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EXHIBIT 10.38
PREEMPTIVE RIGHTS AGREEMENT
THIS PREEMPTIVE RIGHTS AGREEMENT (the "Agreement"), dated as of
January 1, 1999, is by and between PRISON REALTY CORPORATION, a Maryland
corporation ("Prison Realty"), and CORRECTIONAL MANAGEMENT SERVICES CORPORATION,
a Tennessee corporation (the "Company").
W I T N E S S E T H:
WHEREAS, on or about December 31, 1998 and January 1, 1999,
Corrections Corporation of America, a Tennessee corporation ("CCA"), and CCA
Prison Realty Trust, a Maryland real estate investment trust (the "Trust"), were
merged with and into Prison Realty, with Prison Realty being the surviving
corporation (the "Merger");
WHEREAS, in connection with the Merger, CCA shall, or shall cause
certain of its subsidiaries to, transfer, convey and assign all right, title and
interest in and to certain contracts with government entities relating to the
management and operation of certain correctional and detention facilities (the
"Management Contracts"), together with certain accounts receivable and accounts
payable related thereto and certain other net assets used in connection
therewith, to Correctional Management Services Corporation, a Tennessee
corporation ("Operating Company") (collectively, the "Management Contract
Assets");
WHEREAS, in consideration for the transfer of the Management
Contract Assets by CCA, Operating Company will, among other things, issue to CCA
one hundred percent (100%) of its non-voting common stock, $0.01 par value per
share (the "Non-voting Common Stock"), such Non-voting Common Stock representing
9.5% of the economic value of Operating Company (the "Ownership Percentage"),
and, upon completion of the Merger, Prison Realty will hold the Non-Voting
Common Stock; and
WHEREAS, Prison Realty and Operating Company desire that, upon
completion of the Merger, Prison Realty maintain the Ownership Percentage in the
Company.
NOW, THEREFORE, for and in consideration of the premises and the
mutual promises and covenants set forth in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Preemptive Right. (a) Prison Realty shall have a right to
purchase securities of the Company in any issuance of securities (the
"Additional Securities") by the Company which would otherwise have the effect of
reducing Prison Realty's Ownership Percentage. Prison Realty's participation in
any such issuance of Additional Securities shall be in a pro-rata amount and on
the same terms and conditions as are called for by each future issuance (or as
nearly as may be practicable in the event Prison Realty cannot comply with such
terms and conditions). Additional Securities shall not include securities issued
on or before the date hereof or securities issued upon the exercise of
derivative securities issued on or before the date hereof.
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(b) If the Company proposes to undertake an issuance of
Additional Securities, it shall give Prison Realty notice of its intention,
describing the type of Additional Securities, the price and amount of Additional
Securities to be issued, and the general terms and conditions (including closing
conditions) upon which the Company proposes to issue the same. The notice shall
also state that Prison Realty shall have thirty (30) days from the giving of
such notice, or such longer period if a longer period is specifically made
available to any other purchaser, to agree to purchase Additional Securities for
the price and upon the terms and conditions specified in the notice by giving
written notice to the Company and stating therein the quantity of Additional
Securities to be purchased by Prison Realty.
(c) If Prison Realty shall fail to exercise in full such right
within such thirty (30) days, or such longer period if specifically made
available to any other purchaser, the Company shall have one hundred and twenty
(120) days thereafter to sell the Additional Securities at a price and upon
general terms and conditions (including closing conditions) no more favorable to
the purchasers thereof than specified in the Company's notice pursuant to
Section 1(b) above. If the Company has not sold the Additional Securities within
such one hundred and twenty (120) days, the Company shall not thereafter issue
or sell any Additional Securities without first offering such securities to the
Shareholders in accordance with the provisions of this Section
2. Authorization. Each party to this Agreement hereby represents
and warrants that the execution, delivery, and performance of this Agreement are
within the powers of each party and have been duly authorized and approved and
that the Agreement constitutes a valid and enforceable obligation of each party
in accordance with its terms.
3. Amendment. This Agreement may be amended only with the written
consent of the parties hereto.
4. Counterparts. Thus Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one agreement.
5. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Tennessee.
6. Severability. Should any part of this Agreement be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
and enforceability of the remaining parts of this Agreement.
7. Successors. This Agreement shall be binding upon and inure to
the benefit of the respective parties and their permitted assigns and successors
in interest.
8. Waivers. No waiver or any breach of any of the terms or
conditions of this Agreement shall be deemed to be a waiver of any other or
subsequent breach, nor shall any waiver be valid or binding unless the same
shall be in writing and signed by the party alleged to have
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granted the waiver.
9. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been received when delivered or three
days after being mailed by first class, registered or certified mail, return
receipt requested, postage prepaid, or by express delivery providing receipt of
delivery,
to the Company at:
Correctional Management Services Corporation
00 Xxxxxx Xxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxx, Chief Financial Officer
to Prison Realty at:
Prison Realty Corporation
00 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Chief Financial Officer
10. Entire Agreement. Thus Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior agreements and
presentations with respect to the subject matter thereto.
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IN WITNESS WHEREOF, the parties have caused this Preemptive Rights
Agreement to be duly executed as of the date first above written.
COMPANY:
CORRECTIONAL MANAGEMENT
SERVICES CORPORATION,
a Tennessee corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Its: Chief Financial Officer and Secretary
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PRISON REALTY:
PRISON REALTY CORPORATION,
a Maryland corporation
By: /s/ Xxxxxxx X. Xxxxxx
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Its: Chief Operating Officer
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