Executive Severance Agreement - Wackenhut Corrections Corp. and George C. Zoley
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT ("Agreement") is made and entered
into as of this 4th day of May, 2001, by and between Wackenhut Corrections
Corporation, a Florida corporation, its successor or successors, or assigns
(hereinafter referred to as the "Company") and Dr. George C. Zoley (hereinafter
referred to as the "Executive").
The Executive is a key executive of the Company, and the Company
desires to provide the Executive with an incentive to remain with the Company if
concerns arise over a possible change in control of the Company, The majority
shareholder of the Company is The Wackenhut Corporation, a Florida corporation
("TWC").
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the Company and the Executive agree as follows:
1. Termination of Executive Employment. If the Executive's employment is
terminated by the Company for any reason at any time during the 12 month period
commencing on the date on which a Change in Control (as defined in Section 2
below) occurs, by the Executive for "Good Reason" (as defined in Section 2
below) at any time during the 12 month period commencing on the date on which a
Change in Control occurs, or for any reason (including the delivery of a written
resignation to the Company by the Executive or his authorized representative on
the Executive's or his estate's behalf) after the date which is 12 months
following the date a Change in Control occurs and prior to the date which is 24
months following the date a Change in Control occurs, then (i) the Company shall
pay the Special Termination Payment (as defined in Section 3 below) to the
Executive (or his estate) within ten days after said termination, (ii) all
awards granted pursuant to the Wackenhut Corrections Corporation Stock Option
Plans and any other unvested stock options or other interests the Executive
holds in the Company's stock or the stock of a subsidiary of the Company shall
become fully vested, all restrictions on restricted stock units shall lapse, and
all performance targets with respect to performance units or shams will be
deemed to have been met as of the date the Executive's employment is terminated
(iii) the Company shall transfer all of its interest in any automobile used by
the Executive pursuant to the Company's Executive Automobile Policy (the
"Executive Automobile Policy") and shall pay the balance of any outstanding loan
or leases on such automobile (whether such obligations are those of the
Executive or the Company) so that the Executive owns the automobile outright (in
the event such automobile is leased, the Company shall pay the residual cost of
such lease), (iv) the Company shall pay to the Executive, within ten days after
said termination, the present value of all cash payments pursuant to the WCC
Retirement Agreement entered into between the Company and the Executive (the
"Retirement Agreement") as if the Executive had remained employed with the
Company through the Retirement Date defined therein, in complete satisfaction of
the amount due to the Executive thereunder (the "Retirement Agreement payoff"),
(v) the Company shall continue to provide the Executive (and if applicable, his
beneficiaries) with the Executive Benefits (as described in Section 4), at no
cost to the Executive in no less than the same amount and, on the same terms and
conditions as in effect on the date on which the Change in Control occurs for a
period of 3 years after the date of
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termination of the Executive's employment with the Company, regardless of the
cost to the Company, or, alternatively, if the Executive (or his estate) elects
at any time in a written notice delivered to the Company to waive any particular
Executive Benefits, the Company shall make a cash payment to the Executive
within ten days after receipt of such election in an amount equal to the present
value of the Company's cost of providing such Executive Benefits from the date
of such election to the end of the foregoing 3-year period, and such present
value shall be determined by reference to the Company's then-current cost levels
and a discount rate equal to 120 percent of the short-term applicable Federal
rate provided for in Section 1274(d) of the Internal Revenue Code (the "Code")
for the month in which the Change in Control occurs; and (vi) the Company shall
pay to the Executive, within 10 days after said termination, an amount equal to
the sum of (a) the dollar value of vacation time that would have been credited
to the Executive pursuant to the Company's Vacation Policy (the "Vacation
Policy) if the Executive had remained employed by the Company through the
"Anniversary Date" (as defined in the Vacation Policy) immediately following his
termination of employment, multiplied by a fraction, the numerator of which is
the number of days which elapsed from the Executive's Anniversary Date
immediately preceding the date of termination through the date of such
termination, and the denominator of which is 365, plus (b) the dollar value of
vacation time which the Executive was entitled to have taken immediately prior
to the Executive's termination, which was not in fact taken by the Executive;
the dollar value of vacation time referred to above shall be equal to the amount
which would have been paid to the Executive by the Company during such vacation
time had the vacation time in fact been taken by the Executive immediately prior
to the Executive's termination. If the Executive dies during the 3-year period
contemplated by clause (v) of the foregoing sentence, the Company shall provide
the Executive Benefits, to the extent applicable, to the Executive's estate, or
make any applicable cash payments in lieu thereof to said estate. The present
value represented by the Retirement Agreement Payoff referred to above shall be
calculated (i) using a discount rate equal to the lower of the rate provided for
in Code Section 280G(d)(4), or six and one-half percent (6.5%), and (ii) without
regard to any mortality factors or related probabilities. The Executive shall be
deemed to be employed by the Company if the Executive is employed by the Company
or any subsidiary of the Company in which the Company owns a majority of the
subsidiary's voting securities. Notwithstanding anything else in this Agreement
to the contrary, subsequent reemployment of the Executive by the Company or any
successor of the Company following a Change in Control will not cause the
Executive to forfeit any compensation or benefits provided in this Agreement.
2. Definitions
A. Change in Control. For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred as of the first
day that any one or more of the following conditions shall
have been satisfied:
(i) any "person," as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
(other than the Company, TWC or any trustee or other fiduciary holding
securities under any employee benefit plan of the Company), is
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or becomes the "beneficial owner" (as defined in Rule l3d-3 under the
Exchange Act), directly or indirectly, of securities of the Company (or
a successor by merger, consolidation or similar transaction, referred
to in this Section as a "successor") representing a percentage of the
combined voting power of the Company's (or its successor's) then
outstanding securities which is greater than the percentage of the
combined voting power represented by securities of the Company (or its
successor) then owned by TWC; provided, however, that for purposes of
this clause (i), the percentage so owned by TWC shall not be treated as
beneficially owned by any direct or indirect shareholder of TWC; and
provided further, that the transfer of securities of the Company owned
by TWC to any direct or indirect shareholders of TWC in connection with
any one or more spin-offs, split-offs, split-ups, corporate
distributions or similar transactions consummated as part of an
integrated plan involving TWC's direct or indirect shareholders (a
"Restructuring Transaction") shall not be deemed to constitute a Change
in Control; or
(ii) after consummation of a Restructuring Transaction,
any person, as defined above (other than the Company, TWC or any
trustee or other fiduciary holding securities under any employee
benefit plan of the Company), is or becomes the beneficial owner, as
defined above, directly or indirectly, of securities of the Company or
its successor representing a majority of the combined voting power of
the Company's (or its successors's) then outstanding securities;
provided, however, that the ownership of securities of the Company
constituting such a majority by a person immediately after consummation
of a Restructuring Transaction and by such person thereafter shall not
constitute a Change in Control; and provided further, that the
subsequent acquisition of securities by another person which causes
such other person to own such a majority will constitute a Change in
Control; or
(iii) the Company consummates (1) an agreement for the Sale
or disposition by the Company of all or substantially all of the
Company's assets except pursuant to a merger, consolidation or similar
transaction involving the Company and a successor (as defined above)
(said merger, consolidation or similar transaction shall be tested
only pursuant to clause (i) above) or (2) a plan of complete
liquidation of the Company; or
(iv) any "person," as such term is used in Section 13(d)
and 14(d) of the Exchange (other than the Company, TWC, members of the
TWC Controlling Shareholder Group, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company or
TWC, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of TWC
representing 30% or more of the combined voting power of TWC's then
outstanding securities; or
(v) the shareholders of TWC approve a merger or
consolidation of TWC with any other corporation or entity, other than a
merger or consolidation which would result in the voting securities of
TWC outstanding immediately prior thereto continuing to represent,
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of TWC or such surviving entity
outstanding immediately after such merger or consolidation; or
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(vi) TWC consummates (1) an agreement for the sale or
disposition by TWC of all or substantially all of TWC's assets except
pursuant to a merger, consolidation or similar transaction involving
TWC where TWC is not the surviving entity (said merger, consolidation
or similar transaction shall be tested only pursuant to clause (v)
above) or (2) a plan of complete liquidation of TWC; or
(vii) the total combined voting power of TWC (or any
successor entity) represented by shares of voting stock owned by
members of the TWC Controlling Shareholder Group is reduced to 30
percent or less.
Notwithstanding the foregoing, in no event shall a Change in Control be
deemed to have occurred with respect to the Executive if the Executive is part
of a purchasing group which consummates a transaction causing a Change in
Control. The Executive shall be deemed "part of a purchasing group" for purposes
of the proceeding sentence if the Executive is a direct or indirect equity
participant in the purchasing company or group. Furthermore, the occurrence of
any of the events listed in clauses (iv), (v), (vi) or (vii) above shall not
constitute a Change in Control if they occur after consummation of a
Restructuring Transaction.
The "TWC Controlling Shareholder Group" includes (i) George R.
Wackenhut, (ii) the spouse and lineal descendants of George R. Wackenhut, (iii)
any trust whose only beneficiaries are persons described in the foregoing
clauses (i) and (ii), and (iv) Affiliates of the persons described in the
foregoing clauses (i), (ii) and (iii), An "Affiliate" of a person includes only
a corporation, limited liability company, partnership, or similar entity where
all of the voting securities or ownership interests of said entity are directly
owned by such person. Unless otherwise defined, a "person" includes any natural
person and any corporation, limited liability company, partnership, trust or
other entity.
B. Good Reason. Termination by Executive of his employment for "Good
Reason" pursuant to Section I above shall mean a termination by
Executive upon:
(i) Any material reduction in Executive's title or
responsibilities;
(ii) Any reduction in Executive's base Salary or annual
bonus;
(iii) A diminution in the Executive's eligibility to
participate in bonus, stock options, incentive awards
and other compensation plans or a diminution in
Executive Benefits (as defined below); or
(iv) A change in the location of the Executive's principal
place of employment by the Company of more than 50
miles from the location which he was principally
employed at immediately prior to a Change in Control.
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3. Special Termination Payment and Calculation. For purposes of this
Agreement, the "Special Termination Payment" shall mean an aggregate
amount of money equal to the product of three (3) multiplied by the sum
of (x) the Executive's annual base salary as in effect at the time of
the termination giving rise to the Special Termination Payment, or if
greater the annual base salary in effect for the calendar year prior to
the date of termination, plus (y) the greater of (i) the annual bonus
the Executive received with respect to calendar year 1999, or (ii) the
largest annual bonus the Executive would have received if his
employment had not been terminated in the calendar year in which his
employment was terminated assuming that all targets and incentives are
met (regardless of actual results and criteria). In the event that the
Company does not pay the Special Termination Payment by the due date
specified in this Agreement, then the unpaid amount shall bear interest
at the rate of 18 percent per annum, compounded monthly, until it is
paid.
a. Equalization Payment. If any of the Special Termination
Payment will be subject to the tax (the "Excise Tax) imposed
by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any similar tax that may hereafter be
imposed), the Company shall pay to the Executive in cash an
additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive after deduction from the
Special Termination Payment and the Gross-Up Payment of any
Excise Tax imposed upon the Special Termination Payment and
any federal, state and local income tax and Excise Tax imposed
upon the Gross-Up Payment shall be equal to the original
amount of the Special Termination Payment, prior to deduction
of any Excise Tax imposed with respect to the Special
Termination Payment. The Gross-Up Payment is intended to place
the Executive in the same economic position he would have been
in if the Excise Tax did not apply. The Gross-Up Payment shall
be paid to the Executive in full, at the time the Special
Termination Payment is paid pursuant to Section I hereof. For
purposes of determining the Gross-Up Payment pursuant to this
Section 3-a, the Special Termination Payment shall also
include any amounts which would be considered "Parachute
Payments" (within the meaning of Section 2800(b)(2) of the
Code) to the Executive, including, but not limited to, the
value of any Executive Benefits paid or provided to the
Executive during the period provided for in Code Section
28OG(b)(2)(C).
b. Tax Rates. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay Federal
income taxes at the highest marginal rate of Federal income
taxation in the calendar year in which the Gross-Up Payment is
to be made, and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the
Executive's residence on the date of termination, net of the
maximum reduction in Federal income taxes which could be
obtained from deduction of such state and local taxes.
c. Tax Calculation. Simultaneously with the Company's payment of
the Special Termination Payment, the Company shall deliver to
the Executive a written statement specifying the total amount
of the Special Termination Payment and the Gross-Up Payment,
together with all supporting calculations. If the Executive
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disagrees with the Company's calculation of either of said
payments, the Executive shall submit to the Company, no later
than 30 days after receipt of the Company's calculations, a
written notice advising the Company of the disagreement and
setting forth his calculation of said payments. The
Executive's failure to submit such notice within such period
shall be conclusively deemed to be an agreement by the
Executive as to the amount of the Special Termination Payment
and the Gross-Up Payment. If the Company agrees with the
Executive's calculations, it shall pay any shortfall to the
Executive within 20 days after receipt of such a notice from
the Executive, together with interest thereon accruing at the
rate of 18 percent per annum, compounded monthly, from the
original due date of the Special Termination Payment through
the actual date of payment of said shortfall. If the Company
does not agree with the Executive's calculations, it shall
provide the Executive with a written notice within 20 days
after the receipt of the Executive's calculations advising the
Executive that the disagreement is to be referred to an
independent accounting firm for resolution. Such disagreement
shall be referred to an independent "Big 5" accounting firm
which is not the regular accounting firm of the Company and
which is agreed to by the Company and the Executive within 10
days after issuance of the Company's notice of disagreement
(if the parties cannot agree on the identity of the accounting
firm which is to resolve the dispute, the accounting firm
shall be selected by means of a coin toss conducted in Palm
Beach County, Florida by counsel to the Executive on the first
business day after such 10 day period in such manner as such
counsel may specify). The accounting firm shall review all
information provided to it by the parties and submit a written
report setting forth its calculation of the Special
Termination Payment and the Gross-Up Payment within 15 days
after submission of the matter to it, and such decision shall
be final and binding on all of the parties. The fees and
expenses charged by said accounting firm shall be paid by the
Company. If the amount of the Special Termination Payment or
Gross-Up Payment actually paid by the Company was less than
the amount calculated by the accounting firm, the Company
shall pay the shortfall to the Executive within 5 days after
the accounting firm submits its written report, together with
interest thereon accruing at the rate of 18 percent per annum,
compounded monthly, from the original due date of the Special
Termination Payment through the actual date of payment of said
shortfall.
d. Subsequent Calculation. In the event the Internal Revenue
Service imposes an Excise Tax with respect to the Special
Termination Payment that is greater than the Excise Tax
calculated hereunder, the Company shall reimburse the
Executive for the full amount necessary to make the Executive
whole in accordance with the principles set forth above,
including any interest and penalties which may be imposed.
4. Executive Benefits. The term "Executive Benefits" means all health,
dental, disability, life insurance, retirement and fringe benefits or
programs now or hereafter established by the Company which cover the
Company's executives or its employees and applicable family members and
which are in effect on the date on which a Change in Control occurs.
The term
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"Executive Benefits" also includes, for purposes of Section 3, the
value of the items provided for in clauses (ii) and (iii) of the first
sentence in Section 1.
5. Non-Competition. In the event that Executive's employment is terminated
pursuant to Section I hereof and Executive timely receives payment of
the Special Termination Payment, Executive agrees that for a period of
12 months after such termination of employment not to, directly or
indirectly, own, manage, operate, control or participate in the
ownership, management operation or control of, or be connected as an
officer, employee, partner, director or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of,
any business (a "Competitive Operation") which competes with any
business conducted by the Company, or by any group, division or
subsidiary of the Company for which the Executive has had
responsibility, in any area where such business is being conducted at
the time of such termination. It is understood and agreed that, or the
purposes of the foregoing provisions of this Section 5, no business
which is conducted by the Company at the time, of the Executive's
termination and which subsequently is sold or discontinued by the
Company shall be deemed to be a Competitive Operation within the
meaning of this Section 5. Ownership of an amount not to exceed five
percent (5%) of the voting stock of any publicly held corporation shall
not constitute a violation hereof.
6. Release and Indemnity. The Company hereby fully and forever releases,
acquits, discharges and holds the Executive harmless from any and all,
and all manner of, actions and causes of action, claims, suits, costs,
debts, sums of money, claims and demands, presently known or unknown,
whatsoever in law or equity or otherwise, which the Company ever had,
now has or may now have, or will have in the future, by reason of any
matter, cause or thing whatsoever, from the beginning of the world and
all times thereafter. The preceding sentence does not apply to any
matters, events, actions, claims, damages or losses arising from, in
connection with or relating to (i) any intentional illegal conduct of
the Executive, or (ii) conduct of the Executive after the Executive
ceases to be employed by the Company. The Company at all times shall
indemnify, save harmless and reimburse the Executive, from and against
any and all demands, claims, liabilities, losses, actions, suits or
proceedings, or other expenses, fees, or charges of any character or
nature, which the Executive may incur or with which they may be
threatened with, arising from, in connection with, relating to or
arising as a result of Executive's employment by the Company or any
other relationship that the Executive has with the Company as an
officer, director, agent shareholder or otherwise, including without
limitation settlement costs and attorneys' fees and court costs at
trial and appellate levels which the Executive may incur in connection
with settling, defending against or resisting any of the foregoing. The
Company shall pay to the Executive any amounts due with respect to said
indemnity within 5 business days after the Executive issues a written
demand therefor to the Company. The provisions of this section are an
expansion of any rights that the Executive may have with respect to the
subject matter, and no other agreement or arrangement which the Company
may have that benefits the Executive with respect to the subject matter
hereof shall be superseded or limited in any way as a result of the
parties entering into this Agreement.
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7. Notices. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly
given when received at the address specified herein. In the case of
Executive, notices shall be delivered to him at the home address which
he has most recently communicated to the Company in writing. In the
case of the Company, notices shall be delivered to the Company's
corporate headquarters, and all notices shall be directed to the
attention of the Chairman of the Board of the Company, with a copy to
the Company's General Counsel.
8. No Mitigation. Executive shall not be required to mitigate the amount
of any payment or benefit contemplated by this Agreement upon his
termination of employment (whether by seeking new employment or in any
other manner), nor shall any such payment or benefit be reduced by any
earnings or benefits that Executive may receive from any other source.
9. Modification and Waiver. This Agreement shall not be canceled,
rescinded or revoked, nor may any provision of this Agreement be
modified, waived or discharged unless the cancellation, rescission,
revocation, modification, waiver or discharge is agreed to in writing
and signed by Executive and by the Chairman of the Board of the
Company. No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of
the same condition or provision at another time.
10. Complete Agreement. This Agreement supersedes all previous severance
agreements entered into by Executive and the Company. Except as
specifically provided in Section I of this Agreement, this Agreement
does not affect any deferred compensation agreements, non-qualified
retirement plans, or any other agreements entered into by the parties.
11. No Assignment. No right, benefit or interest hereunder, shall be
subject to anticipation, alienation, sale, assignment, encumbrance,
charge, pledge, hypothecation, or set-off in respect of any claim, debt
or obligation, or to execution, attachment, levy or similar process, or
assignment by operation of law. Any attempt, voluntary or involuntary,
to effect any action specified in the immediately preceding sentence
shall, to the full extent permitted by law, be null, void and of no
effect. This Agreement is binding on all successors of the Company,
whether by merger, consolidation, purchase or otherwise, and all
references to the Company shall also include references to any such
successor.
12. Governing. This Agreement shall be governed by, and construed and
enforced in accordance with and subject to, the laws of the State of
Florida applicable to agreements made and to be performed entirely
within such State, as to all matters governed by state law or, if
controlling, by applicable federal law.
13. Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in
full force and effect.
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14. Litigation Venue. Any action at law or in equity under this Agreement
shall be brought in the courts of Palm Beach County, Florida, and in no
other court (whether or not jurisdiction can be established in another
court). Each party hereto waives the right to argue that venue is not
appropriate in the courts of Palm Beach County, Florida.
15. Expenses. The Company shall reimburse the Executive for all legal
and/or accounting expenses he incurs in connection with the execution,
delivery and enforcement of his rights under this Agreement.
16. Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
18. Special Provisions. The continued validity of this Agreement shall not
be affected by any acquisition of capital stock of the Company by TWC
and this Agreement shall continue in full force and effect, and
transactions that occur after any such acquisition shall continue to be
tested pursuant to Section 2.
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IN WITNESS WHEREOF, the parties have executed this Executive Severance
Agreement effective the 4th day of May, 2001.
Signed, Sealed and Delivered EXECUTIVE:
In the Presence of
/s/ Sandra L. Nusbaum /s/ George C.Zoley
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PRINT NAME OF WITNESS BELOW Dr. George C. Zoley
Sandra L. Nusbaum
Date: 5/4/01
/s/ Tanya Grooms -----------------------------
-----------------------------
PRINT NAME OF WITNESS BELOW
Tanya Grooms
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WACKENHUT CORRECTIONS CORPORATION
/s/ J.P. Rowan By: /s/ G.R. Wackenhut
----------------------------- ----------------------------------
PRINT NAME OF WITNESS BELOW
Name: George R. Wackenhut
James P. Rowan ----------------------------
----------------------------- Title: Chairman
----------------------------
/s/ Sandra L. Nusbaum Date: 5-4-01
----------------------------- ----------------------------
PRINT NAME OF WITNESS BELOW
Sandra L. Nusbaum
-----------------------------
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