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EXHIBIT 10.4
FORM OF
RIGHT TO PURCHASE AGREEMENT
THIS RIGHT TO PURCHASE AGREEMENT (the "Agreement"), dated as of
__________, 1998, is made and entered into by and between WACKENHUT CORRECTIONS
CORPORATION, a Florida corporation (hereinafter referred to, together with its
Affiliates as hereinafter defined, as "WCC"), and CPT OPERATING PARTNERSHIP
L.P., a Delaware limited partnership (hereinafter referred to as the
"Company").
R E C I T A L S
A. The Company has as of the date hereof acquired from WCC certain
correctional and detention facilities (hereinafter referred to as the "Leased
Facilities") pursuant to a series of Purchase and Sale Agreements of even date
herewith (the "Purchase Agreements") and the Company has an option to acquire
and lease back to WCC certain other correctional or detention facilities (the
"Option Facilities") pursuant to certain Option Agreements of even date
herewith (the "Option Agreements"); and
B. In addition to the Leased Facilities, WCC has the right to
acquire certain other correctional or detention facilities presently under
construction in New Mexico as hereinafter described and intends to acquire or
have the right to acquire additional correctional and detention facilities in
the future; and
C. WCC desires to grant to the Company herewith an option under
certain circumstances to purchase Future Facilities and Restricted Facilities
(as hereinafter defined);
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00),
the mutual covenants and agreements contained herein, and in the Lease
Agreements, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, WCC and the Company agree as
follows:
1. DEFINITIONS. An "Affiliate" as used herein shall mean any
Person directly or indirectly controlling, controlled by, or under common
control with that Person.
"Facility" shall mean either a Future Facility or a Restricted
Facility.
"Future Facility" shall mean any correctional or detention facility,
other than a Restricted Facility, which WCC or its Affiliates owns or has the
right to acquire during the term of this Agreement.
"Future Facility Option Period" shall mean the time period within
which the Company must exercise (if at all) the option granted herein with
respect to an individual Future Facility which time
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period shall expire upon the earlier to occur of (i) four (4) years from
receipt of a certificate of occupancy (or its equivalent) for such Future
Facility, if developed by WCC or from the date of acquisition, if an operational
Future Facility is acquired by WCC or (ii) 6 months after receipt of written
notice from WCC of the date upon which such Future Facility achieved an
occupancy level of 75% of the number of beds authorized under the certificate of
occupancy (or its equivalent) for the Future Facility.
"Person" as used herein shall mean and include natural persons,
corporations, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"Restricted Facility" shall mean any correctional or detention
facility which WCC or its Affiliates owns or has the right to acquire with
respect to which a sale thereof by WCC or its Affiliates to the Company is
prohibited under the terms of any governmentally assisted tax-exempt financing,
prison operating contract, governmental lease or other agreement entered into
between WCC and a governmental or quasi-governmental entity with respect to
such Restricted Facility.
"Restricted Facility Option Period" shall mean the time period within
which the Company must exercise (if at all) the option granted herein with
respect to an individual Restricted Facility which time period shall expire
upon the later to occur of (i) six (6) months after receipt of written notice
from WCC of the Restriction Release Date or (ii) six (6) months after receipt
of written notice from WCC of the date upon which such Restricted Facility
achieved an occupancy level of 75% of the number of beds authorized under the
certificate of occupancy for the Restricted Facility.
"Restriction Release Date" shall mean the day the Company receives a
notice from WCC that all restrictions on the sale or transfer of the ownership
interest of WCC or its Affiliates in a Restricted Facility have expired or been
waived or otherwise terminated.
"Total Facility Cost" shall mean the aggregate costs related to the
acquisition, development, design, construction, equipment and start-up of a
Facility which, in the case of goods or services provided by WCC, shall not
exceed the costs which would be paid therefor if purchased from a third party
in an arm's-length transaction.
2. FUTURE FACILITY OPTION. During the term of this Agreement, the
Company shall have an option to acquire any Future Facility exercisable at any
time prior to the expiration of the Future Facility Option Period for a
purchase price equal to 105% (or such lower percentage as may be agreed to by
WCC) of the Total Facility Cost. WCC shall notify the Company of the Total
Facility Cost as well as the terms of any prison operating contract,
governmental lease or option rights with respect to the Future Facility
promptly after such information is reasonably available to WCC. If the option
is exercised by the Company, the Future Facility must be acquired within the
Future Facility Option Period, unless otherwise mutually agreed by Company and
WCC or unless a later date is permitted or required under the terms and
conditions of a purchase and sale agreement for the Future
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Facility. The Company's exercise of such option shall be on such other terms
and conditions as the Company and WCC shall reasonably agree, which shall be
substantially similar to the Purchase Agreements.
3. RESTRICTED FACILITY OPTION. During the term of this Agreement,
the Company shall have an option to acquire any Restricted Facility exercisable
at any time prior to the expiration of the Restricted Facility Option Period
for a purchase price equal to 105% (or such lower percentage as may be agreed
to by WCC) of the Total Facility Cost. WCC shall notify the Company of the
Total Facility Cost as well as the terms of any restriction upon the sale of
the Restricted Facility to the Company, prison operating contract, governmental
lease or option rights with respect to the Restricted Facility promptly after
such information is reasonably available to WCC. If the option is exercised by
the Company, the Restricted Facility must be acquired within the Restricted
Facility Option Period, unless otherwise mutually agreed by Company and WCC or
unless a later date is permitted or required under the terms and conditions of
a purchase and sale agreement for the Restricted Facility. The Company's
exercise of such option shall be on such other terms and conditions as the
Company and WCC shall reasonably agree, which shall be generally consistent
with the terms and conditions of the Company's initial acquisition of the
Leased Facilities on the date hereof.
4. EXERCISE OF OPTION. The Company may exercise the option granted
under paragraphs 2 and 3 above only by providing to WCC the Company's written,
unqualified and irrevocable notice of its exercise of such option delivered in
accordance with the provisions of paragraph 11 hereof. In the event the option
is not so exercised prior to the expiration of the Future Facility Option
Period or the Restricted Facility Option Period, as applicable, the option with
respect to the relevant Facility shall expire and the parties shall have no
further obligation hereunder in connection with such Facility.
5. LEASE OF FACILITY. Upon the acquisition of a Facility, the
Company and WCC shall execute a new lease, or an amendment to an existing
lease, with respect thereto (any such new lease or amendment to an existing
lease shall constitute an "operating lease" for all tax and accounting
purposes, and subject to such limitation, shall have a lease term of at least
the same number of years remaining under the term of any prison operating
contract or governmental lease or lease assumption rights then in effect with
respect to the Facility). The initial annual base rent payable under such lease
shall be (i) with respect to a Facility acquired on or before the fifth
anniversary of the date of this Agreement, the greater of (a) fair market rent
as mutually agreed upon by the Company and WCC or in the absence of such
agreement, as determined by binding arbitration in accordance with paragraph 6
below or (b) 9.5% of the purchase price of such Facility and (ii) with respect
to a Facility acquired on or before the fifth anniversary after the date of
this Agreement, fair market rental value of the Facility as reasonably and
mutually determined by Company and WCC or, in the absence of such agreement as
determined by binding arbitration in accordance with paragraph 6 below. Any new
lease will be on terms substantially similar to the leases executed with
respect to the Leased Facilities, including the right of first refusal granted
to WCC therein.
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6. ARBITRATION. If it becomes necessary to determine the fair
market rental of a Facility through arbitration, the Company and WCC shall
attempt to agree upon a single appraiser to make such determination within
thirty (30) days after a demand for arbitration has been made by either the
Company or WCC. If the Company and WCC are unable to agree upon a single
arbitrator within such thirty (30) day period, then the party giving the notice
of demand for arbitration shall give notice to the other of a person selected
to act as appraiser on its behalf. Within ten (10) days after such notice, the
Company (or WCC, as the case may be) shall by notice to the WCC (or the
Company, as the case may be) appoint a second person as appraiser on its
behalf. The appraisers thus appointed, each of whom must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto) and experienced in appraising correctional and detention facilities
(or reasonably similar facilities), shall, within forty-five (45) days after
the date of the notice appointing the first appraiser, proceed to appraise the
relevant facility to determine the fair market rental thereof as of the
relevant date (giving effect to the impact, if any, of inflation from the date
of their decision to the relevant date); provided, however, that if only one
appraiser has been so appointed, or if two appraisers have been so appointed
but only one such appraiser has made such determination within the later of
occur of 10 business days following delivery of such appraisal to the other
party or fifty (50) days after the making of WCC's or the Company's request,
then the determination of such appraiser shall be final and binding upon the
parties. If two appraisers have been appointed and have made their
determinations within the respective requisite periods set forth above and if
the difference between the amounts so determined does not exceed ten percent
(10%) of the lesser of such amounts, then the fair market rental shall be an
amount equal to fifty percent (50%) of the sum of the amounts so determined. If
the difference between the amounts so determined exceeds ten percent (10%) of
the lesser of such amounts, then such two appraisers shall have twenty (20)
days to appoint a third appraiser. If no such appraiser has been appointed
within such twenty (20) days or within ninety (90) days of the original request
for a determination of fair market rental, whichever is earlier, either the
Company or WCC may apply to any court having jurisdiction to have such
appointment made by such court. Any appraiser appointed by the original
appraisers or by such court shall be instructed to determine the fair market
rental within forty-five (45) days after appointment of such appraiser. The
determination of the appraiser which differs most in terms of dollar amount
from the determinations of the other two appraisers shall be excluded, and the
average of the sum of the remaining two determinations shall be final and
binding upon the Company and WCC as the fair market rental of the Facility.
This provision for determining by appraisal shall be specifically enforceable
to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties and
judgment may be entered upon such determination in any court having
jurisdiction of the matter. The Company and WCC shall each pay the fees and
expenses of the appraiser appointed by it and each shall pay one-half (1/2) of
the fees and expenses of the third appraiser and one-half (1/2) of all other
costs and expenses incurred in connection with each appraisal.
7. EXISTING RESTRICTED FACILITIES. WCC and the Company acknowledge
and agree that as of the date hereof, WCC has a right to acquire two Facilities
which constitute Restricted Facilities for purposes of this Agreement. The
first such Restricted Facility is an approximately 379,000 square foot facility
in Lea County, New Mexico which has a design capacity of 1,200 beds. The
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second Restricted Facility is an approximately 201,000 square foot facility in
Xxxxxxxxx County, New Mexico which has a design capacity of 600 beds. These
Facilities constitute Restricted Facilities for purposes of this Agreement
because both the State of New Mexico and the respective counties in which these
Facilities are located have been granted an option to acquire one or both of
these Facilities prior to completion of construction. If such purchase option
is not exercised by the State of New Mexico or the respective county, then the
date on which WCC notifies Company that such option has expired or been waived
or otherwise terminated, shall constitute the Restriction Release Date for such
Facility.
8. TERM OF THE AGREEMENT. This Agreement and any unexercised
options granted hereunder shall expire on the earlier to occur of (i) the
expiration or termination of all of the Leases relating to any Facilities
(including the Leased Facilities) or (ii) fifteen (15) years from the date
hereof.
9. AUTHORITY OF WCC. WCC has duly and validly authorized and
executed this Agreement, and has full right, title, power and authority to
enter into this Agreement and to consummate the transactions provided for
herein. WCC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and is or will be qualified to
do business in each state in which any Facility is located in accordance with
applicable law. The execution by WCC of this Agreement does not result in a
breach of any of the terms or provisions of, or constitute a default or a
condition which upon notice or lapse of time or both would ripen into a default
under, WCC's bylaws or certificate of incorporation, or any indenture,
agreement, instrument or obligation to which WCC is a party; and does not
constitute a violation of any laws, order, rule or regulation applicable to WCC
issued or promulgated by any court or any federal, state or municipal
regulatory body or administrative agency or other governmental body having
jurisdiction over WCC.
10. REMEDIES. In the event WCC breaches this Agreement, the Company
shall have all rights and remedies available at law or in equity and the
Company shall be entitled, and is expressly and irrevocably authorized by WCC,
to demand and obtain specific performance, including, without limitation,
temporary and permanent injunctive relief, and all other appropriate and
equitable relief against WCC in order to enforce against WCC any of the
covenants and agreements contained in this Agreement and/or to prevent any
breach or threat of breach by WCC of the covenants and agreements of WCC
contained in this Agreement. Should the Company prevail in any action to
enforce this Agreement, the Company shall be entitled to recover all of its
costs and expenses relating thereto, including reasonable attorney's fees and
expenses.
11. RIGHT OF ASSIGNMENT. Neither this Agreement nor any interest
herein may be assigned or transferred by the Company to any person, firm,
corporation or other entity without the prior written consent of WCC, which
consent may be given or withheld in the sole discretion of WCC.
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12. NOTICES. WCC and the Company hereby agree that all notices,
demands, requests and consents (hereinafter "Notices") required to be given
pursuant to the terms of this Agreement shall be in writing and shall be
addressed as follows:
If to WCC: Wackenhut Corrections Corporation
0000 Xxxxxxxxx Xxxxx
Xxxx Xxxxx Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxx
With a copy to: Akerman, Senterfitt & Xxxxxx, P.A.
Xxx XX Xxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Attention: Xxxxx X. March, Esq.
If to the Company: CPT Operating Partnership L.P.
0000 Xxxxxxxxx Xxxxx
Xxxx Xxxxx Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxx
With a copy to: Josias, Goren, Cherof, Xxxxx and Xxxxx, P.A.
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
or at such other address, and to the attention of such other person, as the
parties shall give notice as herein provided. A notice, request and other
communication shall be deemed to be duly received if delivered in person or by
a recognized delivery service, when delivered to the address of the recipient,
if sent by mail, on the date of receipt by the recipient as shown on the
return-receipt card, or provided that if a notice, request or other
communication is served by hand on a day which is not a Business Day, or after
5:00 P.M. on any Business Day at the addressee's location, such notice or
communication shall be deemed to be duly received by the recipient at 9:00 a.m.
on the first Business Day thereafter.
13. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement embodies and
constitutes the entire understanding between the Parties with respect to the
transactions contemplated herein, and all prior or contemporaneous agreements,
understandings, representations and statements (oral or written) are merged
into this Agreement. Neither this Agreement nor any provision hereof may be
waived, modified, amended, discharged or terminated except by an instrument in
writing signed by
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the Party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
14. APPLICABLE LAW. THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF FLORIDA. The Parties agree that jurisdiction and venue for any
litigation arising out of this Agreement shall be in the Courts of Palm Beach
County, Florida or the U.S. District Court for the Southern District of Florida
and, accordingly, consent thereto.
15. CAPTIONS AND HEADINGS. The captions and headings are inserted
only as a matter of convenience and for reference and in no way define, limit
or describe the scope of this Agreement or the intent of any provision hereof.
16. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors, and assigns.
17. TIME IS OF THE ESSENCE. With respect to all provisions of this
Agreement, time is of the essence.
18. RECORDATION. At the option of WCC or the Company, this
Agreement, or a memorandum hereof, may be recorded in the real estate records
of any county which Landlord or Tenant deems appropriate in order to provide
legal notice of the existence hereof.
19. LIABILITY OF GENERAL PARTNER OF THE COMPANY. WCC acknowledges
that the Company has disclosed that the general partner of the Company (the
"General Partner") is a Maryland business trust formed pursuant to a
Declaration of Trust as amended, a copy of which is duly filed with the
Department of Assessments and Taxation of the State of Maryland, which provides
that no trustee, officer, shareholder, employee or agent of the General Partner
shall be held personally liable under any written instrument creating an
obligation of, or claim against, the General Partner and that all persons
dealing with the General Partner, in any way, shall look only to the assets of
the General Partner for the payment of any sum or the performance of any
obligation. WCC agrees that any liability of the General Partner or any
trustee, officer, shareholder, employee or agent acting on behalf of the
General Partner arising out of this Agreement or the performance by the Company
of its obligations hereunder is limited to the assets of the General Partner in
accordance with the above Declaration of Trust.
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WACKENHUT CORRECTIONS
CORPORATION
By:
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Xxxxxx X. Xxxxx, Vice Chairman of the Board
CPT OPERATING PARTNERSHIP L.P.
By: Correctional Properties Trust, a Maryland
real estate investment trust, its General Partner
By:
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Xxxxxxx X. Xxxxx, President
STATE OF FLORIDA )
) ss:
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of
____________, 1998 by Xxxxxx X. Xxxxx, Vice Chairman of the Board of WACKENHUT
CORRECTIONS CORPORATION, on behalf of the corporation. He/she is personally
known to me or has produced ____________________ (type of identification) as
identification.
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NOTARY PUBLIC, STATE OF FLORIDA
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(Print, Type or Stamp Commissioned Name of Notary Public)
STATE OF FLORIDA )
) ss:
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of
____________, 1998 by Xxxxxxx X. Xxxxx, President of Correctional Properties
Trust, the general partner of CPT Operating Partnership L.P. on behalf of the
limited partnership. He/she is personally known to me or has produced
____________________ (type of identification) as identification.
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NOTARY PUBLIC, STATE OF FLORIDA
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(Print, Type or Stamp Commissioned Name of Notary Public)
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