repairs, constructions or capital expenditures (other
than normal maintenance) with respect to the PMSI Facilities.
(iii) There are no (A) notices of any violation or alleged
violation of any Environmental Laws relating to the PMSI Facilities or their
uses that have been received by PMSI, or (B) writs, injunctions, decrees, orders
or judgments outstanding, or any actions, suits, claims, proceedings or
investigations pending, or, to the knowledge of PMSI, threatened, relating to
the ownership, use, maintenance or operation of the PMSI Facilities.
(iv) To the knowledge of PMSI, there are no past, present or
anticipated future events, conditions, circumstances, activities, practices,
incidents, actions, or plans relating to PMSI and its Subsidiaries that may
interfere with or prevent compliance or continued compliance with applicable
Environmental Laws or which may give rise to any liability under the
Environmental Laws.
(v) All material permits and licenses required under any
Environmental Laws in respect of the operations of the PMSI Facilities have been
obtained, and the PMSI Facilities and PMSI are in compliance, in all material
respects, with the terms and conditions of such permits and licenses.
46
(k) Benefit Plans.
(i) All "employee benefit plans" (as defined in Section 3(3) of
ERISA) and all other compensation, bonus, pension, profit sharing, deferred
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, employment, change-in-control, welfare, collective bargaining,
severance, disability, death benefit, hospitalization and medical plans,
agreements, arrangements or understandings that are maintained or contributed to
(or previously contributed to) for the benefit of any current or former
employee, officer or director of PMSI or any of its Subsidiaries and with
respect to which PMSI or any of its Subsidiaries would reasonably be expected to
have direct or contingent liability are defined as the "PMSI Benefit Plans."
PMSI has heretofore delivered or made available to Prison Realty, CCA and JJFMSI
true and complete copies of all PMSI Benefit Plans and, with respect to each
PMSI Benefit Plan, true and complete copies of the following documents: the most
recent actuarial report, if any; the most recent annual report, if any; any
related trust agreement, annuity contract or other funding instrument, if any;
the most recent determination letter, if any; and the most recent summary plan
description, if any.
(ii) Except as disclosed in Section 3.04(k) of the PMSI
Disclosure Schedule: (A) none of the PMSI Benefit Plans is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA or is otherwise subject to
Title IV of ERISA; (B) none of the PMSI Benefit Plans promises or provides
retiree medical or life insurance benefits to any person; (C) neither PMSI nor
any of its Subsidiaries has any obligation to adopt or has taken any corporate
action to adopt, any new PMSI Benefit Plan or, except as required by law, to
amend any existing PMSI Benefit Plan; (D) PMSI and its Subsidiaries are in
compliance in all material respects with and each PMSI Benefit Plan is and has
been administered in all material respects in compliance with its terms and the
applicable provisions of ERISA, the Code and all other applicable laws, rules
and regulations except for any failures to so administer any PMSI Benefit Plan
as would not have a material adverse effect on PMSI; (E) each PMSI Benefit Plan
that is intended to be qualified within the meaning of Section 401(a) of the
Code, to PMSI's knowledge, has been determined by the IRS to be so qualified,
and no circumstances exist that could reasonably be expected to result in the
revocation of any such determination; (F) each PMSI Benefit Plan intended to
provide for the deferral of income, the reduction of salary or other
compensation, or to afford other income tax benefits, complies with the
requirements of the applicable provisions of the Code or other laws, rules and
regulations required to provide such income tax benefits; (G) no prohibited
transactions (as defined in Section 406 or 407 of ERISA or Section 4975 of the
Code) have occurred for which a statutory exemption is not available with
respect to any PMSI Benefit Plan, and which could give rise to liability on the
part of PMSI, any of its Subsidiaries, any PMSI Benefit Plan, or any fiduciary,
party in interest or disqualified person with respect thereto that would be
material to PMSI or would be material to PMSI if it were its liability; (H)
neither PMSI nor any entity required to be treated as a single employer with
PMSI under Section 414 of the Code has any unsatisfied liability under Title IV
of ERISA that would have a material adverse effect on PMSI; (I) other than
funding obligations and benefits claims payable in the ordinary course, to
PMSI's knowledge, no event has occurred and no circumstance exists with respect
to any PMSI Benefit
47
Plan that could give rise to any liability arising under the Code, ERISA or any
other applicable law, or under any indemnity agreement to which PMSI or any of
its Subsidiaries is a party, excluding liability relating to benefit claims and
funding obligations payable in the ordinary course, whether directly or by
reason of its affiliation with any entity required to be treated as a single
employer with PMSI under Section 414 of the Code; (J) as of the date hereof
there are no pending or, to the knowledge of the executive officers of PMSI,
threatened investigations, claims or lawsuits in respect of any PMSI Benefit
Plan that would have a material adverse effect on PMSI; (K) other than
continuation coverage required to be provided under Section 4980B of the Code or
Part 6 of Title I of ERISA or otherwise as provided by state law, none of the
PMSI Benefit Plans that are "welfare plans," within the meaning of Section 3(1)
of ERISA, provides for any benefits with respect to current or former employees
for periods extending beyond their retirement or other termination of service;
(L) no amount payable pursuant to a PMSI Benefit Plan or any other plan,
contract or arrangement of PMSI would be considered an "excess parachute
payment" under Section 280G of the Code; and (M) no PMSI Benefit Plan exists
that could result in the payment to any current or former employee, officer or
director of PMSI any money or other property or accelerate or provide any other
rights or benefits as a result of the transactions contemplated by this
Agreement which would constitute an excess parachute payment within the meaning
of Section 280G of the Code.
(l) Material Contracts. All contracts to which PMSI or any Subsidiary is
a party have been duly authorized, executed and delivered by PMSI or any
Subsidiary, constitute valid and binding agreements of PMSI or any Subsidiary
and are enforceable against PMSI or any Subsidiary in accordance with the terms
thereof. Each of PMSI and each Subsidiary has performed all material obligations
required to be performed by it, and is neither in default in any material
respect nor has it received notice of any default or dispute under, any such
contract or other material instrument to which it is a party or by which its
property is bound or affected. To the best knowledge of PMSI, no other party
under any such contract or other material instrument to which it is a party is
in default in any material respect thereunder.
(m) No Undisclosed Liabilities. Except (a) as set forth in the Prison
Realty Filed SEC Documents, (b) as set forth in Section 3.04(m) of the PMSI
Disclosure Schedule, (c) as incurred in the ordinary course of the business of
PMSI subsequent to September 30, 1999 which would, individually or in the
aggregate, not have, or be reasonably expected not to have, a material adverse
effect, (d) for any expenses incurred in connection with transactions
contemplated by this Agreement or for liabilities or obligations relating to
contractual obligations, indebtedness, litigation or other matters which are
covered by other representations and warranties in this Agreement or otherwise
identified in the PMSI Disclosure Schedule, neither PMSI nor any of its
Subsidiaries has any liabilities or obligations (direct or indirect, contingent
or fixed, known or unknown, matured or unmatured accrued or unaccrued), whether
arising out of contract, tort, statute or otherwise, and whether or not required
by GAAP to be reflected on or in footnotes to the financial statements of PMSI.
48
(n) Labor Matters. Except as set forth in Section 3.04(n) of the PMSI
Disclosure Schedule: (i) neither PMSI nor its Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (ii) to the knowledge of
PMSI, no union claims to represent the employees of PMSI and its Subsidiaries;
(iii) none of the employees of PMSI or its Subsidiaries is represented by any
labor organization and PMSI has no knowledge of any current union organizing
activities among the employees of PMSI or its Subsidiaries, nor does any
question concerning representation exist concerning such employees; neither PMSI
nor its Subsidiaries is the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it to bargain with any
labor organization as to wages or conditions of employment; (iv) there is no
strike, work stoppage, lockout or other labor dispute involving PMSI or its
Subsidiaries pending or threatened; (v) no action, suit, complaint, charge,
arbitration, inquiry, proceeding or investigation by or before any Governmental
Entity brought by or on behalf of any employee, prospective employee, former
employee, retiree, labor organization or other representative of its employees
is pending or, to the knowledge of PMSI, threatened against PMSI or its
Subsidiaries; (vi) to the knowledge of PMSI, no grievance is threatened against
PMSI or its Subsidiaries; (vii) neither PMSI nor its Subsidiaries is a party to,
or otherwise bound by, any consent decree with, or citation by, any Governmental
Entity relating to employees or employment practices; (viii) there are no
written personnel policies, rules or procedures applicable to employees of PMSI
or its Subsidiaries, other than those set forth in Section 3.04(n) of the PMSI
Disclosure Schedule, true and correct copies of which have heretofore been
delivered to Prison Realty, CCA and JJFMSI; (ix) PMSI and its Subsidiaries are,
and have at all times been, in material compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, and are not
engaged in any unfair labor practices as defined in the National Labor Relations
Act or other applicable law, ordinance or regulation; (x) since the enactment of
the WARN Act, neither PMSI nor its Subsidiaries has effectuated (A) a "plant
closing" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
any of PMSI or its Subsidiaries; or (B) a "mass layoff" (as defined in the WARN
Act) affecting any site of employment or facility of any of PMSI or its
Subsidiaries, in either case, other than in substantial compliance with the WARN
Act; nor has PMSI or its Subsidiaries been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign law or regulation; and (xi)
neither PMSI nor its Subsidiaries is aware that it has any liability or
potential liability under the Multi-Employer Pension Plan Act.
(o) Insurance. PMSI and its Subsidiaries maintain primary, excess and
umbrella insurance of types and amounts customary for their business against
general liability, fire, workers' compensation, products liability, theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect and with respect to
property insurance for assets for which it is customary to have replacement cost
coverage or there are coinsurance provisions, the amount of such insurance is
sufficient to provide for such coverage or to prevent the application of the
coinsurance provision. Section 3.04(o) of
49
the PMSI Disclosure Schedule sets forth a complete list of the insurance
policies maintained by PMSI and its Subsidiaries.
(p) Affiliate Transactions. Except as set forth in Section 3.04(p) of
the PMSI Disclosure Schedule, there is no transaction and no transaction is now
proposed, to which PMSI or its Subsidiaries is or is to be a party in which any
current stockholder (holding in excess of 5% of the PMSI's Common Stock or any
securities convertible into or exchangeable for Common Stock), general partner,
limited partner (holding in excess of 5% of the limited partnership interests),
director or executive officer of PMSI or its Subsidiaries has a direct or
indirect interest.
(q) Internal Accounting Controls. PMSI's system of internal accounting
controls is sufficient to meet the broad objectives of internal accounting
controls insofar as those objectives pertain to the prevention or detection of
errors or irregularities in amounts that would be material in relation to PMSI's
financial statements.
(r) Vote Required. The PMSI Shareholder Approval is the only vote of the
holders of any class or series of PMSI's securities necessary to approve this
Agreement and the transactions contemplated hereby.
(s) Board Recommendation. On the date hereof with respect to this
Agreement, the Board of Directors of PMSI, at a meeting duly called and held, by
the majority vote of the directors present at such meeting, (i) determined that
such Agreement and the Merger and the other transactions contemplated hereby and
thereby are fair to and in the best interests of the shareholders of PMSI, (ii)
adopted such Agreement and approved the Merger and (iii) resolved to recommend
that the holders of PMSI Common Stock approve such Agreement and the Merger.
(t) Tennessee Business Combination Act. The approval of the Merger by
the Board of Directors of PMSI referred to in Section 3.04(s) constitutes
approval of the Merger for purposes of the TBCA and represents all the actions
necessary to ensure that Sections 48-103-201 et seq. of the TBCA do not apply to
the Merger.
(u) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with PMSI's participation in the
transactions contemplated by this Agreement.
(v) Stock Ownership. PMSI does not, directly or indirectly, own any
shares of Prison Realty Stock other than shares, if any, held in PMSI Benefit
Plans.
SECTION 3.05 Representations and Warranties of JJFMSI. Except as set
forth in the Prison Realty Filed SEC Documents on the Disclosure Schedule
delivered by JJFMSI to Prison Realty, CCA and PMSI prior to the execution of
this Agreement (the "JJFMSI Disclosure Schedule"), which JJFMSI Disclosure
Schedule constitutes a part hereof and is true and correct in
50
all material respects, JJFMSI represents and warrants to Prison Realty, the
Acquisition Companies, CCA and PMSI as follows:
(a) Organization and Authority. JJFMSI is duly formed and validly
existing and in good standing under the laws of the State of Tennessee with full
power and authority to own its properties and conduct its business as now
conducted and is duly qualified or authorized to do business and is in good
standing in all jurisdictions where the failure to so qualify could have a
material adverse effect on JJFMSI. JJFMSI has all requisite corporate power and
authority, and has been duly authorized by all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits of
and from all public, regulatory or governmental agencies and bodies, to own,
lease and operate its assets and properties and to conduct its business as it is
now being conducted and is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the failure to do so could have a
material adverse effect upon the conduct of its business or the ownership or
leasing of property by it in such jurisdiction.
(b) Subsidiaries.
(i) The only direct or indirect Subsidiaries of JJFMSI are those
listed in Section 3.05(b) of the JJFMSI Disclosure Schedule. Except for the
ownership interests set forth in Section 3.05(b) of the JJFMSI Disclosure
Schedule, JJFMSI does not own or control, directly or indirectly, a 50% or
greater capital stock interest in a corporation, a general partnership interest
or a 50% or greater limited partnership interest in a partnership, or a managing
membership interest or a 50% or greater membership interest in a limited
liability company, association or other entity or project.
(ii) Except for the entities listed in Section 3.05(b) of the
JJFMSI Disclosure Schedule, JJFMSI does not hold, directly or indirectly, any
equity interest or equity investment in any corporation, partnership,
association or other entity.
(iii) Except as set forth in Section 3.05(b) of the JJFMSI
Disclosure Schedule, all of the issued and outstanding shares of capital stock
of, or other equity interests in, each Subsidiary of JJFMSI have been validly
issued, are fully paid and nonassessable and are owned, directly or indirectly,
by JJFMSI free and clear of any Liens and there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating any Subsidiary of JJFMSI to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
its capital stock or obligating it to grant, extend or enter into any such
agreement or commitment.
(c) Capital Structure. The authorized capital stock of JJFMSI consists
of 100,000,000 shares of JJFMSI Class A Common Stock, 100,000,000 shares of
JJFMSI Class B Common
51
Stock and 50,000,000 shares of preferred stock, $0.01 par value per share. At
the close of business on November 30, 1999, (A) 99,994 shares of JJFMSI Class A
Common Stock were outstanding, (B) 100,000 shares of JJFMSI Class B Common Stock
were outstanding and (C) no shares of preferred stock were outstanding. Other
than as set forth above, at the close of business on November 30, 1999, there
were outstanding no shares of JJFMSI Common Stock or any other class or series
of stock of JJFMSI or options, warrants or other rights to acquire shares of
JJFMSI Common Stock or any other class or series of stock of JJFMSI from JJFMSI.
No bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into or exchangeable for securities having the right to vote) on any
matters on which shareholders of JJFMSI may vote are issued or outstanding.
All outstanding shares of JJFMSI Common Stock are duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free and
clear of Liens and will not be in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities. Other than as
set forth above, and except for this Agreement and for certain preemptive rights
granted to Prison Realty and set forth in the charter of JJFMSI, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements or undertakings of any kind to which JJFMSI or any Subsidiary of
JJFMSI is a party or by which JJFMSI or any Subsidiary of JJFMSI is bound
obligating JJFMSI or any Subsidiary of JJFMSI to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of JJFMSI Common Stock,
preferred stock or other equity or voting securities of JJFMSI or of any
Subsidiary of JJFMSI or obligating JJFMSI or any Subsidiary of JJFMSI to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement or undertaking. There are no outstanding obligations of
JJFMSI or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of JJFMSI Common Stock or any of its Subsidiaries and, to the knowledge
of the executive officers of JJFMSI, as of the date hereof, no irrevocable
proxies have been granted with respect to shares of JJFMSI Common Stock or
equity of Subsidiaries of JJFMSI.
(d) Authorization. JJFMSI has all requisite power and authority to enter
into this Agreement and, subject to obtaining the JJFMSI Shareholder Approval
with respect to the Merger, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of JJFMSI, subject to obtaining JJFMSI Shareholder Approval
with respect to the Merger. This Agreement has been duly executed and delivered
by JJFMSI and constitutes a valid and binding obligation of JJFMSI, enforceable
against JJFMSI in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent
transfer and other similar laws from time to time in effect. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any breach or
violation of, or default (with or without notice or lapse of time or both)
under, or result in the termination of, or accelerate the performance required
by, or give rise to a right of termination, cancellation or acceleration of any
obligation under, or the creation of a Lien pursuant to, (i) any provision of
the charter (or similar organizational documents) or bylaws of
52
JJFMSI or any Subsidiary of JJFMSI or (ii) subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations and
filings referred to in the following sentence, any loan or credit agreement,
note, mortgage, indenture, lease, or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to JJFMSI or any Subsidiary of JJFMSI
or their respective properties or assets, in any case under this clause (ii)
which would, individually or in the aggregate, have a material adverse effect on
JJFMSI. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to JJFMSI or any Subsidiary of JJFMSI in connection with the execution
and delivery of this Agreement by JJFMSI or the consummation by JJFMSI of the
transactions contemplated hereby, the failure of which to be obtained or made
would, individually or in the aggregate, have a material adverse effect on
JJFMSI or would prevent or materially delay the consummation of the transactions
contemplated hereby, except for (A) the filing of the Articles of Merger with
the Tennessee Secretary of State and appropriate documents with the relevant
authorities of other states in which JJFMSI is qualified to do business, (B)
filings required pursuant to the HSR Act, (C) filings necessary to satisfy the
applicable requirements of state securities or "blue sky" laws, and those
required pursuant to JJFMSI's agreements or management contracts with
Governmental Entities.
(e) Information Supplied. None of the information supplied or to be
supplied by JJFMSI specifically for inclusion or incorporation by reference in
the Proxy Statement-Prospectus will, at the date it is first mailed to
shareholders of JJFMSI or at the time of the JJFMSI Shareholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that in each case no representation or warranty is made by
JJFMSI with respect to statements made or incorporated by reference therein
based on information supplied by Prison Realty, the Acquisition Companies, CCA
or PMSI specifically for inclusion or incorporation by reference therein. The
Proxy Statement-Prospectus will comply as to form in all material respects with
the requirements of the Exchange Act and the Securities Act, except that in each
case no representation or warranty is made by JJFMSI with respect to statements
made or incorporated by reference therein based on information supplied by
Prison Realty, the Acquisition Companies, CCA or PMSI specifically for inclusion
or incorporation by reference therein. If at any time prior to the date of the
JJFMSI Shareholders' Meeting, any event with respect to JJFMSI, or with respect
to information supplied by JJFMSI specifically for inclusion in the Proxy
Statement-Prospectus, shall occur which is required to be described in an
amendment of, or supplement to, the Proxy Statement-Prospectus, such event shall
be so described by JJFMSI.
(f) Absence of Certain Changes or Events. Subsequent to September 30,
1999, neither JJFMSI nor any Subsidiary has sustained any material loss or
interference with its business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, which is not
disclosed; and subsequent to September 30, 1999 (i) neither JJFMSI nor any
53
Subsidiary has incurred any material liabilities or obligations, direct or
contingent, or entered into any transactions not in the ordinary course of
business consistent with past practice, and (ii) there has not been any issuance
of options, warrants or rights to purchase JJFMSI Common Stock or preferred
stock, or interests therein, or any adverse change, or any development involving
a prospective adverse change, in the general affairs, management, business,
prospects, financial position, net worth or results of operations of JJFMSI or
any Subsidiary.
(g) Compliance with Laws; Litigation. Except as described in the JJFMSI
Disclosure Schedule or in the Prison Realty Filed SEC Documents, there are no
claims, actions, suits, arbitration, grievances, proceedings or investigations
pending or, to JJFMSI's knowledge, threatened against JJFMSI or any Subsidiary,
or any properties or rights of JJFMSI or any Subsidiary, or any officers or
directors of JJFMSI or any Subsidiary in their capacity as such, by or before
any Governmental Entity which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on JJFMSI or prevent, materially delay
or intentionally delay the ability of JJFMSI to consummate the transactions
contemplated hereby. Neither JJFMSI nor its Subsidiaries is subject to any
judgment, order or decree which could reasonably be expected to result in a
material adverse effect.
Each of JJFMSI and its Subsidiaries has at all times operated and
currently operates its business in conformity in all material respects with all
applicable statutes, common laws, ordinances, decrees, orders, rules and
regulations of Governmental Entities. Each of JJFMSI and its Subsidiaries has
all licenses, approvals or consents to operate its businesses in all locations
in which such businesses are currently being operated, and to its knowledge is
not aware of any existing or imminent matter which may materially adversely
impact its operations or business prospects other than as specifically disclosed
in the JJFMSI Disclosure Schedule. JJFMSI and each Subsidiary have not failed to
file with the applicable regulatory authorities any material statements,
reports, information or forms required by all applicable laws, regulations or
orders, all such filings or submissions were in material compliance with
applicable laws when filed, and no material deficiencies have been asserted by
any regulatory commission, agency or authority with respect to such filings or
submissions. JJFMSI and each Subsidiary have not failed to maintain in full
force and effect any material licenses, registrations or permits necessary or
proper for the conduct of its business, or received any notification that any
revocation or limitation thereof is threatened or pending, and there is not to
the knowledge of JJFMSI pending any change under any law, regulation, license or
permit which would materially adversely affect the business, operations,
property or business prospects of JJFMSI. JJFMSI and each Subsidiary have not
received any notice of violation of or been threatened with a charge of
violating and are not under investigation with respect to a possible violation
of any provision of any law, regulation or order. Neither JJFMSI nor any of its
Subsidiaries has at any time (i) made any unlawful contribution to any candidate
for domestic or foreign office or failed to disclose fully any contribution in
violation of law or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
54
(h) Taxes.
(i) JJFMSI has timely filed (or there have been filed on its
behalf) all Tax Returns required to be filed by it under applicable law, and all
such Tax Returns were and are true, complete and correct in all material
respects. Except to the extent adequately reserved for in accordance with GAAP
and reflected on the most recent balance sheets of JJFMSI, all Taxes due and
payable by JJFMSI have been timely paid in full.
(ii) There are no Tax liens upon the assets of JJFMSI except
liens for Taxes not yet due.
(iii) JJFMSI has complied with the provisions of the Code,
relating to the withholding of Taxes, as well as similar provisions under any
other laws, and has, within the time and in the manner prescribed by law,
withheld, collected and paid over to the proper governmental authorities all
amounts required.
(iv) No audits or other administrative proceedings or court
proceedings are presently pending or, to the knowledge of JJFMSI, asserted with
regard to any Taxes or Tax Returns of JJFMSI.
(v) JJFMSI has not received a written ruling of a taxing
authority relating to Taxes or entered into a written and legally binding
agreement with a taxing authority relating to Taxes with any taxing authority.
(vi) JJFMSI has not requested any extension of time within which
to file any Tax Return, which Tax Return has not since been filed.
(vii) JJFMSI has not agreed to and is not required to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor provision)
by reason of any change in any accounting method of JJFMSI, and there is no
application pending with any taxing authority requesting permission for any
changes in any accounting method of JJFMSI. To the knowledge of JJFMSI, the IRS
has not proposed any such adjustment or change in accounting method.
(viii) JJFMSI has not joined in the filing of a consolidated
return for federal income tax purposes. JJFMSI is not and has never been subject
to the provisions of Section 1503(f) of the Code.
(ix) JJFMSI is not a party to any agreement providing for the
allocation or sharing of Taxes or indemnification by JJFMSI of any other person
in respect of Taxes.
(x) JJFMSI is not a party to any agreement, contract, or
arrangement that would result, individually or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code.
55
(xi) To the knowledge of JJFMSI, JJFMSI does not have, nor has it
ever had, any income which is includable in computing the taxable income of a
United States person (as determined under Section 7701 of the Code) under
Section 951 of the Code. To the knowledge of JJFMSI, none of the Subsidiaries of
JJFMSI is or has ever been a "passive foreign investment company" within the
meaning of Section 1297 of the Code. To the knowledge of JJFMSI, JJFMSI is not
and never has been a "personal holding company" within the meaning of Section
542 of the Code. To the knowledge of JJFMSI, there are no gain recognition
agreements, within the meaning of Treasury Regulation 1.367(a)-8 or any
predecessor provision, between JJFMSI, on one hand, and a stockholder of the
JJFMSI, on the other. There is no pending or, to the knowledge of JJFMSI,
threatened, action, proceeding or investigation by any taxing authority for
assessment or collection of Taxes with respect to JJFMSI in any jurisdiction
where JJFMSI has not filed a Tax Return. All dealings and arrangements between
and among JJFMSI and its Subsidiaries are at arm's length and consistent with
arm's length dealings and arrangements between or among unrelated, uncontrolled
taxpayers.
(xii) For purposes of this Section 3.05(h), all representations
and warranties with respect to JJFMSI are deemed to include and to apply to each
of its Subsidiaries and predecessors.
(i) No Defaults. Except for violations or defaults which, individually
or in the aggregate, would not have a material adverse effect, neither JJFMSI
nor any of its Subsidiaries is in violation or default under any provision of
its charter, by-laws, partnership agreements or other organizational documents,
or is in breach of or default with respect to any provision of any note, bond,
agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and there does not exist any state
of facts which would constitute an event of default on the part of any of JJFMSI
or its Subsidiaries as defined in such documents which, with notice of lapse of
time or both, would constitute a default. Neither JJFMSI nor any of its
Subsidiaries is a party to any contract (other than leases) containing any
covenant restricting its ability to conduct its business as currently conducted
except for any such covenants that would not, individually or in the aggregate,
have a material adverse effect on JJFMSI.
(j) Environmental Matters.
(i) To the knowledge of JJFMSI, the correctional and detention
facilities operated or managed by JJFMSI (the "JJFMSI Facilities") are presently
operated in compliance in all material respects with all Environmental Laws.
(ii) There are no Environmental Laws requiring any material
remediation, clean up, repairs, constructions or capital expenditures (other
than normal maintenance) with respect to the JJFMSI Facilities.
56
(iii) There are no (A) notices of any violation or alleged
violation of any Environmental Laws relating to the JJFMSI Facilities or their
uses that have been received by JJFMSI, or (B) writs, injunctions, decrees,
orders or judgments outstanding, or any actions, suits, claims, proceedings or
investigations pending, or, to the knowledge of JJFMSI, threatened, relating to
the ownership, use, maintenance or operation of the JJFMSI Facilities.
(iv) To the knowledge of JJFMSI, there are no past, present or
anticipated future events, conditions, circumstances, activities, practices,
incidents, actions, or plans relating to JJFMSI and its Subsidiaries that may
interfere with or prevent compliance or continued compliance with applicable
Environmental Laws or which may give rise to any liability under the
Environmental Laws.
(v) All material permits and licenses required under any
Environmental Laws in respect of the operations of the JJFMSI Facilities have
been obtained, and the JJFMSI Facilities and JJFMSI are in compliance, in all
material respects, with the terms and conditions of such permits and licenses.
(k) Benefit Plans.
(i) All "employee benefit plans" (as defined in Section 3(3) of
ERISA) and all other compensation, bonus, pension, profit sharing, deferred
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, employment, change-in-control, welfare, collective bargaining,
severance, disability, death benefit, hospitalization and medical plans,
agreements, arrangements or understandings that are maintained or contributed to
(or previously contributed to) for the benefit of any current or former
employee, officer or director of JJFMSI or any of its Subsidiaries and with
respect to which JJFMSI or any of its Subsidiaries would reasonably be expected
to have direct or contingent liability are defined as the "JJFMSI Benefit
Plans." JJFMSI has heretofore delivered or made available to Prison Realty, CCA
and PMSI true and complete copies of all JJFMSI Benefit Plans and, with respect
to each JJFMSI Benefit Plan, true and complete copies of the following
documents: the most recent actuarial report, if any; the most recent annual
report, if any; any related trust agreement, annuity contract or other funding
instrument, if any; the most recent determination letter, if any; and the most
recent summary plan description, if any.
(ii) Except as disclosed in Section 3.05(k) of the JJFMSI
Disclosure Schedule: (A) none of the JJFMSI Benefit Plans is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA or is otherwise subject to
Title IV of ERISA; (B) none of the JJFMSI Benefit Plans promises or provides
retiree medical or life insurance benefits to any person; (C) neither JJFMSI nor
any of its Subsidiaries has any obligation to adopt or has taken any corporate
action to adopt, any new JJFMSI Benefit Plan or, except as required by law, to
amend any existing JJFMSI Benefit Plan; (D) JJFMSI and its Subsidiaries are in
compliance in all material respects with and each JJFMSI Benefit Plan is and has
been administered in all material respects in compliance with its terms and the
applicable provisions of ERISA, the Code and all other
57
applicable laws, rules and regulations except for any failures to so administer
any JJFMSI Benefit Plan as would not have a material adverse effect on JJFMSI;
(E) each JJFMSI Benefit Plan that is intended to be qualified within the meaning
of Section 401(a) of the Code, to JJFMSI's knowledge, has been determined by the
IRS to be so qualified, and no circumstances exist that could reasonably be
expected to result in the revocation of any such determination; (F) each JJFMSI
Benefit Plan intended to provide for the deferral of income, the reduction of
salary or other compensation, or to afford other income tax benefits, complies
with the requirements of the applicable provisions of the Code or other laws,
rules and regulations required to provide such income tax benefits; (G) no
prohibited transactions (as defined in Section 406 or 407 of ERISA or Section
4975 of the Code) have occurred for which a statutory exemption is not available
with respect to any JJFMSI Benefit Plan, and which could give rise to liability
on the part of JJFMSI, any of its Subsidiaries, any JJFMSI Benefit Plan, or any
fiduciary, party in interest or disqualified person with respect thereto that
would be material to JJFMSI or would be material to JJFMSI if it were its
liability; (H) neither JJFMSI nor any entity required to be treated as a single
employer with JJFMSI under Section 414 of the Code has any unsatisfied liability
under Title IV of ERISA that would have a material adverse effect on JJFMSI; (I)
other than funding obligations and benefits claims payable in the ordinary
course, to JJFMSI's knowledge, no event has occurred and no circumstance exists
with respect to any JJFMSI Benefit Plan that could give rise to any liability
arising under the Code, ERISA or any other applicable law, or under any
indemnity agreement to which JJFMSI or any of its Subsidiaries is a party,
excluding liability relating to benefit claims and funding obligations payable
in the ordinary course, whether directly or by reason of its affiliation with
any entity required to be treated as a single employer with JJFMSI under Section
414 of the Code; (J) as of the date hereof there are no pending or, to the
knowledge of the executive officers of JJFMSI, threatened investigations, claims
or lawsuits in respect of any JJFMSI Benefit Plan that would have a material
adverse effect on JJFMSI; (K) other than continuation coverage required to be
provided under Section 4980B of the Code or Part 6 of Title I of ERISA or
otherwise as provided by state law, none of the JJFMSI Benefit Plans that are
"welfare plans," within the meaning of Section 3(1) of ERISA, provides for any
benefits with respect to current or former employees for periods extending
beyond their retirement or other termination of service; (L) no amount payable
pursuant to a JJFMSI Benefit Plan or any other plan, contract or arrangement of
JJFMSI would be considered an "excess parachute payment" under Section 280G of
the Code; and (M) no JJFMSI Benefit Plan exists that could result in the payment
to any current or former employee, officer or director of JJFMSI any money or
other property or accelerate or provide any other rights or benefits as a result
of the transactions contemplated by this Agreement which would constitute an
excess parachute payment within the meaning of Section 280G of the Code.
(l) Material Contracts. All contracts to which JJFMSI or any Subsidiary
is a party have been duly authorized, executed and delivered by JJFMSI or any
Subsidiary, constitute valid and binding agreements of JJFMSI or any Subsidiary
and are enforceable against JJFMSI or any Subsidiary in accordance with the
terms thereof. Each of JJFMSI and each Subsidiary has performed all material
obligations required to be performed by it, and is neither in default in any
material respect nor has it received notice of any default or dispute under, any
such contract or
58
other material instrument to which it is a party or by which its property is
bound or affected. To the best knowledge of JJFMSI, no other party under any
such contract or other material instrument to which it is a party is in default
in any material respect thereunder.
(m) No Undisclosed Liabilities. Except (a) as set forth in the Prison
Realty Filed SEC Documents, (b) as set forth in Section 3.05(m) of the JJFMSI
Disclosure Schedule, (c) as incurred in the ordinary course of the business of
JJFMSI subsequent to September 30, 1999 which would, individually or in the
aggregate, not have, or be reasonably expected not to have, a material adverse
effect, (d) for any expenses incurred in connection with transactions
contemplated by this Agreement or for liabilities or obligations relating to
contractual obligations, indebtedness, litigation or other matters which are
covered by other representations and warranties in this Agreement or otherwise
identified in the JJFMSI Disclosure Schedule, neither JJFMSI nor any of its
Subsidiaries has any liabilities or obligations (direct or indirect, contingent
or fixed, known or unknown, matured or unmatured accrued or unaccrued), whether
arising out of contract, tort, statute or otherwise, and whether or not required
by GAAP to be reflected on or in footnotes to the financial statements of
JJFMSI.
(n) Labor Matters. Except as set forth in Section 3.5(n) of the JJFMSI
Disclosure Schedule: (i) neither JJFMSI nor its Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (ii) to the knowledge of
JJFMSI, no union claims to represent the employees of JJFMSI and its
Subsidiaries; (iii) none of the employees of JJFMSI or its Subsidiaries is
represented by any labor organization and JJFMSI has no knowledge of any current
union organizing activities among the employees of JJFMSI or its Subsidiaries,
nor does any question concerning representation exist concerning such employees;
neither JJFMSI nor its Subsidiaries is the subject of any proceeding asserting
that it has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment;
(iv) there is no strike, work stoppage, lockout or other labor dispute involving
JJFMSI or its Subsidiaries pending or threatened; (v) no action, suit,
complaint, charge, arbitration, inquiry, proceeding or investigation by or
before any Governmental Entity brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of its employees is pending or, to the knowledge of JJFMSI,
threatened against JJFMSI or its Subsidiaries; (vi) to the knowledge of JJFMSI,
no grievance is threatened against JJFMSI or its Subsidiaries; (vii) neither
JJFMSI nor its Subsidiaries is a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Entity relating to employees or
employment practices; (viii) there are no written personnel policies, rules or
procedures applicable to employees of JJFMSI or its Subsidiaries, other than
those set forth in Section 3.05(n) of the JJFMSI Disclosure Schedule, true and
correct copies of which have heretofore been delivered to Prison Realty, CCA and
PMSI; (ix) JJFMSI and its Subsidiaries are, and have at all times been, in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation; (x) since the
59
enactment of the WARN Act, neither JJFMSI nor its Subsidiaries has effectuated
(A) a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of any of JJFMSI or its Subsidiaries; or (B) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of any of JJFMSI or its Subsidiaries, in either case, other than in
substantial compliance with the WARN Act; nor has JJFMSI or its Subsidiaries
been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state,
local or foreign law or regulation; and (xi) neither JJFMSI nor any of its
Subsidiaries is aware that it has any liability or potential liability under the
Multi-Employer Pension Plan Act.
(o) Insurance. JJFMSI and its Subsidiaries maintain primary, excess and
umbrella insurance of types and amounts customary for their business against
general liability, fire, workers' compensation, products liability, theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect and with respect to
property insurance for assets for which it is customary to have replacement cost
coverage or there are coinsurance provisions, the amount of such insurance is
sufficient to provide for such coverage or to prevent the application of the
coinsurance provision. Section 3.05(o) of the JJFMSI Disclosure Schedule sets
forth a complete list of the insurance policies maintained by JJFMSI and its
Subsidiaries.
(p) Affiliate Transactions. Except as set forth in Section 3.05(p) of
the JJFMSI Disclosure Schedule, there is no transaction and no transaction is
now proposed, to which JJFMSI or its Subsidiaries is or is to be a party in
which any current stockholder (holding in excess of 5% of the JJFMSI's Common
Stock or any securities convertible into or exchangeable for Common Stock),
general partner, limited partner (holding in excess of 5% of the limited
partnership interests), director or executive officer of JJFMSI or its
Subsidiaries has a direct or indirect interest.
(q) Internal Accounting Controls. JJFMSI's system of internal accounting
controls is sufficient to meet the broad objectives of internal accounting
controls insofar as those objectives pertain to the prevention or detection of
errors or irregularities in amounts that would be material in relation to
JJFMSI's financial statements.
(r) Vote Required. The JJFMSI Shareholder Approval is the only vote of
the holders of any class or series of JJFMSI's securities necessary to approve
this Agreement and the transactions contemplated hereby.
(s) Board Recommendation. On the date hereof with respect to this
Agreement, the Board of Directors of JJFMSI, at a meeting duly called and held,
by the majority vote of the directors present at such meeting, (i) determined
that such Agreement and the Merger and the other transactions contemplated
hereby and thereby are fair to and in the best interests of the shareholders of
JJFMSI, (ii) adopted such Agreement and approved the Merger and (iii) resolved
60
to recommend that the holders of JJFMSI Common Stock approve such Agreement and
the Merger.
(t) Tennessee Business Combination Act. The approval of the Merger by
the Board of Directors of JJFMSI referred to in Section 3.05(s) constitutes
approval of the Merger for purposes of the TBCA and represents all the actions
necessary to ensure that Sections 48-103-201 et seq. of the TBCA do not apply to
the Merger.
(u) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with JJFMSI's participation in the
transactions contemplated by this Agreement.
(v) Stock Ownership. JJFMSI does not, directly or indirectly, own any
shares of Prison Realty Stock other than shares, if any, held in JJFMSI Benefit
Plans.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01 Covenants of Prison Realty. Except as set forth in Section
4.01 of the Prison Realty Disclosure Schedule or as otherwise contemplated by
this Agreement and the transactions related thereto, during the period from the
date of this Agreement until the Effective Time, Prison Realty agrees that:
(a) Ordinary Course. Prison Realty and its Subsidiaries shall carry on
their respective businesses only in the usual, regular and ordinary course
consistent with past practice in all material respects and use their reasonable
best efforts to preserve intact their present business organizations, maintain
their rights and franchises, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing businesses shall not be impaired at the Effective Time.
(b) REIT Qualification. Prison Realty shall conduct its operations in a
manner so as to continue to qualify as a REIT under the Code.
(c) Other Actions. Prison Realty shall not take any action that would
result in any of its representations and warranties set forth in this Agreement
that are qualified as to materiality being untrue, any of such representations
and warranties that are not so qualified being untrue in any material respect or
any of the conditions to the Merger set forth in Article VI not being satisfied.
61
(d) Structure of Transactions. Prison Realty shall advise CCA, PMSI and
JJFMSI from time to time of the proposed structure of Prison Realty and its
subsidiaries and affiliated entities at and after the Effective Time for
purposes of their evaluation of the Merger.
(e) Advice of Changes; Filings. Prison Realty shall advise CCA, PMSI and
JJFMSI of any change or event which would cause or constitute a material breach
of any of its representations or warranties contained herein. Prison Realty
shall file all reports required to be filed by it with the SEC or the NYSE
between the date of this Agreement and the Effective Time and shall deliver to
the Target Companies copies of all such reports promptly after the same are
filed.
SECTION 4.02 Covenants of the Acquisition Companies. During the period
from the date of this Agreement until the Effective Time, each Acquisition
Company agrees that it shall not take any action that would result in any of its
representations and warranties set forth in this Agreement that are qualified as
to materiality being untrue, any of such representations and warranties that are
not so qualified being untrue in any material respect or any of the conditions
to the Merger set forth in Article VI herein not being satisfied.
SECTION 4.03 Covenants of CCA. Except as set forth in Section 4.03 of
the CCA Disclosure Schedule or as otherwise contemplated by this Agreement and
the transactions related thereto, during the period from the date of this
Agreement through and including the Effective Time, CCA shall, and shall cause
its Subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and in compliance in all material respects with
all applicable laws and regulations and, to the extent consistent therewith,
shall use reasonable efforts to preserve intact their current business
organizations and use reasonable efforts to preserve their relationships with
those persons having business dealings with them. Without limiting the
generality of the foregoing, except as set forth in Section 4.03 of the CCA
Disclosure Schedule or as otherwise contemplated by this Agreement, during the
period from the date of this Agreement through the Effective Time, CCA shall
not, and shall not permit any of its Subsidiaries to:
(a) Dividends; Changes in Stock. Other than dividends and distributions
by a direct or indirect wholly owned Subsidiary to CCA or one of their wholly
owned Subsidiaries, (i) declare, set aside or pay any dividends (payable in
cash, stock, property or otherwise) on, make any other distributions in respect
of, or enter into any agreement with respect to the voting of, any of its
capital stock, (ii) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (iii) purchase, redeem
or otherwise acquire any capital stock of CCA or any of its Subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(b) Issuance of Securities. Issue, deliver, sell, pledge or otherwise
encumber or subject to any Lien any of its shares of capital stock or any other
voting securities or any
62
securities convertible into, exercisable for or exchangeable with, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible securities;
(c) Governing Documents. Amend its charter, bylaws or other comparable
organizational documents;
(d) No Acquisitions. Acquire any business (whether by merger,
consolidation, purchase of assets or otherwise) or acquire any equity interest
in any person not an affiliate (whether through a purchase of stock,
establishment of a joint venture or otherwise);
(e) No Dispositions. Other than the obligations for capital commitments
set forth in Section 4.03 of the CCA Disclosure Schedule, (A) sell, lease,
exchange, license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its real properties or other assets, (B) enter into
any new joint ventures or similar projects, or (C) enter into any new
development projects;
(f) Accounting Methods. Change its methods of accounting (or underlying
assumptions) in effect at December 31, 1998, except as required by changes (i)
in generally accepted accounting principles ("GAAP"), (ii) in law or regulation,
or (iii) due to events subsequent to September 30, 1999 related or consequential
to the execution of this Agreement or consummation of the Merger and related
transactions (including, but not limited to, the effects of any changes required
by the SEC as part of its review of the Prison Realty Filed SEC Documents or the
Proxy Statement-Prospectus); or change any of its methods of reporting income
and deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns of CCA for the taxable years ended
December 31, 1998, except as required by changes in law or regulation;
(g) No Settlements. Effect any settlement or compromise of any pending
or threatened proceeding in respect of which CCA is or could have been a party,
unless such settlement (i) includes an unconditional written release of CCA, in
form and substance reasonably satisfactory to CCA, from all liability on claims
that are the subject matter of such proceeding, (ii) does not include any
statement as to any admission of fault, culpability or failure to act by or on
behalf of CCA and (iii) is less than $100,000;
(h) No Cancellation. Other than the obligations for capital commitments
set forth in Section 4.03 of the CCA Disclosure Schedule, create, renew, amend,
terminate or cancel, or take any other action that could reasonably be expected
to result in the creation, renewal, amendment, termination or cancellation of
any agreement or instrument that is material to CCA and its respective
Subsidiaries, taken as a whole;
(i) Indebtedness. Other than the obligations for capital commitments set
forth in Section 4.03 of the CCA Disclosure Schedule and any indebtedness
incurred by CCA in connection with this Agreement and the transactions related
thereto, and except for an increase in
63
amounts outstanding under its revolving credit agreement, incur any indebtedness
for borrowed money;
(j) No Commitments. Other than the obligations for capital commitments
set forth in Section 4.03 of the CCA Disclosure Schedule, enter into any new
capital or take out commitments or increase any existing capital or take out
commitments;
(k) Compensation. Except pursuant to agreements or arrangements in
effect on the date hereof, (A) grant to any current or former director,
executive officer or other key employee of CCA or any Subsidiary any increase in
compensation, bonus or other benefits (other than increases in base salary in
the ordinary course of business consistent with past practice or arising due to
a promotion or other change in status and consistent with generally applicable
compensation practices), (B) grant to any such current or former director,
executive officer or other employee any increase in severance or termination
pay, (C) amend or adopt any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such current or
former director, executive officer or employee, or (D) amend, adopt or terminate
any CCA Benefit Plan, except as may be required to retain qualification of any
such plan under Section 401(a) of the Code;
(l) Related Party Transactions. Except pursuant to agreements or
arrangements in effect on the date hereof or as otherwise contemplated by this
Agreement which have been disclosed in Section 4.03 of the CCA Disclosure
Schedule, pay, loan or advance any amount to, or sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or intangible) to, or
purchase any properties or assets, or enter into any agreement or arrangement
with, any of its officers or directors or any affiliate or the immediate family
members or associates of any of its officers or directors, other than payment of
compensation at current salary, incentive compensation and bonuses and other
than properly authorized business expenses in the ordinary course of business,
in each case consistent with past practice;
(m) Insurance. Permit any material insurance policy naming CCA or any
Subsidiary as a beneficiary or a loss payable payee to be canceled or
terminated;
(n) Advise of Changes. Neglect or fail to advise Prison Realty, PMSI or
JJFMSI of any change or event which would cause or constitute a material breach
of any of the representations or warranties of CCA contained herein; or
(o) Other Actions. Authorize, or commit or agree to take, any of the
foregoing actions.
SECTION 4.04 Covenants of PMSI. Except as set forth in Section 4.04 of
the PMSI Disclosure Schedule or as otherwise contemplated by this Agreement,
during the period from the date of this Agreement through and including the
Effective Time, PMSI shall, and shall cause its Subsidiaries to, carry on their
respective businesses in the ordinary course consistent with past practice and
in compliance in all material respects with all applicable laws and regulations
and, to
64
the extent consistent therewith, shall use reasonable efforts to preserve intact
their current business organizations and use reasonable efforts to preserve
their relationships with those persons having business dealings with them.
Without limiting the generality of the foregoing, except as set forth in Section
4.04 of the PMSI Disclosure Schedule or as otherwise contemplated by this
Agreement, during the period from the date of this Agreement through the
Effective Time, PMSI shall not, and shall not permit any of its Subsidiaries to:
(a) Dividends; Changes in Stock. Other than (x) dividends and
distributions by a direct or indirect wholly owned Subsidiary to PMSI or one of
their wholly owned Subsidiaries and (y) dividends and distributions paid by PMSI
to its respective shareholders in accordance with its distribution and dividend
policy and practice to date, (i) declare, set aside or pay any dividends
(payable in cash, stock, property or otherwise) on, make any other distributions
in respect of, or enter into any agreement with respect to the voting of, any of
its capital stock, (ii) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (iii) purchase, redeem
or otherwise acquire any capital stock of PMSI or any of its Subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(b) Issuance of Securities. Issue, deliver, sell, pledge or otherwise
encumber or subject to any Lien any of its shares of capital stock or any other
voting securities or any securities convertible into, exercisable for or
exchangeable with, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities;
(c) Governing Documents. Amend its charter, bylaws or other comparable
organizational documents;
(d) No Acquisitions. Acquire any business (whether by merger,
consolidation, purchase of assets or otherwise) or acquire any equity interest
in any person not an affiliate (whether through a purchase of stock,
establishment of a joint venture or otherwise);
(e) No Dispositions. Other than the obligations for capital commitments
set forth in Section 4.04 of the PMSI Disclosure Schedule, (A) sell, lease,
exchange, license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its real properties or other assets, (B) enter into
any new joint ventures or similar projects, or (C) enter into any new
development projects;
(f) Accounting Methods. Change its methods of accounting (or underlying
assumptions) in effect at December 31, 1998, except as required by changes (i)
in generally accepted accounting principles ("GAAP"), (ii) in law or regulation,
or (iii) due to events subsequent to September 30, 1999 related or consequential
to the execution of this Agreement or consummation of the Merger and related
transactions (including, but not limited to, the effects of any changes required
by the SEC as part of its review of the Prison Realty Filed SEC Documents
65
or the Proxy Statement-Prospectus); or change any of its methods of reporting
income and deductions for federal income tax purposes, except as required by
changes in law or regulation;
(g) No Settlements. Effect any settlement or compromise of any pending
or threatened proceeding in respect of which PMSI is or could have been a party,
unless such settlement (i) includes an unconditional written release of PMSI, in
form and substance reasonably satisfactory to PMSI, from all liability on claims
that are the subject matter of such proceeding, (ii) does not include any
statement as to any admission of fault, culpability or failure to act by or on
behalf of PMSI and (iii) is less than $100,000;
(h) No Cancellation. Other than the obligations for capital commitments
set forth in Section 4.04 of the PMSI Disclosure Schedule, create, renew, amend,
terminate or cancel, or take any other action that could reasonably be expected
to result in the creation, renewal, amendment, termination or cancellation of
any agreement or instrument that is material to PMSI and its respective
Subsidiaries, taken as a whole;
(i) Indebtedness. Other than the obligations for capital commitments set
forth in Section 4.04 of the PMSI Disclosure Schedule and except for an increase
in amounts outstanding under its revolving credit agreement, incur any
indebtedness for borrowed money;
(j) No Commitments. Other than the obligations for capital commitments
set forth in Section 4.04 of the PMSI Disclosure Schedule, enter into any new
capital or take out commitments or increase any existing capital or take out
commitments;
(k) Compensation. Except pursuant to agreements or arrangements in
effect on the date hereof, (A) grant to any current or former director,
executive officer or other key employee of PMSI or any Subsidiary any increase
in compensation, bonus or other benefits (other than increases in base salary in
the ordinary course of business consistent with past practice or arising due to
a promotion or other change in status and consistent with generally applicable
compensation practices), (B) grant to any such current or former director,
executive officer or other employee any increase in severance or termination
pay, (C) amend or adopt any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such current or
former director, executive officer or employee, or (D) amend, adopt or terminate
any PMSI Benefit Plan, except as may be required to retain qualification of any
such plan under Section 401(a) of the Code;
(l) Related Party Transactions. Except pursuant to agreements or
arrangements in effect on the date hereof or as otherwise contemplated by this
Agreement which have been disclosed in Section 4.04 of the PMSI Disclosure
Schedule, pay, loan or advance any amount to, or sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or intangible) to, or
purchase any properties or assets, or enter into any agreement or arrangement
with, any of its officers or directors or any affiliate or the immediate family
members or associates of any of its officers or directors, other than payment of
compensation at current salary, incentive
66
compensation and bonuses and other than properly authorized business expenses in
the ordinary course of business, in each case consistent with past practice;
(m) Insurance. Permit any material insurance policy naming PMSI or any
Subsidiary as a beneficiary or a loss payable payee to be canceled or
terminated;
(n) Advise of Changes. Neglect or fail to advise Prison Realty, CCA or
JJFMSI of any change or event which would cause or constitute a material breach
of any of the representations or warranties of PMSI contained herein; or
(o) Other Actions. Authorize, or commit or agree to take, any of the
foregoing actions.
SECTION 4.05 Covenants of JJFMSI. Except as set forth in Section 4.05 of
the JJFMSI Disclosure Schedule or as otherwise contemplated by this Agreement,
during the period from the date of this Agreement through and including the
Effective Time, JJFMSI shall, and shall cause its Subsidiaries to, carry on
their respective businesses in the ordinary course consistent with past practice
and in compliance in all material respects with all applicable laws and
regulations and, to the extent consistent therewith, shall use reasonable
efforts to preserve intact their current business organizations and use
reasonable efforts to preserve their relationships with those persons having
business dealings with them. Without limiting the generality of the foregoing,
except as set forth in Section 4.05 of the JJFMSI Disclosure Schedule or as
otherwise contemplated by this Agreement, during the period from the date of
this Agreement through the Effective Time, JJFMSI shall not, and shall not
permit any of its Subsidiaries to:
(a) Dividends; Changes in Stock. Other than (x) dividends and
distributions by a direct or indirect wholly owned Subsidiary to JJFMSI or one
of their wholly owned Subsidiaries and (y) dividends and distributions paid by
JJFMSI to its respective shareholders in accordance with its distribution and
dividend policy and practice to date, (i) declare, set aside or pay any
dividends (payable in cash, stock, property or otherwise) on, make any other
distributions in respect of, or enter into any agreement with respect to the
voting of, any of its capital stock, (ii) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(iii) purchase, redeem or otherwise acquire any capital stock of JJFMSI or any
of its Subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(b) Issuance of Securities. Issue, deliver, sell, pledge or otherwise
encumber or subject to any Lien any of its shares of capital stock or any other
voting securities or any securities convertible into, exercisable for or
exchangeable with, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities;
(c) Governing Documents. Amend its charter, bylaws or other comparable
organizational documents;
67
(d) No Acquisitions. Acquire any business (whether by merger,
consolidation, purchase of assets or otherwise) or acquire any equity interest
in any person not an affiliate (whether through a purchase of stock,
establishment of a joint venture or otherwise);
(e) No Dispositions. Other than the obligations for capital commitments
set forth in Section 4.05 of the JJFMSI Disclosure Schedule, (A) sell, lease,
exchange, license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its real properties or other assets, (B) enter into
any new joint ventures or similar projects, or (C) enter into any new
development projects;
(f) Accounting Methods. Change its methods of accounting (or underlying
assumptions) in effect at December 31, 1998, except as required by changes (i)
in generally accepted accounting principles ("GAAP"), (ii) in law or regulation,
or (iii) due to events subsequent to September 30, 1999 related or consequential
to the execution of this Agreement or consummation of the Merger and related
transactions (including the effects of any changes required by the SEC as part
of its review of the Prison Realty Filed SEC Documents or the Proxy
Statement-Prospectus); or change any of its methods of reporting income and
deductions for federal income tax purposes, except as required by changes in law
or regulation;
(g) No Settlements. Effect any settlement or compromise of any pending
or threatened proceeding in respect of which JJFMSI is or could have been a
party, unless such settlement (i) includes an unconditional written release of
JJFMSI, in form and substance reasonably satisfactory to JJFMSI, from all
liability on claims that are the subject matter of such proceeding, (ii) does
not include any statement as to any admission of fault, culpability or failure
to act by or on behalf of JJFMSI and (iii) is less than $100,000;
(h) No Cancellation. Other than the obligations for capital commitments
set forth in Section 4.05 of the JJFMSI Disclosure Schedule, create, renew,
amend, terminate or cancel, or take any other action that could reasonably be
expected to result in the creation, renewal, amendment, termination or
cancellation of any agreement or instrument that is material to JJFMSI and its
respective Subsidiaries, taken as a whole;
(i) Indebtedness. Other than the obligations for capital commitments set
forth in Section 4.05 of the JJFMSI Disclosure Schedule and except for an
increase in amounts outstanding under its revolving credit agreement, incur any
indebtedness for borrowed money;
(j) No Commitments. Other than the obligations for capital commitments
set forth in Section 4.05 of the JJFMSI Disclosure Schedule, enter into any new
capital or take out commitments or increase any existing capital or take out
commitments;
(k) Compensation. Except pursuant to agreements or arrangements in
effect on the date hereof, (A) grant to any current or former director,
executive officer or other key employee of JJFMSI or any Subsidiary any increase
in compensation, bonus or other benefits (other than
68
increases in base salary in the ordinary course of business consistent with past
practice or arising due to a promotion or other change in status and consistent
with generally applicable compensation practices), (B) grant to any such current
or former director, executive officer or other employee any increase in
severance or termination pay, (C) amend or adopt any employment, deferred
compensation, consulting, severance, termination or indemnification agreement
with any such current or former director, executive officer or employee, or (D)
amend, adopt or terminate any JJFMSI Benefit Plan, except as may be required to
retain qualification of any such plan under Section 401(a) of the Code;
(l) Related Party Transactions. Except pursuant to agreements or
arrangements in effect on the date hereof or as otherwise contemplated by this
Agreement which have been disclosed in Section 4.05 of the JJFMSI Disclosure
Schedule, pay, loan or advance any amount to, or sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or intangible) to, or
purchase any properties or assets, or enter into any agreement or arrangement
with, any of its officers or directors or any affiliate or the immediate family
members or associates of any of its officers or directors, other than payment of
compensation at current salary, incentive compensation and bonuses and other
than properly authorized business expenses in the ordinary course of business,
in each case consistent with past practice;
(m) Insurance. Permit any material insurance policy naming JJFMSI or any
Subsidiary as a beneficiary or a loss payable payee to be canceled or
terminated;
(n) Advise of Changes. Neglect or fail to advise Prison Realty, CCA or
PMSI of any change or event which would cause or constitute a material breach of
any of the representations or warranties of JJFMSI contained herein; or
(o) Other Actions. Authorize, or commit or agree to take, any of the
foregoing actions.
SECTION 4.06 No Solicitation by Prison Realty. (a) Prison Realty shall
not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or
permit any officer, director or employee of, or any investment banker, attorney
or other advisor or representative of, Prison Realty or any of its Subsidiaries
to, directly or indirectly, (i) solicit, initiate, encourage or knowingly
facilitate the submission of any alternative proposal or (ii) enter into or
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, any alternative proposal; provided,
however, that prior to the receipt of the Prison Realty Stockholder Approval,
Prison Realty may, in response to a bona fide alternative proposal that
constitutes a superior proposal (as defined in Section 4.06(b) herein) and that
was made after the date hereof (and not solicited by Prison Realty after the
date hereof) by any person, and subject to compliance with Section 4.06(c)
herein, (A) furnish information with respect to Prison Realty and its
Subsidiaries to such person and its representatives pursuant to a customary
confidentiality agreement and discuss such information with such person and its
representatives and (B) participate in negotiations regarding such alternative
proposal. For purposes of this Section 4.06, the term "alternative proposal"
means any inquiry, proposal or offer from any person relating to any direct
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or indirect acquisition or purchase of 10% or more of the assets (based on the
fair market value thereof) of Prison Realty and its Subsidiaries, taken as a
whole, other than the transactions contemplated by this Agreement, or of 10% or
more of any class of equity securities of Prison Realty or any of its
Subsidiaries or any tender offer or exchange offer (including by Prison Realty
or any of its Subsidiaries) that if consummated would result in any person
beneficially owning 10% or more of any class of equity securities of Prison
Realty or any of its Subsidiaries, or any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving Prison Realty or any of its
Subsidiaries other than the transactions contemplated by this Agreement and
transactions involving the original issuance of any debt or equity securities by
Prison Realty pursuant to the terms of that certain Securities Purchase
Agreement dated the date hereof, by and among Prison Realty, CCA, PMSI, and
JJFMSI, on the one hand, and certain investors therein named, on the other hand
(the "Securities Purchase Agreement").
(b) Except as set forth in this Section 4.06, the Board of Directors of
Prison Realty shall not (i) withdraw or modify, or publicly propose to withdraw
or modify, in a manner adverse to the Target Companies, the approval or
recommendation by such Board of Directors of the Merger or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any
alternative proposal or (iii) cause or agree to cause Prison Realty to enter
into any letter of intent, agreement in principle, acquisition agreement or
similar agreement related to any alternative proposal. Notwithstanding the
foregoing, if the Board of Directors of Prison Realty receives a superior
proposal, such Board of Directors may, prior to the receipt of the Prison Realty
Stockholder Approval, withdraw or modify its approval or recommendation of the
Merger and this Agreement, approve or recommend a superior proposal or terminate
this Agreement, but in each case only at a time that is at least five business
days after receipt by each of the Target Companies of written notice advising
each of them that the Board of Directors of Prison Realty has resolved to accept
a superior proposal if it continues to be a superior proposal at the end of such
five business day period. For purposes of this Section 4.06, the term "superior
proposal" means any bona fide alternative proposal (which, for purposes of
Section 4.06(a) only, may be subject to a due diligence condition), which
proposal was not solicited by Prison Realty after the date of execution of this
Agreement, made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 10% of the shares
of capital stock of Prison Realty then outstanding or all or substantially all
the assets of Prison Realty and its Subsidiaries and otherwise on terms which
the Board of Directors of Prison Realty determines in good faith (after
consultation with its financial advisor) to be more favorable to Prison Realty's
stockholders than the Merger and the issuance of securities pursuant to the
Securities Purchase Agreement and for which financing, to the extent required,
is then committed or which, in the good faith judgment of such Board of
Directors, is reasonably capable of being financed by such third party.
(c) In addition to the obligations of Prison Realty set forth in
paragraphs (a) and (b) above, Prison Realty promptly shall advise each Target
Company orally and in writing of any request for information or of any
alternative proposal, the material terms and conditions of such
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request or alternative proposal and the identity of the person making any such
request or alternative proposal and any determination by the Board of Directors
of Prison Realty that a alternative proposal is or may be a superior proposal.
Prison Realty will keep each Target Company informed as to the status and
material details (including amendments or proposed amendments) of any such
request or alternative proposal.
SECTION 4.07 No Solicitation by Target Companies. Without the prior
written consent of Prison Realty, (a) each Target Company shall not, nor shall
it permit any of its Subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Target Company or any of its Subsidiaries to,
directly or indirectly, (i) solicit, initiate, encourage or knowingly facilitate
the submission of any alternative proposal or (ii) enter into or participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, any alternative proposal. For purposes of this
Section 4.07, the term "alternative proposal" means any inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or purchase
of 10% or more of the assets (based on the fair market value thereof) of any
Target Company and its Subsidiaries, taken as a whole, other than the
transactions contemplated by this Agreement, or of 10% or more of any class of
equity securities of any Target Company or any of its Subsidiaries or any tender
offer or exchange offer (including by any Target Company or any of its
Subsidiaries) that if consummated would result in any person beneficially owning
10% or more of any class of equity securities of any Target Company or any of
its Subsidiaries, or any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction involving any Target Company or any of its Subsidiaries other than
the transactions contemplated by this Agreement.
(b) Except as set forth in this Section 4.07, the Board of Directors of
the Target Company shall not (i) withdraw or modify, or publicly propose to
withdraw or modify, in a manner adverse to Prison Realty, the approval or
recommendation by such Board of Directors of the Merger or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any
alternative proposal or (iii) cause or agree to cause the Target Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or similar agreement related to any alternative proposal.
(c) In addition to the obligations of a Target Company set forth in
paragraphs (a) and (b) above, a Target Company promptly shall advise Prison
Realty orally and in writing of any request for information or of any
alternative proposal, the material terms and conditions of such request or
alternative proposal and the identity of the person making any such request or
alternative proposal and any determination by the Board of Directors of the
Target Company that a alternative proposal is or may be a superior proposal. The
Target Company will keep Prison Realty informed as to the status and material
details (including amendments or proposed amendments) of any such request or
alternative proposal.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Preparation of the Proxy Statement-Prospectus. As promptly
as practicable following the date of this Agreement, Prison Realty, the
Acquisition Companies, CCA, PMSI and JJFMSI shall prepare and file with the SEC
a Registration Statement on Form S-4, of which the Proxy Statement-Prospectus
will be a part. Each party hereto will cooperate with the other party in
connection with the preparation of the Proxy Statement-Prospectus, including,
but not limited to, furnishing all information as may be required to be
disclosed therein. The Proxy Statement-Prospectus shall contain the
recommendation of the Board of Directors that the stockholders approve this
Agreement and the transaction contemplated hereby. Each of Prison Realty, the
Acquisition Companies and the Target Companies shall use its reasonable best
effort to have the Registration Statement on Form S-4 declared effective under
the Securities Act as promptly as practicable after such filing. Each party
hereto will use its reasonable best efforts to cause the Proxy
Statement-Prospectus to be mailed to its shareholders as promptly as practicable
after the Registration Statement on Form S-4 is declared effective under the
Securities Act. No filing of, or amendment or supplement to the Proxy
Statement-Prospectus will be made by any party hereto without providing the
other parties and their Boards of Directors the opportunity to review and
comment thereon and to approve the same, provided that such approvals shall not
be unreasonably withheld. Each party hereto will advise the other parties,
promptly after it receives notice thereof, of any request by the SEC for
amendment of the Proxy Statement-Prospectus or comments thereon and responses
thereto or requests by the SEC for additional information. If at any time prior
to the Effective Time any information relating to any of the parties hereto or
any of their respective affiliates, officers, or directors, should be discovered
by a party hereto which should be set forth in an amendment or supplement to the
Proxy Statement-Prospectus, so that the Proxy Statement-Prospectus would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such information
shall promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the shareholders of Prison
Realty, CCA, PMSI and JJFMSI.
SECTION 5.02 Access to Information. Each party shall, and shall cause
each of its Subsidiaries to, afford to the other party hereto and to its
officers, employees, accountants, counsel and other representatives (including
environmental consultants), reasonable access, during normal business hours
during the period prior to the Effective Time, to their respective properties,
books, records and personnel and, during such period, each party hereto shall,
and shall cause each of its Subsidiaries to, furnish promptly to the other party
hereto (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of Federal or state securities laws and (b) such other information concerning
its business, properties and personnel as the other party may reasonably
request. With respect to matters disclosed in the Prison Realty Disclosure
Schedule, the CCA
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Disclosure Schedule, the PMSI Disclosure Schedule or the JJFMSI Disclosure
Schedule, respectively, each party agrees to supplement from time to time the
information set forth therein.
SECTION 5.03 Shareholders Meeting. Each of Prison Realty, CCA, PMSI, and
JJFMSI shall, as promptly as practicable after the date hereof, (a) duly call,
give notice of, convene and hold a Shareholders' Meeting for the purpose of
obtaining the Prison Realty Stockholder Approval, the CCA Shareholder Approval,
the PMSI Shareholder Approval or the JJFMSI Shareholder Approval, as the case
may be, and (b) subject in the case of Prison Realty to Section 4.06, through
its respective Board of Directors, recommend to its shareholders that they grant
the Prison Realty Stockholder Approval, the CCA Shareholder Approval, the PMSI
Shareholder Approval or the JJFMSI Shareholder Approval, as the case may be.
Each party shall use all reasonable efforts to solicit from its stockholders
proxies in favor of the Merger and shall take all other action necessary or, in
the reasonable opinion of such party, advisable to secure any vote or consent of
stockholders required by the TBCA to effect the Merger. Each party shall vote,
or cause to be voted, in favor of the Merger and/or the related transactions, as
applicable, all shares of its Common Stock directly or indirectly beneficially
owned by it.
SECTION 5.04 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party hereto shall, and shall cause its
Subsidiaries to, use all reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including (i)
the obtaining of any necessary consent, authorization, order or approval of, or
any exemption by, any Governmental Entity and/or any other public or private
third party which is required to be obtained by such party or any of its
Subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement (provided that no party to this Agreement shall
pay or agree to pay any material amount to obtain a consent without the prior
approval of the remaining parties, which approval shall not be unreasonably
withheld or delayed), and the making or obtaining of all necessary filings and
registrations with respect thereto, (ii) the defending of any lawsuits or other
legal proceedings challenging this Agreement, and (iii) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
SECTION 5.05 Benefits Matters. Except as otherwise provided herein,
following the Effective Time, Prison Realty shall honor, or cause to be honored,
all obligations under employment agreements, Prison Realty Benefit Plans and all
other employee benefit plans, programs, policies and arrangements of any of the
parties hereto in accordance with the terms thereof. Nothing herein shall be
construed to prohibit Prison Realty from amending or terminating such
agreements, programs, policies and arrangements in accordance with the terms
thereof and with applicable law.
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SECTION 5.06 Fees and Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses.
SECTION 5.07 Indemnification, Exculpation and Insurance.
(a) Prison Realty, the Acquisition Companies, CCA, PMSI and JJFMSI agree
that all rights to indemnification and exculpation from liability for acts or
omissions occurring at or prior to the Effective Time and rights to advancement
of expenses relating thereto now existing in favor of the current or former
directors or officers of the parties hereto, or their Subsidiaries (such
persons, "Indemnified Persons") as provided in their respective charter (or
similar constitutive documents) or bylaws and any existing indemnification
agreements or arrangements of Prison Realty, the Acquisition Companies, CCA,
PMSI or JJFMSI shall survive the Merger and shall not be amended, repealed or
otherwise modified in any manner that would in any manner adversely affect the
rights thereunder of any such Indemnified Persons. The parties hereto agree that
Prison Realty shall maintain, for a period of six years from the Effective Time,
each parties' current directors' and officers' insurance and indemnification
policy to the extent that it provides coverage for events occurring at or prior
to the Effective Time (the "D&O Insurance") for all Indemnified Persons;
provided, however, that the Surviving Companies or Prison Realty, as
appropriate, may, in lieu of maintaining such existing D&O Insurance as provided
above, cause comparable coverage to be provided under any policy issued by an
insurer substantially comparable to the insurer with respect to the existing D&O
Insurance, so long as the terms thereof are no less advantageous to the
Indemnified Parties than the existing D&O Insurance. If the existing D&O
Insurance expires, is terminated or canceled during such six-year period, Prison
Realty will use its reasonable best efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such period on terms and
conditions no less advantageous in any material respect than the existing D&O
Insurance.
(b) The parties hereto agree that the provisions of this Section 5.07
are (i) intended to be for the benefit of, and shall be enforceable by, each
Indemnified Person and each Indemnified Person's heirs and representatives, and
(ii) in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such person may have by contract or
otherwise.
(c) The parties hereto agree that in the event that Prison Realty or any
of its successors or assigns (i) consolidates with or merges into any other
person and is not the continuing or surviving company or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision will be made by such person so that the successors and assigns of such
Surviving Company assume the obligations of the parties hereto and such
Surviving Company set forth in this Section 5.07.
SECTION 5.08 Transfer Taxes. All state, local, foreign or provincial
sales, use, real property transfer, stock transfer or similar taxes (including
any interest or penalties with respect
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thereto, but not including any shareholder-level taxes based upon net income)
attributable to the Merger shall be timely paid by Prison Realty.
SECTION 5.09 Resignation of Directors and Officers. Prior to the
Effective Time, CCA, PMSI and JJFMSI shall deliver to Prison Realty evidence
satisfactory to Prison Realty of the resignation of the directors and officers
of CCA, PMSI and JJFMSI, respectively, effective at the Effective Time.
SECTION 5.10 Stock Exchange Listing. The Surviving Companies and Prison
Realty shall each use their reasonable best efforts to cause the Prison Realty
Stock to be issued in connection with the Merger to be listed on the NYSE,
subject to official notice of issuance, if applicable.
SECTION 5.11 Tax-Free Reorganization. Prior to the Effective Time, each
party shall use its reasonable best efforts to cause the Merger to qualify as a
reorganization qualifying under the provisions of Section 368(a) of the Code.
SECTION 5.12 Shareholders' Agreements. As of the Effective Time, the
Shareholders' Agreement, dated September 22, 1998, among certain shareholders of
CCA, the Shareholders' Agreement, dated September 22, 1998, among certain
shareholders of PMSI, and the Shareholders' Agreement, dated September 22, 1998,
among certain shareholders of JJFMSI shall each be terminated and shall no
longer have any force or effect.
SECTION 5.13 Lock-Up Agreement. As of the Effective Time, each of the
holders of shares of CCA Common Stock whose shares are not subject to forfeiture
under the CCA Restricted Stock Plan shall enter into a lock-up agreement with
Prison Realty (the "Lock-Up Agreement"), a form of which is attached hereto as
Exhibit A, pursuant to which each such holder shall agree not to sell, assign or
otherwise transfer (collectively, a "Transfer") any shares of Prison Realty
Common Stock received in connection with the Merger (the "Shares"), nor enter
into any agreement regarding the same, for a period of one hundred eighty (180)
days (the "180-Day Period") following the date of closing of the Merger, and
further agrees not to Transfer such Shares thereafter except as follows: (i)
after expiration of the 180-Day Period, a holder may Transfer up to twenty-five
percent (25%) of the aggregate amount of the Shares; (ii) after December 31,
2001, a holder may Transfer up to fifty percent (50%) of the aggregate amount of
the Shares; (iii) after December 31, 2002, a holder may Transfer up to
seventy-five percent (75%) of the aggregate amount of the Shares; and (iv) after
December 31, 2003, a holder may Transfer up to one hundred percent (100%) of the
aggregate amount of the Shares.
SECTION 5.14 Equity Incentive Plan. Following the consummation of the
Merger and the related transactions, Prison Realty shall adopt a new equity
incentive plan pursuant to which it will have the authority to grant options to
purchase shares of Prison Realty Common Stock and other types of equity-based
incentive compensation, on such terms and conditions as are approved by the
Board of Directors of Prison Realty following the consummation of the Merger.
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SECTION 5.15 Change of Corporate Name. Following the consummation of the
Merger and the related transactions, Prison Realty shall amend its charter,
bylaws and organizational documents to change the name of the corporation to
"Corrections Corporation of America" and the business and affairs of Prison
Realty following the consummation of the Merger and the related transactions
shall be conducted using the name "Corrections Corporation of America."
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(b) No Injunctions or Restraints; Illegality. No statute, rule,
regulation, judgment, writ, decree, order, temporary restraining order,
preliminary or permanent injunction shall have been promulgated, enacted,
entered or enforced, and no other action shall have been taken, by any
Governmental Entity of competent jurisdiction enjoining or otherwise preventing
the consummation of the Merger shall be in effect; provided, however, that each
of the parties shall use its reasonable best efforts to prevent the entry of any
such injunction or other order or decree and to cause any such injunction or
other order or decree that may be entered to be vacated or otherwise rendered of
no effect.
(c) Listing of Merger Consideration. The Prison Realty Stock to be
issued in the Merger shall have been approved for listing on the NYSE, subject
to official notice of issuance, if applicable.
(d) Registration Statement. The Registration Statement shall be
satisfactory in all material respects to Prison Realty, CCA, PMSI and JJFMSI and
shall have been declared effective, and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings for such purpose shall be pending before or threatened by the SEC.
(e) Financing. Prison Realty shall have obtained financing sufficient to
fund the operations of the business of Prison Realty and the Surviving Companies
after the Effective Time of the Merger and the consummation of the transactions
contemplated hereby, as such financing is substantially described in and
contemplated by the Commitment Letter delivered in connection with the
Securities Purchase Agreement (as defined therein).
(f) Tax-Free Reorganization. The receipt by each of Prison Realty, CCA,
PMSI and JJFMSI of an opinion of its respective tax counsel to the effect that
each of the CCA Merger, the
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PMSI Merger and the JJFMSI Merger qualifies as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 6.02 Conditions to Obligation of Prison Realty and Acquisition
Companies To Effect the Merger. The obligation of Prison Realty and each
Acquisition Company to effect the Merger is subject to the satisfaction of the
following conditions unless waived by Prison Realty and each Acquisition
Company:
(a) Shareholder Approval. The Prison Realty Stockholder Approval, the
CCA Shareholder Approval, the PMSI Shareholder Approval and the JJFMSI
Shareholder Approval shall have been obtained.
(b) Representations and Warranties. The representations and warranties
of CCA, PMSI and JJFMSI set forth in this Agreement shall be true and correct,
except that this condition shall be deemed satisfied so long as any failures of
such representations and warranties to be true and correct do not individually
or in the aggregate have a material adverse effect on CCA, PMSI or JJFMSI,
respectively, as of the date of this Agreement and as of the Closing Date,
except as otherwise contemplated by this Agreement, and Prison Realty and the
respective Acquisition Company shall have received a certificate to such effect
signed on the Closing Date on behalf of each such entity by the Chief Executive
Officer and Secretary.
(c) Performance of Obligations of Other Parties. CCA, PMSI and JJFMSI
shall have performed in all material respects all material obligations required
to be performed by them under this Agreement at or prior to the Closing Date,
and Prison Realty shall have received a certificate to such effect signed on
behalf of each party by its Chief Executive Officer or Chief Financial Officer.
(d) Consents, etc. Prison Realty shall have received evidence, in form
and substance reasonably satisfactory to it, that such consents, approvals,
authorizations, qualifications and orders of Governmental Entities and other
third parties as are necessary in connection with the transactions contemplated
hereby have been obtained, other than those the failure of which to be obtained,
individually or in the aggregate, would not have a material adverse effect on
Prison Realty, CCA, PMSI or JJFMSI.
(e) Bring-Down Opinion. Prison Realty shall have received a bring-down
of the Merrill Lynch Prison Realty Opinion on each of the date of mailing of the
Proxy Statement-Prospectus to the stockholders of Prison Realty and on the date
of Closing.
(f) Consents to Assignment of Management Contracts. To the extent
required by applicable law and the provisions of the contracts, CCA, PMSI and
JJFMSI shall have obtained all necessary written consents of governmental
authorities to the performance of their respective facility management contracts
by Prison Realty and/or the Acquisition Companies after the Merger.
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(g) Prison Realty Senior Notes. To the extent required under the terms
of the Senior Notes (as hereinafter defined), Prison Realty shall have obtained
the separate consent to the consummation of the Merger and related transactions
from the holders of its 12% Senior Notes (the "Senior Notes") in accordance with
the terms of (i) an Indenture, dated as of June 10, 1999, between Prison Realty
and State Street Bank and Trust Company ("State Street"), as Trustee (the
"Master Indenture"), and (ii) a First Supplemental Indenture, dated as of June
11, 1999, between Prison Realty and State Street, as Trustee (the "Supplemental
Indenture"), or, in the alternative, Prison Realty shall have redeemed such
Senior Notes pursuant to the terms of the Supplemental Indenture.
(h) Execution of Lock-Up Agreement. The Lock-Up Agreement shall have
been executed and delivered in accordance with Section 5.13.
(i) Purchase of CCA Common Stock Held by Baron and Sodexho. Prison
Realty shall have purchased the CCA Common Stock held by each of Baron and
Sodexho Alliance, S.A. ("Sodexho") pursuant to the terms and conditions set
forth in that certain Stock Purchase Agreement, dated the date hereof, among
Prison Realty, Baron and Sodexho (the "Baron/Sodexho Stock Purchase Agreement").
(j) Purchase of PMSI Common Stock Held by Privatized Management LLC.
Prison Realty shall have purchased the PMSI Common Stock held by Privatized
Management Services, LLC ("Privatized Management LLC") pursuant to the terms and
conditions set forth in that certain Stock Purchase Agreement, dated the date
hereof, between Prison Realty, PMSI and Privatized Management LLC.
(k) Purchase of JJFMSI Common Stock Held by Correctional Services LLC.
Prison Realty shall have purchased the JJFMSI Common Stock held by Correctional
Services Investors, LLC ("Correctional Services LLC") pursuant to the terms and
conditions set forth in that certain Stock Purchase Agreement, dated the date
hereof, between Prison Realty, JJFMSI and Correctional Services LLC.
SECTION 6.03 Conditions to Obligation of PMSI To Effect the Merger. The
obligation of PMSI to effect the Merger is subject to the satisfaction of the
following conditions unless waived by PMSI:
(a) Representations and Warranties. The representations and warranties
of Prison Realty set forth in this Agreement shall be true and correct, except
that this condition shall be deemed satisfied so long as any failures of such
representations and warranties to be true and correct do not individually or in
the aggregate have a material adverse effect on Prison Realty as of the date of
this Agreement and as of the Closing Date, except as otherwise contemplated by
this Agreement, and PMSI shall have received a certificate to such effect signed
on the Closing Date on behalf of Prison Realty by its Chief Executive Officer
and Secretary.
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(b) Shareholder Approval. The Prison Realty Stockholder Approval and the
PMSI Shareholder Approval shall have been obtained.
(c) Purchase of PMSI Common Stock Held by Privatized Management LLC.
Prison Realty shall have purchased the PMSI Common Stock held by Privatized
Management LLC pursuant to the terms and conditions set forth in that certain
Stock Purchase Agreement, dated the date hereof, between Prison Realty, PMSI and
Privatized Management LLC.
SECTION 6.04 Conditions to Obligation of JJFMSI To Effect the Merger.
The obligation of the JJFMSI to effect the Merger is subject to the satisfaction
of the following conditions unless waived by JJFMSI:
(a) Representations and Warranties. The representations and warranties
of Prison Realty set forth in this Agreement shall be true and correct, except
that this condition shall be deemed satisfied so long as any failures of such
representations and warranties to be true and correct do not individually or in
the aggregate have a material adverse effect on Prison Realty as of the date of
this Agreement and as of the Closing Date, except as otherwise contemplated by
this Agreement, and JJFMSI shall have received a certificate to such effect
signed on the Closing Date on behalf of Prison Realty by its Chief Executive
Officer and Secretary.
(b) Shareholder Approval. The Prison Realty Stockholder Approval and the
JJFMSI Shareholder Approval shall have been obtained.
(c) Purchase of JJFMSI Common Stock Held by Correctional Services LLC.
Prison Realty shall have purchased the JJFMSI Common Stock held by Correctional
Services LLC pursuant to the terms and conditions set forth in that certain
Stock Purchase Agreement, dated the date hereof, between Prison Realty, JJFMSI
and Correctional Services LLC.
SECTION 6.05 Conditions to Obligation of CCA To Effect the Merger. The
obligation of CCA to effect the Merger is subject to the satisfaction of the
following conditions unless waived by CCA:
(a) Representations and Warranties. The representations and warranties
of Prison Realty set forth in this Agreement shall be true and correct, except
that this condition shall be deemed satisfied so long as any failures of such
representations and warranties to be true and correct do not individually or in
the aggregate have a material adverse effect on Prison Realty as of the date of
this Agreement and as of the Closing Date, except as otherwise contemplated by
this Agreement, and CCA shall have received a certificate to such effect signed
on the Closing Date on behalf of Prison Realty by its Chief Executive Officer
and Secretary.
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(b) Bring-Down Opinion. CCA shall have received a bring-down of the
Merrill Lynch CCA Opinion on each of the date of mailing of the Proxy
Statement-Prospectus to the shareholders of CCA and on the date of Closing.
(c) Performance of Obligations of Prison Realty. Prison Realty shall
have performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and CCA
shall have received a certificate to such effect signed on behalf of Prison
Realty by its Chief Executive Officer or Chief Financial Officer.
(d) Shareholder Approval. The Prison Realty Stockholder Approval and the
CCA Shareholder Approval shall have been obtained.
(e) Purchase of CCA Common Stock Held by Baron and Sodexho. Prison
Realty shall have purchased the CCA Common Stock held by Baron and Sodexho
pursuant to the terms and conditions set forth in the Baron/Sodexho Stock
Purchase Agreement.
SECTION 6.06 Frustration of Closing Conditions. No party to this
Agreement may rely on the failure of any condition set forth in Sections 6.01
through 6.05, as the case may be, to be satisfied if such failure was caused by
such party's failure to use all reasonable best efforts to consummate the Merger
and the other transactions contemplated by this Agreement.
ARTICLE VII
TERMINATION AND AMENDMENT
SECTION 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Prison Realty
Stockholder Approval, the CCA Shareholder Approval, the PMSI Shareholder
Approval and the JJFMSI Shareholder Approval are received:
(a) by mutual written consent of the parties hereto;
(b) by Prison Realty, CCA, PMSI or JJFMSI upon written notice to the
other parties:
(i) if any Governmental Entity of competent jurisdiction shall
have issued a permanent injunction or other order or decree enjoining or
otherwise preventing the consummation of the Merger and such injunction or other
order or decree shall have become final and nonappealable; provided that the
party seeking to terminate this Agreement pursuant to this clause (i) shall have
used its reasonable best efforts to prevent or contest the imposition of, or
seek the lifting or stay of, such injunction, order or decree;
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(ii) if the Merger shall not have been consummated on or before
July 31, 2000, unless the failure to consummate the Merger is the result of a
material breach of this Agreement by the party seeking to terminate this
Agreement;
(iii) if, upon a vote at a duly held Prison Realty Stockholders'
Meeting or any adjournment thereof, the Prison Realty Stockholder Approval shall
not have been obtained;
(c) by Prison Realty upon written notice to the other parties if, upon a
vote at a duly held CCA Shareholders' Meeting or any adjournment thereof, the
CCA Shareholder Approval shall not have been obtained;
(d) by Prison Realty upon written notice to the other parties if, upon a
vote at a duly held PMSI Shareholders' Meeting or any adjournment thereof, the
PMSI Shareholder Approval shall not have been obtained; or
(e) by Prison Realty upon written notice to the other parties if, upon a
vote at a duly held JJFMSI Shareholders' Meeting or any adjournment thereof, the
JJFMSI Shareholder Approval shall not have been obtained;
(f) by Prison Realty upon written notice to the remaining parties, if
the Board of Directors of CCA, PMSI or JJFMSI or any committee thereof shall
have withdrawn or modified in a manner adverse to Prison Realty its approval or
recommendation of the Merger or this Agreement or resolved to do so;
(g) by CCA, PMSI or JJFMSI upon written notice to the remaining parties,
if the Board of Directors of Prison Realty or any committee thereof shall have
withdrawn or modified in a manner adverse to such terminating party its approval
or recommendation of the Merger or this Agreement or resolved to do so;
(h) unless the party seeking to terminate this Agreement is in material
breach of its obligations hereunder, by CCA, PMSI or JJFMSI upon written notice
to the other parties if Prison Realty breaches or fails to perform any of its
representations, warranties, covenants or other agreements hereunder, which
breach or failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.03, 6.04 or 6.05 hereof and (B) is incapable of being
cured by Prison Realty or is not cured within thirty (30) days after the
terminating party gives written notice of such breach to Prison Realty and such
a cure is not effected during such period; or
(i) unless Prison Realty is in material breach of its obligations
hereunder, by Prison Realty upon written notice to the other parties if either
CCA, PMSI or JJFMSI breaches or fails to perform any of their representations,
warranties, covenants or other agreements hereunder, which breach or failure to
perform (A) would give rise to the failure of a condition set forth in Section
6.02 hereof and (B) is incapable of being cured by the party so breaching or
failing to perform or
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is not cured within thirty (30) days after Prison Realty gives written notice of
such breach to the breaching party and such a cure is not effected during such
period.
SECTION 7.02 Effect of Termination. In the event of termination of this
Agreement by Prison Realty as provided in Section 7.01 herein, this Agreement
shall, at the election of Prison Realty, either: (i) forthwith become void and
have no effect; or (ii) terminate only as to the merger with the party with
respect to which the grounds for termination have arisen and otherwise the
Agreement shall continue in full force and effect with respect to the mutual
obligations of, and merger of, Prison Realty and the other parties, and, except
to the extent that such termination results from the wilful and material breach
by a party of any of its representations, warranties, covenants or agreements
set forth in this Agreement, there shall be no liability or obligation on the
part of CCA, PMSI and JJFMSI except with respect to Section 5.06, this Section
7.02 and Article VIII hereof, which provisions shall survive such termination.
In the event of termination of this Agreement by CCA, PMSI or JJFMSI, this
Agreement shall, at the election of Prison Realty, terminate only in respect of
the merger with such terminating party, and the Agreement shall continue in full
force and effect with respect to the mutual obligations of, and merger among,
Prison Realty and the other parties not so terminating.
SECTION 7.03 Amendment. This Agreement may be amended by the parties
hereto at any time before or after the Prison Realty Stockholder Approval, the
CCA Shareholder Approval, the PMSI Shareholder Approval and the JJFMSI
Shareholder Approval is received, provided that after receipt of the Prison
Realty Stockholder Approval, the CCA Shareholder Approval, the PMSI Shareholder
Approval or the JJFMSI Shareholder Approval, no amendment shall be made which by
law requires further approval by such shareholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
SECTION 7.04 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) subject to
the proviso of Section 7.03, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
SECTION 7.05 Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to Section
7.04 shall, in order to be effective, require action by the Board of Directors,
or the duly authorized committee of such Board to the extent permitted by law,
of the party authorizing such action.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 8.02 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or sent by overnight or same-day courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
if to Prison Realty, to:
Prison Realty Trust, Inc.
10 Burton Hills Boulevard, Suite 100
Nashville, Tennessee 37215
Attention: Doctor R. Crants, Jr., Chairman of the Board of Directors
and Chief Executive Officer
Facsimile: (615) 263-0234
with a copy to:
Stokes & Bartholomew, P.A.
424 Church Street, Suite 2800
Nashville, Tennessee 37219-2323
Attention: Elizabeth E. Moore, Esq.
Facsimile: (615) 259-1470
if to CCA, to:
Corrections Corporation of America
10 Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: J. Michael Quinlan, President and Chief Operating Officer
Facsimile: (615) 263-3010
83
with a copy to:
Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Attention: John R. Voigt, Esq.
Facsimile: (615) 742-4239
if to PMSI, to:
Prison Management Services, Inc.
10 Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Darrell K. Massengale, Chief Executive Officer and President
Facsimile: (615) 263-3170
if to JJFMSI, to:
Juvenile and Jail Facility Management Services, Inc.
10 Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Darrell K. Massengale, Chief Executive Officer and President
Facsimile: (615) 263-3170
SECTION 8.03 Definitions; Interpretation.
(a) As used in this Agreement:
(i) unless otherwise expressly provided herein, an "affiliate" of
any person means another person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such first person, where "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by contract or
otherwise;
(ii) "business day" means any day on which banks are not required
or authorized to close in the City of New York;
(iii) "material adverse effect" means any change, effect, event,
occurrence or development that is, or is reasonably likely to be, materially
adverse to the business, results of operations or financial condition of a party
hereto or its Subsidiaries, taken as a whole, other than any change, effect,
event or occurrence relating to or arising out of (A) the economy or securities
markets in general, (B) this Agreement or the transactions contemplated hereby
or the announcement thereof, including, but not limited to, changes in methods
of accounting with
84
respect to the financial statements of a party hereto or its Subsidiaries as
precipitated by this Agreement or the transactions contemplated hereby or by the
review of the SEC of the Prison Realty Filed SEC Documents or the Proxy
Statement-Prospectus, or (C) private corrections industry in general, and not
specifically relating to the parties hereto or their Subsidiaries;
(iv) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(v) "Subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are not such voting interests, more than 50%
of the equity interests of which) is owned directly or indirectly by such first
person.
(b) When a reference is made in this Agreement to Articles, Sections,
Exhibits or Schedules, such reference shall be to an Article, Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. The term "or" when used in
this Agreement is not exclusive. All terms defined in this Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms. Any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors and
assigns.
SECTION 8.04 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party.
SECTION 8.05 Entire Agreement; No Third-Party Beneficiaries; Rights of
Ownership. This Agreement (a) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, and (b) other than Section
5.07 of this Agreement, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
85
SECTION 8.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to any principles of conflicts of law of such State.
SECTION 8.07 Publicity. Except as otherwise permitted by this Agreement
or required by law or the rules of the NYSE, so long as this Agreement is in
effect, no party to this Agreement shall, or shall permit any of its affiliates
to, issue or cause the publication of any press release or other public
announcement or statement with respect to this Agreement or the transactions
contemplated hereby without first obtaining the consent of the other parties
hereto. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties.
SECTION 8.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties, and any such assignment that is not
so consented to shall be null and void; provided that, if necessary or advisable
under applicable provisions of corporate or tax law, Prison Realty may assign
its rights hereunder to any of its Subsidiaries or affiliates to cause CCA, PMSI
and/or JJFMSI to merge with a Subsidiary or affiliate of Prison Realty, but no
such assignment shall relieve Prison Realty of its obligations hereunder
including the obligations to deliver the CCA Merger Consideration, the PMSI
Merger Consideration or the JJFMSI Merger Consideration. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 8.09 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Tennessee or in any Tennessee state court, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any Federal court located in the State of Tennessee or any
Tennessee state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement and (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court.
[SIGNATURE PAGES TO FOLLOW]
86
Accepted and agreed to this 26th day of December, 1999.
PRISON REALTY TRUST, INC.
By: /s/ Doctor R. Crants
----------------------------------
Name: Doctor R. Crants
----------------------------------
Title: Chief Executive Officer
----------------------------------
CCA ACQUISITION SUB, INC.
By: /s/ Darrell K. Massengale
----------------------------------
Name: Darrell K. Massengale
----------------------------------
Title: President and CEO
----------------------------------
PMSI ACQUISITION SUB, INC.
By: /s/ Darrell K. Massengale
----------------------------------
Name: Darrell K. Massengale
----------------------------------
Title: President and CEO
----------------------------------
JJFMSI ACQUISITION SUB, INC.
By: /s/ Darrell K. Massengale
----------------------------------
Name: Darrell K. Massengale
----------------------------------
Title: President and CEO
----------------------------------
[ADDITIONAL SIGNATURE PAGE TO FOLLOW]
87
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Darrell K. Massengale
----------------------------------
Name: Darrell K. Massengale
----------------------------------
Title: CFO and Secretary
----------------------------------
PRISON MANAGEMENT SERVICES, INC.
By: /s/ Darrell K. Massengale
----------------------------------
Name: Darrell K. Massengale
----------------------------------
Title: President and CEO
----------------------------------
JUVENILE AND JAIL FACILITY
MANAGEMENT SERVICES, INC.
By: /s/ Darrell K. Massengale
----------------------------------
Name: Darrell K. Massengale
----------------------------------
Title: President and CEO
----------------------------------
88
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
December __, 1999
Prison Realty Trust, Inc.
10 Burton Hills Boulevard, Suite 100
Nashville, Tennessee 37215
Re: Shares of Common Stock to be Issued by Prison Realty Trust, Inc. in
Connection with the Merger of Corrections Corporation of America with
and into Prison Realty Trust, Inc.
Ladies and Gentlemen:
The undersigned understands that as a result of the merger (the
"Merger") of Corrections Corporation of America, a Tennessee corporation
formerly known as Correctional Management Services Corporation ("CCA"), with and
into CCA Acquisition Sub, Inc., a Tennessee corporation and wholly-owned
subsidiary of Prison Realty Trust, Inc. (the "Company"), shares of capital stock
held by the undersigned in CCA will be exchanged or converted into shares of
common stock (the "Common Stock") of the Company. In consideration of the
foregoing and in connection with the Merger, the undersigned hereby agrees that
the undersigned will not, without the prior written approval of the Board of
Directors of the Company, offer for sale, sell, transfer, assign, pledge,
hypothecate or otherwise dispose of, directly or indirectly (collectively, a
"Transfer"), any shares of Common Stock received in connection with the Merger
(the "Shares"), nor enter into any agreement regarding the same, for a period of
one hundred eighty (180) days (the "180-Day Period") following the date of
closing of the Merger, and further agrees not to Transfer such Shares thereafter
except as follows: (i) after expiration of the 180-Day Period, a holder may
Transfer up to twenty-five percent (25%) of the aggregate amount of the Shares;
(ii) after December 31, 2001, a holder may Transfer up to fifty percent (50%) of
the aggregate amount of the Shares; (iii) after December 31, 2002, a holder may
Transfer up to seventy-five percent (75%) of the aggregate amount of the Shares;
and (iv) after December 31, 2003, a holder may Transfer up to one hundred
percent (100%) of the aggregate amount of the Shares.
The foregoing agreements shall be binding on the undersigned and the
undersigned's respective heirs, personal representatives, successors and
assigns.
It is understood that if the Merger is not consummated this agreement
shall terminate.
Sincerely,
Signature:
-----------------------------------
Name:
-----------------------------------
89
SCHEDULE 1.06
[INTENTIONALLY OMITTED]
90
SCHEDULE 1.07
[INTENTIONALLY OMITTED]
91
Dates Referenced Herein and Documents Incorporated by Reference
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