Services Agreement - Wackenhut Corrections Corp. and The Wackenhut Corp.
WCC
SERVICES AGREEMENT
BETWEEN
WACKENHUT CORRECTIONS CORPORATION
AND
THE WACKENHUT CORPORATION
FOR THE PERIOD JANUARY 1, 2002 THROUGH DECEMBER 31, 2004
FINAL DOCUMENT - OCTOBER 28 , 2002
<PAGE>
SERVICES AGREEMENT
This AGREEMENT (the Agreement) is made as of January 1, 2002 by and between The
Wackenhut Corporation, a Florida corporation with its principal place of
business at 4200 Wackenhut Drive #100, Palm Beach Gardens, Florida 33410
(together with all of its subsidiaries other than Wackenhut Corrections
Corporation, "TWC") and Wackenhut Corrections Corporation, a Florida corporation
with its principal place of business at 4200 Wackenhut Drive #100, Palm Beach
Gardens, Florida 33410 (together with all of its subsidiaries, "WCC").
RECITALS
By means of this Agreement, the parties wish to set forth the terms and
conditions on which TWC will provide WCC with services and assistance in its
business and operations.
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the above premises and the mutual covenants
contained herein, it is agreed by and between the parties as follows:
A. PRICE/PAYMENT. As consideration for the services to be provided to WCC
by TWC under the terms of this Agreement, WCC shall pay to TWC an
annual fee (the "Annual Services Fee") as follows:
PAYMENT PER AGREEMENT
<TABLE>
<CAPTION>
MONTHS OF THE YEAR 2002 2003 2004
------------------ ---- ---- ----
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<S> <C> <C> <C>
January $ 204,918 $ 134,615 $ 134,615
---------------------------------- ------------------------- ------------------------ --------------------
February 204,918 134,615 134,615
---------------------------------- ------------------------- ------------------------ --------------------
March 256,147 168,270 168,270
---------------------------------- ------------------------- ------------------------ --------------------
April 204,918 134,615 134,615
---------------------------------- ------------------------- ------------------------ --------------------
May 204,918 134,615 134,615
---------------------------------- ------------------------- ------------------------ --------------------
June 256,147 168,270 168,270
---------------------------------- ------------------------- ------------------------ --------------------
July 204,918 134,615 134,615
---------------------------------- ------------------------- ------------------------ --------------------
August 192,163 134,615 134,615
---------------------------------- ------------------------- ------------------------ --------------------
September 240,201 168,270 168,270
---------------------------------- ------------------------- ------------------------ --------------------
October 108,844 134,615 134,615
---------------------------------- ------------------------- ------------------------ --------------------
November 108,844 134,615 134,615
---------------------------------- ------------------------- ------------------------ --------------------
December 136,052 168,270 168,270
--------- --------- ---------
---------------------------------- ------------------------- ------------------------ --------------------
Total $ 2,322,988 $ 1,750,000 $ 1,750,000
---------------------------------- ========================= ======================== ====================
</TABLE>
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The Annual Services Fee shall be payable by WCC to TWC in scheduled
installments on a monthly basis. Any services provided by TWC to WCC
beyond the services covered by the Annual Services Fee shall be billed
to WCC on a cost basis as described below, or on such other basis as
the parties may agree from time to time.
B. TERM. The term of this Agreement shall be for the period
January 1, 2002 through December 31, 2004.
C. SERVICES. TWC agrees to provide the following services
(subject to such modification or adjustment as may be mutually
agreed upon by the parties) to WCC during the term of this
Agreement:
I. CORPORATE FINANCIAL GROUP: The Financial Department of TWC will provide
the following services:
A. RISK MANAGEMENT
o Procure general liability, workers' compensation,
automobile, Directors and Officers and property insurance
coverage on behalf of WCC through September 30, 2002.
o As of October 1, 2002 TWC will manage all general
liability, automobile and workers' compensation claims
with occurrence dates prior to September 30, 2002.
B. TAX DEPARTMENT:
o Prepare all tax returns and filings.
o Provide guidance on tax matters in the preparation of bids
and proposals, financing structures, and in the
structuring of joint ventures and international business
arrangements.
o Manage any IRS and State audits.
o THESE COSTS AND RELATED ACTIVITIES WILL NO LONGER BE
PROVIDED AFTER DECEMBER 31, 2002.
C. CASH & TREASURY FUNCTIONS:
o Manage daily cash transactions
o Controlled disbursement funding
o Stop payments
o Debit & Credit detail
o Lockbox, wire & ACH transfers
o Electronic positive pay
o Balance reporting
o Daily investment sweeps
o Research and analysis
o Manage excess cash and maximize interest income while
ensuring sufficient liquidity to meet capital expenditure
requirements
o Provide daily balance position, interest calculation and
transaction detail
o Manage new account setup and account deletions as directed
by WCC.
o THESE SERVICES WILL NO LONGER BE PROVIDED AFTER JULY 31,
2002.
D. PAYROLL:
o Provide weekly and bi-weekly payroll processing, check
issuance and handle federal withholding and reporting.
o THESE COSTS AND RELATED ACTIVITIES WILL NO LONGER BE
PROVIDED AFTER DECEMBER 31, 2002.
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E. MAIL/WAREHOUSE/STORAGE:
o TWC will provide mail pickup and delivery at two times
daily.
o THESE COSTS AND RELATED ACTIVITIES WILL NO LONGER BE
PROVIDED AFTER MARCH 31, 2003.
II. INFORMATION SYSTEMS FOR THE PERIOD JANUARY 1, 2002 THROUGH DECEMBER 31,
2002:
TWC will provide Information Services in three areas:
A. Regarding Enterprise Resource Planning (ERP) System, TWC will,
o Provide quarterly training services according to WCC
business requirements.
o Provide application development to support data analysis
needs of WCC Corporate and Regional business management.
o Schedule, coordinate and distribute weekly and monthly
financial reports.
o Provide Help Desk telephone support in the use of
application software.
o Provide support with respect to configuration and
deployment of personal computers for Corporate and field
user.
o Update existing application systems in the areas of human
resources and financials.
o Design disaster recovery procedures and execute disaster
recovery plan in the event of a disaster.
o Establish and support the existence of The Wackenhut User
Group.
o Provide on-site support for Enterprise applications to PGA
office
B. Regarding Telecommunications, TWC will,
o Provide necessary infrastructure and equipment to support
the use of telecommunications equipment throughout the
organization.
o Provide on-site support for telecommunications to PGA
office.
o Provide the necessary infrastructure and equipment to
support the sharing of applications and data throughout
the organization.
o Provide the necessary hardware to support the enterprise
systems in the areas of high-speed printing and
distribution, automated report distribution, automated
job-scheduling, back up and recovery services.
o Provide Internet access and Internet e-mail capabilities
to WCC Corporate, PGA office and field sites.
C. Regarding Project Management, TWC will,
o Provide project management services as required in the
form of day- to-day project management.
III. INFORMATION SYSTEMS: JANUARY 1, 2003 THROUGH DECEMBER 31, 2004
ENTERPRISE APPLICATIONS
A. INFINIUM MODULES
Through the use of the shared Infinium/CCM system, TWC will
continue to provide core transactional application services to
WCC. To support the business requirements of WCC, the
following Infinium subsystems will continue to be utilized
under this service agreement:
In addition, if WCC decided to use any of the functionality
provided in the CCM specific software, WCC will negotiate with
TWC an appropriate fee to be paid for this use. This fee will
be determined by market comparison of similar software using a
third party,
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such as Gartner Group or IBM, and will be agreed upon prior to
WCC's use of the CCM functionality.
i. Financial Systems
o General Ledger (GL)
o Accounts Receivable (AR)
o Accounts Payable (AP)
o Purchasing
o Fixed Assets
ii. Payroll
iii. Human Resources
iv. Benefits
v. Financial Analysis System
As a supplemental analytical capability to Infinium's
reporting system, WCC also uses Essbase, an industry leader in
the financial Online Analytical Processing (OLAP) sector.
B. IT SUPPORT SERVICES
Consistent with the services rendered since the implementation
of Infinium, the TWC IT staff will provide the following
service and support functions to include:
o Ongoing application support
o Apply Infinium upgrades as needed to support core business
requirements
o Printing and distribution of financial reports
o Help Desk support for all WCC Infinium users
o Essbase administration, which includes the ongoing
maintenance of the financial "cubes" and the monthly
loading process from the Infinium financial subsystems.
o Ongoing Infinium user-ID administration as authorized by
WCC
o Affirmative action and EEO reporting
o Processing of daily bank extracts
C. HOURS OF OPERATION
The TWC IT function operates on a 7x24 basis. The full staff
is onsite from 08:30 to 17:30 Monday through Friday. A
computer operator is onsite from 06:30 to 24:00 Monday through
Friday and 00:00 to 08:00 on Sundays. During off-hours, the
Wackenhut Call Center can page the on-call staff member(s)
whenever requested. In addition, system management
capabilities have been implemented in the data center that
automatically page personnel if key systems or networks fail.
Please note that the all major IT applications, including
Infinium, are not available to users on Sundays, from 00:00 to
12:00. System maintenance, modifications and upgrades are
performed during this weekly "change window".
D. NETWORK SERVICES
TWC will continue to provide both long distance voice
communications and Wide Area Network (WAN) data network
communications under the respective AT&T services contracts.
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The AT&T long distance voice contract expires January 1, 2003.
The value of WCC participating under a common long distance
contract is simply an optimal cost per minute as part of a
larger volume-based service. WCC intends to continue to
participate in a shared long distance contract. TWC is
currently negotiating a two-year extension with AT&T given the
unsettled dynamics associated with the telecommunications
industry (there is a fear the cost per minute could rise due
to reduced competition). WCC will participate in discussions
with TWC prior to and during negotiations of this contract.
WCC reserves the right to opt out of participating in any
common long distance contract up until contract signing.
Nothing in this agreement prevents WCC from negotiating a
separate agreement with the same or different contractor.
The AT&T WAN contracts (one for the data services and one for
management services) expire November 2003. TWC will continue
to provide WCC data network services to HQ and Field employees
to provide access to Infinium, email, operational applications
and the Internet.
Technically, the network links at the correctional and
hospital facilities will be redirected to the new WCC
Headquarters facility. Optionally, two high-speed, diverse
network links will be provided between the WCC and TWC
locations for authorized access to Infinium depending on the
location of the AS-400 and the location of the Essbase server.
From a security perspective, TWC will place and manage a
firewall at the WCC location to ensure only authorized network
traffic is routed to the TWC Infinium environment.
WCC will directly pay for the network links between their HQ
facility and the TWC Headquarter facility. In addition, WCC
will contract with an Internet Service Provider (ISP) to gain
direct access to the Internet from their new HQ facility.
E. END USER TRAINING
The TWC IT department will provide quarterly classroom-style
training sessions on all applicable Infinium modules for WCC
personnel. Typically, the training sessions are three days in
length. Assuming that the new WCC Headquarters facility has an
adequate training classroom, the session will be held at the
WCC location. If training facilities are not available,
training will be held at the TWC Headquarters location.
WCC is responsible for all travel, lodging, and meal costs for
WCC field personnel who attend the quarterly training
sessions.
TWC will provide Infinium technical training to WCC IT
personnel for support of the Infinium system.
F. DISASTER RECOVERY PLANNING (DRP)
TWC has a commercial contract with IBM for IT DRP services.
Specifically, TWC can restore all major business applications
at an IBM location in New Jersey in the event of a disaster.
In addition, the TWC IT department conducts a "dry-run" of the
DRP restoral process on an annual basis to best ensure the
staff is prepared to support TWC and WCC in the event of an
actual business disaster.
Please note two important elements of the DRP contract with
IBM:
o There will be an incremental charge of $39,000 to WCC due
to the need for a second AS400. This charge will be in
addition to the $1.75mm annual service fee.
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o Systems based at the WCC correctional facilities (e.g.,
PDS, commissary system) are NOT covered under the TWC DRP
plan per previous direction from the WCC management team.
These systems could be covered under the DRP strategy if
desired at an incremental cost. Please note that a DRP
strategy for critical business systems will be a primary
element of any external audit of IT systems and processes.
o If WCC elects to operate the server at its new
headquarters in Boca Raton Florida, it may elect to obtain
IT DRP services from an alternative provider.
G. TRANSITIONAL SERVICES AND ASSOCIATED COSTS
WCC will build and implement fully functional Human Resources,
Payroll, Accounts Payable and Tax capabilities by January 1,
2003. These functional areas will continue to use the infinium
application supported and maintained by TWC. To securely
support this functional separation, a dedicated AS400 is
required to run a copy of Infinium/CCM for WCC. The one-time
capital / operating expense associated with the AS400 is
estimated at $810,000. WCC will be the owner of the new AS 400
and all associated data and software except for Infinium/CCM.
WCC will determine the operating location of the AS-400 and
Essbase server. Ongoing operating expenses are estimated at
$64,000 (excludes depreciation, software maintenance and
hardware maintenance). These costs will be directly paid by
WCC and are not part of the $1.75mm annual service charge.
In the event that the AS400 is moved from TWC Headquarters to
any other location, WCC will provide and will be responsible
for operational support to TWC in the following areas: Backup
and recovery, offsite date storage, and other support as
necessary.
If WCC elects to select new service providers (e.g., banking
partner, medical insurer, 401K/retirement) and electronic
interfaces are required between Infinium and the third party
business partner, the development of the computer interfaces
will be charged to WCC on a time and materials basis. All work
will have proper authorization from the WCC management team
before any expense is incurred.
At some point, during the term of this agreement for IT
Services, WCC will begin the process of transitioning to its
own fully functional IT department. TWC will assist with this
process on a negotiated basis. Specifically, TWC may assist
with programming, data retrieval, etc.
H. OUT OF SCOPE SERVICES
i. Electronic Mail
While part of the Year 2000 systems strategy called for a
common, Lotus Notes-based email solution for Security
Services, WCC and WRI, only Security Services fully
adopted this mail platform. There was a stated direction
for WCC to adopt Lotus Notes approximately six months ago,
but with the planned separation, WCC has elected to
implement their own email platform (Microsoft Exchange) no
later than January 1, 2003. The WCC technical support team
will implement and manage this email package.
ii. PC Service and Support
WCC will continue to provide help desk and technical
support for all PCs within their respective organization.
Whenever upgraded PC software is required to access
Infinium, TWC will provide a copy of the software via a CD
to the WCC staff for installation.
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iii. Local Area Network (LAN) Service and Support
WCC will continue to support all file and print services
as well as the physical infrastructure associated with
their LAN environments (e.g., wiring, Ethernet hubs).
iv. Corporate Headquarters Telephone System (PBX) Service and
Support
WCC will manage the PBX system in the new HQ facility.
This includes all moves, additions, and troubleshooting of
telephones and inside wiring.
v. REMOTE FACILITY APPLICATION SUPPORT
WCC will continue to have full responsibility and
accountability for all correctional and hospital-base
business applications. Key examples include PDS, their
inmate tracking system, and their commissary system.
vi. NEW PROJECTS PROCESS
If and when WCC elects engage the TWC IT staff for any new
project activity, a detailed proposal will be jointly
developed outlining overall project goals and objectives,
business benefits, project costs, and a project timeline
for management review. If approved by the WCC and TWC
management teams, the project will then be fully
initiated. Please note that the costs of any project are
not included in the $1.75mm service charge and will result
in an incremental charge to WCC.
THESE SERVICES WILL EXPIRE DECEMBER 31, 2004.
IV. Human Resources Department: The Human Resources Department of TWC will
provide the following services until December 31, 2002. After that the
services described in A. though F. will no longer be provided:
A. EMPLOYEE GROUP BENEFIT PLANS:
o Administration of group health benefit programs to include
preparation of employee communications, processing of
enrollments/cancellations, reconciling and processing of
insurance carrier invoices for payment, responding to
employee inquiries, etc.
o Provide compliance with laws affecting employee group
health benefit programs in an effort to avoid penalties
and potential lawsuits, (e.g., Section 125, Form 5500,
preparation/distribution of Summary Annual Reports and
COBRA).
o Identify benefit providers and appropriate plan designs to
support new and existing WCC business needs.
o Negotiate annual renewal of HMO contracts. Present
information with alternatives, if applicable, to WCC
Management.
o Implementation of new benefit plans to include set up of
new plans in the Payroll/HR System, participation in
education and orientation of employees, etc.
B. SALARY ADMINISTRATION:
o Administer merit budget for headquarters to provide
compliance with WCC guidelines.
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o Analyze Position Analysis Questionnaires to develop
recommendations for competitive salary ranges and merit
budgets.
o Provide recommendations for competitive salaries for
facility employees, as needed.
C. RETIREMENT PROGRAMS:
o Oversee plan administration to include preparation of plan
documents and required amendments, processing of
enrollments/withdrawals, responding to employee inquiries,
etc.
o Design and develop retirement plans to support new and
existing WCC business needs.
o Provide compliance with regulatory issues.
o Compile all information required for discrimination
testing and review results.
o Prepare employee communication materials as well as
educate employees through orientation meetings.
D. AFFIRMATIVE ACTION/EEOC:
o Provide guidance and support with respect to equal
employment opportunity/affirmative action concerns and
claims.
o Serve as a source for certain affirmative action
statistical information, Federal and State civil rights
legislation, and TWC and WCC policy interpretation.
Prepare equal employment/affirmative action policies and
make periodic modifications to provide consistency with
Federal and State Civil Rights Laws.
o Investigation and prepare position statements in response
to charges of discrimination filed with Federal (EEOC) and
State Agencies (Texas Commission on Human Rights,
California Department of Fair Employment and Housing,
etc.) Serve as liaison with investigating agencies
throughout the duration of said charges. Prepare and
provide additional information when requested by the
government agencies. Coordinate settlement of charges if
deemed appropriate.
o Coordinate OFCCP Compliance reviews and provide technical
support for audits of WCC locations; serve as liaison with
the OFCCP.
E. RECRUITMENT AND SELECTION:
o Provide support in the area of identifying, interviewing,
and selecting candidates.
o Coordinate relocation of new hires and transfers.
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F. EMPLOYEE RELATIONS:
o Provide guidance and compliance with certain Federal and
State Regulations pertaining to the Family Medical Leave
Act, Fair Labors Standards Act, Wage and Hour issues, etc.
o Assist in the review and critique of employee handbooks.
o Provide support and interpretation of company human
resources policies and practices.
o Administer service and recognition award programs.
o Provide support with unemployment claim issues.
o Monitor Worker Opportunity Tax Credit (WOTC) program for
compliance.
o Provide guidance with respect to employee issues involving
disciplinary actions and counseling.
V. Details of Performance; Changes. Reasonable details of TWC's
performance of services hereunder may be specified in greater detail in
one or more memoranda signed by the parties and such memoranda shall be
deemed incorporated in this Agreement by reference as if recited herein
in their entirety.
VI. Audit Rights. WCC shall have the right to (or cause its accountants to)
review the books and records of TWC at any time during reasonable
business hours to (a) confirm that the services required to be provided
by TWC hereunder as part of the Annual Services Fee have been provided,
and (b) to confirm the cost basis of any services provided by TWC which
are not provided as part of the Annual Services Fee. The cost of such
audit shall be borne by WCC, unless such audit shall reveal a
discrepancy in the cost of any services in excess of 5%, in which case,
the cost of such audit shall be borne by TWC.
VII. No Agency. TWC shall perform its services under this Agreement as an
independent contractor. Each party acknowledges and agrees that it is
not granted any express or implied authority to assume or create any
obligation or responsibility on behalf of the other party, or to bind
the other party with regard to third parties in any manner.
VIII. Notices. Any notices required or permitted to be provided pursuant to
this Agreement shall be provided in writing and be deemed received upon
delivery by hand or five days after mailing by certified mail, return
receipt requested, addressed to the recipient party at its address set
forth above.
IX. Transition: TWC will assist WCC in the process of transitioning
services currently provided for human resources, payroll and tax. This
assistance will include, but not be limited to, historical information,
job descriptions, access to data, discussion of policies, electronic
copies of policies.
X. For purposes of historical payroll and tax information TWC will provide
access to this information in the event of audits by local state or
federal regulators or agencies. Labor and material cost incurred
related to retrieving information will be paid for by WCC.
XI. Force Majeure. In the event that either party is prevented from
performing, or is unable to perform, any of its obligations under this
Agreement due to any act of God, fire, casualty, flood, war, strike,
lock out, failure of public utilities, injunction or any act, exercise,
assertion or requirement of governmental authority, epidemic,
destruction of production facilities, insurrection, inability to
procure materials, labor, equipment, transportation or energy
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sufficient to meet manufacturing needs, or any other cause beyond the
reasonable control of the party invoking this provision, and if such
party shall have used its best efforts to avoid such occurrence and
minimize its duration and has given prompt written notice to the other
party, then the affected party's performance for the period of delay or
inability to perform due to such occurrence shall be suspended. Should
TWC fail to perform hereunder and shall have provided proper notice to
WCC that it is unable to perform on account of one or more reasons set
forth in this section, WCC may obtain replacement services from a third
party for the duration of such delay or inability to perform, or for
such longer period as WCC shall be reasonably required to commit to in
order to obtain such replacement services and the Annual Services Fee
shall be reduced accordingly up to a maximum of the annual service fee
calculated on a pro rate basis for each day services are not provided.
However, WCC will not be permitted to recover any resultant or
consequential damages due to the inability of TWC to perform.
XII. Deleted
XIII. Miscellaneous.
A. This Agreement embodies the entire agreement and understanding
of the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings
relative to said subject matter.
B. This Agreement shall be binding upon, and shall inure to the
benefit of TWC, WCC and their respective successors and
assigns.
C. Neither this Agreement nor any rights or obligations hereunder
shall be assignable by either party without the prior written
consent of the other party hereto, which consent shall not be
unreasonably withheld.
D. This Agreement shall be governed by and construed in
accordance with the law of the State of Florida applicable to
contracts to be performed entirely in that State.
E. This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together
shall constitute one and the same instrument.
F. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or
interpretation of this Agreement.
EXECUTION
The parties have caused this Agreement to be signed as of the date
first above written, whereupon it became a binding agreement.
THE WACKENHUT WACKENHUT CORRECTIONS
CORPORATION CORPORATION
BY: DANIEL E. MASON BY: JOHN G. O'ROURKE
--------------------------------- -----------------------------
NAME: DANIEL E. MASON NAME: JOHN G. O'ROURKE
------------------------------ ---------------------------
TITLE: VICE PRESIDENT & CFO TITLE: CHIEF FINANCIAL OFFICER & TREASURER
----------------------------- ------------------------------------
DATE: OCTOBER 22, 2002 DATE: OCTOBER 22, 2002
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ALLOCATION OF ANNUAL SERVICES FEE
<TABLE>
<CAPTION>
SERVICES 2002 2003 2004
------------------------------------- ----------------------- ----------------------- -----------------------
<S> <C> <c> <c>
PAYROLL $ 213,531 - -
------------------------------------- ----------------------- ----------------------- -----------------------
WAREHOUSE 9,991 - -
------------------------------------- ----------------------- ----------------------- -----------------------
TREASURY 28,119 - -
------------------------------------- ----------------------- ----------------------- -----------------------
INFORMATION SYSTEMS 1,438,086 $ 1,750,000 $ 1,750,000
------------------------------------- ----------------------- ----------------------- -----------------------
TAX 148,011 - -
------------------------------------- ----------------------- ----------------------- -----------------------
BUILDING SERVICES - -
------------------------------------- ----------------------- ----------------------- -----------------------
HUMAN RESOURCES 415,144 - -
------------------------------------- ----------------------- ----------------------- -----------------------
INTERNAL AUDIT 70,106 - -
------------------------------------- ----------------------- ----------------------- -----------------------
TOTAL G&A $ 2,322,988 $ 1,750,000 $ 1,750,000
======================= ======================= =======================
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</TABLE>
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