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Exhibit 10.13
AGREEMENT IN PRINCIPLE
Agreement in Principle between Sodexho Alliance, S.A., a French
corporation, located at 0, Xxxxxx Xxxxxx, 00000 Xxxxxxxx-xx-Xxxxxxxxxx, Xxxxxx
("Sodexho"), Corrections Corporation of America, a Tennessee corporation,
located at 00 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000 ("CCA") and CCA
Prison Realty Trust, a Maryland real estate investment trust, located at 00
Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000 (the "REIT").
WHEREAS, Sodexho and the Delaware corporate predecessor of CCA entered
into various agreements, all of which were assumed by CCA pursuant to that
certain agreement dated May 12, 1997 and the merger in May 1997 of the Delaware
corporate predecessor of CCA with and into CCA;
WHEREAS, it is contemplated that CCA will merge with and into a newly
created Maryland corporation and immediately thereafter, the REIT will merge
with and into that company, which shall be the surviving entity;
WHEREAS, Sodexho and CCA are parties to that certain Securities
Agreement dated as of June 23, 1994 and as previously amended on July 11, 1995
and December 31, 1996 and as amended on May 12, 1997 (the "Securities Purchase
Agreement"), that certain Stockholders Agreement dated as of June 23, 1994 and
as amended on May 12, 1997 (the "Stockholders Agreement"), that certain
Registration Rights Agreement dated as of June 23, 1994, that certain
International Fee Agreement dated as of June 23, 1994, that certain
International Joint Venture Agreement dated as of June 23, 1994, that certain
Confidentiality Agreement dated as of June 23, 1994, that certain Stock Purchase
Agreement dated as of June 29, 1995, that certain Note Purchase Agreement dated
as of April 5, 1996, that certain Registration Rights Agreement dated as of
April 5, 1996, that certain agreement dated May 12, 1997 (to which the Delaware
corporate predecessor of CCA was also a party) and related agreements, pursuant
to which agreements and related agreements Sodexho holds, prior to the Merger,
the following securities of CCA:
(a) 3,890,000 shares of CCA's common stock;
(b) 8.5% Convertible Subordinated Note due November 7, 1999, in the
aggregate principal amount of $7,000,000, convertible into
1,953,942 shares of common stock of CCA at a conversion price, as
adjusted, of $3.58 per share;
(c) warrants to purchase a total of 4,400,000 shares of common stock
of CCA (exercisable at $3.95 per share and expiring on December
31, 1999);
(d) 7.5% Convertible Subordinated Note due February 28, 2002, in the
aggregate principal amount of $20,000,000, convertible into
771,865 shares of common stock of CCA (at a conversion price, as
adjusted of $25.91 per share);
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(e) right to acquire (prior to December 31, 1999) a Floating Rate
Convertible Subordinated Note in the aggregate principal amount
of $20,000,000 convertible into 2,930,403 shares of common stock
of CCA, at a conversion price, as adjusted, of $6.825 per share;
and
(f) options to acquire a total of 67,500 shares of common stock of
CCA exercisable and expiring as set forth on:
Number of Shares Exercise Price Expiration Date
30,000 14.625 11/03/2005
30,000 25.875 11/01/2006
7,500 31.938 11/04/2007
and whereas such agreements listed above (and including such related agreements
between the parties as may not be specifically listed above), all as assumed by
CCA and as amended prior to the date hereof and as further amended hereby, are
sometimes referred to herein collectively as the "Pre-Existing Contracts"; and
WHEREAS, the parties wish to confirm certain agreements (and
amendments) with respect to the Pre-Existing Contracts and certain other
matters.
NOW THEREFORE, in consideration of these premises and the mutual
promises set forth below, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, each of the parties hereto agrees as
follows:
1. REPRESENTATIONS AND COVENANTS REGARDING THE MERGER.
1.1. THE AGREEMENT. Each of the parties represents that this Agreement
is a duly authorized and executed agreement respectively binding
on such party.
1.2. THE MERGER. In consideration of the Agreements contained
herein, each of CCA and the REIT agree that they will amend
their proposed Agreement and Plan of Merger to provide that
the proposed Merger of CCA within and into the REIT shall be
restructured as follows:
Immediately prior to the end of calendar year 1998, CCA will
merge with and into a newly created Maryland corporation (the
"Surviving Company") and each share of CCA Common Stock will
be converted into 0.875 share of Surviving Company common
stock; immediately after the commencement of calendar year
1999, the REIT will merge with and into the Surviving Company,
with each REIT Common
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Share being converted into one share of the Surviving Company.
These transactions are collectively called the "Merger."
1.3. TAX-FREE EXCHANGE. CCA and the REIT hereby represent that the
exchange of shares of the Surviving Company for shares of CCA
and shares of the REIT, respectively, in the Merger will be a
tax-free reorganization under the Internal Revenue Code and
the laws of the applicable states.
1.4. REIT QUALIFICATION. CCA and the REIT hereby represent that
immediately subsequent to the Merger, the Surviving Company
will qualify as a real estate investment trust for federal
income tax purposes.
2. BUSINESS COMBINATION STATUTE, CONTROL SHARE ACQUISITION STATUTE AND
REIT CHARTER OR BY-LAW WAIVER. The REIT hereby delivers a certified copy of a
resolution, which is irrevocable (as permitted by Subtitle 6 of the Maryland
General Corporation Law) and has been duly adopted by its Board of Trustees to
the effect that from and after the date hereof the provisions of Section 3-602
of Subtitle 6 of the Maryland General Corporation Law do not apply to a business
combination (as defined therein) with Sodexho (which will be, after the Merger,
an "interested stockholder" under said Subtitle 6), or its affiliates (as
defined). Each of the REIT and CCA agree that the Surviving Company will adopt a
similar resolution.
The REIT hereby represents that its bylaws include a provision in which
it has elected not to be subject to Subtitle 7 ("Voting Rights of Certain
Controlling Shares") of the Maryland general corporation law and each of CCA and
the REIT agree that the bylaws of the Surviving Company shall include such a
provision.
3. REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement
originally dated as of June 23, 1994 between CCA and Sodexho (the "Registration
Rights Agreement") shall be assumed by the Surviving Company and is hereby
amended by substituting "90 days" for "180 days" in Sections 1.2(d) and 1.10(b).
The Surviving Company must also assume the Registration Rights Agreement dated
as of April 5, 1996 between CCA and Sodexho.
4. INTERNATIONAL FEE AGREEMENT. The International Fee Agreement
originally dated as of June 23, 1994 between CCA and Sodexho shall be assumed by
the affiliated managing operating company to be formed at or prior to
consummation of the Merger ("Opco").
5. AMENDMENT OF PRE-EXISTING CONTRACTS. Sodexho, CCA and the REIT
hereby agree that upon consummation of the Merger, this Agreement shall
constitute an amendment to the Pre-Existing Contracts, as amended, effective
immediately prior to the Merger. Under the terms of the Pre-Existing Contracts,
as amended, Sodexho shall have only the right thereunder to own or acquire a
specific number and type of securities as set forth in paragraphs (a) through
(f) of the Recitals to this Agreement in accordance with the terms thereof. The
Securities Purchase Agreement shall be amended by deleting Sections 2.3, 3, 3A,
7, 8, 9, 10 and 11 thereof. The Stockholders Agreement shall be terminated other
than with respect to Section 8 thereof. Effective upon the
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Merger, Sodexho shall have the right to designate one representative for
nomination as a Director on the Surviving Company Board and Sodexho shall have
the right to designate that such Director serve on the audit committee of the
Surviving Company. The Board of Directors of the Surviving Company shall
recommend the Sodexho Designee for election and the Surviving Company shall use
its best efforts to have the Sodexho Designee elected by the Surviving Company's
stockholders at each annual meeting of such stockholders. Sodexho shall provide
the Surviving Company with notice of the Sodexho Designee at the same time
shareholder proposals are due each year for the annual meeting. In the absence
of timely designation from Sodexho, the Sodexho Designee then serving shall be
renominated if still eligible to serve as provided herein.
Sodexho shall be entitled to fill any vacancy on the Board of Directors
created by the resignation, removal, incapacity or death of the Sodexho
Designee. The Board of Directors shall vote to fill such vacancy with the new
Sodexho Designee (to the extent it can fill such vacancy). Any such vacancy
shall not be filled in the absence of a new designation by Sodexho.
6. SURVIVING COMPANY OWNERSHIP LIMITATIONS. Sodexho acknowledges that
certain ownership limitations with respect to Surviving Company common shares
will apply to it upon consummation of the Merger. Sodexho agrees that to satisfy
such limitations it will sell or otherwise dispose of in public or privately
negotiated transactions a sufficient number of shares of CCA common stock owned
by it in order to satisfy those ownership limitations prior to consummation of
the Merger. In making any such disposition, Sodexho will comply with the federal
securities laws as well as the xxxxxxx xxxxxxx policies of CCA with respect to
the sale of securities by affiliates, which will be applied in a way not to
frustrate the ability of Sodexho to comply with the federal securities laws in
connection with public sales of shares of CCA.
7. INVESTMENT IN OPERATING COMPANY. The parties agree that Sodexho
shall purchase 16.0% of Opco. The purchase price shall be $8.0 million for the
16.0% interest. The purchase price shall be no higher than the purchase price to
be paid by persons other than current REIT or CCA employees provided that the
purchase price shall be reduced, prior to payment by Sodexho or thereafter by a
partial refund, by the appropriate amount if any person other than active
management of Opco purchases an interest in Opco at a lower valuation prior to
36 months after the Merger. It is currently anticipated that an affiliate of
Baron Capital Group, Inc. will make a similar investment in Opco. Sodexho shall
have the right to designate one director of Opco. The Board of Directors of Opco
shall recommend the Sodexho Designee for election and Opco shall use its best
efforts to have the Sodexho Designee elected by Opco's stockholders at each
annual meeting of such stockholders. Sodexho shall provide Opco with notice of
the Sodexho Designee at the same time shareholder proposals are due each year
for the annual meeting. In the absence of timely designation from Sodexho, the
Sodexho Designee then serving shall be renominated if still eligible to serve as
provided herein. Sodexho shall be entitled to fill any vacancy on the Board of
Directors created by the resignation, removal, incapacity or death of the
Sodexho Designee. The Board of Directors shall vote to fill such vacancy with
the new Sodexho Designee (to the extent it can fill such vacancy). Any such
vacancy shall not be filled in the absence of the new designation by Sodexho.
CCA and the REIT agree to cause Opco to enter into non-competition covenants
along the lines of those set
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forth in existing agreements between Sodexho and CCA prior to the Merger. The
parties further agree that the Charter of Opco shall provide that Opco shall not
be merged with or sold to another entity without the prior consent of the
holders of 80.0% of the capital stock of Opco. In addition, the parties agree
that any shares issued to current REIT or CCA management employees or Opco
employees will be restricted to provide that such shares may not be transferred
to a third party without the consent of the Opco Board of Directors. In the
event of a transfer or series of transfers (however occurring) by any
shareholder(s) of Opco to a third party (including a transfer of shares owned by
any then current or former employee of CCA, the REIT or Opco), which, in the
aggregate, constitute more than a majority of the outstanding shares of Opco,
Sodexho shall have tag-along rights with respect to the sale of shares of Opco
owned by Sodexho in connection with such transfers. The preceding sentence shall
not apply to a transfer by an Opco employee to a trust for the benefit of all
Opco employees provided the trust agrees to be bound by these provisions with
respect to any subsequent transfers.
8. AGREEMENT TO VOTE IN FAVOR OF THE PROPOSED MERGER. In consideration
of the agreements set forth herein, Sodexho agrees that it will vote the shares
of CCA common stock owned by it in favor of the Merger. Sodexho's obligation to
vote in favor shall be subject to the fulfillment of CCA's and the REIT's
agreements set forth herein. The obligations of CCA and the REIT hereunder are
subject to Sodexho's favorable vote on the Merger. Sodexho agrees that in their
public statements regarding the proposed Merger that CCA and the REIT may note
that Sodexho has agreed to vote in favor of the proposed Merger.
9. INTERNATIONAL JOINT VENTURE AGREEMENT.
9.1 The parties acknowledge that it is possible that, after the
announcement of the Merger, a third party (other than the REIT) may cause a
"change in control" of CCA and that such event would cause disruption in
operations governed by the International Joint Venture Agreement originally
dated June 23, 1994 between CCA and Sodexho (the "International Joint Venture
Agreement"). Accordingly, in order to continue to provide for harmonious
operations under said Agreement (including the foreign entity joint ventures
thereunder), CCA agrees that, in the event there is a "change in control" of CCA
between the date of announcement of the Merger and the effective date of the
Merger, Sodexho shall have the right to purchase from CCA (or its assignee) 1%
of the outstanding stock of each of CCA Australia, UKDS and APM, so that Sodexho
would own 51% of each said venture, at the price(s) provided for in the
International Joint Venture Agreement or related agreements (or such other
prices as may be mutually agreed), it being understood that the price of such 1%
shall be 2% of the price for such 50% interest as is contemplated in said
Agreement (without any so-called "control premium").
9.2 CCA agrees that the International Joint Venture Agreement will be
sold, assigned to, assumed by and be binding upon Opco. It will also be made
binding upon one or more third-party service subsidiaries ("TPSS") to the extent
that any business or matter which would have been done by or related to CCA
thereunder prior to the Merger is or may be done by or relate to a TPSS, after
giving effect to the transfer of assets by CCA or REIT in or after the Merger.
The parties further
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agree that said Agreement shall be supplemented to cover such additional
subjects as may be appropriate for operations after the Merger, and in any
event, each of Opco and TPSS shall enter into covenants not to compete in
substance as in the existing International Joint Venture Agreement. The Merger
and assignment of that Agreement to Opco shall not be a change in control under
the International Joint Venture Agreement.
9.3 The REIT agrees that Sodexho will have the right to purchase from
CCA (or its assignee, which is expected to be Opco) 1% of the outstanding stock
of each of CC Australia, UKDS and APM, so that Sodexho would own 51% of each
said venture, in the event that there is a "change in control" of the REIT or
Opco at the price provided for in the International Joint Venture Agreement or
related agreements (or such other price as may be mutually agreed), it being
understood that the price of such 1% shall be 2% of the price for such 50%
interest as is contemplated in said Agreement (without any so-called "control
premium").
10. FURTHER ASSURANCES. The parties agree that this binding Agreement
in Principle shall be supplemented by such further documents in form and
substance reasonably satisfactory to the parties as may be reasonably requested
by the parties or their counsel to give effect to the foregoing and the general
intent thereof. Sodexho shall be entitled to receive copies of the opinions of
counsel to the REIT and counsel to CCA in connection with the Merger with
respect to matters relating to the Merger, the contemplated structure and
operations of the REIT after the Merger and tax aspects thereof and, an opinion
addressed to Sodexho as to the binding effect of this Agreement on the REIT, CCA
and Opco.
11. RELEASE. Each of Sodexho, CCA and the REIT hereby agree to release
any and all Claims (as hereinafter defined) against the Released Persons (as
hereinafter defined) to the fullest extent permitted by law. For purposes of
this section, "Claims" shall mean all claims, suits, liabilities, actions,
demands, rights, whether known or unknown, asserted or unasserted (including,
without limitation, any claims for violation of federal and/or state statutory
and/or common law and/or duty), that may be or could be brought in any court or
other forum by any of the parties hereto relating to or arising out of any
matters that relate in any way to the Merger, the negotiation, consideration of
this Agreement or otherwise in connection with the relationship between CCA
and/or the REIT, on the one hand, and Sodexho, on the other hand but not to the
extent they relate to (i) the pending purported class action complaints filed
against CCA and its directors, (ii) any breach of this Agreement or (iii) future
actions. For purposes of this section, "Released Persons" shall mean each of
CCA, the REIT and Sodexho and their respective predecessors or successors and
their present, former and future partners, members, principals, officers,
directors, employees, agents, attorneys, shareholders, investors, insurers,
reinsurers, auditors, accountants, commercial bank lenders, financial advisors,
underwriters, investment bankers, advisors, affiliates, associates (as defined
in Rule 12b-2 promulgated under the Securities Exchange Act of 1934), present,
former or future parents, subsidiaries, or affiliates, and each of their
assigns, representatives, heirs, trustees, executors, administrators, and
members of their immediate families.
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12. SUCCESSORS. This Agreement shall be binding upon each of the
parties and shall also be binding upon their respective successors or assigns,
including a transferee of all or substantially all of its assets. Sodexho may
assign this Agreement to a wholly owned subsidiary which owns its CCA
securities, provided that Sodexho guarantees the performance of such
subsidiary's obligations hereunder.
13. MISCELLANEOUS. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Maryland (other than
its internal conflict of laws) and may not be modified or amended except by a
duly executed instrument in writing signed by the REIT, Sodexho and, if prior to
the Merger, also CCA. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement by facsimile shall be equally as effective as
delivery of a manually executed counterpart. Any party delivering an executed
counterpart of this Agreement by facsimile shall also deliver a manually
executed counterpart, but the failure to deliver a manually executed counterpart
shall not affect the validity, enforceability and binding effect of this
Agreement. Each of the parties acknowledges that it has been represented by
independent counsel of its choice throughout all negotiations that have preceded
the execution of this Agreement and that it has executed the same with consent
and upon the advice of said independent counsel. Each party and its counsel
cooperated in the drafting and preparation of this Agreement and the documents
referred to herein, and any and all drafts relating thereto shall be deemed the
work product of the parties and may not be construed against any party by reason
of its preparation. Accordingly, any rule of law or any legal decision that
would require interpretation of any ambiguities in this Agreement against the
party that drafted it is of no application and is hereby expressly waived. The
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the intentions of the parties and this Agreement.
CCA agrees to pay the reasonable expenses of Sodexho's legal counsel in
connection with the preparation of this Agreement, any supplementary documents
as contemplated by Section 9 and other sections of this Agreement and the
Merger. This Agreement shall cease to be effective if the Merger is not
consummated prior to December 31, 1999.
(Remainder of page intentionally left blank)
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by its duly authorized officer on the day first above written.
SODEXHO ALLIANCE, S.A.
By: /s/ Xxxx-Xxxxxx Cuny
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Name: Xxxx-Xxxxxx Cuny
Title: Senior Vice President
CCA PRISON REALTY TRUST
By: /s/ Doctor X. Xxxxxx
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Name: Doctor X. Xxxxxx
Title: Chairman of the Board of Trustees
CORRECTIONS CORPORATION OF AMERICA
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxx
Title: Chief Financial Officer and Secretary
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