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EXHIBIT 4.6
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., 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 CORPORATION
7.5% CONVERTIBLE, SUBORDINATED NOTE
DUE FEBRUARY 28, 2005
No. 001 January 1, 1999
SECTION 1. PAYMENT OBLIGATION. PRISON REALTY CORPORATION, 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 XXXXXX
& 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 March 31, 1999, at (i)
the Coupon Rate, or (ii) upon the occurrence of a Triggering Event 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 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. Any payments
due hereunder that fall due on a day that is not a
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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:
"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.
"CHANGE EVENT" shall 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
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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.
"CONVERSION PRICE" means $27.419 per share of Common Stock, subject to
adjustment from time to time as herein set forth.
"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) the principal
amount of this Note to be converted, divided by (ii) the Conversion Price.
Subject to the provisions for adjustment set forth herein, the Conversion
Ratio initially shall be 3.647.
"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 seven and one-half percent (7.5%) 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
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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 reputation as a valuer of
securities, which opinion may be based on such assumptions as such firm
shall deem to be necessary and appropriate.
"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.
"MAJOR TRANSACTION" shall 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
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(b) 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.
"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 February 28, 2005.
"NOTE" means this 7.5% convertible, subordinated note issued by the
Corporation.
"NOTE PURCHASE AGREEMENT" means that certain Note Purchase Agreement, dated
as of December 31, 1998, between the Corporation and PMI.
"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 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
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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 nine and one-half percent (9.5%) per annum.
"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, 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.
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(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 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
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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 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:
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(i) In case the Corporation shall at any time or from time to time
after the Closing 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 Closing Date at a price per share (or having a
conversion price per share) less than the Current Market Price per share of
Common Stock, as of the date of issuance of such shares or of such Convertible
Securities, 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 (A) the applicable
Conversion Ratio on the day immediately prior to such date by (B) a fraction,
the numerator of which shall be the sum of (1) the number of shares of Common
Stock outstanding on such date, plus (2) 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 (a) the number of shares of Common
Stock outstanding on such date, plus (b) the number of shares of Common Stock
purchasable at the then Current Market Price per share 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). 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 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
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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 Closing Date declare, order, pay, or make a dividend or other
distribution (including, without limitation, any distribution of 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), on its
Common Stock, other than (A) dividends 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 dividend is paid;
provided, that, to the extent required by the terms thereof, such dividend shall
have been previously consented to by the holders of the Notes issued pursuant to
the Note Purchase Agreement, or (B)
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dividends or 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 dividend or distribution 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 dividend
or 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,
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.
(vii) 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).
(viii) 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
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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 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
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
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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 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, 2003, 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
equalled 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 Closing 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 equalled 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 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 forty-five (45) consecutive Trading Days prior to the Mandatory Conversion
Date, the Corporation's election to require conversion will be deemed void and
no conversion will be
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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
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, 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 being so converted.
(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
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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.
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.
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(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 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
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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.
(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 shall 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
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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 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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IN WITNESS WHEREOF, the undersigned has executed this Note effective as of
the date first above written.
PRISON REALTY CORPORATION,
a Maryland corporation
By: /s/ Doctor X. Xxxxxx
--------------------------------------
Title: Chairman & CEO
-----------------------------------
ATTEST:
/s/ Xxxx X. Xxxxxxx
----------------------------------
Secretary
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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, between Prison Realty Corporation and PMI Mezzanine Fund,
L.P., Prison Realty Corporation hereby elects to require conversion of the 7.5%
Convertible, 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 CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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Exhibit B
[FORM OF MANDATORY PREPAYMENT NOTICE]
TO: PRISON REALTY CORPORATION
-------------------------
-------------------------
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, between 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:
-----------------------------------
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Exhibit C
[FORM OF OPTIONAL CONVERSION NOTICE]
TO: PRISON REALTY CORPORATION
-------------------------
-------------------------
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, between Prison Realty Corporation, 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 Corporation 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):
$----------------
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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
-----------------------------
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