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EXHIBIT 10.5
WAIVER AND AMENDMENT
THIS WAIVER AND AMENDMENT, dated as of June 30, 2000 (this
"Agreement"), is entered into between PRISON REALTY TRUST, INC., a Maryland
corporation formerly known as Prison Realty Corporation ("Company"), and PMI
MEZZANINE FUND, L.P., a Delaware limited partnership ("PMI"), in light of the
following:
WHEREAS, Company and PMI are parties to that certain Note
Purchase Agreement, dated as of December 31, 1998 (as amended, supplemented, or
otherwise modified from time to time, the "Note Agreement") pursuant to which
Company issued to PMI its $30,000,000 7.5% convertible subordinated note due
February 28, 2005 (the "Note");
WHEREAS, Company has informed PMI that Company has violated
certain of the covenants contained in the Note Agreement, as more particularly
described in Section 2 below (the defaults set forth in Section 2 below being
referred to collectively herein as the "Designated Events of Default");
WHEREAS, Company has requested that PMI (i) waive the
Designated Events of Default; (ii) acknowledge certain transactions that Company
desires to consummate; and (iii) agree to certain amendments to the Note
Agreement, as more particularly described below; and
WHEREAS, subject to the terms and conditions set forth below,
PMI is willing to agree to certain waivers, acknowledgments and amendments, as
more particularly described below.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS; CONSTRUCTION.
(a) Any and all initially capitalized terms used herein shall
have the meanings ascribed thereto in the Note Agreement or the Note, as
applicable, unless specifically defined herein. Unless the context of this
Agreement clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the part includes the
whole, the terms "include" and "including" are not limiting, and the term "or"
has the inclusive meaning represented by the phrase "and/or".
(b) As used herein, the following terms shall have the
following definition:
"C Corporation" has the meaning attributed thereto in the Code.
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"Change in Tax Status" means Company's election not to be taxed as a
REIT, but rather as a C Corporation, commencing with its taxable year ending
December 31, 2000 and thereafter, all in connection with the Management Opco
Merger.
"Credit Agreement Amendment" means that certain waiver and amendment to
the Senior Credit Agreement, dated June 9, 2000, executed between Company,
certain of its Subsidiaries, certain lenders and Xxxxxx Commercial Paper Inc.
"Credit Agreement Defaults" means Company's failure to comply with
certain terms of the Senior Credit Agreement as a result of the MDP Defaults and
the Designated Events of Default.
"Disqualified Stock" means any capital stock of Company that Company is
or, upon the passage of time or the occurrence of any event (in each case prior
to December 31, 2008), may become obligated to redeem, purchase, retire, defease
or otherwise make any payment in respect of, in consideration other than capital
stock (other than Disqualified Stock).
"Management Opco" means Corrections Corporation of America (formerly
Correctional Management Services Corporation (and not CCA)), a Tennessee
corporation.
"Management Opco Merger" means the legal and valid merger of Management
Opco with and into Management Sub, with Management Sub as the surviving entity,
for consideration in the merger consisting only of Company's common or preferred
stock (other than Disqualified Stock), as more particularly described in the
Proxy.
"Management Sub" means the wholly-owned subsidiary of Company formed in
connection with the Management Opco Merger.
"MDP" means MDP Ventures IV LLC, a New York limited liability company.
"MDP Defaults" means (a) Company's failure to deliver to MDP under
Section 10.1 of the MDP Note Purchase Agreement a "Repurchase Right Notice" (as
defined therein) in connection with the Securities Purchase Agreement, dated as
of April 5, 2000 among Company, certain of its subsidiaries, and Pacific Life
Insurance Company or the Securities Purchase Agreement, dated as of December 26,
1999, by and between Company and Prison Acquisition Company LLC, (b) Company's
failure to comply with Section 8.5 of the MDP Note Purchase Agreement; (c)
Company's failure to issue a notice of default or take other action in
connection with Management Opco's defaults under the Master Agreement to Lease,
dated January 1, 1999, between Company and MDP, pursuant to Section 7.15 of the
MDP Note Purchase Agreement; and (d) in connection with the Management Opco
Merger and the Change in Tax Status, Company's (i) failure to maintain its
status as a REIT and (ii) conduct of business other than financing, owning and
developing prisons and other correctional facilities, each as required by the
MDP Note Purchase Agreement.
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"MDP Note" means the $40,000,000 9.5% convertible subordinated note or
notes issued by Company pursuant to the MDP Note Purchase Agreement.
"MDP Note Purchase Agreement" means the Note Purchase Agreement, dated
as of December 31, 1998, between Company and MDP.
"Proxy" means Company's Amendment No. 1 to Proxy Statement, to be filed
with the United States Securities and Exchange Commission (the "SEC") that, if
approved by Company's common shareholders, would permit, among other things, the
Change in Tax Status and the Management Opco Merger, a draft of which is
attached hereto as Exhibit A.
"Senior Notes Indenture" means Company's Indenture, dated as of June
10, 1999, between Company and State Street Bank and Trust Company (the
"Trustee"), as amended by that certain First Supplemental Indenture, dated as of
June 11, 1999 between Company and the Trustee.
"Service Company A" means Prison Management Services, Inc., a Tennessee
corporation.
"Service Company B" means Juvenile and Jail Facility Management
Services, Inc., a Tennessee corporation.
"Service Company Mergers" means the merger of Service Company A and
Service Company B with and into the applicable Service Company Sub for aggregate
consideration of not more than $10,600,000 (plus up to $2,000,000 to be paid to
certain wardens and other employees of Service Company A and Service Company B),
in each case in the form of Company's common or preferred stock (other than
Disqualified Stock) only.
"Service Company Subs" means the two wholly-owned subsidiaries of
Company created in connection with the Service Company Mergers.
"Termination Event" shall mean the occurrence of any of the following
events:
(i) If, on or before June 30, 2000, the lenders or the agents
under the Senior Credit Agreement shall not have withdrawn the blockage notice
previously sent to PMI and agreed not to issue another blockage notice to PMI
based upon the existence of the MDP Defaults;
(ii) If, on or before June 30, 2000, PMI does not receive the
payment of interest then due and payable under the Note; or
(iii) If MDP exercises any of its rights or remedies or takes
any other action adverse to Company or PMI (in the reasonable opinion of PMI).
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2. DESIGNATED EVENTS OF DEFAULT.
Company hereby acknowledges that, as of the date hereof, each of the
following material Events of Default has occurred and is continuing:
(a) Financial Covenants. Company's failure to comply with the
financial covenants set forth in Sections 6.15(i) and 6.15(ii) of the Note
Agreement.
(b) MDP Defaults. The MDP Defaults, to the extent that the
same are not cured or waived in accordance with Section 7.1(iii) of the Note
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY.
Company hereby represents and warrants to PMI that:
(a) Authority. Company has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and under the Note Agreement (as modified hereby). The execution,
delivery and performance by Company of this Agreement, the Note Agreement (as
modified hereby) and the transactions contemplated hereby and thereby have been
duly approved by all necessary corporate action of Company and no other
corporate proceedings on the part of Company are necessary to consummate such
transactions (except as expressly contemplated hereby and thereby).
(b) Enforceability. This Agreement has been duly executed and
delivered by Company. Each of this Agreement and, after giving effect to this
Agreement, the Note and the other Transaction Documents is the legal, valid and
binding obligation of Company, enforceable against Company in accordance with
its terms, and is in full force and effect.
(c) No Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
performance of and compliance with the terms and provisions hereof by Company
will, at the time of such performance, (i) violate or conflict with any
provision of its articles or certificate of incorporation or bylaws or other
organizational or governing documents of such Person, (ii) violate, contravene
or materially conflict with any requirement of law or any other law, regulation,
order, writ, judgment, injunction, decree or permit applicable to it, except for
any violation, contravention or conflict which could not reasonably be expected
to have a material adverse effect, or (iii) violate, contravene or conflict with
contractual provisions of, or cause an event of default under, any indenture,
loan agreement, mortgage, deed of trust, contract or other agreement or
instrument to which it is a party or by which it may be bound (including,
without limitation, the Senior Notes Indenture, the MDP Note Purchase Agreement,
or the Senior Credit Agreement), except for any violation, contravention or
conflict which could not reasonably be expected to have a material adverse
effect.
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(d) No Default: General. After giving effect to the
acknowledgments set forth in Section 5 and the waivers set forth in Section 6
hereof, no Event of Default shall have occurred and be continuing under the Note
Agreement or any other Transaction Document.
(e) No Default: Other than Designated Events of Default. No
Default or Event of Default, other than the Designated Events of Default, has
occurred or is continuing under the Note Agreement or the Note.
(f) No Default: Certain Other Agreements. No event of default
exists under the Senior Credit Agreement (other than the Credit Agreement
Defaults) or the Senior Notes Indenture.
The foregoing representations and warranties shall be deemed made as of
the date of the execution and delivery hereof and as of the date of the
effectiveness of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF PMI.
PMI hereby represents and warrants to Company that:
(a) Authority. PMI has the requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
under the Note Agreement (as modified hereby). The execution, delivery and
performance by PMI of this Agreement, the Note Agreement (as modified hereby)
and the transactions contemplated hereby and thereby have been duly approved by
all necessary action of PMI and no other proceedings on the part of PMI are
necessary to consummate such transactions (except as expressly contemplated
hereby and thereby).
(b) Enforceability. This Agreement has been duly executed and
delivered by PMI. Each of this Agreement and, after giving effect to this
Agreement, the Note and the other Transaction Documents is the legal, valid and
binding obligation of PMI, enforceable against PMI in accordance with its terms,
and is in full force and effect.
The foregoing representations and warranties shall be deemed made as of
the date of the execution and delivery hereof and as of the date of the
effectiveness of this Agreement.
5. Acknowledgment.
Subject to the satisfaction of the conditions contained herein, and in
reliance on the representations and warranties of Company herein, PMI hereby
acknowledges the following transactions and agrees that neither the consummation
of, or the failure to consummate, any of these transactions shall constitute or
otherwise cause a Default or an Event of Default under the Note Agreement or the
Note:
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(a) the Management Opco Merger;
(b) the Change in Tax Status;
(c) the Service Company Mergers;
(d) the Rights Offering; and
(e) the transactions disclosed in the Proxy or the Credit
Agreement Amendment.
6. WAIVERS.
Subject to the satisfaction of the conditions contained herein, and in
reliance on the representations and warranties of Company herein, PMI hereby
waives (a) the Designated Events of Default; and (b) any failure of Company to
comply with the covenants contained in Sections 6.15(a)(i), (ii), or (iii) of
the Note Agreement for the periods ending June 30, 2000, September 30, 2000 and
December 31, 2000, which waivers shall be effective when each of the conditions
contained herein have been satisfied and shall continue unless and until the
date, if any, on which a Termination Event shall occur (in which case such
waivers automatically shall terminate).
7. AMENDMENTS TO NOTE AGREEMENT.
Subject to the satisfaction of the conditions contained herein, Company
and PMI hereby amend the Note Agreement as follows:
(a) The following definitions set forth in Section 3.1 of the
Note Agreement hereby are, in each case, amended and restated in their entirety
to read as follows:
""CCA" means Corrections Corporation of America, a Tennessee
corporation, which was merged with and into the Corporation, with the
Corporation as the surviving entity, on December 31, 1998."
""COUPON RATE" means eight percent (8.0%) per annum."
""OPERATING COMPANY" means Corrections Corporation of America
(formerly Correctional Management Services Corporation (and not CCA)),
a Tennessee corporation."
""REIT" means a real estate investment trust as defined in
Sections 856-860 of the Code."
""SENIOR CREDIT AGREEMENT" means that certain Amended and
Restated Credit Agreement, dated as of August 4, 1999, by and among the
Corporation, the Subsidiary Guarantors (as defined therein), the
Lenders (as defined therein), Xxxxxx Commercial Paper Inc., as
Xxxxxxxxxxxxxx Xxxxx,
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Xxxxxxx Xxxxxxxx, as Documentation Agent, The Bank of Nova Scotia, as
Syndication Agent, Southtrust Bank, N.A., as Co-Agent, and Xxxxxx
Brothers Inc., as Advisor, as Lead Arranger and as Book Manager, as the
same may be amended, restated, supplemented, or otherwise modified from
time to time."
""TRIGGERING EVENT RATE" means the sum of (a) the Coupon Rate,
plus (b) two percentage points."
(b) Section 3.1 of the Note Agreement hereby is amended by
adding the following new definitions thereto:
""C CORPORATION" has the meaning attributed thereto in the
Code."
""CHANGE IN TAX STATUS" means the Corporation's election not
to be taxed as a REIT, but rather as a C Corporation, commencing with
its taxable year ending December 31, 2000 and thereafter in connection
with the Management Opco Merger."
""CREDIT AGREEMENT AMENDMENT" means that certain waiver and
amendment to the Senior Credit Agreement, dated June 9, 2000, executed
between Company, certain of its Subsidiaries, certain lenders and
Xxxxxx Commercial Paper Inc."
""DISQUALIFIED STOCK" means any capital stock of the
Corporation that the Corporation is or, upon the passage of time or the
occurrence of any event (in each case prior to December 31, 2008), may
become obligated to redeem, purchase, retire, defease or otherwise make
any payment in respect of, in consideration other than capital stock
(other than Disqualified Stock)."
""FEE AGREEMENTS" means (i) that certain agreement, dated
September 14, 1999, between the Company and Xxxxxxx Xxxxx & Co. and
(ii) that certain amended and restated agreement, dated March 3, 2000,
as amended on May 1, 2000, between the Company and Xxxxxxxxxxx Xxxxxxx
& Co., Inc."
""MANAGEMENT OPCO MERGER" means the legal and valid merger of
Operating Company with and into Management Sub, with Management Sub as
the surviving entity, as more particularly described in the
Restructuring Proxy."
""MANAGEMENT OPCO MERGER DATE" means the earlier of (i)
October 31, 2000, and (ii) the date that is 5 Business Days after the
date on which all consents and authorizations necessary to validly and
legally consummate the Management Opco Merger have been obtained."
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""MANAGEMENT SUB" means the wholly-owned subsidiary of the
Corporation formed in connection with the Management Opco Merger."
"PACIFIC LIFE AGREEMENT" means that certain Securities
Purchase Agreement, dated as of April 5, 2000, and executed as of April
16, 2000, among the Corporation, Operating Company, Service Company A
and Service Company B, on the one hand, and Pacific Life Insurance
Company, on the other hand."
""POTENTIAL CLAIMS" means the potential claims against the
Company under the Pacific Life Agreement, the Securities Purchase
Agreement and the Fee Agreements."
""RIGHTS OFFERING" means an offering made, in accordance with
all applicable federal and state laws, by the Corporation to its
then-current common shareholders through the distribution of rights to
purchase shares of common stock of the Corporation (based on each
shareholder's then-current pro rata share of the Corporation's common
stock), which, if consummated, would result in net cash proceeds to the
Corporation of at least $50,000,000."
""RESTRUCTURING PROXY" means the Corporation's Amendment No. 1
to Proxy Statement, to be filed with the United States Securities and
Exchange Commission (the "SEC") that, if approved by the Corporation's
common shareholders, would permit, among other things, the Change in
Tax Status and the Management Opco Merger, a draft of which is attached
to the Waiver and Amendment as Exhibit A."
""SECURITIES PURCHASE AGREEMENT" means that certain Securities
Purchase Agreement, dated as of December 26, 1999, by and between the
Company and Prison Acquisition Company L.L.C."
""SERVICE COMPANY A" means Prison Management Services, Inc., a
Tennessee corporation."
""SERVICE COMPANY B" means Juvenile and Jail Facility
Management Services, Inc., a Tennessee corporation."
""SERVICE COMPANY MERGERS" means the merger of Service Company
A and Service Company B with and into the applicable Service Company
Sub for aggregate consideration of not more than $10,600,000 (plus up
to $2,000,000 to be paid to certain wardens and other employees of
Service Company A and Service Company B), in each case in the form of
the Corporation's common or preferred stock (other than Disqualified
Stock) only."
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""SERVICE COMPANY SUBS" means the two wholly-owned
subsidiaries of the Corporation created in connection with the Service
Company Mergers."
""WAIVER AND AMENDMENT" means that certain Waiver and
Amendment, dated as of June 30, 2000, between the Corporation and PMI."
(c) Section 6.10 of the Note Agreement hereby is deleted in
its entirety and replaced with the following new Section 6.10:
"Conduct of Business. (a) Except as may be necessary in order
to consummate, and as contemplated by, the Management Opco Merger and
the Service Company Mergers, the Corporation shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than
the financing, ownership and development of prisons and other
correctional facilities and other businesses or activities
substantially similar or related thereto.
(b) After consummation of the Management Opco Merger, the
business of the Corporation and its Subsidiaries may include, in
addition to those activities listed in subsection (a) above, the
operation and management of correctional, justice and detention
facilities."
(d) Section 6.13 of the Note Agreement hereby is amended by
adding the following new subsection at the end thereof:
"(v) Upon and after the consummation of the Management Opco
Merger, this Section 6.13 shall have no further force or effect with
respect to Operating Company."
(e) Section 6.14 of the Note Agreement hereby is deleted in
its entirety and replaced with the notation: "[Intentionally Omitted]".
(f) Section 6.15 of the Note Agreement hereby is amended by
inserting the following immediately before clause (i) of such section:
"(a) Prior to the consummation of the Management Opco Merger,
the following covenants shall apply (subject to the waiver contained in
the Waiver and Amendment):"
(g) Section 6.15 of the Note Agreement hereby is further
amended by adding the following thereto as a new subsection (b) at the end of
such section:
(b) For purposes of this Section 6.15(b) only, all capitalized
terms used in this Section shall have the meaning given to them in the
Senior Credit Agreement as in effect as of the date hereof and all
definitions that are referred to in such capitalized terms that also
are defined in the Senior Credit
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Agreement also shall have the meanings given to them in the Senior
Credit Agreement (such capitalized terms and definitions referred to in
such capitalized terms being referred to as "Financial Covenant
Definitions"); provided, however, that if the Financial Covenant
Definitions contained in the Senior Credit Agreement as of the date
hereof subsequently are amended or modified (other than in connection
with a refinancing or replacement thereof), then the Financial Covenant
Definitions used herein automatically shall be deemed amended or
modified to conform to the changes in the Senior Credit Agreement as of
the effective date of the applicable amendment or modification. If the
Senior Credit Agreement is terminated prior to the termination of this
Agreement, the Financial Covenant Definitions shall have the meaning
given to them in the Senior Credit Agreement as of the date immediately
preceding the applicable termination date (without giving effect to
amendments effected in connection with such termination). Upon and
after consummation of the Management Opco Merger, the following
financial covenants shall apply:
(i) Maximum Total Leverage. At all times the ratio of Total
Indebtedness to Post Merger EBITDA of the Consolidated Parties for the
immediately preceding four full fiscal quarters ("LTM Post Merger
EBITDA") shall be equal to or less than the ratio set forth below for
such fiscal quarter. For purposes of determining compliance with this
Section 6.15(b)(i), (A) during the third quarter of 2000, LTM Post
Merger EBITDA shall be calculated by multiplying Post Merger EBITDA for
the third quarter of 2000 by four (4), (B) during the fourth quarter of
2000, LTM Post Merger EBITDA shall be calculated by multiplying (i) the
sum of Post Merger EBITDA for the third quarter of 2000 plus Post
Merger EBITDA for the fourth quarter of 2000 by (ii) two (2), and (C)
during the first quarter of 2001, LTM Post Merger EBITDA shall be
calculated by multiplying (i) the sum of Post Merger EBITDA for the
third quarter of 2000 plus Post Merger EBITDA for the fourth quarter of
2000 plus Post Merger EBITDA for the first quarter of 2001 by (ii)
four-thirds (4/3):
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Fiscal Quarter Ratio
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Q3 - 2000 8.00:1.00
Q4 - 2000 7.50:1.00
Q1 - 2001 6.75:1.00
Q2 - 2001 6.00:1.00
Q3 - 2001 5.25:1.00
Q4 - 2001 5.00:1.00
(ii) Post Merger Interest Coverage Ratio. The Post Merger
Interest Coverage Ratio, as of the last day of each fiscal quarter of
the Consolidated Parties, shall be equal to or greater than the ratio
set forth below for such fiscal quarter:
Fiscal Quarter Ratio
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Q3 - 2000 0.75:1.00
Q4 - 2000 1.00:1.00
Q1 - 2001 1.20:1.00
Q2 - 2001 1.20:1.00
Q3 - 2001 1.40:1.00
Q4 - 2001 1.40:1.00
(iii) Fixed Charge Coverage. The Fixed Charge Coverage Ratio,
as of the last day of each fiscal quarter of the Consolidated Parties,
shall be equal to or greater than the ratio set forth below for such
fiscal quarter:
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Fiscal Quarter Ratio
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Q3 - 2000 0.50:1.00
Q4 - 2000 1.00:1.00
Q1 - 2001 1.00:1.00
Q2 - 2001 1.00:1.00
Q3 - 2001 1.00:1.00
Q4 - 2001 1.00:1.00
(iv) Pro Forma Adjustments and Setting of Future Financial
Covenants. To the extent that the Management Opco Merger is consummated
on a date in a fiscal quarter of the Consolidated Parties other than
the final day of such fiscal quarter, the financial covenants contained
in (i) through (iii) above shall be calculated as if the Management
Opco Merger had occurred on the first of day of such fiscal quarter.
Further, at any time on and after September 30, 2001 that the financial
covenants set forth in the Senior Credit Agreement are reset or
otherwise renegotiated, but no less frequently than annually, Purchaser
and the Corporation agree to establish reset covenant levels (at a
level equal to 50 basis points higher than the comparable financial
covenant in the Senior Credit Agreement in the case of the Maximum
Total Leverage Ratio, 25 basis points lower than the comparable
financial covenant in the Senior Credit Agreement in the case of the
Post Merger Interest Coverage Ratio, and 25 basis points lower than the
comparable financial covenant in the Senior Credit Agreement in the
case of the Fixed Charge Coverage Ratio) in each case, for the period
covered by the reset or otherwise renegotiated Senior Credit Agreement
financial covenants."
(h) Section 7.1 of the Note Agreement hereby is amended by
adding to the beginning thereof the clause: "Subject to the waivers contained in
the Waiver and Amendment,".
(i) Section 7.1(iii) of the Note Agreement hereby is amended
by modifying the beginning thereof to read: "default under any evidence of
indebtedness, including any bond, debenture or note, for money borrowed in
excess of $1,000,000 by the Corporation or any of its Subsidiaries,". The
remainder of Section 7.1(iii) shall remain the same.
(j) Section 7.1(v) of the Note Agreement hereby is amended by
adding to the beginning thereof the clause: "provided that the representations
and warranties contained in Section 4 of this Agreement are, by their terms,
made specifically and apply
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only as of the Closing Date and provided that the representations and warranties
contained in Section 3 of the Waiver and Amendment are, by their terms, made
specifically and apply as of the date thereof and as of the date of the
effectiveness thereof,".
(k) Section 7.1(vi) of the Note Agreement hereby is amended by
adding to the beginning thereof the clause: "except in connection with the
Potential Claims,".
8. FEE.
Company shall pay to PMI a fee (the "Waiver Fee") equal to $75,000,
which fee shall be fully earned and be due and payable upon the execution and
delivery hereof by the parties hereto.
9. CONDITIONS PRECEDENT.
The effectiveness of the waivers and amendments contained in this
Agreement (but not the effectiveness of this Agreement, which will be effective
upon the satisfaction of the terms contained in Section 10.2(b)) is subject to
the fulfillment of each of the following conditions:
(a) Company and PMI, respectively, shall have received a
counterpart of this Agreement duly executed and delivered by the other, and the
same shall be in full force and effect;
(b) PMI shall have received an 8.0% convertible, extendable,
subordinated note due February 28, 2005 (in the form attached hereto as Exhibit
B; herein, the "Replacement Note") in substitution for the Note. In this regard,
(i) the Replacement Note shall not become effective or be enforceable against
Company until the waivers and amendments contained in this Agreement have become
effective under this Section 9, (ii) promptly after the date of the
effectiveness of the waivers and amendments contained in this Agreement, PMI
agrees to return the Note to Company for cancellation, and (iii) from and after
the date of the effectiveness of the waivers and amendments contained in this
Agreement (and irrespective of whether a Termination Event subsequently occurs),
PMI and Company agree that all references in the Note Agreement to the Note that
do not conflict with the terms of the Replacement Note automatically shall be
deemed to be references to the Replacement Note and that the Replacement Note
shall evidence, for all purposes, the indebtedness of Company owed by it to PMI
that previously had been evidenced by the Note;
(c) PMI shall have received the Waiver Fee;
(d) after giving effect hereto, no Default or Event of Default
shall have occurred and be continuing;
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(e) the lenders or the agents under the Senior Credit
Agreement shall have withdrawn the blockage notice, dated April 14, 2000, sent
by Xxxxxx Commercial Paper Inc. to PMI, shall have agreed not to issue another
blockage notice to PMI based upon the existence of the MDP Defaults, and no
other blockage notice shall have been sent to PMI by the lenders or agents under
the Senior Credit Agreement or the Senior Notes Indenture;
(f) the receipt of the payment of interest accrued under the
Note due on June 30, 2000;
(g) PMI shall have received payment of its reasonable costs
and expenses (including attorneys fees and costs) incurred in connection with
the Designated Events of Default and the preparation, negotiation, execution,
and delivery of this Agreement and the Replacement Note; and
(h) each of the representations and warranties contained
herein shall be true and correct in all respects on and as of the effectiveness
hereof, as though made on and as of such date.
10. MISCELLANEOUS.
10.1 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS WAIVER, THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS WAIVER SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN XXX XXXX XX XXX XXXX, XXXXX XX XXX XXXX. COMPANY
AND PMI WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
(c) COMPANY AND PMI HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
WAIVER OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. COMPANY AND PMI REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
AND EACH KNOWINGLY AND
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VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS WAIVER MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.2 COUNTERPARTS; TELEFACSIMILE EXECUTION; EFFECTIVENESS.
(a) This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed an
original. All of such counterparts shall constitute but one and the same
instrument. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement.
(b) This Agreement shall be effective as of the date first
written above when one or more counterparts hereof shall have been executed by
Company and PMI and shall have been delivered to PMI.
10.3 LIMITED WAIVER.
The waivers, consents, and modifications herein are limited to the
specifics hereof, shall not apply with respect to any facts or occurrences other
than those on which the same are based, shall not excuse future non-compliance
with the Note Agreement, and except as expressly set forth herein, shall not
operate as a waiver or an amendment of any right, power or remedy of PMI, nor as
a consent to any further or other matter, under the Note Agreement or the Note.
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16
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
PRISON REALTY TRUST, INC.,
a Maryland corporation formerly known as Prison
Realty Corporation
By: /s/ Xxxx X. Xxxxxxx
Its Chief Financial Officer, Secretary/Treasurer
PMI MEZZANINE FUND, L.P.,
a Delaware limited partnership
By: Pacific Mezzanine Investors, LLC, a Delaware
limited liability company, its General Partner
By: /s/ Xxxxxx Xxxxxxxxxxx
Its Managing Principal
17
EXHIBITS TO WAIVER AND AMENDMENT
Exhibit A: Proxy
Exhibit B: Replacement Note
S-2
18
EXHIBIT A
---------
[Intentionally omitted]
19
EXHIBIT B
---------
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
NOTE PURCHASE AGREEMENT DATED AS OF DECEMBER 31, 1998 BETWEEN THE
CORPORATION AND PMI MEZZANINE FUND, L.P. AND A REGISTRATION RIGHTS
AGREEMENT DATED AS OF DECEMBER 31, 1998 BETWEEN THE CORPORATION AND PMI
MEZZANINE FUND, L.P., IN EACH CASE, AS AMENDED, COPIES OF WHICH ARE ON
FILE AT THE OFFICES OF THE CORPORATION.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 AND QUALIFICATION
UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, OR
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION REQUIREMENTS.
PRISON REALTY TRUST, INC.
8.0% CONVERTIBLE, EXTENDABLE, SUBORDINATED NOTE
DUE FEBRUARY 28, 2005
No. 003 June 30, 2000
SECTION 1. PAYMENT OBLIGATION.
(a) PRISON REALTY TRUST, INC., a corporation duly
organized and existing under the laws of the State of Maryland (herein called
the "Corporation"), for value received, hereby promises to pay to MAC & CO., as
nominee for PMI Mezzanine Fund, L.P., a limited partnership duly organized and
existing under the laws of the State of Delaware (herein called "PMI"), or
registered assigns (hereinafter referred to as the "Holder"), the principal sum
of Thirty Million Dollars ($30,000,000) on the Maturity Date, and to pay
interest thereon from the date hereof quarterly on March 31, June 30, September
30, and December 31 of each year, commencing September 30, 2000, at (i) the
Coupon Rate, or (ii) upon the occurrence of a Triggering Event occurring after
June 30, 2000 and until the date on which such Triggering Event is cured or
waived or until the date that is ninety (90) days from initial occurrence of the
Triggering Event, whichever is later, at the
20
Triggering Event Rate, until the principal hereof is paid to the person in whose
name this Note is registered at the close of business on the Business Day
immediately preceding the date such payment is due.
(b) The Corporation and the Holder acknowledge that the
payment of interest on the Notes at the Coupon Rate is subject to the approval
of the Required Lenders (as such term is defined in the Senior Credit
Agreement), pursuant to Section 3.1 of the Senior Credit Agreement. The
Corporation will use its reasonable best efforts to obtain such approval. If
such approval is not obtained, the Corporation will issue additional convertible
notes (substantially in the form of this Note) to the Holder in an amount equal
to the difference between the Coupon Rate hereunder and the coupon rate in
effect under the note issued pursuant to the Note Purchase Agreement immediately
prior to the issuance of this Note (the "PIK Notes") and will pay the balance
(i.e., 7.5% per annum) in cash as and when due hereunder. Any PIK Notes shall be
issued on the date that the applicable interest payment is due hereunder and
shall accrue interest in accordance with subsection (a) above.
(c) Any payments due hereunder that fall due on a day
that is not a Business Day shall be payable on the first succeeding Business Day
and such extension of time shall be included in the computation of interest due
hereunder. Payment of the principal of and interest on this Note will be made by
cashiers check or by wire transfer of immediately available funds, in currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts, at such address or to such account, as
applicable, as shall be designated to the Corporation by the Holder.
SECTION 2. DEFINITIONS. As used herein, the following terms
will be deemed to have the meanings set forth below. Capitalized terms not
otherwise defined herein shall have the meaning given to them in the Note
Purchase Agreement, dated as of December 31, 1998, between the Corporation and
PMI (as amended by the Waiver and Amendment, dated June 30, 2000, between the
Corporation and PMI, and as subsequently amended, supplemented, or otherwise
modified from time to time, the "Note Purchase Agreement").
"BOARD" means the board of directors of the Corporation.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday,
Thursday, or Friday that is not a day on which banking
institutions in Los Angeles, California are authorized or
obligated by law or executive order to close.
"CAPITAL STOCK" means (a) the Common Stock and (b) any
preferred stock of the Corporation issued after June 30, 2000,
which is convertible, whether at the option of the holder or
otherwise, into Common Stock, other than any preferred stock
which provides for payment of dividends in kind issued in lieu
of cash dividends required to be paid by the Corporation in
order to maintain its taxable status as a real estate
investment trust for its 1999 taxable year.
2
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"CHANGE EVENT" shall, excluding any and all transactions
consummated in connection with, or contemplated by, the Rights
Offering, the Restructuring Proxy or the Credit Agreement
Amendment, mean:
(a) the acquisition by any individual, entity, or
group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of the combined
voting power of the then outstanding voting
securities of the Corporation entitled to vote
generally in the election of directors, but
excluding, for this purpose, any such acquisition by
(i) the Corporation or any of its subsidiaries, (ii)
any employee benefit plan (or related trust) of the
Corporation or its subsidiaries, or (iii) any
corporation with respect to which, following such
acquisition, more than 50% of the combined voting
power of the then outstanding voting securities of
such corporation entitled to vote generally in the
election of directors is then beneficially owned,
directly or indirectly, by individuals and entities
who were the beneficial owners of voting securities
of the Corporation immediately prior to such
acquisition in substantially the same proportion as
their ownership, immediately prior to such
acquisition, of the combined voting power of the then
outstanding voting securities of the Corporation
entitled to vote generally in the election of
directors; or
(b) the Incumbent Board shall cease for any reason to
constitute at fifty percent (50%) of the members of
the Board; or
(c) approval by the stockholders of the Corporation
of a reorganization, merger, or consolidation, in
each case, with respect to which all or substantially
all the individuals and entities who were the
respective beneficial owners of the voting securities
of the Corporation immediately prior to such
reorganization, merger, or consolidation do not,
following such reorganization, merger, or
consolidation beneficially own, directly or
indirectly, more than 50% of the combined voting
power of the then outstanding voting securities
entitled to vote generally in the election of
directors of the corporation resulting from such
reorganization, merger, or consolidation; or
(d) the sale or other disposition of all or
substantially all the assets or property of the
Corporation in one transaction or a series of related
transactions.
"CLOSING DATE" shall have the meaning ascribed thereto in
Section 2.2 of the Note Purchase Agreement.
"COMMON STOCK" means the common stock of the Corporation, par
value $0.01 per share.
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"CONVERSION PRICE" means a price per share of Common Stock
equal to the result of (a) 125%, times (b) the average of the
daily closing bid prices for Common Stock of the Corporation
during the 30 day period immediately following the
Determination Date.
"CONVERSION RATIO" means the number of Conversion Shares to be
delivered upon conversion of One Hundred Dollars ($100) of
principal amount of this Note. Subject to the provisions for
adjustment set forth herein, the Conversion Ratio shall be
determined as the quotient of (i) One Hundred Dollars ($100),
divided by (ii) the Conversion Price.
"CONVERSION SHARES" means fully paid and nonassessable shares
of Common Stock issuable upon conversion of the indebtedness
evidenced by this Note.
"CONVERTIBLE NOTES" means the Corporation's (a) $7,000,000
aggregate principal amount 8.5% Convertible Subordinated Notes
due November 7, 1999, (b) option to purchase the Floating Rate
Notes, and (c) the Floating Rate Notes when issued.
"CONVERTIBLE SECURITIES" means rights, warrants, options or
other securities convertible into or exchangeable for shares
of Common Stock.
"COUPON RATE" means eight percent (8.0%) per annum.
"CURRENT MARKET PRICE" when used with reference to shares of
Common Stock, shall mean (i) the closing price per share of
Common Stock on such date or (ii) if securities are sold based
on an average price, the lesser of (a) the closing price per
share of Common Stock on such date, or (b) the average of the
daily closing prices per share of Common Stock for the period
over which the sales price was calculated, but if such period
exceeds thirty days, then the average of the daily closing
prices per share of Common Stock for the last thirty days of
such period. If the Common Stock is listed or admitted to
trading on a national securities exchange, the closing price
for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock
is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed
on the principal national securities exchange on which the
Common Stock is listed or admitted to trading. If the Common
Stock is not publicly held or so listed or publicly traded,
"Current Market Price" shall mean the fair market value per
share of Common Stock as determined in good faith by the Board
based on an opinion of an independent investment banking firm
with an established national
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reputation as a valuer of securities, which opinion may be
based on such assumptions as such firm shall deem to be
necessary and appropriate.
"DETERMINATION DATE" means the earlier of (a) the date of
consummation of the Management Opco Merger, or (b) October 31,
2000.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
7.1 of the Note Purchase Agreement.
"EXCHANGE ACT" shall have the meaning set forth in Section 3.1
of the Note Purchase Agreement.
"FLOATING RATE NOTES" shall have the meaning set forth in the
Sodexho Agreement.
"INCUMBENT BOARD" means the individuals who, as of the Closing
Date, constitute the Board; provided, however, that any
individual becoming a director subsequent to the Closing Date,
whose election, or nomination for election by the
Corporation's stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board.
"ISSUE DATE" shall mean June 30, 2000.
"MAJOR TRANSACTION" shall, excluding any and all transactions
consummated in connection with, or contemplated by, the Rights
Offering, the Restructuring Proxy or the Credit Agreement
Amendment, mean:
(a) approval by the stockholders of the Corporation
of a reorganization, merger, or consolidation, in
each case, with respect to which all or substantially
all the individuals and entities who were the
respective beneficial owners of the voting securities
of the Corporation immediately prior to such
reorganization, merger, or consolidation do not,
following such reorganization, merger, or
consolidation beneficially own, directly or
indirectly, more than 50% of the combined voting
power of the then outstanding voting securities
entitled to vote generally in the election of
directors of the corporation resulting from such
reorganization, merger, or consolidation; or
(b) the sale or other disposition of all or
substantially all the assets or property of the
Corporation and its Subsidiaries, taken as a whole,
in one transaction or a series of related
transactions.
"MANAGEMENT OPCO MERGER" means the legal and valid merger of
Operating Company with and into Management Sub, with
Management Sub as the surviving entity.
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"MANAGEMENT SUB" means the wholly-owned subsidiary of the
Corporation formed in connection with the Management Opco
Merger.
"MANDATORY CONVERSION DATE" means the Business Day specified
by the Corporation, in compliance with the provisions hereof,
as the date on which all or a portion of the indebtedness
evidenced by this Note will be converted into shares of Common
Stock pursuant to the Corporation's right to compel such
conversion.
"MANDATORY CONVERSION NOTICE" means a written notice
substantially in the form of the notice attached hereto as
Exhibit A and incorporated herein by this reference.
"MANDATORY PREPAYMENT DATE" means the Business Day specified
by the Holder, in compliance with the provisions hereof, as
the date on which all or a portion of the indebtedness
evidenced by this Note must be prepaid pursuant to the
Holder's right to compel such prepayment.
"MANDATORY PREPAYMENT NOTICE" means a written notice
substantially in the form of the notice attached hereto as
Exhibit B and incorporated herein by this reference.
"MATURITY DATE" means the later of (a) February 28, 2005, (b)
if Holder elects to extend the maturity date by sending a
written notice to the Corporation at least thirty days prior
to the date set forth in item (a), February 28, 2006, and (c)
if Holder elects to extend the maturity date by sending a
written notice to the Corporation at least thirty days prior
to the date set forth in item (b), February 28, 2007.
"NOTE" means this convertible, extendable, subordinated note
issued by the Corporation.
"OPERATING COMPANY" means Corrections Corporation of America
(formerly Correctional Management Services Corporation), a
Tennessee corporation.
"OPTIONAL CONVERSION NOTICE" means a written notice
substantially in the form of the notice attached hereto as
Exhibit C and incorporated herein by this reference.
"SENIOR INDEBTEDNESS" means the principal of and premium, if
any, and unpaid interest on (a) indebtedness (other than
indebtedness evidenced by the Convertible Notes, indebtedness
that is subordinated in right of payment to one or more item
or type of indebtedness of the Corporation, or indebtedness
incurred in violation of the terms and conditions of the Note
Purchase Agreement) of the Corporation, irrespective of
whether secured and whether heretofore or hereafter (i)
incurred for borrowed money, or (ii) evidenced by a
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25
note or similar instrument given in connection with the
acquisition by the Corporation of any business, properties, or
assets, including securities (but not including any account
payable or other obligation created or assumed by the
Corporation in the ordinary course of business in connection
with the obtaining of materials or services), (b) any
refundings, renewals, extensions, or deferrals of any of the
indebtedness included as Senior Indebtedness by virtue of
clause (a) hereof, and (c) obligations under capital leases;
in each case for the payment of which the Corporation is
liable directly or indirectly by guarantee, letter of credit,
obligation to purchase or acquire, or otherwise, unless the
terms of the instrument evidencing such indebtedness or
capital lease or pursuant to which such indebtedness or
capital lease is outstanding specifically provide that such
indebtedness or capital lease is not superior in right of
payment to the indebtedness evidenced by this Note.
"SODEXHO AGREEMENT" means that certain Securities Purchase
Agreement, dated as of June 23, 1994, between Sodexho S.A., a
French corporation, or its designee and the Corporation, as
amended by that certain Amendment No. 1 to Securities Purchase
Agreement, dated as of July 11, 1995, and that certain
Amendment No. 2 to Corrections Corporation of America/Sodexho
S.A. 1994 Securities Purchase Agreement and Note and Warrant
Modification Agreement, dated as of February 26, 1996.
"TRADING DAY" means, if the Common Stock is listed or admitted
to trading on any national securities exchange, a day on which
such exchange is open for the transaction of business,
otherwise, a Business Day.
"TRIGGERING EVENT" means the occurrence of any Unmatured Event
of Default or Event of Default described in Section 7.1 of the
Note Purchase Agreement. For purposes of determining the
period during which the Triggering Event Rate shall be in
effect, a Triggering Event shall not be deemed to have
occurred until the date on which the Holder shall have given
notice of the occurrence thereof to the Corporation.
"TRIGGERING EVENT RATE" means the sum of (a) the Coupon Rate,
plus (b) two percentage points.
"UNMATURED EVENT OF DEFAULT" shall mean any event or
condition, the occurrence of which would, with the lapse of
time or the giving of notice, or both, constitute an Event of
Default.
SECTION 3. OPTIONAL CONVERSION.
(a) Subject to and upon compliance with the provisions of this
Note, the Holder is entitled, at its option, at any time on or before the close
of business on the Business Day prior to the Maturity Date, or in case this Note
or a portion hereof is called for conversion by the Corporation in accordance
with the terms hereof, then until and including,
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26
but not after, the close of business on the third Business Day prior to the
Mandatory Conversion Date, to convert all or a portion of the principal amount
of the indebtedness evidenced by this Note into Conversion Shares.
(b) The principal amount of the indebtedness evidenced by this
Note or any portion of the principal amount of the indebtedness evidenced hereby
that is One Thousand Dollars ($1,000), an integral multiple of One Thousand
Dollars ($1,000), or the remaining balance of the principal amount of the
indebtedness evidenced by this Note may be converted into Conversion Shares.
Subject to the provisions for adjustment set forth hereinafter, the indebtedness
evidenced by the Note shall be convertible into Conversion Shares at a price per
share equal to the Conversion Price and the number of Conversion Shares to be
deliverable to the Holder upon conversion of One Hundred Dollars ($100) of the
principal amount of this Note shall be equal to the Conversion Ratio.
(c) Conversion of all or a portion of the indebtedness
evidenced by this Note may be effected by the Holder upon the surrender to the
Corporation at the principal office of the Corporation in the State of Tennessee
or at the office of any agent or agents of the Corporation, as may be designated
by the Board, of this Note, duly endorsed or assigned to the Corporation or in
blank, accompanied by a Optional Conversion Notice to the Corporation that the
Holder elects to convert the principal amount of the indebtedness evidenced by
this Note or, if less than the entire principal amount of the indebtedness
evidenced by this Note is to be converted, the portion thereof to be converted.
Such Optional Conversion Notice shall specify the name or names in which the
Holder wishes the certificate or certificates for shares of Common Stock to be
issued. In case such notice shall specify a name or names other than that of the
Holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names. Other
than such taxes, the Corporation will pay any and all issue and other taxes
(other than taxes based on income) that may be payable in respect of any issue
or delivery of shares of Common Stock on conversion of the indebtedness
evidenced by this Note. No payment or adjustment shall be made upon any
conversion of this Note on account of any dividends or other distributions
payable on the Conversion Shares; provided, however, that the Holder shall be
entitled to receive the full amount of any dividends or other distributions
declared with respect to the Conversion Shares with a record date on or after
the effective date of such conversion.
As promptly as practicable, and in any event within five (5)
Business Days after the surrender of this Note and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes (or the
demonstration to the satisfaction of the Corporation that such taxes have been
paid), the Corporation shall deliver or cause to be delivered, either by
personal delivery or by certified or registered mail or by a recognized
overnight courier service, in any such case, properly insured, to the Holder in
accordance with the written instructions of the Holder (i) certificates
representing the number of Conversion Shares to which the Holder shall be
entitled, and (ii) if less than the entire principal amount of indebtedness
evidenced by this Note is being converted, a new promissory note, in the form of
this Note, for the balance of the indebtedness that is not
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27
being so converted. Such conversion shall be deemed to have been made at the
close of business on the date of giving such notice and of such surrender of
this Note so that the rights of the Holder (as a noteholder) with respect to the
principal amount being converted shall cease, and the person or persons entitled
to receive the Conversion Shares issuable upon conversion shall be treated for
all purposes as the record holder or holders of such Common Stock as of such
day. All accrued but unpaid interest through the Business Day immediately
preceding the date of such conversion with respect to the principal amount of
the indebtedness evidenced by this Note being converted shall be payable upon
conversion.
The Corporation shall not be required to convert, and no
surrender of this Note shall be effective for that purpose, while the transfer
books of the Corporation for the Common Stock are closed for any purpose (but
not for any period in excess of 15 days); but the surrender of this Note for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if the
conversion had been made on the date this Note is surrendered, and at the
Conversion Ratio in effect at the date of such surrender.
(d) In case this Note is to be prepaid pursuant to the
mandatory prepayment provisions hereof, such right of conversion shall cease and
terminate as to the portion of this Note that is to be prepaid at the close of
business on the Business Day next preceding the date fixed for mandatory
prepayment unless the Corporation shall default in the payment of the mandatory
prepayment amount.
(e) In connection with the conversion of the indebtedness
evidenced by this Note, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the Trading
Day on which such indebtedness evidenced by this Note is deemed to have been
converted. If more than one note shall be surrendered for conversion by the
Holder at the same time, the number of full shares of Common Stock issuable on
conversion thereof shall be computed on the basis of the total amount of
indebtedness to be converted.
(f) (i) The Corporation shall at all times reserve
and keep available for issuance upon the conversion of the indebtedness
evidenced by this Note, free from any preemptive rights, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all of the indebtedness evidenced by this
Note, and shall take all action required to increase the authorized number of
shares of Common Stock if necessary to permit the conversion of all of the
indebtedness evidenced by this Note.
(ii) If the Corporation shall issue shares of
Common Stock upon conversion of indebtedness evidenced by this Note as
contemplated by this Section 3, the Corporation shall issue together with each
such share of Common Stock any rights issued to holders of Common Stock of the
Corporation, irrespective of whether such rights shall be
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28
exercisable at such time, but only if such rights are issued and outstanding and
held by other holders of Common Stock of the Corporation at such time and have
not expired.
(g) The Conversion Ratio will be subject to adjustment from
time to time as follows:
(i) In case the Corporation shall at any time or
from time to time after the Issue Date (A) pay a dividend, or make a
distribution, on the outstanding shares of Common Stock in shares of Common
Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the
outstanding shares of Common Stock into a smaller number of shares, or (D) issue
by reclassification of the shares of Common Stock any shares of capital stock of
the Corporation, then, and in each such case, the Conversion Ratio in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the Holder shall be entitled to receive the
number of shares of Common Stock (or other capital stock) of the Corporation
that the Holder would have owned or have been entitled to receive after the
happening of any of the events described above, had the indebtedness evidenced
by this Note been converted immediately prior to the happening of such event or
the record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such subdivision,
reclassification, or combination, at the close of business on the day upon which
such corporate action becomes effective. No adjustment shall be made pursuant to
this clause (i) in connection with any transaction to which subsection (h)
applies.
(ii) In case the Corporation shall issue shares
of Common Stock or Convertible Securities after the Issue Date, (A) at a price
per share (or having a conversion price per share) less than the greater of the
Current Market Price per share of Common Stock or the Conversion Price, as of
the date of issuance of such shares or of such Convertible Securities, or (B) in
settlement, in whole or in part, of any shareholder or class action lawsuit (a
"Settlement Payment"), then, and in each such case, the Conversion Ratio shall
be adjusted so that the Holder shall be entitled to receive, upon the conversion
hereof, the number of shares of Common Stock determined by multiplying (1) the
applicable Conversion Ratio on the day immediately prior to such date by (2) a
fraction, the numerator of which shall be the sum of (a) the number of shares of
Common Stock outstanding on such date, plus (b) the number of additional shares
of Common Stock issued (or into which the Convertible Securities may convert),
and the denominator of which shall be the sum of (x) the number of shares of
Common Stock outstanding on such date, plus (y) either the number of shares of
Common Stock purchasable at the greater of the then Current Market Price per
share or the Conversion Price with the aggregate consideration received or
receivable by the Corporation for the total number of shares of Common Stock so
issued (or into which the Convertible Securities may convert), or zero in the
case of a Settlement Payment. Notwithstanding the foregoing, in the event that
after the date hereof the Corporation issues the Floating Rate Notes, (an
"Adjustment Event") then the Conversion Ratio shall be adjusted so that the
holder shall be entitled to receive, upon the conversion
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29
hereof, the number of shares of Common Stock determined by multiplying the
applicable Conversion Ratio on the day immediately prior to the Adjustment Event
by a fraction, (i) the numerator of which shall be the number of shares of
Common Stock outstanding, plus the number of shares of Common Stock into which
the Floating Rate Notes may convert, immediately after such Adjustment Event,
and (ii) the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to the Adjustment Event.
An adjustment made pursuant to this clause (ii) shall be made
on the next Business Day following the date on which any such issuance is made
and shall be effective retroactively to the close of business on the date of
such issuance. For purposes of this clause (ii), the aggregate consideration
received or receivable by the Corporation in connection with the issuance of
shares of Common Stock or of rights, warrants, or other securities convertible
into shares of Common Stock shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such Common Stock,
rights, warrants, and convertible securities plus the minimum aggregate amount,
if any, payable upon exercise of conversion of any such rights, warrants, and
convertible securities into shares of Common Stock. The issuance of any shares
of Common Stock (whether treasury shares or newly issued shares) pursuant to (a)
a dividend or distribution on, or subdivision, combination or reclassification
of, the outstanding shares of Common Stock requiring an adjustment in the
conversion ratio pursuant to clause (i) of this subsection (g), or (b) the terms
of a firmly committed underwritten public offering, shall not be deemed to
constitute an issuance of Common Stock or Convertible Securities by the
Corporation to which this clause (ii) applies.
Upon the expiration of any unexercised options, warrants, or
rights to convert any convertible securities for which an adjustment has been
made pursuant to this clause (ii), the adjustments shall forthwith be reversed
to effect such rate of conversion as would have been in effect at the time of
such expiration or termination had such options, warrants, or rights or
convertible securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued. If the purchase price provided for
in any option, warrant, or rights to convert any convertible securities for
which an adjustment has been made pursuant to this clause (ii), the additional
consideration, if any, payable upon the conversion or exchange of any
convertible securities for which an adjustment has been made, or the rate at
which any convertible securities referred to above are convertible into or
exchangeable for Common Stock shall, at any time, increase or decrease (other
than under or by reason of provisions designed to protect against dilution),
then, the Conversion Ratio in effect at the time of such event shall forthwith
be readjusted to the Conversion Ratio that would have been in effect at such
time had such options, warrants, or rights or convertible securities still
outstanding provided for such changed purchase price, additional consideration,
or conversion rate, as the case may be, at the time initially granted, issued,
or sold. No adjustment shall be made pursuant to this clause (ii) in connection
with any transaction to which subsection (h) applies.
(iii) In case the Corporation shall at any time or
from time to time after the Issue Date declare, order, pay, or make a dividend
or other distribution (in each
11
30
case, a "Distribution"), (including, without limitation, (a) any distribution of
Capital Stock or other securities or property or rights or warrants to subscribe
for securities of the Corporation or any of its subsidiaries by way of dividend
or spinoff and (b) any dividend, payment or distribution of cash or Capital
Stock, or the incurrence of any accounting charge or reserve that reduces the
net income of the Corporation as of the end of any fiscal year, in respect of
any Capital Stock that provides for a guaranteed rate of return or accretion of
value (whether by increases in liquidation value or otherwise), including,
without limitation, any issuance of Common Stock required by such guaranty or
accretion of value, whether upon conversion of such Capital Stock or otherwise),
on its Capital Stock, other than (A) Distributions payable in cash in an
aggregate amount not to exceed 50% of net income from continuing operations
before extraordinary items of the Corporation, determined in accordance with
generally accepted accounting principles, during the period (treated as one
accounting period) commencing on December 31, 1995, and ending on the date such
Distribution is paid; provided, that, to the extent required by the terms
thereof, such Distribution shall have been previously consented to by the
holders of the Notes issued pursuant to the Note Purchase Agreement, or (B)
Distributions of shares of Common Stock which are referred to in clause (i) of
this subsection (g), then, and in each such case, the Conversion Ratio shall be
adjusted so that the Holder shall be entitled to receive, upon the conversion
hereof, the number of shares of Common Stock determined by multiplying (1) the
applicable Conversion Ratio on the day immediately prior to the record date
fixed for the determination of stockholders entitled to receive such
Distribution (or in the case of clause (b), the day immediately prior to the
making of any such dividend, payment, or distribution, or, in the case of the
incurrence of any accounting charge or reserve, December 31 of the applicable
year) by (2) a fraction, the numerator of which shall be the Current Market
Price per share of Common Stock for the period of 30 Trading Days preceding such
record date, and the denominator of which shall be such Current Market Price per
share of Common Stock less the fair market value, as determined in good faith by
the Board, (a certified resolution with respect to which shall be mailed to the
Holder), per share of Common Stock of such Distribution. No adjustment shall be
made pursuant to this clause (iii) in connection with any transaction to which
subsection (h) applies.
(iv) For purposes of this subsection (g), the
number of shares of Common Stock at any time outstanding shall not include any
shares of Common Stock then owned or held by or for the account of the
Corporation.
(v) The term "dividend," as used in this
subsection (g), shall mean a dividend or other distribution upon stock of the
Corporation.
(vi) Anything in this subsection (g) to the
contrary notwithstanding, no adjustment in the Conversion Ratio shall be made on
account of a Distribution, dividend, issuance, grant of rights or other action
that otherwise would cause an adjustment in the Conversion Ratio under this
subsection (g), to the extent that the Distribution, dividend, issuance, grant
of rights or other action is taken in connection with the transactions
contemplated by the Rights Offering, the Restructuring Proxy or the Credit
Agreement
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31
Amendment, including the distribution of the Series B preferred stock and the
conversion of such shares into common stock.
(vii) Anything in this subsection (g) to the
contrary notwithstanding, the Corporation shall not be required to give effect
to any adjustment in the Conversion Ratio unless and until the net effect of one
or more adjustments (each of which shall be carried forward), determined as
above provided, shall have resulted in a change of the Conversion Ratio by at
least one one-hundredth (.01) of one share of Common Stock, and when the
cumulative net effect of more than one adjustment so determined shall be to
change the Conversion Ratio by at least one one-hundredth (.01) of one share of
Common Stock, such change in Conversion Ratio shall thereupon be given effect.
(viii) The certificate of any firm of independent
public accountants of recognized standing selected by the Board (which may be
the firm of independent public accountants regularly employed by the
Corporation) shall be presumptively correct for any computation made under this
subsection (g).
(ix) If the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
subsection (g) or in the Conversion Ratio then in effect shall be required by
reason of the taking of such record.
(h) In the case of any Major Transaction occurring at any
time, at the option of the Holder, the indebtedness evidenced by the Note shall
thereafter be convertible into, in whole and in part and in lieu of the Common
Stock issuable upon such conversion prior to consummation of such Major
Transaction, the kind and amount of shares of stock and other securities and
property receivable (including cash) upon the consummation of such Major
Transaction by a holder of that number of shares of Common Stock into which such
indebtedness, or portion thereof, was convertible immediately prior to such
Major Transaction (including, on a pro rata basis, the cash, securities, or
property received by holders of Common Stock in any tender or exchange offer
that is a step in such Major Transaction). In case securities or property other
than Common Stock shall be issuable or deliverable upon conversion as aforesaid,
then all references in this Section 3 shall be deemed to apply, so far as
appropriate and nearly as may be, to such other securities or property.
(i) In case at any time or from time to time, other than in
connection with the transactions contemplated by the Rights Offering, the
Restructuring Proxy or the Credit Agreement Amendment, the Corporation shall pay
any stock dividend or make any other non-cash distribution to the holders of its
Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
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32
Stock of the Corporation or consolidation or merger of the Corporation with or
into another corporation or other entity, or any sale or conveyance to another
corporation or other entity of the assets or property of the Corporation as an
entirety or substantially as an entirety, or there shall be a voluntary or
involuntary dissolution, liquidation, or winding up of the Corporation, then, in
any one or more of said cases the Corporation shall give at least 20 days prior
written notice (the time of mailing of such notice shall be deemed to be the
time of giving thereof) to the Holder at the address of the Holder as shown on
the books of the Corporation as of the date of which (i) the books of the
Corporation shall close or a record shall be taken for such stock dividend,
distribution, or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, or winding up shall take place, as the case may be, provided that
in the case of any Major Transaction to which subsection (h) applies the
Corporation shall give at least 30 days prior written notice as aforesaid. Such
notice also shall specify the date as of which the holders of the Common Stock
of record shall participate in said dividend, distribution, or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, or conveyance or participate in such dissolution,
liquidation, or winding up, as the case may be. Failure to give such notice
shall not invalidate any action so taken.
(j) Anything herein to the contrary notwithstanding, the
issuance or sale of the following shares of Common Stock or options, warrants,
or other rights to purchase Common Stock shall be excluded from any calculation
of, and shall not be deemed issued or sold for purposes of calculating, any
reduction, adjustment, or readjustment of the Conversion Ratio hereunder: (i)
shares of Common Stock issued upon conversion of the indebtedness evidenced by
this Note or any portion thereof; (ii) shares of Common Stock or options,
warrants, or other rights to purchase Common Stock issuable, reserved for
issuance, or issued pursuant to a stock option plan, employee stock ownership
plan, or other compensatory benefit plan of the Corporation, duly adopted by the
Board; (iii) shares of Common Stock, issuable, reserved for issuance, or issued
pursuant to any currently outstanding warrants or options (other than as
provided in subparagraph (g)(ii) above), or any options, warrants, or other
rights issuable, reserved for issuance, or issued to officers of the Corporation
in the future for compensatory purposes, if duly authorized by the Board; and
(iv) shares of Common Stock issued upon conversion of the indebtedness evidenced
by the Convertible Notes (other than as provided in subparagraph (g)(ii) above).
SECTION 4. REPORTS AS TO ADJUSTMENTS. Upon any adjustment of
the Conversion Ratio then in effect and any increase or decrease in the number
of shares of Common Stock issuable upon the operation of the conversion set
forth in Section 3, then, and in each such case, the Corporation shall promptly
deliver to the Holder, a certificate signed by the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Ratio then in effect following such adjustment and
the increased or decreased number of shares issuable upon the conversion granted
by Section 3, and shall set forth in reasonable detail the method of calculation
of each and a brief statement of the
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33
facts requiring such adjustment. Where appropriate, such notice to the Holder
may be given in advance and included as part of the notice required under the
provisions of Section 3(i).
SECTION 5. MANDATORY CONVERSION.
(a) At any time after February 28, 2004, and so long as at
such time the Common Stock is listed or admitted to trading on a national
securities exchange, the Corporation may require the Holder to convert all or a
portion of the principal amount of the indebtedness evidenced by this Note into
shares of Common Stock if, at such time, the Current Market Price of the Common
Stock has equaled or exceeded one hundred fifty percent (150%) of the Conversion
Price (as it may from time to time be adjusted) for forty-five (45) consecutive
Trading Days following the thirty-fifth monthly anniversary of the Issue Date.
To exercise such right, the Corporation must deliver a Mandatory Conversion
Notice of the exercise of such right to the Holder within thirty (30) days of
the last day of such forty-five (45) day period, such Mandatory Conversion
Notice must be given at least ten (10) Business Days, but not more than fifteen
(15) Business Days prior to the proposed Mandatory Conversion Date, and such
Mandatory Conversion Notice must specify the proposed Mandatory Conversion Date
and the portion of the principal amount of the indebtedness evidenced by this
Note to be converted into Common Stock.
(b) All conversions effected pursuant to the preceding
paragraph will be made effective as of the close of business on the Mandatory
Conversion Date at the Conversion Ratio in effect on the Mandatory Conversion
Date; provided, however, that, in order to be able to convert, the Current
Market Price must have equaled or exceeded one hundred fifty percent (150%) of
the Conversion Price (as it may from time to time be adjusted) for the
forty-five (45) consecutive Trading Days immediately prior to the Mandatory
Conversion Date. If the Current Market Price on the Mandatory Conversion Date
does not equal or exceed one hundred fifty percent (150%) of the Conversion
Price (as it may from time to time be adjusted) for the forty-five (45)
consecutive Trading Days immediately prior to the Mandatory Conversion Date, the
Corporation's election to require conversion will be deemed void and no
conversion will be effected pursuant to such notice. Such event will not be
deemed, however, to alter or restrict the Corporation's right to again require
conversion at such time as the Current Market Price equals or exceeds one
hundred fifty percent (150%) of the then current Conversion Price for forty-five
(45) consecutive Trading Days prior to such time. Upon conversion required by
the Corporation pursuant to this paragraph and the immediately preceding
paragraph, all accrued but unpaid interest with respect to the principal amount
of the indebtedness evidenced by this Note being converted shall be payable in
accordance with the provisions of the following paragraph.
(c) Conversions of the indebtedness evidenced by this Note
effected by the exercise of the Corporation's right to require conversion will
be deemed effective as of the close of business on the Mandatory Conversion Date
without any action by the Holder and the Holder will, as of such time, be a
stockholder of the Corporation with respect to the number of shares of Common
Stock into which the principal balance evidenced by this Note (or such portion
of the principal balance evidenced by this Note as the Corporation shall have
15
34
specified) shall have been converted. The Holder agrees promptly to surrender
this Note for cancellation following mandatory conversion. Certificates
representing the shares of Common Stock issuable by the Corporation as a result
of the mandatory conversion of all or a portion of the principal balance of the
indebtedness evidenced by this Note and all dividends and other distributions
payable with respect to such shares and all accrued but unpaid interest payable
pursuant to the immediately preceding paragraph will be retained by the
Corporation pending surrender of this Note for cancellation. As promptly as
practicable, and in any event within five (5) Business Days after the surrender
of this Note, the Corporation shall deliver or cause to be delivered, either by
personal delivery or by certified or registered mail or by a recognized
overnight courier service, in any such case, properly insured, to the Holder in
accordance with the written instructions of the Holder (i) certificates
representing the number of Conversion Shares to which the Holder shall be
entitled, (ii) if less than the entire principal amount of indebtedness
evidenced by this Note is being converted, a new promissory note, in the form of
this Note, for the balance of the indebtedness that is not being so converted,
and (iii) a cashiers check or wire transfer of the amount of the accrued but
unpaid interest in respect of the principal of the Note that has been converted
into Conversion Shares.
(d) In connection with the conversion of the indebtedness
evidenced by this Note, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the Trading
Day on which such indebtedness evidenced by this Note is deemed to have been
converted. If more than one note shall be surrendered for conversion by the
Holder at the same time, the number of full shares of Common Stock issuable on
conversion thereof shall be computed on the basis of the total amount of
indebtedness to be converted.
SECTION 6. MANDATORY PREPAYMENT. In the case of any Change
Event occurring at any time, at the option of the Holder, the Holder may require
the Corporation to prepay all or a portion of the then outstanding principal
amount of the indebtedness evidenced by this Note. To exercise such right of
prepayment, the Holder must provide the Corporation with a Mandatory Prepayment
Notice at least thirty (30) days prior to the proposed Mandatory Prepayment Date
which Mandatory Prepayment Notice shall specify the portion of the principal
amount of the indebtedness evidenced by this Note (which must be in integral
multiples of One Thousand Dollars ($1,000)) to be prepaid. On the Mandatory
Prepayment Date specified, the Corporation shall prepay the portion of the
principal amount of the indebtedness evidenced by this Note that the Holder has
specified must be prepaid on such date, plus accrued interest on such principal
amount to the date of the prepayment. Any prepayment shall be made by cashiers
check or by wire transfer of immediately available funds, in currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts, at such address or to such account, as applicable,
as shall be designated to the Corporation by the Holder.
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35
SECTION 7. SUBORDINATION.
(a) The Corporation covenants and agrees, and the Holder
likewise covenants and agrees, that no payment shall be made by the Corporation
on account of principal of or interest on this Note, or otherwise, if there
shall have occurred and be continuing, and the Corporation and the Holder shall
have received notice from the holder or holders of, a default with respect to
any Senior Indebtedness (i) permitting the acceleration thereof and such default
is the subject of a judicial proceeding, or (ii) in an aggregate principal
amount of not less than One Million Dollars ($1,000,000) entitling such holder
or holders to compel the acceleration thereof (provided, however, that in the
case of Senior Indebtedness issued pursuant to an indenture, such notice may be
validly given only by the trustee under such indenture), unless and until such
default or Event of Default shall have been cured or waived or shall have ceased
to exist or such notice is withdrawn or found by a court of competent
jurisdiction to be invalid.
(b) Upon any payment by the Corporation or distribution of
assets of the Corporation of any kind or character, whether in cash, property,
or securities, to creditors of the Corporation upon any dissolution or winding
up or liquidation or reorganization of the Corporation, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership, or other similar
proceedings, all amounts due or to become due upon all Senior Indebtedness shall
first be paid in full in money or money's worth, or payment thereof provided
for, before any payment is made on account of the principal of or interest on
this Note and upon such dissolution or winding up or liquidation or
reorganization, any payment by the Corporation, or distribution of assets of the
Corporation of any kind or character, whether in cash, property, or securities,
to which the Holder would be entitled except for the provisions hereof, shall be
paid by the Corporation or by any receiver, trustee in bankruptcy, liquidating
trustee, agent, or other person making such payment or distribution directly to
the holders of Senior Indebtedness or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full in money or money's worth, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness,
before any payment or distribution is made to the Holder.
(c) The foregoing notwithstanding, in the event that any
payment of or distribution of assets of the Corporation of any kind or
character, whether in cash, property or securities, prohibited by the foregoing,
shall be received by the Holder before all Senior Indebtedness is paid in full
in money or money's worth, or provision is made for such payment, then and in
such event such payment or distribution shall be paid over or delivered to the
holders of Senior Indebtedness or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in full
in money or money's worth, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior
17
36
Indebtedness (but subject to the power of a court of competent jurisdiction to
make other equitable provision, which shall have been determined by such court
to give effect to the rights conferred herein upon the Senior Indebtedness and
the holders thereof with respect to this Note or the Holder hereof by a lawful
plan or reorganization or readjustment under applicable bankruptcy law).
(d) The holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Holder, without
incurring responsibility to the Holder and without impairing or releasing the
obligations of the Holder to the holders of Senior Indebtedness: (i) change the
manner, place, or terms of payment or change or extend the time of payment of,
or renew or alter Senior Indebtedness, or otherwise amend, in any manner, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; provided, however, that the average
weighted maturity of such Senior Indebtedness shall not be decreased without the
consent of the Holder; (ii) sell, exchange, release, or otherwise deal with any
property pledged, mortgaged, or otherwise securing Senior Indebtedness; (iii)
release any person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Corporation and any other person.
(e) Subject to the payment in full of all amounts then due
(whether by acceleration of the maturity thereof or otherwise) on account of the
principal of, premium, if any, and interest on all Senior Indebtedness at the
time outstanding, the Holder shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property, or
securities of the Corporation applicable to the Senior Indebtedness until the
principal of and interest on this Note shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions by the Corporation to
the holders of Senior Indebtedness of any cash, property, or securities to which
the Holder would be entitled except for the provisions hereof, and no payments
over pursuant to the provisions hereof to the holders of Senior Indebtedness by
the Holder, shall, as between the Corporation, its creditors other than holders
of Senior Indebtedness, and the Holder, be deemed to be a payment by the
Corporation to or on account of the Senior Indebtedness.
(f) It is understood that the foregoing provisions of this
Note are and are intended solely for the purpose of defining the relative rights
of the Holder on the one hand and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Note is intended to or shall impair, as
among the Corporation, its creditors (other than the holders of Senior
Indebtedness), and the Holder, the obligation of the Corporation, which is
absolute and unconditional, to pay to the Holder the principal of and interest
on this Note as and when the same shall become due and payable in accordance
with its terms, or is intended to or shall affect the relative rights of the
Holder and creditors of the Corporation other than the holders of Senior
Indebtedness, nor shall anything herein prevent the Holder from exercising all
remedies otherwise permitted by applicable law upon default under this Note or
the Note Purchase Agreement.
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(g) Upon any payment or distribution of assets of the
Corporation referred to herein, the Holder shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation, or reorganization proceedings are pending,
or certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent, or other person making such payment or distribution, delivered to the
Holder, for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of Senior Indebtedness and other indebtedness of
the Corporation, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon, and all other facts pertinent thereto.
(h) The Corporation shall give prompt written notice to the
Holder of any fact known to the Corporation that would prohibit the making of
any payment of moneys to or by the Corporation in respect of this Note.
SECTION 8. ACCELERATION. This Note and the indebtedness
evidenced hereby is subject to acceleration under the terms and conditions set
forth in the Note Purchase Agreement.
SECTION 9. NO OPTIONAL PREPAYMENT. This Note and the
indebtedness evidenced hereby may not be prepaid at the option of the
Corporation.
SECTION 10. MISCELLANEOUS.
(a) Any notice required by the provisions of this Note to be
given to the Holder or the Corporation shall be given and deemed received or
delivered in accordance with the provisions of Section 10.4 of the Note Purchase
Agreement.
(b) In the event of prepayment or conversion of this Note in
part only, a new note or notes for the unpaid or unconverted portion hereof will
be issued in the name or names requested by the Holder upon the cancellation
hereof.
(c) The transfer of this Note is registrable on the books of
the Corporation upon surrender of this Note for registration of transfer at the
offices of the Corporation in Nashville, Tennessee, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Corporation duly executed by, the Holder or its attorney duly authorized in
writing, and thereupon one or more new notes of authorized denominations and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees. New notes are issuable only in registered form without coupons
in denominations of One Thousand Dollars ($1,000) and any integral multiple
thereof. This Note is exchangeable for a like aggregate principal amount of
notes of a different authorized denomination, as requested by the Holder. No
service charge shall be made for any such registration of transfer or exchange,
but the Corporation may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
(d) Prior to the due presentment of this Note for registration
of transfer, the Corporation and any agent of the Corporation may treat the
person in whose name this Note
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38
is registered as the owner hereof for all purposes, irrespective of whether this
Note be overdue, and neither the Corporation nor any such agent shall be
affected by notice to the contrary.
(e) This Note shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by,
construed under, and enforced in accordance with the laws of the State of New
York.
(f) The Corporation agrees, to the extent permitted by law, to
pay to the Holder all costs and expenses (including attorneys' fees) incurred by
it in the collection hereof or the enforcement of any right or remedy provided
for herein (including such costs and expenses incurred in connection with a
workout or an insolvency or bankruptcy proceeding).
(g) The provisions of the Note Purchase Agreement are hereby
incorporated into this Note by this reference.
[Remainder of page intentionally left blank.]
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39
IN WITNESS WHEREOF, the undersigned has executed this Note effective as
of the date first above written.
PRISON REALTY TRUST, INC.,
a Maryland corporation
By:
------------------------------
Title:
---------------------------
ATTEST:
----------------------------------
Secretary
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40
Exhibit A
[FORM OF MANDATORY CONVERSION NOTICE]
-------------------------
-------------------------
-------------------------
Notice hereby is given that, in accordance with the terms and
conditions of the Note hereinafter described and that certain Note Purchase
Agreement, dated December 31, 1998, as amended, between Prison Realty Trust,
Inc. (formerly known as Prison Realty Corporation) and PMI Mezzanine Fund, L.P.,
Prison Realty Trust, Inc. hereby elects to require conversion of the 8.0%
Convertible, Extendable, Subordinated Note, due February 28, 2005, issued by it
(the "Note"). The Note to be converted and the principal amount thereof to be
converted are as follows:
Principal Number of
Outstanding Amount to be Shares to
Note Number Principal Amount Converted Be Delivered
--------------------------------------------------------------------------
The Mandatory Conversion Date will be .
------------
PRISON REALTY TRUST, INC.
By:
------------------------------
Name:
----------------------------
Title:
----------------------------
41
Exhibit B
[FORM OF MANDATORY PREPAYMENT NOTICE]
TO: PRISON REALTY TRUST, INC.
-------------------------
-------------------------
The undersigned owner of the attached Note hereby gives notice
that, in accordance with the terms and conditions of such Note and that certain
Note Purchase Agreement, dated December 31, 1998, as amended, between Prison
Realty Trust, Inc. (formerly known as Prison Realty Corporation) and PMI
Mezzanine Fund, L.P., it hereby exercises its right to require prepayment of
such Note or portion thereof (which is $1,000 or an integral multiple thereof),
plus all accrued but unpaid interest with respect to such principal amount.
The Mandatory Prepayment Date shall be __________________. The
principal amount to be prepaid shall be $_________________________.
[Name of Holder]
Dated:
-------------------
By:
---------------------------
Name:
-------------------------
Title:
-------------------------
42
Exhibit C
[FORM OF OPTIONAL CONVERSION NOTICE]
TO: PRISON REALTY TRUST, INC.
---------------------
---------------------
The undersigned owner of the attached Note hereby gives notice
that, in accordance with the terms and conditions of such Note and the Note
Purchase Agreement, dated December 31, 1998, as amended, between Prison Realty
Trust, Inc. (formerly known as Prison Realty Corporation) and PMI Mezzanine
Fund, L.P., it hereby exercises its right to convert such Note, or portion
hereof (which is $1,000 or an integral multiple thereof) below designated, into
shares of Common Stock of Prison Realty Trust, Inc. and directs that the shares
issuable and deliverable upon the conversion, and any notes representing any
unconverted principal amount thereof, be issued and delivered to the registered
holder of such Note unless a different name has been indicated below. If shares
or a new note representing unconverted principal are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
[Name of Holder]
Dated:
---------------------
By:
---------------------------------
Name:
-------------------------------
Title:
-------------------------------
Principal Amount to be converted (in an
integral multiple of $1,000, if less than
all):
$
----------------
43
Fill in for registration of shares of Common Stock and note if to be issued
other than to the registered Holder.
-----------------------------
Name
-----------------------------
Address
-----------------------------
Please print name and address
(including zip code number)
SOCIAL SECURITY OR OTHER TAXPAYER
IDENTIFYING NUMBER
-----------------------------
-25-
