-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FVDlhyDogkx6JddylJgbSZgZDssmbRfsOZin5wz096R0FTLnsO0gope5SlfUH6N+ C13C1e9IxwX+LSs1d+bNdA== 0000950144-01-003962.txt : 20010327 0000950144-01-003962.hdr.sgml : 20010327 ACCESSION NUMBER: 0000950144-01-003962 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WACKENHUT CORP CENTRAL INDEX KEY: 0000104030 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381] IRS NUMBER: 590857245 STATE OF INCORPORATION: FL FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-05450 FILM NUMBER: 1579334 BUSINESS ADDRESS: STREET 1: 4200 WACKENHUT DRIVE STREET 2: #100 CITY: PALM BEACH GARDEN STATE: FL ZIP: 33410 BUSINESS PHONE: 5616225656 MAIL ADDRESS: STREET 1: 4200 WACKENHUT DR STREET 2: #100 CITY: PALM BEACH GARDEN STATE: FL ZIP: 33410 10-K405 1 g67411ke10-k405.txt WACKENHUT CORPORATION FORM 10-K405 12/31/00 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________ COMMISSION FILE NUMBER 1-5450 THE WACKENHUT CORPORATION (Exact name of registrant as specified in its charter) FLORIDA 59-0857245 (State of incorporation or organization) (I.R.S. Employer Identification No.) 4200 Wackenhut Dr. #100, Palm Beach Gardens, FL 33410-4243 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (561) 622-5656 Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, Series A, $.10 par value New York Stock Exchange Common Stock, Series B, $.10 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] At February 16, 2001, the aggregate value of 1,922,111 shares of Series A Common Stock and 8,188,165 shares of Series B Common Stock held by non-affiliates of the Registrant was $114,145,044. DOCUMENTS INCORPORATED BY REFERENCE Parts of the registrant's Annual Report to Shareholders for the fiscal year ended December 31, 2000 are incorporated by reference into Parts II and IV of this Report. Parts of the registrant's Proxy Statement for its 2001 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report. ================================================================================ 2 PART I ITEM 1. BUSINESS GENERAL The Wackenhut Corporation (the "Company") is a leading provider of diversified services to business and government. The Company focuses strategically on three major businesses worldwide - security related and other operational support services, developer and manager of privatized correctional and detention facilities and personnel employee leasing and temporary services. The Security Services business operates in North American (domestic) and international markets. The domestic security-related service businesses have expanded into a range of other support services to include base operations, facility management, fire and emergency medical services. Internationally, Security Services provides a greater variety of services than the Company offers domestically. These services include, among other things, electronic security systems, central station monitoring, cash-in-transit, satellite tracking of vehicles and cargo, building maintenance, secure storage of documents, postal services and distribution logistics. The Company, through its approximately 57% owned publicly-held subsidiary, Wackenhut Corrections Corporation (NYSE: WHC) designs, constructs, finances and manages correctional, detention and public sector mental health facilities and performs separate correctional-related services, including prisoner transportation, home detention monitoring and correctional health care. The Company has established a strong presence in the southeast and midwest United States in the flexible staffing industry that includes, personnel employee leasing, temporary services, recruiting, risk management, payroll processing and human resource services. The Company has approximately 65,000 full and part-time employees, worldwide, serving over 11,000 commercial and governmental customers through an extensive network of offices and operations in 48 states and approximately 50 countries. The Company was incorporated in 1958 to continue the businesses that were originally established in 1954 by its Chairman, George R. Wackenhut, to provide security-related services to commercial and governmental customers. Since its founding, the Company has grown by: (i) enhancing its position in its security-related services business through the development of specialized and upgraded services; (ii) targeting specific segments of the security services industry; and (iii) expanding into a range of other support services in response to a growing trend toward privatization of governmental services and outsourcing by commercial customers. The Company is the largest U.S.-based global security services provider, with 120 customer support centers across the United States and additional centers in approximately 50 other countries around the world. In addition to its physical security and uniformed officer services, the Company is a leader in the development of specialized niche services. For example, in response to a growing demand in the marketplace for security professionals with greater skill and responsibility levels, the Company has developed its Custom Protection Officer(R) ("CPO") program to provide highly specialized and trained security professionals to a broad range of customers such as national retailers, financial institutions and gated communities. CPO security professionals also are used as supplemental law enforcement forces by public transportation authorities and other governmental entities. Custom Protection Officer(R) is a Registered Service Mark of the Company. Another market initiative is the Company's National Accounts program, developed to provide focused and consistent service quality across its larger client's national, regional and global organizations. These clients asked for, and received, a dedicated executive within the Company to integrate and coordinate client security programs. These quality-centered programs partner the Company and its clients in performance excellence across the client's organization. The Company believes that the National Accounts program may also enable it to expand the scope of services offered worldwide to its National Account customers. Management believes that the high quality and consistent service of its CPO and National Accounts programs provide the Company with an opportunity to maintain and enhance long-term relationships with its clients. As part of its strategy to respond to the growing trend toward privatization of governmental services, in 1984, the Company entered into the development and management of privatized correctional and detention facilities, a business which is now operated exclusively through its approximately 57% owned subsidiary Wackenhut Corrections Corporation ("WHC"). As of December 2000, WHC had contracts to manage 55 privatized 2 3 correctional and detention facilities, with a rated capacity of 39,522 beds. It also had contracts for prisoner transportation, correctional health care services, mental health services and electronic monitoring. Building upon four decades of expertise in providing services to businesses and government, in the fourth quarter of 1996, the Company entered into the professional employer organization ("PEO") employee leasing business by establishing Oasis Outsourcing, Inc. During 1997, the Company continued to expand its market presence in these areas when, Wackenhut Resources, Inc. (WRI), a subsidiary of the Company, acquired the King Companies, in May 1997, and Professional Employee Management, Inc. (PEM Companies) in December 1997. Both companies were professional employer organizations, and in addition, the King Companies was in the temporary employment and recruiting service business. These two companies were combined with Oasis Outsourcing, Inc., under Wackenhut Resources, Inc., to form Flexible Staffing Services (Staffing Services). In November 1998, Flexible Staffing Services acquired Sharp Services and Advantage Temporary Services companies. During Fiscal 2000, the regional structure of Staffing Services was reorganized under a single name of "Oasis" to achieve a single identity for the marketing of its services. By the end of Fiscal 2000, Flexible Staffing Services had 38 offices in 11 states. In addition to the services that the Company has specifically targeted for expansion, the Company continues to explore and selectively invest in other service businesses, including commercial and governmental support services, supplemental police services, crash-fire-rescue services and fire protection services. See Note 18 of Notes to Consolidated Financial Statements included in Exhibit 13.0 to this Form 10-K for a summary of the contribution to consolidated revenues and operating income by each of the Company's business segments and by domestic and international operations for fiscal 2000, 1999 and 1998 (53 weeks). BUSINESS STRATEGY The Company focuses strategically on three major businesses worldwide - security related and other support services, developer and manager of privatized correctional, detention and public sector mental health facilities and personnel employee leasing and temporary staffing. Key elements of the Company's business strategy are described below: SECURITY SERVICES o ENHANCE LEADERSHIP POSITION OF SECURITY-RELATED SERVICES. The Company strives to enhance its market position by attempting to provide the most reliable and consistent service in the industry. The Company believes its security professionals provide quality service because of: (i) strictly enforced screening and hiring procedures; (ii) intensive training; (iii) well organized supervisory and feedback procedures and (iv) management dedicated to total quality programs. o DEVELOP SPECIALIZED SECURITY SERVICES. The Company has identified and targeted the National Account and CPO programs, as well as the traditional small commercial client market, as ongoing growth avenues toward market expansion. Management believes that the high quality and consistent service of its National Accounts and CPO programs provide the Company with an opportunity to establish and enhance long-term relationships with all its clients. o DEVELOP COMPLEMENTARY SUPPORT SERVICES. The Company will seek to expand the scope of complementary support services it offers. The Company's successful identification and development of the correctional services and the staffing services has provided it with the experience it believes will allow it to develop other specialized programs and support services. o FOCUSED GEOGRAPHIC PRESENCE. In order to enhance quality revenue and earnings growth, the Company seeks to focus its international presence in countries where it can achieve a proper critical mass. To achieve this strategic initiative, during fiscal 2000, management initiated an ongoing review of the 3 4 Company's international security-related businesses, with a view towards concentrating the Company's resources to achieve a proper critical mass. Correctional Services Correctional Service's objective is to enhance its position as one of the leading providers of privatized correctional, detention and public sector mental health facility services. Key elements of Correctional Service's business strategy include: (i) effective management of projects; (ii) selective development of new business opportunities such as mental health services provided through its subsidiary Atlantic Shores Healthcare, Inc.; (iii) selective pursuit of acquisitions; (iv) expansion of its scope of services; (v) expansion into international markets by establishing alliances with strategic local partners; and (vi) limiting capital risk. Flexible Staffing Services Wackenhut Resources has expanded to become one of the leading outsourcing companies in the southeast, with a principal concentration in Florida, and the midwest. Its growth is resulting from the increasing trend of small and medium size businesses to lease employees from PEOs or use temporary workers in order to cut costs and provide more and better employee benefits. Wackenhut Resources' strategy for growth is to expand PEO services while maintaining a viable temporary services network. The Company believes that this broader blend of human resources services will better meet the needs of our clients as outsourcing trends continue. Staffing services derives a competitive advantage in the PEO market by providing an "a la carte" menu of staffing alternatives and attractive benefit options. In addition to internal growth, the Company has increased its presence in staffing services through selective acquisitions such as the acquisitions of the King Companies in May 1997, Professional Employee Management, Inc. (PEM Companies) in December 1997, and Sharp Services and Advantage Temporary Services Companies in November 1998. During 2000 the regional structure of Staffing Services was reorganized under a single brand name of "Oasis" to achieve a single identity for the marketing of its services. Pursue Selected Acquisitions In addition to internal growth, the Company's growth strategy includes selected acquisitions. MARKETS SECURITY SERVICES. The private security-related services industry includes guard services, alarm-monitoring services, security consulting services, armored car transport and other security services. The largest and most visible component of the industry is the guard service component, which also accounts for the largest portion of Security Service's revenues. Guard service is often characterized within the industry as either "proprietary" or "contract," depending on the service provider. Under proprietary arrangements, end users of the services employ, schedule and manage their own security officers. In contrast, contract services are provided to end users pursuant to contracts with independent security-related service firms such as Wackenhut. Management believes that the advantages to clients of using contract security service providers rather than providing services internally on a proprietary basis are threefold: (i) the client may realize cost and administrative savings; (ii) the client is freed to concentrate on its core competencies; and (iii) the client may be able to reduce labor management concerns with security-related employees, who are employed by the Company. CORRECTIONAL SERVICES. Correctional Service's customer base is principally governmental agencies responsible for state correctional facilities in the United States and governmental agencies responsible for correctional facilities in the United Kingdom and Australia. Correctional Service's other customers include the U.S. Immigration and Naturalization Service, other federal and local agencies in the United States and other foreign governmental agencies. 4 5 FLEXIBLE STAFFING SERVICES. Staffing Services provides temporary staffing, permanent placement, and Professional Employer Organization (PEO) services. The PEO provides integrated human resource administration, such as personnel employee leasing, risk management, payroll processing and human resource services. Client companies outsource a large part of the human resource function to the PEO. While the PEO becomes the employer of record for payroll and tax purposes, the client maintains control of the activities of the worksite employees. Due to the increasing complexity of the regulatory environment, employment costs per employee are rising dramatically, and constitute one of the market determinants. Outsourcing is expected to have a very compelling appeal to companies in the process of downsizing and reengineering. COMPANY ORGANIZATION The Company's business can be divided into the Global Security Services, Correctional Services and Flexible Staffing Services. Security Services provides security-related and other support services. Correctional Services, which consists exclusively of the business conducted through WHC, provides privatized correctional, detention, and public sector mental health, facility design, development and management services. Flexible Staffing Services provides personnel employee leasing, temporary services, recruiting, risk management, payroll processing and human resource services. GLOBAL SECURITY SERVICES Global Security Services is conducted in North American and international markets. NORTH AMERICAN MARKET. Security Services provides security-related and other support services throughout the United States and Canada. The North American market is divided into commercial, government and regulated industry accounts. In providing its Security Services, the Company has adopted a quality management approach to its services. General management responsibilities for each operation are vested in managers of geographic regions supported by a small group of managers located at Company headquarters. Day-to-day management responsibility for each group is vested in regional and site field managers who have primary responsibility for client contact and satisfaction. Field managers are selected through an intensive screening process and receive what the Company believes is state-of-the-art training. Supervisory personnel from Company headquarters periodically visit region headquarters and sites and carefully monitor operating results. COMMERCIAL ACCOUNTS. The Company furnishes security officers (armed and unarmed) to protect its clients' property, in the United States and Canada, against fire, theft, intrusion, vandalism and other physical harm. Specialized security services offered by the Company include crash-fire-rescue services, fire protection services and airport services. The Company also provides security-consulting services including security assessment and program development, specialized training programs for security guards, fire-crash-rescue personnel, and background investigative services. The Company will further enhance its market position in the security-related services industry through internal growth by continuing to: (i) pursue domestic and international National Accounts; (ii) differentiate its security-related services within the industry by emphasizing its CPO program; and (iii) market the Company's services to specialized market niches such as gated residential communities and hospitals. The Company intends to emphasize attracting and retaining national accounts that benefit from security-related services on a national or regional level at multiple locations. Such clients include retail chains, banks, specialized manufacturers and high tech companies. Management believes that such clients value the flexibility and service provided by a dedicated single point of contact with the Company through these nationally managed programs. For its CPO program, the Company recruits law enforcement academy graduates, former military police, and members of elite military units and college graduates with criminology-related degrees. These recruits are prepared for critical security assignments after completing a Company training program that surpasses any state or local requirements for security officer licensing. CPO security personnel perform such functions as prisoner 5 6 transportation in Maryland and Colorado, neighborhood and downtown security in Florida, transit security in Wisconsin and Colorado, and other supplemental law enforcement-related services. Management believes that services provided by CPO security personnel distinguish the Company's services from those of the competition by providing highly specialized and trained security personnel capable of undertaking and accepting responsibilities that are beyond the capabilities of traditional security guards. Contracts with private industry generally are for a minimum of a one-year term. Most of these contracts are subject to termination by either party on 30 days prior notice. For most small accounts, billing rates are typically based on a specified rate per hour and generally are subject to renegotiations or escalation if related costs increase because of changes in minimum wage laws, payroll tax changes or certain other events beyond the control of the Company. For many larger accounts, cost plus performance and management fee contracts are becoming the norm. The Company designs and engineers integrated security programs using both security officers and electronic equipment. These services include planning master security programs for particular facilities, custom designing security systems, procuring requisite electronic equipment, managing contracts and construction, training security personnel, and reviewing and evaluating security programs. Contracts for these integrated security-related services generally provide for a fixed fee and are awarded by competitive bidding. The Company complements security services provided to its clients with investigative services, such as employee background screening and insurance fraud investigations. The Company maintains a national research center with the latest information-gathering technology for public records and a "fraud-waste-criminal" hotline for employees of clients to report workplace abuses. Clients ordinarily are charged an hourly rate for investigative services and a flat rate for background record searches. GOVERNMENT AND REGULATED INDUSTRY ACCOUNTS. The Company provides specialized security-related and support services for United States federal government entities and nuclear power generating facilities. Wackenhut Services, Inc. ("WSI") provides security services primarily to United States federal government entities. Services provided by WSI range from basic security and administrative support to specialized emergency response. In the United States, WSI provides security-related services at 12 sensitive government installations. For example, the Company has held the operations and maintenance contract for the Savannah River Site in South Carolina since 1983, the single largest government contract for security-related services. The Company since 1990 has managed the Rocky Flats Environmental Technology Site near Denver, since 1964 the Nevada Test Site near Las Vegas, and began providing security services during 2000 at the Oak Ridge Site near Oak Ridge, Tennessee. Since 1984, WSI has overseen training and resource development for the United States Department of Energy at the Nonproliferation and National Security Institute in Albuquerque, New Mexico. The Company's service contracts with governmental agencies are typically cost-reimbursable contracts providing the Company the ability to earn award fees based upon the achievement of performance goals. The Company's service contracts with governmental agencies are subject to annual governmental appropriations. With contracts at 27 commercial nuclear power plants in 13 states, the Company is the market share leader in the Nuclear Services niche market. The Company provides Nuclear Utility customers with highly trained and qualified security personnel, emergency planning, electronic detection equipment and integrated security systems to these utility companies. The terms of contracts entered into by the Nuclear Division generally are multi-year and include a variety of fee arrangements. The Company's experience with requirements and standards of the Nuclear Regulatory Commission ("NRC") enable it to assist customers in ensuring NRC compliance. INTERNATIONAL MARKETS. International security services are provided primarily through Wackenhut International, Inc., ("WII") and its subsidiaries, affiliates and strategic partners. WII includes a network of subsidiaries, partnerships and affiliates in approximately 50 countries. The majority of WII's international operations are structured through local joint ventures with parties who operate in the given market. These parties often provide valuable insight into local markets, in addition to sharing financial responsibility for the venture. WII also provides a greater variety of services than the Company offers domestically. These services include, among other things, electronic security systems, central station monitoring, cash-in-transit, 6 7 satellite tracking of vehicles and cargo, building maintenance, secure storage of documents, postal services, and distribution logistics. In addition to providing traditional security services to commercial customers at overseas locations, WII provides security for the U.S. Department of State at embassies and missions in 17 locations. WII also provides protective services at NASA space shuttle support sites in Africa. Major competitors of WII include sizable foreign concerns such as Group 4, Securitas, Securicor, and Chubb and local and regional companies. In order to enhance quality revenue and earnings growth, the Company seeks to focus its international presence in countries where it can achieve a proper critical mass. To achieve this strategic initiative, during fiscal 2000, management initiated an ongoing review of the Company's international security-related businesses, with a view towards concentrating the Company's resources to achieve a proper critical mass. CORRECTIONAL SERVICES Correctional Services is conducted through the operations of Wackenhut Corrections Corporation ("WHC"). WHC is a leading developer and manager of privatized correctional, detention and public sector mental health facilities in the United States, the United Kingdom, Australia and South Africa. Correctional Services was founded in 1984 as a division of the Company to capitalize on emerging opportunities in the private correctional services market. As of December 2000, Correctional Services had contracts to manage 55 correctional and detention facilities with an aggregate rated capacity of 39,522 beds. It also had contracts for prisoner transportation, correctional health care services, mental health services and electronic monitoring. Correctional Services offers a comprehensive range of correctional, detention and public sector mental health facility management services from individual consulting projects to the integrated design, construction and management of correctional, detention and public sector mental health facilities. In addition to providing the fundamental services relating to the security of facilities and the detention and care of inmates, Correctional Services has built a reputation as an effective provider of a wide array of in-facility rehabilitative and educational programs, such as chemical dependency counseling and treatment, basic education, and job and life skills training. Management believes that Correctional Service's experience in delivering a full range of quality privatization services on a cost-effective basis to governmental agencies provides such agencies strong incentives to choose WHC when awarding new contracts or renewing existing contracts. WHC's facility management contracts typically have original terms ranging from one to ten years and give the customer at least one renewal option. STAFFING SERVICES Building upon four decades of expertise in providing services to businesses and government the Company entered into the professional employer organization ("PEO") employee leasing business by establishing Oasis Outsourcing, Inc., a majority owned subsidiary, in the fourth quarter 1996. During 1997, the Company continued to expand its market presence when Wackenhut Resources, Inc. (WRI), a subsidiary of the Company, acquired the King Companies, in May 1997, and Professional Employee Management, Inc. (PEM Companies) in December 1997. Both companies were professional employer organizations, and in addition, the King Companies was in the temporary employment and recruiting service business. These two companies were combined with Oasis Outsourcing, Inc., under Wackenhut Resources, Inc., to form Flexible Staffing Services (Staffing Services). In November 1998 Flexible Staffing Services acquired Sharp Services Inc. and Advantage Temporary Services companies. By the end of 2000, Flexible Staffing Services had 38 offices in 11 states. During 2000, the regional structure of Staffing Services was reorganized under a single name of "Oasis" to achieve a single identity for the marketing of its services. CUSTOMERS During 2000, Security Services provided services to approximately 8,600 customers worldwide. The United States Department of Energy accounted for 8% and 6% of the Company's revenue during Fiscal 2000 and Fiscal 7 8 1999, respectively. Correctional Services contracts with the State of Florida accounted for 4% of the Company's revenues in Fiscal 2000 and Fiscal 1999 and contracts with governmental agencies of the State of Texas accounted for 3% and 4% of the Company's revenue in Fiscal 2000 and Fiscal 1999, respectively. The Staffing Services Business provides services to over 1,100 employee leasing clients and more than 1000 temporary services clients. COMPETITION The Company is the largest United States-based security and protective services organization and a leading provider of such services worldwide. The Company competes domestically and internationally with Securitas, which acquired the Company's largest U.S.-based competitors Burns Security Company and Pinkertons in Fiscal 2000 and Fiscal 1999, respectively. The Company also competes with numerous local and regional security services companies. The top five providers of services similar to those provided by Security Services account for less than 15% of the security-services market in the United States. Competition in the security-related and other support services business is intense and is based primarily on price in relation to quality of service, the scope of services performed, and the extent of employee training and supervision. However, potential competitors can enter the security-related and other support services business without substantial capital investment or expense. WHC competes primarily on the basis of the quality and range of services offered, and its experience and reputation, both domestically and internationally, in the design and management of facilities. WHC competes with a number of companies, including, but not limited to, Corrections Corporation of America, Correctional Services Corporation, Group 4 International Corrections Service, U.K. Detention Services, Ltd., Cornell Corrections Corporation, Securicor Group and Prison Realty Trust. Some of WHC's competitors are larger and have greater resources than WHC. WHC also competes on a localized basis in some markets with small companies that may have better knowledge of the local conditions and may be better able to gain political and public acceptance. Potential competitors can enter the correctional business without substantial capital investment or experience in management of correctional or detention facilities. In addition, in some markets, WHC may compete with governmental agencies that are responsible for correctional facilities. Staffing Services competes primarily on the basis of the quality and range of services offered. Staffing Services competes domestically with a number of companies, including but not limited to Spherion, Staff Leasing, Administaff, ADP Total Source and many regional based firms. Some of the competitors are larger and have greater resources than Staffing Services. EMPLOYEES Security Services principal business is labor intensive, and is affected substantially by the availability of qualified personnel and the cost of labor. As of December 2000, Security Services had over 55,000 full and part-time employees worldwide, most of whom are security officers and other personnel providing physical security services. The Company has not experienced any material difficulty in employing sufficient numbers of suitable security officers. Security officers and other personnel supplied by the Company to its clients are employees of the Company, even though stationed regularly at a client's premises. A small percentage of the employees of the Security Service business are covered by collective bargaining agreements. Relations with employees have been generally satisfactory. As of December 2000, Correctional Services had approximately 9,000 full-time employees. Correctional Services employs management, administrative and clerical, security, educational services, health services and general maintenance personnel. WHC's correctional officer employees at George W. Hill Correctional Facility (Pennsylvania), Queens Private Correctional Facility (New York), and Junee Correctional Centre, Arthur Gorrie Correctional Centre, Fulham Correctional Centre and Immigration Detention Services (Australia) are members of unions. WHC has entered into a contract with the union for the correctional officers at the Queens Private Correctional Facility and Junee Correctional Centre, however, WHC has not entered into a contract with the other two unions. 8 9 Staffing Services had approximately 300 administrative employees as of December 2000. In addition, the PEO Division of Flexible Staffing Services had over 35,900 work-site employees as of December 2000. BUSINESS REGULATIONS AND LEGAL CONSIDERATIONS Security Services is subject to numerous city, county, and state firearm and occupational licensing laws that apply to security officers and private investigators. Many states have laws requiring training and registration of security officers, regulating the use of badges and uniforms, and imposing minimum bond, surety, or insurance standards. Many foreign countries have laws that restrict the Company's ability to render certain services, including laws prohibiting security-related services or limiting foreign investment. In addition, many state and local governments are required to enter into a competitive bidding procedure before awarding contracts for products or services. The laws of certain jurisdictions may also require the Company to award subcontracts on a competitive basis or to subcontract with businesses owned by women or members of minority groups. The industry in which the Correctional Services operates is subject to national, federal, state and local regulations in the United States, Europe, South Africa and Australia which are administered by a variety of regulatory authorities. Generally, prospective providers of correctional services must be able to detail their readiness to, and must comply with, a variety of applicable state and local regulations, including education, health care and safety regulations. WHC's contracts frequently include extensive reporting requirements and require supervision and on-site monitoring by representatives of contracting governmental agencies. WHC's Kyle New Vision Chemical Dependency Treatment Center is licensed by the Texas Department of Criminal Justice to provide substance abuse treatment. Certain states, such as Florida and Texas, deem prison guards to be peace officers and require WHC personnel to be licensed and may make them subject to background investigation. State law also typically requires corrections officers to meet certain training standards. Flexible Staffing Services is subject to federal and state laws regarding the employer-employee relationship, including numerous federal and state laws relating to labor, tax and discrimination matters. While many states do not explicitly regulate PEO activities, a number of states have passed laws that have licensing or registration requirements for PEO companies and other states are considering such regulation. Such laws vary from state to state but generally provide for monitoring the fiscal responsibility of PEO companies. Management believes it conducts its business in compliance with the licensing and registration requirements of the states in which it operates and monitors such compliance annually. The failure to comply with applicable laws, rules or regulations or the loss of any required license could have a material adverse effect on the Company's business, financial condition and results of operations. Furthermore, the current and future operations of the Company may be subject to additional regulations as a result of, among other factors, new statutes and regulations and changes in the manner in which existing statutes and regulations are or may be interpreted or applied. Any such additional regulations could have a material adverse effect on the Company's business, financial condition and results of operations. The Company may, under certain circumstances, be responsible for the actions of its employees and agents. Under the common law of negligence in many states, the Company can be held vicariously liable for wrongful acts or omissions of its agents or employees performed in the course and within the scope of their agency or employment. In addition, some states have statutes that expressly impose on the Company legal responsibility for the conduct of its agents or employees. The nature of the security-related services provided by the Company (such as armed security officers and fire rescue) may expose it to greater risks of liability for employee acts or omissions than are posed to other businesses. The Company maintains public liability insurance to mitigate against this exposure, although the laws of many states limit or prohibit insurance coverage of liability for punitive damages arising from willful, wanton or grossly negligent conduct. 9 10 COMMITMENTS AND CONTINGENCIES WHC's contract to manage the Jena Juvenile Justice Center in Jena, Louisiana was terminated by the Louisiana Department of Public Safety and Corrections on June 30, 2000. WHC has a ten-year non-cancelable operating lease for the facility with Correctional Properties Trust (CPV). WHC has recorded an operating charge of $3.8 million ($2.3 million after tax) that represents the expected losses to be incurred on the lease with CPV. After taxes and minority interest effect, this charge reduced the Company's diluted earnings per share by $0.09. See Note 9 of the "Notes to Consolidated Financial Statements". WHC has a contract with the State of Florida Department of Children and Families (DCF) to design and construct a new 350-bed South Florida State Psychiatric Hospital for approximately $35 million. The construction is complete. However, WHC has incurred additional costs in excess of $2 million beyond the initial scope of the construction contract through December 31. 2000. WHC is in the process of negotiating with DCF to recover these additional costs. There can be no assurances that WHC will be successful in negotiating for additional funding of this project. Accordingly, WHC has recognized these additional costs as incurred and has not recorded revenue on the pending claim. CERTAIN FACTORS THAT MAY EFFECT FUTURE RESULTS Prospective investors should carefully consider the following factors that may effect future results, together with the other information contained in this Annual Report on Form 10-K, in evaluating the Company and its business before purchasing its securities. In particular, prospective investors should note that this Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and that actual results could differ materially form those contemplated by such statements. See "Safe Harbor Statements under the Private Securities Litigation Reform Act of 1995" below. The factors listed below represent certain important factors the Company believes could cause such results to differ. These factors are not intended to represent a complete list of the general or specific risks that may affect the Company. It should be recognized that other risks may be significant, presently or in the future, and the risks set forth below may affect the Company to a greater extent than indicated. REVENUE AND PROFIT GROWTH DEPENDENT ON EXPANSION. The Company's growth depends to a significant degree upon its ability to obtain additional service contracts, PEO clients and correctional and detention facility development and management contracts and to retain existing contracts. The Company faces significant competition among: (i) providers of security-related and other support services for service contracts and for the renewal of such contracts upon expiration, (ii) operators of correctional and detention facilities for development and management contracts for new facilities and for the renewal of those contracts upon expiration and (iii) other PEO and temporary staffing companies. Accordingly, there can be no assurance that the Company will be able to obtain additional contracts or to retain contracts upon expiration thereof. Growth of the Correctional Services is generally dependent on the development and management of new correctional and detention facilities, since contracts to manage existing public facilities are not typically offered to private operators. The rate of development of new facilities and, therefore, the Correctional Services' potential for growth, will depend on a number of factors, including crime rates and sentencing patterns in countries in which WHC operates, governmental and public acceptance of the concept of privatization, the number of facilities available for privatization and WHC's ability to obtain awards for contracts and to integrate new facilities into its management structure on a profitable basis. In addition, certain jurisdictions in the past have required the successful bidder to make a significant capital investment in connection with the financing of a particular project. WHC's ability to secure awards under such circumstances will, therefore, also depend on WHC having sufficient capital resources. GROWTH/ACQUISITION STRATEGY. The Company has grown its Security Services, Staffing Services and Correctional Services through internal expansion and through selective acquisitions of additional companies or assets that would expand its existing business. There can be no assurance that the Company will be able to identify, acquire or profitably manage additional companies or assets or successfully integrate such additional companies or assets into the Company without substantial costs, delays or other problems. In addition, there can be no assurance that companies acquired in the future will be profitable at the time of their acquisition or will achieve levels of 10 11 profitability that justify the investment therein. Acquisitions may involve a number of special risks, including, but not limited to, adverse short-term effects on the Company's reported operating results, diversion of management's attention, dependence on retaining, hiring and training key personnel, risks associated with unanticipated problems or legal liabilities and amortization of acquired intangible assets, some or all of which could have a material adverse effect on the Company's operations and financial performance. CAPITAL REQUIREMENTS TO FUND GROWTH. The Company's acquisition strategy may require substantial capital. While the Company believes that its present capital position will be sufficient to meet its capital requirements, future acquisitions may require additional capital. Such capital may be obtained by borrowings under the Company's existing credit facilities, through the issuance of long-term or short-term indebtedness or through the issuance of equity securities in private or public transactions. This could result in dilution of existing equity positions and/or increased interest expense. There can be no assurance that acceptable capital financing for future acquisitions can be obtained on suitable terms, if at all. INTERNATIONAL OPERATIONS. In Fiscal 1998, Fiscal 1999, Fiscal 2000, revenues derived from the provision of services to customers outside the United States accounted for approximately 11.8%, 11.1% and 11.9%, respectively, of the Company's consolidated revenues. The Company anticipates that international revenues will continue to account for a significant portion of consolidated revenues in the foreseeable future. The Company's operating results, therefore, are subject to the risks inherent in international operations, including various regulatory requirements, fluctuations in currency exchange rates, political and economic changes and disruptions, tariffs or other barriers, and difficulties in staffing and managing foreign operations. One or more of these factors may have a material adverse effect on the Company's future international operations and, consequently, on the Company's operating results. BUSINESS CONCENTRATION. Contracts with the United States Department of Energy accounted for approximately 8% and 6% of the Company's consolidated revenues in Fiscal 2000 and Fiscal 1999, respectively. Moreover, correctional contracts with governmental agencies of the State of Texas accounted for 3% and 4% of the Company's consolidated revenues in Fiscal 2000 and Fiscal 1999, respectively. Correctional Services contracts with the State of Florida accounted for 4% of the Company's consolidated revenues in both Fiscal 2000 and Fiscal 1999. The loss of, or a significant decrease in, the Company's business with the Department of Energy or WHC's business with the foregoing agencies could have a material adverse effect on the Company's results of operations. CORRECTIONAL CONTRACTS. WHC's facility management contracts typically have terms ranging from one to five years. WHC has 18 contracts that will expire in 2001. WHC's management contracts generally contain one or more renewal options for terms ranging from one to five years. Only the contracting governmental agency may exercise a renewal option. No assurance can be given that any agency will exercise a renewal option in the future. Additionally, the contracting governmental agency typically may terminate a facility contract without cause by giving WHC adequate written notice. Furthermore, in certain cases the development of facilities to be managed by WHC is subject to the facility obtaining construction financing. Such financing may be obtained through a variety of means, including without limitation, sale of tax-exempt bonds or other obligations or direct governmental appropriation. The sale of tax-exempt bonds may be adversely affected by changes in applicable tax laws or adverse changes in the market for tax-exempt bonds or other obligations. POTENTIAL LEGAL LIABILITY. The Company's Security Services and Correctional Services exposes the Company to potential third-party claims or litigation by persons for personal injury or other damages resulting from contact with Company or WHC personnel. In the case of WHC, such damages may arise from a prisoner's escape or from a disturbance or riot at a WHC-managed facility. WHC's management contracts generally require WHC to indemnify the governmental agency against any damages to which the governmental agency may be subject in connection with such claims or litigation. Under principles of common law, the Company can generally be held liable for wrongful acts or omissions of its agents or employees performed in the course and within the scope of their agency or employment. In addition, some states have adopted statutes that expressly impose on the Company legal responsibility for the conduct of its agents and employees. While the Company maintains an insurance program that provides coverage for certain liability risks, including personal injury, death and property damage where the Company or WHC is found negligent, the laws of many states limit or prohibit insurance coverage for 11 12 liability for punitive damages arising from willful, wanton or grossly negligent conduct. There can be no assurance that the Company's insurance will be adequate to cover all potential claims or damages. INFLATION. The Company's largest expense is personnel costs. A number of the Company's security-related and correctional and detention facility management contracts, including contracts with governmental agencies and national accounts, provide for payments of either fixed fees or fees that increase by only small amounts during their terms. If, due to inflation or other causes, the Company must increase the wages and salaries of its employees at rates faster than it can increase the fees charged under such contracts, the Company's profitability would be adversely affected. COMPETITION. The security-related and other support service industries are highly competitive and fragmented. The Company competes with a number of major companies, as well as local or regional security service companies. Through WHC, the Company competes with a number of companies in the correctional business, including Corrections Corporation of America, U.K. Detention Services, Ltd. and Correctional Services Corporation. Some of the companies with which the Company and WHC compete are larger and have greater resources than the Company or WHC. The smaller local and regional companies with which the Company and WHC compete may have better knowledge of the local conditions and be better able to gain political and substantial capital investment or previous experience. In addition, the Company and WHC may compete in some markets with governmental agencies that provide security-related or other support services and manage correctional facilities. ACCEPTANCE OF PRIVATIZATION OF TRADITIONAL PUBLIC FUNCTIONS. Privatization of traditional governmental functions such as the management of correctional and detention facilities by private entities has not achieved complete acceptance by either governments or the public. Some sectors of the federal government and some state governments are legally unable to delegate traditional management responsibilities, including management of correctional and detention facilities, to private companies. The performance of traditional government functions by private companies is not widely understood by the public and has encountered resistance from certain groups, such as labor unions, sheriff's departments and groups that believe certain functions, including correctional and detention facility management should only be conducted by governmental agencies. Such resistance may cause a change in public and governmental acceptance of privatization in general. In addition, changes in dominant political parties in any of the markets in which the Company or WHC operates could result in significant changes to previously established views of privatization in such markets. GOVERNMENTAL REGULATION; OVERSIGHT, AUDITS AND INVESTIGATIONS. The Company's Correctional Services and certain portions of its Security Services are highly regulated by a variety of governmental authorities which oversee the Company's businesses and operations. For example, with respect to the Correctional Services, the contracting agency typically assigns full-time, on-site personnel to a facility to monitor WHC's compliance with contract terms and applicable laws and regulations. Failure by WHC to comply with contract terms or regulations could expose it to substantial penalties, including the loss of a facility management contract. In addition, changes in existing regulations could require the Company to modify substantially the manner in which it conducts business and, therefore, could have a material adverse effect on the Company's results of operations. Additionally, the Company's security-related and correctional contracts give the contracting agency the right to conduct audits of the Company's services provided or the facilities and operations managed by the Company for the agency, and such audits occur routinely. An audit involves a governmental agency's review of the Company's compliance with the prescribed policies and procedures established with respect to services provided or the facility managed. The Company also may be subject to investigations as a result of an audit or other causes. DEPENDENCE UPON EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES. The continued success of the Company is dependent to a significant degree upon the continuing services of its executive officers. The loss or unavailability of any of the Company's executive officers could have an adverse effect on the Company. The Company does not have long-term employment contracts with most of its executive officers. In addition, the Company is dependent upon its ability to hire and retain senior operational employees. 12 13 CONTROL OF COMPANY. George R. Wackenhut and his wife, Ruth J. Wackenhut, individually and through trusts over which they have sole dispositive and voting power, control approximately 50.05% of the issued and outstanding voting common stock of the Company. As a result, George R. Wackenhut and Ruth J. Wackenhut have significant voting power on all matters requiring approval of the shareholders of the Company, including the election of all of the directors. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report and the documents incorporated by referenced herein contain "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. "Forward-looking" statements are any statements that are not based on historical information. Such statements involve risks and uncertainties, including but not limited to: general economic conditions; competitive factors and pricing pressures; shifts in market demand; the performance and needs of clients served by the Company; actual future costs of operating expenses; self-insurance claims and employee wages and benefits; possible changes in ownership positions of the Company's subsidiaries; and other factors discussed elsewhere in this report and the documents filed by the Company with the Securities and Exchange Commission. These risks and uncertainties may cause the Company's results to differ materially from the statements made in this report or otherwise made by or on behalf of the Company. ITEM 2. PROPERTIES The Company's executive offices are in The Wackenhut Center, located at 4200 Wackenhut Drive #100, Palm Beach Gardens, Florida. The Wackenhut Center contains approximately 95,000 square feet and is leased from Lepercq Corporate Income Fund, L.P., for an initial term of 15 years, commencing in March 1996, with consecutive options to extend the term of the lease for three additional five-year periods. This lease requires annual rental payments of approximately $1.8 million with no escalation during the initial 15-year term. In 1997, WHC purchased and renovated a 72-bed psychiatric hospital in Ft. Lauderdale, Florida. In December 1997, WHC entered into a $220 million operating lease facility that was established to acquire and develop new correctional institutions used in its business. As a condition of this facility, WHC unconditionally agreed to guarantee certain obligations of First Security Bank, N.A., a party to the aforementioned operating lease facility. As of December 31, 2000, approximately $142.7 million of this operating lease facility was utilized for properties in operation or under development. The Company owns a 15,000 square foot warehouse building in Miami, Florida. In addition, the Company owns three buildings in Ecuador and one each in the Dominican Republic, Costa Rica, Puerto Rico, Peru and Uruguay that are used for the operations of its foreign subsidiaries in those countries. All other offices of the Company are leased. The aggregate fiscal 2000 rent expense for all non-cancelable operating leases of office space, automobiles, data processing and other equipment was $26.9 million. The Company owns substantially all uniforms, firearms, and accessories used by its security officers. ITEM 3. LEGAL PROCEEDINGS In December 1999, a Travis County, Texas grand jury indicted twelve of WHC's former facility employees for various types of sexual misconduct at the Travis County Community Justice Center. Management believes these indictments are not expected to have any material financial impact on the Company. Eleven of the twelve indicted former employees already resigned from or had been terminated by WHC as a result of WHC initiated 13 14 investigations over the course of the prior three years. WHC is not providing counsel to assist in the defense of these twelve individuals. The District Attorney in Travis County continues to review WHC documents at the Travis County Facility. At this time, WHC cannot predict the outcome of this investigation or the potential impact on WHC's financial position, results of operations and cash flow. The Company is presently, and is from time to time, subject to claims arising in the ordinary course of its business. In certain of such actions, plaintiffs request punitive or other damages that may not be covered by insurance. In the opinion of management, there are no other pending legal proceedings except those disclosures above, for which the potential impact if decided unfavorable to the Company could have a material adverse effect on the consolidated financial statements of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. 14 15 EXECUTIVE OFFICERS OF THE REGISTRANT GEORGE R. WACKENHUT is Chairman of the Board of the Company and has been since its inception. He was Chief Executive Officer of the Company from the time it was founded until February 17, 2000. He was President of the Company from the time it was founded until April 26, 1986. He formerly was a Special Agent of the Federal Bureau of Investigation. Mr. Wackenhut is Chairman of the Board of Directors for Wackenhut Corrections Corporation, a member of the Board of Trustees of Correctional Properties Trust and is on the Dean's Advisory Board of the University of Miami School of Business. He is on the National Council of Trustees, Freedoms Foundation at Valley Forge, and the President's Advisory Council for the Small Business Administration, Region IV. He is a past participant in the Florida Governor's War on Crime and a past member of the Law Enforcement Council, National Council on Crime and Delinquency, and the Board of Visitors of the U.S. Army Military Police School. He is also a former member of the Board of Directors of SSJ Medical Development, Inc., Miami, Florida. Mr. Wackenhut is also a member of the American Society for Industrial Security. He was a recipient in 1990 of the Labor Order of Merit, First Class, from the government of Venezuela and in 1999 was awarded the distinguished Ellis Island Medal of Honor by the National Ethnic Coalition of Organizations. Also in 1999, he was inducted into the West Chester University Hall of Fame and the Athlete's Hall of Fame in Delaware County, Pennsylvania. Mr. Wackenhut received his B.S. degree from the University of Hawaii and his M.Ed. degree from Johns Hopkins University. He has been named a Distinguished Alumnus by West Chester University (1979), the University of Hawaii (1987), and Johns Hopkins University (2000). Mr. Wackenhut is married to Ruth J. Wackenhut, Secretary of the Company. His son, Richard R. Wackenhut, is Vice Chairman of the Board of the Company and is President and Chief Executive Officer of the Company. RICHARD R. WACKENHUT is Vice Chairman of the Board of Directors, President and Chief Executive Officer of the Company. He has been Vice Chairman of the Board since August 1999, and Chief Executive Officer since February 2000. Mr. Wackenhut was appointed President and Chief Operating Officer of the Company and a member of the Board of Directors in 1986. He was Senior Vice President of Operations from 1983 to 1986. He was Manager of Physical Security from 1973 to 1974 and also served as Manager, Development at the Company's Headquarters from 1974 to 1976; Area Manager, Columbia, South Carolina, from 1976 to 1977; District Manager, Columbia, South Carolina from 1977 to 1979; Director, Physical Security Division at Corporate Headquarters from 1979 to 1980; Vice President, Operations from 1981 to 1982; and Senior Vice President, Domestic Operations from 1982 to 1983. Mr. Wackenhut is a Director of Wackenhut del Ecuador, S.A.; Wackenhut UK Limited; Wackenhut Dominicana, S.A.; and several domestic subsidiaries of the Company, including Wackenhut Corrections Corporation. He is also Vice Chairman of the Board of Trustees of Correctional Properties Trust. He is Vice Chairman of Associated Industries of Florida and is also a member of the American Society for Industrial Security, the International Association of Chiefs of Police and the International Security Management Association. He received his B.A. degree from The Citadel in 1969 and is currently a member of The Citadel Advisory Council. He also completed the Advanced Management Program of the Harvard University School of Business Administration in 1987. Mr. Wackenhut is the son of George R. Wackenhut, Chairman of the Board of the Company, and Ruth J. Wackenhut, Secretary of the Company. ALAN B. BERNSTEIN was elected to the Company's Board of Directors May 5, 1998, is Executive Vice President of the Company, beginning in 2000 became President, Global Security, and was promoted to Chief Operating Officer effective March 9, 2000. Mr. Bernstein was President, North American Operations from 1991 through 1999. Prior to that, Mr. Bernstein was Senior Vice President, Domestic Operations from 1986 to 1991. He has been employed by the Company since 1976, except for a brief absence during 1982 when he was a partner in a family-owned security alarm business in New York State. Mr. Bernstein has served in the following positions with the Company or its subsidiaries: Vice President of Domestic Operations, 1985; Vice President, Corporate Business Development, 1984; President, Wackenhut Systems Corporation, 1983; Director of Integrated Guard Security, 1981; and Manager of Wackenhut Electronic Systems Corporation (Miami) from 1976 to 1981. He also serves on the Board of Directors of several subsidiaries of the Corporation. He received his B.S.E.E. degree from the University of Rochester, and a M.B.A. degree from Cornell University. FERNANDO CARRIZOSA is Senior Vice President and President, Wackenhut International, Inc. and has been since January 28, 1989. Mr. Carrizosa was Vice President of International Operations from January 31, 1988 to 15 16 January 28, 1989. He joined Wackenhut de Colombia in 1968 as Manager of Investigations. He was promoted to Manager of Human Resources, and then to Assistant to the President in 1974. He moved to Headquarters as a trainee in 1974, and was promoted to Manager of Latin American Operations in 1980, a capacity in which he served until 1983. Mr. Carrizosa also served as Executive Vice President of Wackenhut International, 1983 to 1984 and President of Wackenhut International, 1984 to 1988. He is a Director of several subsidiaries and affiliates of the Company. He received a B.B.A. from Universidad Javeriana in Colombia, and a M.B.A. with honors from Florida International University in 1976. He also completed the Advanced Management Program at the Wharton School of Business in 1992. ROBERT C. KNEIP is Senior Vice President of the Company, and President and Chief Executive Officer of Wackenhut Resources, Inc. Since he joined the Company in 1982, Dr. Kneip has held various positions in the Company including Director, Power Generating Services; Director, Contracts Management; Vice President, Contracts Management; Vice President, Planning and Development and Senior Vice President, Corporate Planning and Development. Dr. Kneip started Flexible Staffing Services by establishing OASIS Outsourcing, Inc., a majority owned subsidiary of the Company in 1996 and continues to be a major force in the Company's development of the Staffing Services Business. Prior to joining the Company, Dr. Kneip was employed by the Atomic Energy Commission, the Nuclear Regulatory Commission and Dravo Utility Constructors, Inc. He received a B.A. (Honors) from the University of Iowa, and an M.A. and Ph.D. from Tulane University. Dr. Kneip also serves on the Board of Directors of Ecometry Corporation, as well as numerous civic organizations. PHILIP L. MASLOWE is Executive Vice President and Chief Financial Officer and Treasurer of the Company and has been since March 30, 2000. He joined the Company in August 1997 as Senior Vice President and Chief Financial Officer of the Company and was given the title of Treasurer effective March 9, 2000. Prior to joining the Company, Mr. Maslowe was employed by KinderCare Learning Centers, Inc., as Executive Vice President and Chief Financial Officer since 1993. Before joining KinderCare, he was Executive Vice President and Chief Financial Officer of Thrifty Corporation. From 1980 to 1991, Mr. Maslowe was with The Vons Companies, Inc., where he served as Group Vice President, Finance. Mr. Maslowe is a graduate of Loyola University of Chicago (magna cum laude) and holds a M.B.A. from the J.L. Kellogg Graduate School of Management at Northwestern University. Mr. Maslowe also serves on the Board of Directors of Bruno's Supermarkets, Inc. SANDRA L. NUSBAUM is Senior Vice President, Human Resources of the Company. Since she joined the Company in 1981, Ms. Nusbaum has held various positions in the Company including Personnel Representative, Director of Compensation and Benefits, and Vice President, Human Resources. Prior to joining the Company, Ms. Nusbaum was employed by DAK Industries. Ms. Nusbaum received a B.B.A. degree in Personnel Management and Marketing from Florida International University. JAMES P. ROWAN is Executive Vice President General Counsel and Assistant Secretary of the Company. He joined the Company in 1979 as Assistant General Counsel, became Associate General Counsel in 1982, a Vice President in 1986 and a Senior Vice President in 1998. He is an attorney admitted to the Bar of the States of Indiana, Iowa and Michigan. He holds degrees of B.S.C. (Accounting) and J.D. (Law) from the University of Iowa and a C.P.A. from the University of Illinois. RUTH J. WACKENHUT is Secretary of the Company and has been since 1958. She is married to George R. Wackenhut, Chairman of the Board of the Company and her son, Richard R. Wackenhut, is Vice Chairman, President and Chief Executive Officer of the Company and is also a director. 16 17 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference to page 25 of the Registrant's 2000 Annual Report to Shareholders, Exhibit 13.0. ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is incorporated by reference to pages 26 through 27 of the Registrant's 2000 Annual Report to Shareholders, Exhibit 13.0. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is incorporated by reference to pages 28 through 33 of the Registrant's 2000 Annual Report to Shareholders, Exhibit 13.0. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated by reference to pages 34 through 48 of the Registrant's 2000 Annual Report to Shareholders, Exhibit 13.0, except for the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III The information required by Items 10, 11, 12 and 13 of Form 10-K (except such information as is furnished in a separate caption "Executive Officers of the Registrant" and is included in Part I, hereto) is contained in, and is incorporated by reference from, the proxy statement (with the exception of the Board Compensation Committee Report and the Performance Graph) for the Company's 2001 Annual Meeting of Shareholders, which has been filed with the Securities and Exchange Commission pursuant to Regulation 14A. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The following consolidated financial statements of the Company, included in the Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 2000 are incorporated by reference in Part II, Item 8: Consolidated Balance Sheets - December 31, 2000 and January 2, 2000 Consolidated Statements of Income - Fiscal years ended December 31, 2000, January 2, 2000 and January 3, 1999 17 18 Consolidated Statements of Cash Flows - Fiscal years ended December 31, 2000, January 2, 2000, and January 3, 1999 Consolidated Statements of Shareholders' Equity Notes to Consolidated Financial Statements - Fiscal years ended December 31, 2000, January 2, 2000, and January 3, 1999 With the exception of the information incorporated by reference from the 2000 Annual Report to Shareholders in Part II, Items 5,6,7,8, and Parts IV of the Form 10-K, the Registrant's 2000 Annual Report to Shareholders is not to be deemed filed as part of this Report. 2. Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts - Page 24 All other schedules specified in the accounting regulations of the Securities and Exchange Commission have been omitted because they are either inapplicable or not required. Individual financial statements of the Company have been omitted because it is primarily an operating Company and all significant subsidiaries included in the consolidated financial statements filed with this Annual Report are majority-owned. 3. Exhibits The following exhibits are filed as part of this Annual Report: EXHIBIT NUMBER DESCRIPTION ------ ----------- 3.1 Articles of Incorporation as amended and restated. 3.2 Bylaws currently in effect (incorporated by reference to the Registrants Form 10-K Annual Report for the fiscal year ended January 2, 2000). 4.1 Credit Agreement dated as of November 13, 2000 by and among The Wackenhut Corporation, as Borrower, Bank of America, N.A., as Administrative Agent and as Lender and Scotiabanc Inc., as Syndication Agent and as Lender and First Union National Bank, As Documentation Agent and a Lender and the Lenders party hereto from time to time. 4.2 Receivables Purchase Agreement dated as of December 30, 1997 among Wackenhut Funding Corporation, as Transferor, The Wackenhut Corporation, as Servicer, Enterprise Funding Corporation, as a Purchaser, and Nations Bank, N.A., as Agent (incorporated by reference to the Registrants Form 10-K Annual Report for the fiscal year ended January 3, 1999). 4.3 Amendment Agreement No. 1, dated December 12, 2000 to the Credit Agreement dated as of November 12, 2000 by and among The Wackenhut Corporation, as Borrower, Bank of America, N.A., as Administrative Agent and as Lender and Scotiabanc Inc., as Syndication Agent and as Lender and First Union National Bank, As Documentation Agent and a Lender and the Lenders party hereto from time to time. 4.4 Amended and Restated Transfer and Administrative Agreement dated as of January 26, 2001, among Wackenhut Funding Corporation, a Delaware corporation and its successors and assigns, The Wackenhut Corporation, a Florida Corporation Individually and as Servicer, Enterprise Funding Corporation, a Delaware corporation and its successors assigns, and Bank of America, N.A. (as successor to Nationsbank, N.A.), 18 19 a national banking association, as agent for Enterprise and the Bank Investors and as a Bank Investor. 4.5 Amendment Number 1 to Receivable Purchase Agreement dated as of January 26, 2001, between Wackenhut Funding Corporation, a Delaware corporation and its successors and assigns and The Wackenhut Corporation, a Florida corporation, and its successors assigns, amending that certain Receivables Purchase Agreement dated as of December 30, 1997. 4.6 LC Account Agreement dated November 13, 2000 among The Wackenhut Corporation, a Florida corporation, and Bank of America, N.A., as the agent for the Lenders party to the Credit Agreement dated as of November 13, 2000 by and among The Wackenhut Corporation, as Borrower, Bank of America, N.A., as Administrative Agent and as Lender and Scotiabanc Inc., as Syndication Agent and as Lender and First Union National Bank, As Documentation Agent and a Lender and the Lenders party hereto from time to time. 4.7 Amended and Restated Credit Agreement, dated December 18, 1997, by and among Wackenhut Corrections Corporation, Nations Bank, National Association, Scotia Banc Inc. and the Lenders Party thereto from time to time (incorporated by reference to Wackenhut Corrections Corporation's Form 10-K Annual Report for the fiscal year ended December 28, 1997). 4.8 Amended and Restated Participation Agreement, dated June 19, 1997 among Wackenhut Corrections Corporation, First Security Bank, National Association, the Various Bank and other Lending Institutions which are partners thereto from time to time, Scotia Banc Inc., and Nations Bank, National Association (incorporated by reference to Wackenhut Corrections Corporation's Form 10-K Annual Report for the fiscal year ended December 28, 1997). 4.9 Amended and Restated Lease Agreement, dated as of June 19, 1997, between First Security Bank, National Association and Wackenhut Corrections Corporation (incorporated by reference to Wackenhut Corrections Corporation's Form 10-K Annual Report for the fiscal year ended December 28, 1997). 4.10 Guaranty and Suretyship Agreement, dated December 18, 1997, among the Guarantors parties thereto and Nations Bank, National Association (incorporated by reference to Wackenhut Corrections Corporation's Form 10-K Annual Report for the fiscal year ended December 28, 1997). 4.11 Third Amended and Restated Trust Agreement, dated as of June 19, 1997, among Nations Bank, National Association and other financial institutions parties thereto and First Security Bank, National Association. (incorporated by reference to Wackenhut Corrections Corporation's Form 10-K Annual Report for the fiscal year ended December 28, 1997). 10.1 Amended and restated Senior Officer Retirement/Deferred Compensation Agreements for Executive Officers (the "Senior Plan"): Alan B. Bernstein, Fernando Carrizosa, Robert C. Kneip, Sandra Nusbaum, Philip L. Maslowe, and Richard R. Wackenhut (incorporated by reference to the Registrants Form 10-Q Quarterly Report for the quarterly period ended April 2, 2000). 10.2 Executive Severance Agreements for Alan B. Bernstein, Fernando Carrizosa, Robert C. Kneip, Sandra Nusbaum, and Philip L. Maslowe (incorporated by reference to the Registrants Form 10-Q Quarterly Report for the quarterly period ended April 2, 2000). 10.3 Executive Officer Retirement Plan. 10.4 Amended and Restated Split Dollar arrangement with George R. and Ruth J. Wackenhut. 19 20 10.5 Employment Agreement with G.R. Wackenhut (incorporated by reference to the Registrants Form 10-Q Quarterly Report for the quarterly period ended April 2, 2000). 10.6 Employment Agreement with R.W. Wackenhut (incorporated by reference to the Registrants Form 10-Q Quarterly Report for the quarterly period ended April 2, 2000). 10.7 Office Lease dated April 18, 1995 by and between The Wackenhut Corporation and Daniel S. Catalfumo, as Trustee under F.S. 689.071. 10.8 First Amendment dated November 3, 1995 to Office Lease dated April 18, 1995 by and between The Wackenhut Corporation and Daniel S. Catalfumo, as Trustee under F.S. 689.071. 10.9 The Wackenhut Corporation Key Employee Long-Term Incentive Stock Plan Amendments through May 5, 2000. 10.10 Second Amendment dated August 1, 1996 to Office Lease dated April 18, 1995 by and between The Wackenhut Corporation and Daniel S. Catalfumo, as Trustee under F.S. 689.071 (incorporated by reference to the Registrant's Form 10-K Annual Report for the fiscal year ended December 28, 1997). 10.11 Amended Non-employee Director Stock Option Plan dated October 29, 1996 (incorporated by reference to the Registrant's Form 10-K Annual Report for the fiscal year ended December 28, 1997). 10.12 Third Amendment dated December 10, 1997 to Office Lease dated April 18, 1995 by and between The Wackenhut Corporation and Daniel S. Catalfumo, as Trustee under F.S. 689.071 (incorporated by reference to the Registrants Form 10-K Annual Report for the fiscal year ended January 3, 1999). 10.13 Summary description of the amendment to the Key Employee Long-Term Incentive Stock Plan effective as of January 28, 1997 (incorporated by reference to the Registrants Form 10-K Annual Report for the fiscal year ended January 3, 1999). 10.14 Senior Officer Retirement Agreement for James P. Rowan (incorporated by reference to the Registrants Form 10-K Annual Report for the fiscal year ended January 2, 2000). 10.15 Fourth Amendment dated April 1, 1999 to Office Lease dated April 18, 1995 by and between The Wackenhut Corporation and Lepercq Corporate Income Fund L.P., as successor-in-interest to PGA Professional Center, LTD. 10.16 Designated Executive Officer Bonus Plan for Fiscal 2000. 10.17 Senior Management Bonus Plan for Fiscal 2000. 13.0 Annual Report to Shareholders for the year ended December 31, 2000, beginning with page 25 (to be deemed filed only to the extent required by the instructions to exhibits for reports on this Form 10-K). 21.1 Subsidiaries of The Wackenhut Corporation.* 23.1 Consent of Arthur Andersen LLP.* 24.1 Powers of Attorney. *Filed herewith. (b). Reports on Form 8-K. None. 20 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE WACKENHUT CORPORATION By: /s/ Philip L. Maslowe Date: March 21, 2001 ---------------------- Philip L. Maslowe EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER AND TREASURER Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Richard R. Wackenhut * Vice Chairman of the Board, President and Chief March 6, 2001 -----------------------------------Executive Officer (principal executive officer) Richard R. Wackenhut /s/ Philip L. Maslowe Executive Vice President and Chief Financial Officer March 21, 2001 -----------------------------------and Treasurer Philip L. Maslowe /s/ Juan D. Miyar Vice President and Corporate Controller March 21, 2001 -----------------------------------(principal accounting officer) Juan D. Miyar /s/ Alan B. Bernstein * Director March 6, 2001 ----------------------------------- Alan B. Bernstein /s/ Julius W. Becton, Jr. * Director March 6, 2001 ----------------------------------- Julius W. Becton, Jr. /s/ Carroll A. Campbell * Director March 6, 2001 ----------------------------------- Carroll A. Campbell /s/ Benjamin R. Civiletti * Director March 6, 2001 ----------------------------------- Benjamin R. Civiletti /s/ Anne N. Foreman * Director March 6, 2001 ----------------------------------- Anne N. Foreman /s/ Edward L. Hennessy, Jr. * Director March 6, 2001 ----------------------------------- Edward L. Hennessy, Jr. /s/ Paul X. Kelley * Director March 6, 2001 ----------------------------------- Paul X. Kelley /s/ Nancy Clark Reynolds * Director March 6, 2001 ----------------------------------- Nancy Clark Reynolds /s/ John F. Ruffle* Director March 6, 2001 ----------------------------------- John F. Ruffle Director ----------------------------------- Thomas P. Stafford
21 22
SIGNATURE TITLE DATE --------- ----- ---- /s/ George R. Wackenhut * Director March 6, 2001 ----------------------------------- George R. Wackenhut /s/ Richard R. Wackenhut * Director March 6, 2001 ----------------------------------- Richard R. Wackenhut */s/ James P. Rowan Executive Vice President, General Counsel and March 6, 2001 -----------------------------------Assistant Secretary James P. Rowan Attorney-in-fact
22 23 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To The Wackenhut Corporation: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in The Wackenhut Corporation's 2000 Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 8, 2001. Our audits were made for the purpose of forming an opinion on those consolidated financial statements taken as a whole. The schedule listed in Item 14(a)2 of the Wackenhut Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP West Palm Beach, Florida, February 8, 2001. 23 24 SCHEDULE II THE WACKENHUT CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2000 JANUARY 2, 2000 AND JANUARY 3, 1999 (IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED DEDUCTIONS, BALANCE AT BEGINNING COST AND TO OTHER ACTUAL END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS CHARGE-OFFS PERIOD - ----------- ---------- ---------- -------- ----------- --------- YEAR ENDED DECEMBER 31, 2000: Allowance for doubtful accounts.................. $ 5,202 3,238 200 (3,797) $ 4,843 YEAR ENDED JANUARY 2, 2000: Allowance for doubtful accounts.................. $ 4,699 257 1,631 (1,385) $ 5,202 YEAR ENDED JANUARY 3, 1999: Allowance for doubtful accounts.................. $ 2,713 3,079 515 (1,608) $ 4,699
24 25 FINANCIAL REVIEW The Wackenhut Corporation and Subsidiaries Market for the Company's Common Equity and Related Stockholder Matters The ensuing table shows the high and low prices for the Company's series A [NYSE: WAK] and B [NYSE: WAKB] common stock, as reported on the New York Stock Exchange, for each quarterly period during fiscal 2000 and 1999. Holders of series A, the voting stock, have control over all aspects of the operations of the Company. Holders of series B only have voting rights in connection with a transaction affecting the essence of their shareholder rights. In all other respects, series B shareholders have the same rights as series A shareholders. The approximate number of record holders of series A and B common stock as of February 8, 2001, was 555 and 585, respectively. During the 2000 fiscal year, the Company's publicly owned, separately traded subsidiary, Wackenhut Corrections Corporation [NYSE: WHC], purchased 500,000 shares of its common stock at an average price of $9.87.
- --------------------------------------------------------------------------------------------------------------------------------- Fiscal 2000 Fiscal 1999 - --------------------------------------------------------------------------------------------------------------------------------- Series A Series B Series A Series B - --------------------------------------------------------------------------------------------------------------------------------- High Low High Low High Low High Low First $ 15.5625 $ 12.8750 $ 11.2500 $ 8.6250 $ 26.0000 $ 21.0000 $ 21.6875 $ 6.6875 Second 14.5000 12.5000 10.0000 7.7500 29.7500 20.0000 24.0000 14.7500 Third 15.2500 12.7500 10.3750 7.9375 29.0000 19.5000 23.5000 14.5625 Fourth 14.6250 11.4375 8.7500 6.6250 20.0000 12.3750 15.0000 8.2500 - ---------------------------------------------------------------------------------------------------------------------------------
Forward-Looking Statements The management's discussion and analysis of financial condition and results of operations, corporate profile, letter to shareholders, corporate diversity, and the February 9, 2001 press release contain forward-looking statements that are based on current expectations, estimates and projections about the segments in which the corporation operates. These sections of the annual report also include beliefs and assumptions made by management. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The corporation undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Future Factors include increasing price and product/service competition by domestic and foreign competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost effective basis; the mix of products/services; the achievement of lower costs and expenses; domestic and foreign governmental and public policy changes including environmental regulations; protection and validity of patent and other intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in increasing use of large, multi-year contracts; the outcome of pending and future litigation and governmental proceedings and continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support the corporation's future business; and other factors discussed in the Company's filings with the Securities and Exchange Commission. These are representative of the Future Factors that could affect the outcome of the forward-looking statements. In addition, such statements could be affected by general industry and market conditions and growth rates, general domestic and international economic conditions including interest rate and currency exchange rate fluctuations and other future factors. The Company does not assume any obligation to update any such forward-looking statements. 26 The Wackenhut Corporation and Subsidiaries Selected Financial Data (in millions except per share data) The selected consolidated financial data should be read in conjunction with the Company's consolidated financial statements and the notes thereto.
FISCAL YEAR ENDED: 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- RESULTS OF OPERATIONS: Revenues $ 2,505.1 $ 2,152.3 Operating income [a] 34.9 37.9 Income before income taxes [a] 33.3 39.9 Income before extraordinary charge and cumulative effect of accounting change [a] 17.6 19.6 Extraordinary charge - early extinguishment of debt, net of income taxes Cumulative effect of accounting change [b] (0.8) --------------------------- Net income $ 16.8 $ 19.6 - ----------------------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE - BASIC: [c] Income before extraordinary charge and cumulative effect of accounting change [a] $ 1.17 $ 1.31 Extraordinary charge - early extinguishment of debt, net of income taxes Cumulative effect of accounting change [b] (0.05) --------------------------- Earnings per share - Basic $ 1.12 $ 1.31 - ----------------------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE - ASSUMING DILUTION: [c] Income before extraordinary charge and cumulative effect of accounting change [a] $ 1.15 $ 1.28 Extraordinary charge - early extinguishment of debt, net of income taxes Cumulative effect of accounting change [b] (0.05) --------------------------- Earnings per share - Assuming Dilution $ 1.10 $ 1.28 - ----------------------------------------------------------------------------------------------------------------------- CASH DIVIDENDS PER SHARE OF COMMON STOCK: [c] Total Dividends $ none $ .08 - ----------------------------------------------------------------------------------------------------------------------- FINANCIAL CONDITION: Working capital $ 130.6 $ 124.0 Total assets 570.3 521.0 Total debt [d] 16.5 21.2 Shareholders' equity 177.8 163.9 - -----------------------------------------------------------------------------------------------------------------------
(a) Fiscal year 2000 includes an operating charge of $3.8 million before income taxes ($1.3 million after income taxes and minority interest expense) or $0.09 per share related to the deactivation of the Jena Juvenile Justice Center, see note 9 to the consolidated financial statements. Fiscal year 1997 includes a one-time pre-tax charge of $18.3 million before income taxes ($11.3 million after income taxes) or $0.76 per share. (b) See Note 2 to the consolidated financial statements. (c) Restated to reflect a 25% stock dividend declared during fiscal 1995 and 1994 and to reflect a 100% stock dividend, effected in the form of a stock split, declared during fiscal 1992. After the first quarter of fiscal 1999, dividends were discontinued to optimize growth opportunities. (d) Includes current portion of long-term debt, notes payable and long-term debt. * 53 weeks. 27
1998* 1997 1996 1995 1994 1993 1992* 1991 - ----------------------------------------------------------------------------------------------------------------------------------- $ 1,755.1 $ 1,126.8 $ 906.0 $ 797.0 $ 727.0 $ 659.0 $ 615.0 $ 570.0 32.4 3.3 16.3 15.8 6.6 4.5 3.4 13.9 34.6 6.0 17.9 13.7 3.0 3.4 1.6 11.9 15.9 0.1 9.1 7.3 2.3 3.6 1.1 7.7 (0.9) (1.4) (6.6) 7.4 - ----------------------------------------------------------------------------------------------------------------------------------- $ 9.3 $ 0.1 $ 9.1 $ 7.3 $ 1.4 $ 2.2 $ 8.5 $ 7.7 - ----------------------------------------------------------------------------------------------------------------------------------- $ 1.07 $ .01 $ .66 $ .60 $ .19 $ .30 $ .09 $ .64 (.08) (.12) (.44) .61 - ----------------------------------------------------------------------------------------------------------------------------------- $ .63 $ .01 $ .66 $ .60 $ .11 $ .18 $ .70 $ .64 - ----------------------------------------------------------------------------------------------------------------------------------- $ 1.03 $ (.01) $ .65 $ .60 $ .19 $ .30 $ .09 $ .64 (.08) (.12) (.44) .61 - ----------------------------------------------------------------------------------------------------------------------------------- $ .59 $ (.01) $ .65 $ .60 $ .11 $ .18 $ .70 $ .64 - ----------------------------------------------------------------------------------------------------------------------------------- $ .30 $ .26 $ .26 $ .24 $ .23 $ .23 $ .20 $ .19 - ----------------------------------------------------------------------------------------------------------------------------------- $ 98.2 $ 116.8 $ 148.1 $ 51.9 $ 75.6 $ 56.2 $ 56.9 $ 48.6 445.0 404.4 323.9 197.9 212.8 211.3 192.2 172.1 7.8 15.8 5.9 6.5 42.8 67.9 64.0 47.7 149.2 146.8 148.2 62.9 57.5 47.4 47.6 42.8 - -----------------------------------------------------------------------------------------------------------------------------------
28 The Wackenhut Corporation and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular information in millions) Overview The Wackenhut Corporation, a Florida corporation, and subsidiaries (the "Company") is a major provider of global business services including providing security-related and other support services to business and government, developing and managing privatized correctional, detention and public sector mental health services facilities through Correctional Services or WHC, a 57% owned public subsidiary, and providing employee leasing and temporary staffing. Global Security Services includes security operations, facility management and fire and emergency medical services. WHC designs, constructs, finances and manages correctional, detention and mental health psychiatric facilities and performs separate correctional-related services, including prisoner transportation, home detention monitoring and correctional health care. The Company's flexible staffing business includes worksite employee leasing, temporary services, recruiting, risk management, payroll processing and human resource services. Fiscal year 2000 revenues of $2.5 billion when compared to fiscal year 1999 revenues of $2.2 billion grew 16 percent. Growth occurred in all three of the Company's service businesses - Security Services, Correction Services and Flexible Staffing Services. Comparing this year's Security Services' revenues with the prior year's revenues results in a 12 percent growth rate attributable to several new government and commercial contracts. In the fourth quarter 2000, the Company agreed to sell certain assets of its food service division, part of Security Services, with fiscal year 2000 revenues of approximately $69 million, and completed this sale in the first quarter 2001. In 2000 Correctional Services' revenues increased by 22 percent through the addition of revenue producing beds and two construction projects. Although domestic beds are estimated to increase in fiscal 2001, an anticipated decrease in construction revenues and Australian immigration activity is expected to reduce fiscal 2001 revenues slightly below the same level achieved in 2000. At present, the backlog of additional beds expected to be contracted by government agencies worldwide over approximately the next 18 months is 16,000. The Company's Flexible Staffing services business had a 19 percent growth rate during the 2000 fiscal year. Because of the restructuring of a large temporary staffing account, growth rates for fiscal year 2001 are expected to be lower than the preceding year. Flexible Staffing services continues to grow by expanding and developing existing offices. Improved profitability and margins in Security Services was more than offset by Correctional Services' decreased earnings in 2000. WHC's earnings were adversely affected by the recognition of an operating charge related to the deactivation of the Jena facility, additional expenses related to the operations at six facilities, and an increase in insurance expense. The Company's Chilean affiliate reported a loss over last year due to increased borrowing levels and further expansion in diversified businesses. Management has developed and implemented strategies to restructure its Chilean affiliate to improve operating performance. Correctional Services has put measures in place to improve its profitability. There can be no assurances that these strategies will be successful. Management continually monitors the operations of its subsidiaries and affiliates. If conditions were to arise that indicate an impairment of one of these investments, this could have an adverse impact on the Company's results of operations. During the fourth quarter of 2000, the Company adopted SEC Staff Accounting Bulletin No. 101 (SAB No. 101) - Revenue Recognition. Government contract award fees, previously accrued for based on the Company's performance and long-term historical experience of being awarded such fees, are now only recognized when formally awarded. SAB No. 101 applied retroactively for recognition of such award fees to the first quarter 2000, resulted in a decrease in 2000 of net income of $0.8 million. On a diluted basis, the cumulative effect of the change was $0.05 per share. On a basic and diluted basis for 1999 and 1998, the pro forma effect of the adoption of SAB No. 101 was $0.02 per share less than that reported for each of these years. Liquidity and Capital Resources The Company's principal sources of liquidity are from operations and borrowings under its credit facilities. Cash and cash equivalents totaled $60.8 million at December 31, 2000, compared to $67 million at January 2, 2000. Of this $60.8 million, $17.6 million collateralizes certain obligations of the Company's captive insurance subsidiary. In addition, cash and cash equivalents of WHC, which totaled $33.8 million at December 31, 2000, is generally not available to the Company in any form, including dividends or loans. The total amount available to the Company from its revolving credit and securitization facilities is $187.5 million. On November 13, 2000, the Company entered into a new three year credit facility increasing the Company's borrowing capacity from $95 million to $112.5 million. On January 26, 2001, the Company amended and restated its agreement to sell, on an ongoing basis, eligible receivables up to a maximum of $75 million. This agreement is subject to renewal on an annual basis. Additionally, at December 31, 2000, WHC had a $30 million multi-currency revolving credit facility, which includes $5 million for the issuance of letters of credit and twelve letters of guarantee totaling $13.3 million under separate international facilities. WHC also has a $220 million operating lease facility to acquire and develop new correctional facilities used in its business. At December 31, 2000, $142.7 million of this operating lease facility was utilized for properties in operation or under development. At December 31, 2000, the Company had borrowings of $0.5 million and $44.6 million of outstanding letters of credit against its revolving bank facility. The unused portion of the revolving line of credit was $67.4 million. Some of the Company's outstanding letters of credit are in support of international operations including support of the affiliate in Chile of $20 million. If adverse conditions were to arise at the Company's international operations, there could be an adverse impact on the Company's cash position. Under the accounts receivable securitization agreement, $67.5 million was outstanding at the end of fiscal 2000. Under the terms of the securitization facility, the Company retains substantially the same risk of credit loss as if receivables had not been sold under this facility. At December 31, 2000, $10 million was outstanding under WHC's revolving credit facility and six letters of credit were outstanding in an aggregate amount of $2.8 million. On January 7, 2000, WHC exercised its right to acquire the 276-bed Jena Juvenile Justice Center (the "Facility") in Jena, Louisiana from the trust of WHC's operating lease facility and, 29 simultaneously sold it to Correctional Properties Trust ("CPV"), a Maryland real estate investment trust. This Facility is being leased back to WHC under a 10 year noncancelable operating lease. On May 17, 2000, the Louisiana Department of Public Safety and Corrections removed all inmates from the Facility and WHC terminated the employment of the Facility staff. The cooperative agreement for such Facility was terminated June 30, 2000. WHC has recorded an operating charge of $3.8 million ($2.3 million after tax, or on a WHC diluted basis, $0.11 per share), that represents the losses expected to be incurred on the lease. WHC's management estimates that the Facility will remain inactive through the end of 2001. After taxes and minority interest expense, this charge reduced the Company's diluted earnings per share by $0.09. WHC is continuing its efforts to sublease or find an alternative use for the Facility. If WHC is unable to sublease or find an alternative use for the Facility, there could be an adverse impact on WHC's and the Company's financial positions and future results of operations. WHC's access to capital and ability to compete for future capital intensive projects is dependent upon, among other things, its ability to meet certain financial covenants included in the $220 million operating lease facility and $30 million revolving credit facility. A substantial decline in WHC's financial performance as a result of an increase in operational expenses relative to revenue could negatively impact WHC's ability to meet these covenants, and could therefore limit WHC's access to capital. With the completion of the remaining properties under development, WHC will have consumed its available capacity under the operating lease facility. WHC is exploring other financing alternatives for future project development such as the sale of facilities to government entities, the third-party sale and leaseback of facilities, and the issuance of taxable or nontaxable bonds by local government entities. Current cash requirements consist of amounts needed for capital expenditures, increased working capital needs resulting from corporate growth and business expansion, payment of liabilities incurred in the operation of the Company's business, the renovation or construction of correctional facilities by WHC, and possible acquisitions. The Company continues to expand its domestic and international businesses and to pursue major contracts, some of which may require substantial initial cash outlays, which are partially or fully recoverable over the original term of the contract. As a result of the Company's ongoing efforts to restructure its Chilean affiliate, additional cash commitments may become necessary. Management believes that cash on hand, cash provided by operating activities and available lines of credit will be adequate to support currently planned business expansion and various obligations incurred in the operation of the Company's business through 2001. Management will continue to review its capital/financial planning alternatives to ensure long-term financial capital access and availability. Proceeds from the sale of the Company's food services division will be used for general corporate purposes. Inflation Management believes that inflation has not had a material effect on the Company's results of operations during the past three fiscal years. Some of the Company's contracts include provisions for inflationary indexing. During a period of low unemployment, some business units may experience difficulty in finding qualified personnel. Since personnel costs represent the Company's largest expense, this could have a substantial adverse effect on the Company's results of operations in the future to the extent that wages and salaries increase at a faster rate than the per diem or fixed rate received by the Company for its services. Market Risk The Company is exposed to market risks, including changes in interest rates and currency exchange rates. These exposures primarily relate to outstanding balances under the revolving line of credit and securitization facilities and international investments. In addition, WHC is exposed to market risks arising from changes in interest rates with respect to its $220.0 million operating lease facility and the $30.0 million revolving credit facility. Based on the Company's interest rate and foreign exchange rate position at December 31, 2000, a hypothetical 100 basis point change in market interest rate or a 10% change in the historical currency rates would not have a material effect on the Company's financial position or results of operations over the next fiscal year. Results of Operations The following discussion should be read in conjunction with the Company's consolidated financial statements and notes thereto. The table on page 30 summarizes results of operations for the Company's three business segments by organizational group. Fiscal 2000 compared with Fiscal 1999 Revenues Fiscal 2000 consolidated revenues increased $352.8 million, or 16.4%, over fiscal 1999 due to increases in all business groups. The Company's growth in security services and in the staff leasing/temporary services were the largest contributors to the increase over fiscal 1999. Correctional Services also showed solid growth. Global Security Services Fiscal 2000 Global Security Services' revenues increased $127.2 million, or 12.2%, to $1,168.2 million from $1,041.0 million in fiscal 1999. North American market revenues increased $109.0 million, or 12.2%, to $1,001.3 million in fiscal 2000 from $892.3 million in fiscal 1999. Within the North American market, revenues from commercial accounts represented approximately 60% of total revenues of the group in fiscal 2000 versus 62% in fiscal 1999, and revenues from government/regulated industries represented the other portion. Commercial account revenues increased approximately 8% in fiscal 2000 over fiscal 1999, primarily due to a combination of higher billing rates and increases in billable hours as the Company continued to expand its base of national accounts and Custom Protection Officer(R) ("CPO") clients. Revenues of government and regulated industries increased 28% in fiscal 2000 over fiscal 1999, principally due to a new contract at the U.S. Department of Energy's Oak Ridge facility with revenues of approximately $50 million and several new security contracts in the nuclear industry. International market revenues increased $18.2 million, or 12.2%, to $166.9 million in fiscal 2000 from $148.7 million in fiscal 1999, primarily due to growth in the United Kingdom. Revenues in Latin America, principally in Peru, Guatemala, Costa Rica and Paraguay continued to increase mainly through expansion of the security-related business, diversification of services, and expansion of the client base of multi-national companies. Correctional Services Business Fiscal 2000 Correctional Services' revenues increased $97.1 million, or 22.1%, to $535.6 million in fiscal 2000 from $438.5 30 million in fiscal 1999. Of the increase in revenues in 2000 compared with 1999, $68.7 million is attributable to increased compensated resident days resulting from the opening of two new facilities in 2000 and increased compensated resident days at six facilities, $27.8 million is due to project revenues for the development of a hospital and a prison, and the balance represents facilities open during all of both periods. WHC expects to open two facilities in the first quarter 2001. When opening a new facility, WHC incurs significant costs for payroll and training of new personnel. However, WHC does not receive occupants until the contracting agency has certified the facility as being complete and ready for use. WHC believes it will meet all the necessary requirements and intake inmates in accordance with its planned schedule. However, there can be no assurances that the contracting agency will certify the facility and as a result that the facility will open as scheduled. Any delays in opening could significantly impact the Company's first quarter 2001 results of operations. Average facility occupancy in domestic facilities remained constant at 97.4% of capacity for 2000 and 1999. Average facility occupancy in Australian facilities increased to 99.1% of capacity in 2000 compared to 96.6% in 1999. Total compensated resident days increased to 10.6 million in fiscal 2000 from 9.6 million in fiscal 1999. Flexible Staffing Services Business Flexible Staffing Services' revenues increased $128.5 million, or 19.1%, to $801.3 million in fiscal 2000 from $672.8 million in fiscal 1999 and is attributable to internal growth. Worksite employees grew to 35,900 at the end of 2000 from 29,500 at the end of 1999. Temporary staffing hours were approximately 3.6 million in 2000 compared to 3.3 million in 1999. Operating Income Fiscal 2000 consolidated operating income was $34.9 million versus $37.9 million in fiscal 1999. The operating margin for fiscal 2000 decreased to 1.4% from 1.8% in 1999. This decrease is primarily related to WHC due to: [1] a $3.8 million operating charge related to the deactivation of the Jena, Louisiana facility, [2] additional expenses related to operations at six facilities, and [3] an increase in insurance expense. Although WHC has put strategies in place to improve profitability, there can be no assurances these strategies will be successful. This decrease in operating margin was partially offset by improved profitability and margins in Security Services. Global Security Services Fiscal 2000 Security Services' business operating income of $33.4 million increased $5.7 million, or 20.6%, from $27.7 million in fiscal 1999. Margins increased to 2.9% in 2000 from 2.7% in 1999. Fiscal 2000 operating income of $30.1 million in the North American market increased $5.4 million, or 21.9%, from $24.7 million in fiscal 1999. This increase can be attributed mainly to increased revenue growth from commercial and government-regulated security services net of decreased profits in food services. North American market operating income as a percentage of revenues increased 20 basis points in fiscal 2000 compared to fiscal 1999 due to an increase in billing rates. Security Services fiscal 2000 operating income in the international market increased $0.3 million, or 10.0%, to $3.3 million from $3.0 million in 1999 with operating margins remaining the same at 2.0%. Improved operations of subsidiaries in the United Kingdom and Africa contributed to this improvement. Correctional Services Business Fiscal 2000 operating income from Correctional Services decreased $7.1 million, or 27.4%, to $18.9 million from $26.0 million in fiscal 1999. This decrease is due to WHC reporting a third quarter operating charge of $3.8 million related to the deactivation of the Jena, Louisiana facility. WHC estimates this facility will remain inactive through the end of 2001. There were also additional expenses related to the operations at six facilities in the United States. WHC has developed strategies to improve
2000 1999 1998* ----------------------------------------------------------------------------------- $ % $ % $ % ------------- ------------- ------------- ------------- ------------- ------------- REVENUES (a) GLOBAL SECURITY SERVICES $ 1,168.2 46.6 $1,041.0 48.3 $ 947.2 54.0 CORRECTIONAL SERVICES 535.6 21.4 438.5 20.4 312.8 17.8 FLEXIBLE STAFFING SERVICES 801.3 32.0 672.8 31.3 495.1 28.2 ----------------------------------------------------------------------------------- CONSOLIDATED REVENUES $ 2,505.1 100.0 $2,152.3 100.0 $ 1,755.1 100.0 ----------------------------------------------------------------------------------- OPERATING INCOME (b) GLOBAL SECURITY SERVICES $ 33.4 2.9 $ 27.7 2.7 $ 24.2 2.6 CORRECTIONAL SERVICES 18.9 3.5 26.0 5.9 22.5 7.2 FLEXIBLE STAFFING SERVICES 3.7 0.5 3.5 0.5 2.7 0.5 UNALLOCATED CORPORATE EXPENSE ( 21.1) ( 0.8) ( 19.3) (0.9) (17.0) (1.0) ------------- ------------- ------------- CONSOLIDATED OPERATING INCOME $ 34.9 1.4 $ 37.9 1.8 $ 32.4 1.8 ------------- ------------- ------------- - ----------------------------------------------------------------------------------------------------------------------
(a) Represents percent of total revenues. (b) Represents percent of respective business related revenues. * 53 weeks 31 the operational performance of these facilities, however, there can be no assurances that these strategies will be successful. Additionally, WHC has informed a state board of corrections that it would not consider a third extension of its management contract for two correctional facilities, both owned by the state, under the contracts' current terms and conditions which expire on June 30, 2001. WHC does not expect the expiration of the current management contracts to have any material impact on the Company's financial guidance for fiscal 2001. However, there can be no assurance that WHC will be able to exit these facilities without negative financial impact. In addition, there has been an increase in insurance expense. WHC continues to incur additional insurance expense which could have an adverse impact on WHC's and the Company's future financial results of operations. Although WHC is developing a strategy to improve the management of loss claims incurred, there can be no assurances that this strategy will be successful. Additional payroll costs were incurred related to unanticipated wage increases due to tight labor markets in 2000. WHC also experienced increased medical costs for offsite hospitalizations and treatment of serious illnesses of certain residents, which were beyond the treatment capabilities of WHC's facilities. Operating margin as a percentage of revenues was 3.5% in fiscal 2000, compared to 5.9% in fiscal 1999. Flexible Staffing Services Business Flexible Staffing Services' operating income of $3.7 million increased $0.2 million, or 5.7%, from $3.5 million in fiscal 1999. The operating income of the Flexible Staffing Services as a percentage of total Flexible Staffing revenues was 0.5% for fiscal 2000 and fiscal 1999. Corporate Expenses Unallocated corporate general and administrative expenses increased to $21.1 million from $19.3 million in 1999. As a percentage of consolidated revenues, unallocated corporate general and administrative expenses did not significantly change. EBITDA Fiscal 2000 EBITDA, defined as earnings before interest expense, income taxes, depreciation and amortization was $60.8 million. Fiscal 1999 EBIDTA was also $60.8 million. Other Income (Expense) Interest and investment income decreased $2.1 million (29.2%) in fiscal 2000 over fiscal 1999 primarily due to WHC recognizing $2.0 million more in gains from the sale of its loans to overseas affiliates in 1999. Interest expense increased $1.5 million to $6.7 million in fiscal 2000 from $5.2 million in 1999. The increase in interest expense is primarily attributable to increases in the average outstanding balances for securitized accounts receivable and the revolving credit facility. Minority Interest Minority interest (net of income taxes) decreased to $8.2 million in fiscal 2000 from $10.9 million in fiscal 1999, reflecting principally the decrease of $2.5 million in minority interest pertaining to decreased earnings of WHC. Equity in Income of Affiliates Equity in income of affiliates (net of income taxes) decreased $0.7 million, or 9.9%, to $5.8 million in fiscal 2000 from $6.5 million in fiscal 1999. Equity income of the Chilean affiliate decreased by $1.8 million after tax due to a decrease in operating income and an increase in interest expense. Management has developed strategies to restructure its Chilean affiliate and to improve operating performance; however, there can be no assurances that these strategies will be successful. This decrease is partially offset by improved performance of WHC's U.K. affiliate due to the expansion of services and a full year of operations at H.M. Prison Kilmarnock which opened in March 1999, the Hassockfield Secure Training Centre in Medomsley England, which opened in September 1999, and H.M. Prison & Youth Offender Institution Ashfield in Pucklechurch, England, which opened in November 1999. Income Before Cumulative Effect of Change in Accounting Principle Income before cumulative effect of change in accounting principle decreased $2.0 million to $17.6 million in fiscal 2000, compared to $19.6 million in fiscal 1999. Diluted earnings per share before the cumulative effect of change in accounting principle was $1.15 in fiscal 2000, compared to $1.28 in fiscal 1999. Cumulative Effect of Change in Accounting Principle In fiscal 2000, the Company adopted SAB No. 101. The adoption of SAB No. 101 resulted in a one-time charge in 2000 of $0.8 million, net of income taxes. Net Income Net income was $16.8 million for fiscal 2000, or $1.12 basic earnings per share, as compared to $19.6 million, or $1.31 per share for fiscal 1999. Earnings per share on a diluted basis was $1.10 in fiscal 2000 compared to $1.28 for fiscal 1999. Goodwill amortization, after tax, amounted to $1.5 million for fiscal 2000. Excluding goodwill amortization, after tax, basic and diluted earnings per share would have been $0.09 and $0.10 more, respectively. Fiscal 1999 compared with Fiscal 1998 Revenues Fiscal 1999 consolidated revenues increased $397.2 million, or 23%, over fiscal 1998 due to increases in all business groups. The Company's growth in the staff leasing/temporary services and the correctional business were the largest contributors to the increase over fiscal 1998. Security services also showed solid growth. Global Security Services Business Fiscal 1999 Global Security Services' revenues increased $93.8 million, or 10%, to $1,041.0 million from $947.2 million in fiscal 1998. North American market revenues increased $82.3 million, or 10%, to $892.3 million in fiscal 1999 from $810.0 million in fiscal 1998. Within the North American market, revenues from commercial accounts represented approximately 62% of total revenues of the group in fiscal 1999 versus 60% in fiscal 1998, and revenues from government/regulated industries represented the other portion. Commercial account revenues increased approximately 15% in fiscal 1999 over fiscal 1998, primarily due to a combination of higher billing rates and increases in billable hours as the Company continued to expand its base of national accounts and Custom Protection Officer(R) ("CPO") clients. Revenues of government and regulated industries increased 3% in fiscal 1999 over fiscal 1998. International market revenues increased $11.5 million, or 8%, to $148.7 million in fiscal 1999 32 from $137.2 million in fiscal 1998. Revenues in Latin America, principally in Venezuela, Guatemala, Peru, Uruguay and Costa Rica continued to increase mainly through expansion of the security-related business, diversification of services, and expansion of the client base of multi-national companies. In addition, a Mexican subsidiary, previously an affiliate, had revenues in 1999 of $4.3 million. Correctional Services Business Fiscal 1999 Correctional Services' revenues increased $125.7 million, or 40%, to $438.5 million in fiscal 1999 from $312.8 million in fiscal 1998. Of the increase in revenues in 1999 compared with 1998, $110.6 million is attributable to increased compensated resident days resulting from the opening of six new facilities in 1999 and increased compensated resident days at ten facilities that opened in 1998, $8.9 million is due to project revenues for the development of a hospital, and the balance represents facilities open during all of both periods. Average facility occupancy in domestic facilities increased slightly to 97.4% of capacity in 1999 compared to 95.4% in 1998. Average facility occupancy in Australian facilities decreased slightly to 96.6% of capacity in 1999 compared to 98.2% in 1998. Total compensated resident days increased to 9.6 million in fiscal 1999 from 7.7 million in fiscal 1998. Flexible Staffing Services Business The significant growth in the Flexible Staffing Services business has resulted from both internal growth and acquisitions. Flexible Staffing Services' 1999 revenues of $672.8 million reflect the acquisition, in November 1998, of Sharp and Advantage Temporary Staffing Companies and were 36% above last year's revenues of $495.1 million. Worksite employees grew to 29,500 at the end of 1999 from 25,000 at the end of 1998. Including Sharp and Advantage, temporary staffing hours were approximately 3.3 million in 1999 compared to 2.2 million in 1998. Operating Income Fiscal 1999 consolidated operating income was $37.9 million versus $32.4 million in fiscal 1998. The operating margin for fiscal 1999 remained flat at 1.8%. Although Security Services' operating margin improved, this improvement was offset by a decline in WHC's operating margin and an increase in information technology costs related to the roll-out of new enterprise-wide systems. WHC's decline was due to the following factors: [1] lease payments to CPV for a full year in 1999, [2] an increase in expenses related to the construction of the South Florida State Hospital, and [3] additional expenses related to operations at seven facilities. Global Security Services Business Fiscal 1999 Security Services business operating income of $27.7 million increased $3.5 million, or 14%, from $24.2 million in fiscal 1998. In the North American market fiscal 1999 operating income of $24.7 million increased $2.5 million, or 11%, from $22.2 million in fiscal 1998. This increase can be attributed mainly to increased revenue growth from commercial and government-regulated security services net of decreased profit margins in food services. These increases were offset by increases in administrative and corporate costs. The increase in administrative and corporate expenses as compared to fiscal 1998 was due to increases in information technology costs as the Company continued to roll out new enterprise wide systems. Despite the higher costs associated with information technology, the North American market operating income as a percentage of revenues increased slightly in fiscal 1999 compared to fiscal 1998. The 1999 operating income in the international market increased $1.0 million, or 50%, to $3.0 million from $2.0 million in 1998 with operating margins improving to 2.0% in 1999 versus 1.5% in 1998. Improved operations of subsidiaries in Africa and Europe and growth in the security business contributed to this improvement. Correctional Services Business Fiscal 1999 operating income from Correctional Services increased $3.5 million, or 16%, to $26.0 million from $22.5 million in fiscal 1998. The increase is due principally to the increased profits from the six new facilities opened in fiscal 1999 and ten facilities opened in 1998. Operating margin as a percentage of revenues was 5.9% in fiscal 1999, compared to 7.2% in fiscal 1998. The decrease in operating margin was due partially to lease payments to CPV of $20.6 million offset by the amortization of deferred revenues of $1.7 million and expenses related to the development of the South Florida State Hospital. Additional expenses were also incurred related to operations at seven facilities in the United States. Flexible Staffing Services Business Flexible Staffing Services operating income of $3.5 million increased $0.8 million, or 30%, from $2.7 million in fiscal 1998. The operating income of the Flexible Staffing Services as a percentage of total Flexible Staffing revenues was 0.5% for fiscal 1999 and fiscal 1998. Corporate Expenses and Information Systems Unallocated corporate general and administrative expenses increased 14% to $19.3 million from $17.0 million in 1998. The increase reflects the continuing increase in information technology costs related to the rollout of new enterprise-wide systems and payroll-related costs attributable to corporate staff. However, as a percentage of consolidated revenues, unallocated corporate general and administrative expenses decreased to 0.9% from 1.0% in 1998. EBITDA Fiscal 1999 EBITDA, defined as earnings before interest expense, income taxes, depreciation and amortization of $60.8 million increased $10.9 million, or 22%, from $49.9 million in fiscal 1998. As a percentage of revenues, EBITDA remained flat at 2.8%. Other Income (Expense) Interest and investment income increased $2.2 million (44%) in fiscal 1999 over fiscal 1998 primarily due to WHC recognizing a gain of $2.6 million from the sale of approximately one-half of its loans to overseas affiliates. This increase was more than offset by an increase in interest expense of $2.4 million to $5.2 million in fiscal 1999 from $2.8 million in 1998. The increase in interest expense is primarily attributable to increases in the average outstanding balances for securitized accounts receivable and the revolving credit facility. Minority Interest Minority interest (net of income taxes) increased to $10.9 million in fiscal 1999 from $8.5 million in fiscal 1998, reflecting principally the increase of $2.0 million in minority interest pertaining to increased earnings of WHC. Minority interest in international subsidiaries increased $0.4 million in fiscal 1999 over fiscal 1998. 33 Equity in Income of Affiliates Equity in income of foreign affiliates (net of income taxes) increased $3.0 million, or 86%, to $6.5 million in fiscal 1999 from $3.5 million in fiscal 1998. This increase relates to the Space Gateway joint venture in the North American Market and improved performances overseas, primarily in the U.K. due to the commencement of home monitoring contracts in January 1999, the opening of a prison in March 1999 and a juvenile detention center in September 1999. Income Before Cumulative Effect of Change in Accounting Principle Income before cumulative effect of change in accounting principle increased $3.7 million to $19.6 million in fiscal 1999, compared to $15.9 million in fiscal 1998. Diluted earnings per share before the cumulative effect of change in accounting principle was $1.28 in fiscal 1999, compared to $1.03 in fiscal 1998. Cumulative Effect of Change in Accounting Principle In fiscal 1998, the Company adopted SOP 98-5. The adoption of SOP 98-5 resulted in 1998 a one-time charge of $6.6 million, net of income taxes. Net Income Net income was $19.6 million for fiscal 1999, or $1.31 basic earnings per share, as compared to $9.3 million, or $0.63 per share for fiscal 1998. Earnings per share on a diluted basis was $1.28 in fiscal 1999 compared to $0.59 for fiscal 1998. Goodwill amortization, after tax, amounted to $1.2 million for fiscal 1999. Excluding goodwill amortization, after tax, basic and diluted earnings per share would have been $0.08 and $0.07 more, respectively. 34 The Wackenhut Corporation and Subsidiaries Consolidated Statements of Income (in millions except per share data) FISCAL YEARS ENDED DECEMBER 31, 2000, JANUARY 2, 2000, and JANUARY 3, 1999
2000 1999 1998* - --------------------------------------------------------------------------- ------------------ ------------------ ----------------- REVENUES $ 2,505.1 $ 2,152.3 $ 1,755.1 ------------------ ------------------ ----------------- OPERATING EXPENSES Payroll and related taxes 1,950.4 1,688.5 1,359.5 Other operating expenses 493.9 403.0 345.7 Depreciation and amortization 25.9 22.9 17.5 ------------------ ------------------ ----------------- OPERATING INCOME 34.9 37.9 32.4 ------------------ ------------------ ----------------- OTHER INCOME (EXPENSE) Interest and investment income 5.1 7.2 5.0 Interest expense (6.7) (5.2) (2.8) ------------------ ------------------ ----------------- INCOME BEFORE INCOME TAXES 33.3 39.9 34.6 INCOME TAXES (13.3) (15.9) (13.7) MINORITY INTEREST, NET OF INCOME TAXES OF $5.5, $7.2 AND $5.5 (8.2) (10.9) (8.5) EQUITY IN INCOME OF AFFILIATES, NET OF INCOME TAXES OF $3.9, $4.3 AND $2.3 5.8 6.5 3.5 ------------------ ------------------ ----------------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 17.6 19.6 15.9 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET (Note 2) (0.8) - (6.6) ------------------ ------------------ ----------------- NET INCOME $ 16.8 $ 19.6 $ 9.3 ------------------ ------------------ ----------------- EARNINGS (LOSS) PER SHARE: Basic Income before cumulative effect of change in accounting principle $ 1.17 $ 1.31 $ 1.07 Cumulative effect of change in accounting principle (0.05) - (0.44) ------------------ ------------------ ----------------- Net income $ 1.12 $ 1.31 $ 0.63 ------------------ ------------------ ----------------- Diluted Income before cumulative effect of change in accounting principle $ 1.15 $ 1.28 $ 1.03 Cumulative effect of change in accounting principle (0.05) - (0.44) ------------------ ------------------ ----------------- Net income $ 1.10 $ 1.28 $ 0.59 ------------------ ------------------ ----------------- BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 15.0 14.9 14.8 ------------------ ------------------ ----------------- DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 15.1 15.1 15.1 - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. * 53 weeks 35 The Wackenhut Corporation and Subsidiaries Consolidated Balance Sheets (in millions except share data) DECEMBER 31, 2000 and JANUARY 2, 2000
2000 1999 - ---------------------------------------------------------------------------------------------- ------------------ ----------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 60.8 $ 67.0 Accounts receivable, net 218.4 182.3 Inventories 11.5 14.7 Deferred taxes, net 12.1 10.5 Prepaid expenses 10.6 12.5 Other 15.1 12.1 ------------------ ----------------- 328.5 299.1 MARKETABLE SECURITIES 37.3 28.8 PROPERTY AND EQUIPMENT, 118.2 96.1 Less: accumulated depreciation and amortization (38.8) (27.9) ------------------ ----------------- 79.4 68.2 DEFERRED TAXES, net 7.5 9.9 OTHER ASSETS Goodwill, net 50.1 52.3 Other intangibles, net 14.1 16.7 Investment in and advances to affiliates 44.9 37.3 Other 8.5 8.7 ------------------ ----------------- 117.6 115.0 ------------------ ----------------- $ 570.3 $ 521.0 - ---------------------------------------------------------------------------------------------- ------------------ ----------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable and current portion of long-term debt $ 5.1 $ 4.7 Accounts payable 36.9 36.5 Accrued payroll and related taxes 90.3 77.1 Accrued expenses 65.6 56.8 ------------------ ----------------- 197.9 175.1 RESERVES FOR INSURANCE LOSSES 92.7 77.5 LONG-TERM DEBT 11.4 16.5 DEFERRED REVENUE 12.8 15.2 OTHER 19.6 17.4 COMMITMENTS AND CONTINGENCIES (notes 3, 9 and 17) MINORITY INTEREST 58.1 55.4 SHAREHOLDERS' EQUITY Preferred stock, 10 million shares authorized, none outstanding - - Common stock, $.10 par value, 50 million shares authorized Series A, 3.9 million issued and outstanding 0.4 0.4 Series B, 11.1 million issued and outstanding 1.1 1.1 Additional paid-in capital 121.9 121.7 Retained earnings 67.8 51.0 Accumulated other comprehensive loss (13.4) (10.3) ------------------ ----------------- 177.8 163.9 ------------------ ----------------- $ 570.3 $ 521.0 - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 36 The Wackenhut Corporation and Subsidiaries Consolidated Statements of Cash Flows (in millions) FISCAL YEARS ENDED DECEMBER 31, 2000, JANUARY 2, 2000 and JANUARY 3, 1999
2000 1999 1998* - ----------------------------------------------------------------------------- ------------------ ------------------ ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 16.8 $ 19.6 $ 9.3 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Cumulative effect of accounting changes 0.8 - 6.6 Depreciation and amortization expense 25.9 22.9 17.5 Deferred taxes 0.8 1.1 (16.1) Provision for bad debts 3.2 0.3 3.0 Equity income, net of dividends received (7.2) (8.1) (5.7) Minority interests in net income 13.7 18.1 14.0 Tax benefit from exercise of stock options - 0.4 0.3 Other (1.5) 0.5 (0.7) Changes in operating assets and liabilities, net of acquisitions and divestitures - (Increase) Decrease in operating assets: Accounts receivable (38.4) (31.2) (50.6) Inventories (4.7) (8.2) (11.0) Prepaid expenses 1.9 (5.4) 2.0 Other current assets (3.1) 0.1 (5.0) Other (0.5) (4.8) (5.8) Increase (Decrease) in operating liabilities: Accounts payable and accrued expenses 14.8 5.1 13.5 Accrued payroll and related taxes 13.2 7.2 17.6 Reserve for insurance losses 15.2 20.4 9.7 Other (0.2) (0.7) 1.2 ------------------ ------------------ ---------------- Net Cash Provided By (Used In) Operating Activities 50.7 37.3 (0.2) ------------------ ------------------ ---------------- CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from sale of prison facilities to CPV (see note 10) - 22.3 41.8 Payments for acquisitions, net of cash acquired (10.3) (4.7) (8.1) Net investment in and advances (to) from affiliates and joint ventures - 7.4 (10.9) Capital expenditures (24.3) (44.0) (33.9) Sales of marketable securities 14.3 6.2 17.4 Purchases of marketable securities (20.1) (19.5) (28.1) Non-current assets - (1.5) (7.7) ------------------ ------------------ ---------------- Net Cash Used In Investing Activities (40.4) (33.8) (29.5) ------------------ ------------------ ---------------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from exercise of stock options of subsidiary - 0.2 1.8 Net proceeds from exercise of stock options - 1.1 0.9 Proceeds from issuance of debt 369.3 315.0 294.5 Payments on debt (374.0) (301.6) (305.7) Dividends paid - (2.2) (4.4) Net cash settlements from sales of accounts receivable (2.0) 16.5 53.0 Shares repurchased and retired, including subsidiary's (4.9) (8.0) (10.8) ------------------ ------------------ ---------------- Net Cash (Used In) Provided by Financing Activities (11.6) 21.0 29.3 ------------------ ------------------ ---------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (4.9) (1.0) (1.3) ------------------ ------------------ ---------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6.2) 23.5 (1.7) CASH AND CASH EQUIVALENTS, beginning of year 67.0 43.5 45.2 ------------------ ------------------ ---------------- CASH AND CASH EQUIVALENTS, end of year $ 60.8 $ 67.0 $ 43.5 ------------------ ------------------ ---------------- SUPPLEMENTAL DISCLOSURES: Cash paid during the year for - interest $ 8.0 $ 6.3 $ 2.8 - income taxes 8.6 12.6 18.4 - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. * 53 weeks 37 The Wackenhut Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity and Comprehensive Income (in millions except share data in thousands) FISCAL YEARS ENDED DECEMBER 31, 2000, JANUARY 2, 2000, and JANUARY 3, 1999
Common Stock Par Value $.10 ------------------------------------- Unrealized Series A Series B Addi- Gain Total ------------------ ----------------- tional Foreign (Loss) Share- Number Number Paid-in Retained Currency on holders' of Shares Amount of Shares Amount Capital Earnings Translation Securities Equity - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 28, 1997 3,855 $ 0.4 10,998 $ 1.1 $ 124.1 $ 27.6 $ (6.4) $ - $146.8 Proceeds from the exercise of stock options 79 0.9 0.9 Tax benefit related to employee stock options 0.3 0.3 Subsidiary's exercise of stock options 3.9 3.9 Subsidiary's shares repurchased (4.8) (4.8) Shares repurchased and retired (109) (1.9) (1.9) Dividends (4.4) (4.4) Comprehensive income (loss): Net Income 9.3 Foreign currency translation adjustments, net of income tax benefits of $0.6 (0.9) Total comprehensive income 8.4 --------------------------------------------------------------------------------------- BALANCE, JANUARY 3, 1999 3,855 0.4 10,968 1.1 122.5 32.5 (7.3) 149.2 Proceeds from the exercise of stock options 110 1.1 1.1 Tax benefit related to employee stock options 0.4 0.4 Issuance of Performance Shares 38 0.6 0.6 Subsidiary's exercise of stock options 1.7 1.7 Subsidiary's shares repurchased (4.5) (4.5) Shares repurchased and retired (5) (0.1) (0.1) Dividends (1.1) (1.1) Comprehensive income (loss): Net Income 19.6 Foreign currency translation adjustments, net of income tax benefits of $0.7 (1.1) Unrealized loss on marketable securities, net of income tax benefits of $1.0 (1.9) Total comprehensive income 16.6 --------------------------------------------------------------------------------------- BALANCE, JANUARY 2, 2000 3,855 0.4 11,111 1.1 121.7 51.0 (8.4) (1.9) 163.9 Equity increase from affiliate stock offering 0.9 0.9 Issuance of Performance Shares 33 0.5 0.5 Subsidiary's shares repurchased (1.2) (1.2) Comprehensive income (loss): Net Income 16.8 Foreign currency translation adjustments, net of income tax benefits of $3.3 (4.9) Unrealized gain on marketable securities, net of income taxes of $0.9 1.8 Total comprehensive income 13.7 --------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2000 3,855 $ 0.4 11,144 $ 1.1 $ 121.9 $ 67.8 $ (13.3) $(0.1) $177.8 - ----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 38 The Wackenhut Corporation and Subsidiaries Notes to Consolidated Financial Statements (Tabular dollar information in millions except share and per share data) For the Fiscal Years Ended December 31, 2000, January 2, 2000, and January 3, 1999 (1) General The Wackenhut Corporation (the "Company") is a major provider of global business services including providing security-related and other support services to business and government, developing and managing privatized correctional, detention and public sector mental health services facilities through Wackenhut Corrections Corporation ("WHC") a 57% owned public subsidiary, and providing worksite employees and temporary staffing. (2) Summary of Significant Accounting Policies Fiscal Year The Company's fiscal year ends on the Sunday closest to the calendar year end. Fiscal years 2000 and 1999 each included 52 weeks. Fiscal year 1998 included 53 weeks. Basis of Financial Statement Presentation The consolidated financial statements include the accounts of all wholly owned and majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Partially owned equity affiliates are accounted for under the equity method. Certain prior year amounts have been reclassified to conform to the current year's presentation. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, the accounting for doubtful accounts, depreciation of fixed assets, amortization of intangibles, and contingencies. Actual results could differ from those estimates. Fair Value of Financial Instruments The carrying value of cash and cash equivalents, accounts receivable, other receivables, notes payable, accounts payable and long-term debt approximates fair value. Accounts receivable are reported net of allowances of $4.8 million and $5.2 million at December 31, 2000 and January 2, 2000, respectively. Marketable Securities Marketable securities are classified as available-for-sale. Realized gains and losses from the sale of securities are based on specific identification of the security. Unrealized gains and losses on marketable securities are included in shareholders' equity as a component of accumulated other comprehensive income (loss). Cash and Cash Equivalents The Company classifies as cash equivalents all interest-bearing deposits or investments with original maturities of three months or less. Cash of the Company's captive insurance subsidiary collateralizes certain obligations. Cash and cash equivalents of WHC is generally not available to the Company in any form, including dividends or loans. Inventories Food, alarm systems and electronics inventories are carried at the lower of cost or market, on a first-in first-out basis. Uniform inventories are carried at amortized cost and are amortized over a period of eighteen months. A provision has been made to reduce obsolete or excess inventories to market. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of related assets. Accelerated methods of depreciation are generally used for income tax purposes. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. Impairment of Long-lived Assets Long-lived assets including certain identifiable intangibles, and the goodwill related to those assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset in question may not be recoverable including, but not limited to, a deterioration of profits for a business segment that has long-lived assets, and when other changes occur which might impair recovery of long-lived assets. Management has reviewed the Company's long-lived assets and has determined that there are no events requiring impairment loss recognition. The method used to determine the existence of an impairment would be undiscounted operating cash flows estimated over the remaining amortization period for the related long-lived assets. Impairment is measured as the difference between fair value and unamortized cost at the date impairment is determined. Goodwill and Other Intangibles Goodwill represents the cost of an acquired enterprise in excess of the fair value of the net tangible and identifiable intangible assets acquired. Other intangibles include the fair market value of contracts purchased in acquisitions. Goodwill and contract values are amortized on a straight-line basis over 10 to 30 years. Reserves for Insurance Losses The Company's wholly owned casualty insurance subsidiary reinsures a portion of the Company's workers' compensation, general and automobile liability insurance. Incurred losses are recorded as reported. Provision is made to cover losses incurred but not reported. Loss reserves are computed based on actuarial studies and, in the opinion of management, are adequate. 39 Deferred Revenue Deferred revenue primarily represents the unamortized net profit on the sale of properties by WHC to Correctional Properties Trust ("CPV"), a Maryland real estate investment trust. WHC leases these properties back from CPV. Deferred revenue is being amortized over the lives of the leases and is recognized in income as a reduction of rental expense. Foreign Currency Translation The Company's foreign operations use the local currency as their functional currency. Assets and liabilities of the operations (except for countries with highly inflationary economies) are translated at the exchange rates in effect on the balance sheet date. Equity is translated using historical exchange rates. Income statement items (except for countries with highly inflationary economies) are translated at the average exchange rates for the reporting period. The impact of currency fluctuations on these transactions is included in shareholders' equity as a component of accumulated other comprehensive income (loss) except for intercompany accounts which are included in gains (losses). The financial statements of subsidiaries located in highly inflationary economies are remeasured as if the functional currency were the U.S. dollar. The remeasurement of these local currencies into U.S. dollars creates translation adjustments which are included in the consolidated statements of income. Foreign exchange gains or (losses) were ($0.5) million, $0.2 million, and ($1.5) million for 2000, 1999 and 1998, respectively. Revenues Project development and design revenues are recognized as earned on a percentage of completion basis measured by the percentage of costs incurred to date as compared to estimated total cost for each contract. This method is used because management considers costs incurred to date to be the best available measure of progress on these contracts. Provisions for estimated losses on uncompleted contracts are made in the period in which the Company determines that such losses are probable. Contract costs include all direct material and labor costs and those indirect costs related to contract performance. Changes in job performance, job conditions, estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Revenues earned from services are recognized when services are provided. During the fourth quarter 2000, the Company adopted SAB No. 101 which resulted in government contract award fees, previously accrued for based on the Company's performance and long-term historical experience of being awarded such fees, being recognized only when awarded. Income Taxes Deferred income taxes are determined on the estimated future tax effects of differences between the financial reporting and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the asset or liability from year to year. Valuations allowances are recorded related to deferred tax assets if their realization does not meet the "not more likely than" criteria detailed in Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The Company and WHC file separate tax returns. Minority Interest The minority interest expense represents principally the separate public ownership in WHC, as listed on the New York Stock Exchange, and the ownership by foreign investors in several international subsidiaries. SEC Staff Accounting Bulletin: No. 51 (SAB No. 51) In connection with the initial public offering of our Greek affiliate, the Company adopted SEC Staff Accounting Bulletin: No. 51 (SAB No. 51) - Accounting for Sale of Stock by a Subsidiary, which provides guidance related to gain recognition upon public sale of shares of a subsidiary. SAB No. 51 allows for the recording of gains from the sale of newly issued shares of a subsidiary directly to shareholders' equity and is reflected in additional paid-in capital. SEC Staff Accounting Bulletin: No. 101 (SAB No. 101) During the fourth quarter of 2000, the Company adopted SEC Staff Accounting Bulletin: No. 101 (SAB No. 101) - Revenue Recognition. Government contract award fees, previously accrued for based on the Company's performance and long-term experience of being awarded such fees, are now only recognized when formally awarded. SAB No. 101 applied retroactively to the first quarter of 2000, resulted in a one-time charge in 2000 of $0.8 million, net of income taxes. On a diluted basis, the cumulative effect of change in accounting principle was $0.05 per share during 2000. On a basic and diluted basis for 1999 and 1998, the pro forma effect was $0.02 per share less than that reported for each of these years. AICPA Statement of Position 98-5 (SOP 98-5) During the fourth quarter of 1998, the Company adopted AICPA Statement of Position 98-5 (SOP 98-5), "Accounting for Costs of Start-up Activities." SOP 98-5 requires the expensing of start-up costs, defined as pre-opening, pre-operating and pre-contract type costs. The adoption of SOP 98-5, which was applied retroactively to the first quarter of 1998, resulted in a one-time charge in 1998 of $6.6 million, net of income taxes and after deducting the portion applicable to minority shareholders of WHC. On a diluted basis, the cumulative effect of change in accounting principle was $0.44 per share in 1998. Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding. In the computation of diluted earnings per share, net income is reduced by the dilutive effect of subsidiaries' stock options and dividing the result by the weighted-average number of common shares outstanding of all potential dilutive common stock equivalents except in cases where the effect would be anti-dilutive. Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income" requires companies to report all changes in equity in a financial statement for the period in which they are recognized, except those resulting from investment by owners and distributions to owners. The Company has chosen to disclose Comprehensive Income, which encompasses net income and foreign currency translation adjustments, net of tax, in the Consolidated 40 Statements of Shareholders' Equity and Comprehensive Income. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, trade accounts receivable and financial instruments used in hedging activities. The Company's cash management and investment policies restrict investments to short and medium term securities, and the Company performs periodic evaluations of the credit standing of the financial institutions with which it deals. The Company performs ongoing credit evaluations of its customers' financial condition and generally does not require collateral. The Company maintains reserves for potential credit losses, and such losses traditionally have been within management's expectations and have not been material in any year. As of December 31, 2000 and January 2, 2000, management believes the Company had no significant concentrations of credit risk. Accounting Pronouncements The Company will adopt SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and 138, on January 1, 2001. The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. WHC's 50% owned equity foreign affiliate has entered into interest rate swaps to fix the interest rate it receives on its variable rate credit facility. WHC's management has determined the swaps to be effective cash flow hedges. Accordingly, WHC will record its share of the affiliate's change in other comprehensive income as a result of applying SFAS 133. The adoption of SFAS 133 will result in a $12 million reduction in shareholders equity in WHC's financial statements for the quarter ended April 1, 2001, and approximately $6.9 million in the Company's financial statements for the same period. In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB Opinion No. 25". FIN 44 clarifies the application of APB Opinion No. 25 and, among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25: the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. The adoption of FIN 44 did not have an impact on the Company's financial position, results of operations or cash flow. (3) Acquisitions In November 1998, the Company purchased certain assets and assumed certain liabilities of Sharp Services, Inc. and Advantage Temporary Services, Inc., for an initial payment of $8.1 million in cash, with a contingent cash payment, payable no later than May 2001, subject to adjustments based on actual workers' compensation claims. In no event will the total purchase price exceed $10.0 million. The acquisitions were accounted for under the purchase method, and the Company recorded approximately $6.5 million of goodwill which is being amortized on a straight-line basis over 30 years. The results of operations for Sharp and Advantage Companies have been included in the Company's consolidated financial statements from the date of acquisition. The following unaudited pro forma information combines the consolidated results of operations of the Company, Sharp and Advantage as if the acquisitions had occurred at the beginning of 1998. 1998* - ------------------------------------------------------------ Pro forma revenues $ 1,771.9 Pro forma net income $ 9.8 Pro forma per share - basic $ 0.66 Pro forma per share - diluted $ 0.63 - ------------------------------------------------------------ * 53 weeks The unaudited pro forma results have been prepared for comparative purposes only, after the cumulative effect of change in accounting principle in 1998, and include adjustments for additional amortization expense as a result of goodwill and the related income tax effects. The pro forma results may not be indicative of results that would have occurred had the combination been in effect for the period presented, nor do they purport to be indicative of the results that will be obtained in the future. In December 1997, the Company purchased certain assets and assumed certain liabilities of Professional Employee Management, Inc. An initial payment of $18.9 million in cash was made together with a series of annual contingent earn-out payments that have been paid out or become payable based on annual performance through 2000. At December 31, 2000, no additional liability was required to be accrued under the contingent earn-out. In no event will the total purchase price exceed $50.7 million. The acquisition was accounted for under the purchase method, and to date the Company has recorded $32.8 million of goodwill, which is being amortized on a straight-line basis over 30 years. (4) Property and Equipment Property and equipment consist of the following at fiscal year end: Useful 2000 1999 Life - ---------------------------------------------------------- Land $ 2.8 $ 3.5 Buildings and improvements 7 to 30 53.2 23.2 Equipment 11/2to 20 44.7 33.6 Furniture and fixtures 3 to 10 7.4 6.9 Automobiles 3 9.3 7.7 Construction in progress 0.8 21.2 ------------------- $ 118.2 $ 96.1 - ---------------------------------------------------------- (5) Marketable Securities Marketable securities, carried at fair value, consist of the following at fiscal year end: 2000 1999 - -------------------------------------------------------------- Fair Fair Value Cost Value Cost - -------------------------------------------------------------- Municipal Bonds $ 20.7 $ 20.6 $ 11.7 $ 12.8 Taxable Bonds 9.1 8.9 10.7 10.9 Preferred Stock 7.5 8.0 6.4 8.0 ----------------------------------------- $ 37.3 $ 37.5 $ 28.8 $ 31.7 - -------------------------------------------------------------- The Company has placed in trust, in favor of certain insurance companies, its marketable securities and $17.6 million in cash and cash equivalents, and has issued irrevocable standby letters of credit for $22.7 million. Municipal bonds mature from 5 41 months to 24 years and taxable bonds, which includes corporate and government bonds, mature in periods ranging from 8 months to 30 years. At December 31, 2000, the Company's reinsurance subsidiary has specific restrictions on future purchases of marketable securities, and on withdrawals from the trust. (6) Investment in Affiliates Equity in undistributed earnings of affiliates approximated $27.6 million and $22.5 million at December 31, 2000, and January 2, 2000, respectively, and is included in "Investments in and advances to affiliates" in the consolidated balance sheets. The following is a summary of condensed unaudited information pertaining to affiliates: 2000 1999 - ------------------------------------------------------------- Balance sheet items at fiscal year end: Current assets $ 190.0 $ 142.6 Noncurrent assets 358.5 280.6 Current liabilities 147.3 93.0 Noncurrent liabilities 320.7 262.2 Minority interest liability 0.4 0.5 Income statement items for the fiscal year: Revenues $ 596.9 $ 545.5 Operating income 32.6 31.9 Net income before taxes 23.2 23.7 - ------------------------------------------------------------- (7) Goodwill and Other Intangibles Goodwill and other intangibles consist of the following at fiscal year end: 2000 1999 - ------------------------------------------------------------- Goodwill $ 58.0 $ 57.6 Contract values 15.6 15.6 Other 8.7 8.8 -------------------------- 82.3 82.0 Accumulated amortization Goodwill 7.9 5.3 Contract values 5.7 4.8 Other 4.5 2.9 -------------------------- 18.1 13.0 -------------------------- Net $ 64.2 $ 69.0 - ------------------------------------------------------------- Amortization expense of intangibles was $5.4 million, $4.9 million, and $3.7 million for fiscal years 2000, 1999, and 1998, respectively. (8) Notes Payable and Long-Term Debt Long-term debt consists of the following at fiscal year end: 2000 1999 - ------------------------------------------------------------- Revolving loans - The Wackenhut Corporation, parent $ 0.5 $ - WHC 10.0 15.0 Lease obligation payable in installments through 2004 at a weighted average rate of 4.5% 1.3 1.8 Other debt principally related to security services 4.7 4.4 -------------------------- Total 16.5 21.2 Less: current portion 5.1 4.7 -------------------------- Total $ 11.4 $ 16.5 - ------------------------------------------------------------- On November 13, 2000, the Company entered into a new, three year, Credit Facility increasing the Company's borrowing capacity from $95 million to $112.5 million. As of December 31, 2000, the unused portion of the revolving line of credit was $67.4 million, after deducting $44.6 million in outstanding letters of credit and $0.5 million loan balance outstanding with an interest rate of 8.75% at year end maturing November 2003. The agreement requires, among other things, that the Company maintain a minimum consolidated net worth and limits certain payments and distributions. As of December 31, 2000, the Company and its subsidiaries were in compliance with applicable covenants. On January 26, 2001, the Company amended and restated its agreement to sell, on an ongoing basis, eligible receivables up to a maximum of $75 million. This agreement is subject to renewal on an annual basis. The costs associated with this sale of receivables are based on the volume and cost of issued commercial paper plus predetermined fees. Such costs are included in "Interest expense" in the consolidated statements of income. There were $67.5 million and $69.5 million accounts receivable sold under this agreement at December 31, 2000, and January 2, 2000, respectively. The total amount available to the Company from its revolving credit and accounts receivable securitization facility is $187.5 million. The Company has a demand operating line of credit with a Canadian bank with a maximum borrowing amount of $2.7 million. At December 31, 2000, the Company had short-term borrowings under this line of credit of $2.5 million for working capital purposes, bearing interest at a rate based on the bank's prime lending rate, or 8.25% at year end. The Company had outstanding notes payable and operating lines of credit of $2.2 million at December 31, 2000 to meet working capital needs of its international subsidiaries with $2.1 million due within one year. In December 1997, WHC entered into a five year $30 million multi-currency revolving credit facility with a syndicate of banks, which includes a $5 million line of credit for the issuance of letters of credit. Indebtedness under this facility bears interest at the alternate base rate, defined as the higher of prime rate or federal funds rate plus 0.5%, or LIBOR plus 150 to 250 basis points, depending upon fixed charge coverage ratios. The facility requires WHC to, among other things, maintain a maximum leverage ratio; minimum fixed charge coverage ratio; and a minimum tangible net worth. The facility also limits certain payments and distributions. As of December 31, 2000, $10 million was outstanding under this facility with an interest rate of 8.4% and six outstanding letters of credit amounted to $2.8 million, in addition to twelve letters of guarantee totaling $13.3 million under a separate foreign facility. The $10 million debt becomes due in 2002. In December 1997, WHC entered into a $220 million operating lease facility that was established to acquire and develop new correctional institutions used in its business. As a condition of this facility, WHC unconditionally agreed to guarantee certain obligations of First Security Bank, N.A., a party to the aforementioned operating lease facility. As of December 31, 2000, approximately $142.7 million of properties were under development under this facility. The long-term portion of the capital lease obligation maturing during the next two years after 2000 is $0.6 million and $0.1 million, respectively. The Company leases correctional facility office space, computers and vehicles under non-cancelable operating leases expiring through 2009. Rent expense for the fiscal years ended December 31, 2000, January 2, 2000, and January 3, 1999 was $26.9 million, $22.2 million, and $15.8 million, respectively. 42 The minimum commitments under these leases and the 15 year lease for the corporate headquarters, are as follows: Minimum Year Commitments - ------------------------------------------------------------- 2001 $ 21.9 2002 19.5 2003 17.7 2004 15.1 2005 11.5 Thereafter 61.2 ---------------- $ 146.9 - ------------------------------------------------------------- (9) Jena Charge On January 7, 2000, WHC exercised its right to acquire the 276-bed Jena Juvenile Justice Center (the "Facility") in Jena, Louisiana from the trust of WHC's operating lease facility and, simultaneously sold it to Correctional Properties Trust ("CPV"). This Facility is being leased back to WHC under a ten year non-cancelable operating lease. On May 17, 2000, the Louisiana Department of Public Safety and Corrections and WHC had removed all inmates from the Facility and WHC terminated the employment of the facility staff. The cooperative agreement for such Facility was terminated June 30, 2000. WHC has recorded an operating charge of $3.8 million ($2.3 million after tax, or on a WHC diluted basis, $0.11 per share), that represents the expected losses to be incurred on the lease with CPV, including lease costs and property taxes. WHC's management estimates that the facility will remain inactive through the end of 2001. After taxes and minority interest effect, this charge reduced the Company's diluted earnings per share by $0.09. WHC is continuing its efforts to sublease or find an alternative correctional use for the facility. If WHC is unable to sublease or find an alternative use for the facility, there could be an adverse impact on WHC's and the Company's financial position, future results of operations, and future cash flows. (10) Sale of Facilities to Correctional Properties Trust On April 28, 1998, CPV acquired eight correctional and detention facilities operated by WHC. WHC received approximately $42 million for the three facilities owned by it and for the rights to acquire four of the other five facilities, and realized a profit of approximately $18 million. The eighth facility was purchased directly from the government entity. CPV was also granted the option to acquire three additional correctional facilities and the fifteen year right to acquire and lease back future correctional and detention facilities developed or acquired by WHC. During fiscal 1998 and 1999, CPV acquired two additional facilities for $94.1 million. In fiscal 2000, CPV purchased an eleventh facility that WHC had the right to acquire for $15.3 million. WHC recognized no net proceeds from the sale. Simultaneous with the purchases, WHC entered into ten year operating leases of these facilities from CPV. As the lease agreements are subject to contractual lease increases, WHC records operating lease expense for these leases on a straight-line basis over the term of the leases. The deferred unamortized net profit at December 31, 2000, which is included in "Deferred revenue" in the accompanying consolidated balance sheets, is $13.8 million with $1.9 million short-term included in "Accrued Expenses," and $11.9 million long-term, excluding the long-term portion of deferred development fee revenue. The net gain is being amortized over the ten year lease terms. The Company recorded net rental expense related to CPV of $19.7 million in 2000, excluding the Jena rental expense, and $18.9 million and $6.9 million in 1999 and 1998, respectively. The future minimum lease commitments under the leases for these eleven facilities are as follows: Annual Year Rental - ------------------------------------------------------------- 2001 $ 22.7 2002 22.7 2003 22.7 2004 22.7 2005 22.7 Thereafter 61.5 ----------- $ 175.0 - ------------------------------------------------------------- (11) Preferred and Common Stock and Shares Repurchased and Retired The Board of Directors has authorized 10 million shares of preferred stock. As of December 31, 2000, no preferred stock has been issued. The Board of Directors has authorized 50 million shares of the Company's common, with 3.9 million shares to be designated as series A common stock and 46.1 million shares to be designated as series B common stock. Holders of series A, the voting stock, have control over all aspects of the operations of the Company. Holders of series B only have voting rights in connection with a transaction affecting the essence of their shareholder rights. In all other respects, series B shareholders have the same rights as series A shareholders. The Board of Directors of the Company and of WHC authorized the repurchase, at the discretion of each company's senior management, of up to 0.5 million shares of Series B common stock and 1.0 million shares of WHC's common stock, respectively. In February 2000, the Board of Directors of WHC authorized, in addition to that previously authorized, the repurchase of up to 0.5 million shares of its common stock. All of the Company's repurchases of shares of common stock have been retired and result in a reduction of shareholders' equity. WHC's common stock repurchases are recorded as a reduction to additional paid-in capital and minority interest. As of December 31, 2000, the Company had bought back 201,492 shares of the Company's Series B common stock at an average price of $15.52, and WHC repurchased 1,378,000 shares of WHC's common stock at an average price of $15.77 per share. All shares repurchased by the Company and WHC were retired. (12) Stock Incentive and Stock Option Plans Key employees of the Company and its subsidiaries are eligible to participate in the Key Employee Long-Term Incentive Stock Plan ("incentive stock plan"). Under the incentive stock plan, options for the Company's series B common stock are granted to participants as approved by the Nominating and Compensation Committee of the Company's Board of Directors (the "Committee"). Under terms of the incentive stock plan, options are granted at prices not less than the fair market value at date of grant (or as otherwise determined by the Committee), become exercisable after a minimum of six months, and expire no later than ten years after the date of grant. The Committee may grant incentive stock options or non-qualified stock options. Options are subject to adjustment upon the occurrence of certain events, including stock splits and stock dividends. The incentive stock plan authorizes the 43 Company to award or grant restricted stock and performance shares to key employees. Performance shares are earned only if certain three year earnings per share performance goals established by the Compensation Committee are met. Non-employee directors of the Company are eligible to participate in The Wackenhut Corporation non-employee directors' stock option plan (the "Directors' Stock Option Plan"). Under the Directors' Stock Option Plan, non-employee directors were granted 2,000 stock options for series B common stock upon their election or re-election to the Board of Directors. Under terms of the directors' stock option plan, options are granted at the fair market value at date of grant, become exercisable at date of grant, and expire ten years after the date of grant. At December 31, 2000, 2,356,870 shares of series B common stock were reserved for issuance, including 555,443 shares available for future grants or awards. A summary of the status of the Company's employee stock option plans, as of December 31, 2000, January 2, 2000, and January 3, 1999 is presented in the following chart: 2000 1999 1998 - ---------------------------------------------------------------------- Shares Price* Shares Price* Shares Price* - ---------------------------------------------------------------------- Outstanding at beginning of year 978,904 $15.06 847,630 $14.06 668,693 $11.64 Options: Granted 587,000 9.71 230,000 16.69 255,000 19.75 Exercised - - (101,851) 10.15 (76,063) 11.71 Forfeited (32,250) 15.66 3,125 6.16 - - ------------------------------------------------------ Outstanding & exercisable end of year 1,533,654 13.01 978,904 15.06 847,630 14.06 - ---------------------------------------------------------------------- *Weighted average exercise price. Option groups outstanding at December 31, 2000 and related exercise price and remaining life information are as follows: Outstanding Exercise Remaining Grant Date & Exercisable Price Life (Years) - ------------------------------------------------------------- 04/30/94 130,104 $ 6.16 3 01/28/95 96,750 $ 10.80 4 01/31/96 110,000 $ 14.00 5 01/28/97 127,800 $ 15.25 6 08/09/97 30,000 $ 18.94 6 01/27/98 243,000 $ 19.75 7 02/18/99 218,000 $ 16.69 8 02/17/00 520,200 $ 9.75 9 05/05/00 57,800 $ 9.38 9 - ------------------------------------------------------------- Total 1,533,654 $ 13.01* 7* - ------------------------------------------------------------- *Weighted average exercise price and life. The Company applies Accounting Principles Board Opinion No. 25 ("APB No. 25") and related interpretations in accounting for its stock-based compensation plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation for the Company's stock-based compensation plans been determined pursuant to Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have decreased accordingly. Using the Black-Scholes option pricing model for all options granted after January 1, 1995, the Company's pro forma net income, pro forma net income per share and pro forma weighted average fair value of options granted, with related assumptions, are as follows: 2000 1999 1998* - ------------------------------------------------------------- Pro forma basic net income $ 15.0 $ 18.6 $ 8.2 Pro forma basic earnings per share $ 1.00 $ 1.25 $ 0.55 Pro forma diluted net income $ 14.9 $ 18.5 $ 7.7 Pro forma diluted earnings per share $ 0.99 $ 1.22 $ 0.51 Pro forma weighted average fair value of options granted $ 4.42 $ 6.69 $ 6.94 Risk-free interest rate 6.7% 4.9% - 5.4% - 5.4% 5.6% Expected life (years) 5 5 5 Expected volatility 38.0% 38.0% 35.0% Quarterly dividend** - - $ 0.075 - ------------------------------------------------------------- *53 weeks **The Company discontinued its quarterly dividend after the first quarter of 1999. (13) WHC Stock Option Plans In January 1996, WHC sold 4.6 million shares of common stock at an offering price of $12.00 per share. After the offering, the Company's ownership in WHC was reduced to approximately 55%. During 2000, WHC shares repurchased and retired resulted in the Company's ownership of WHC equaling approximately 57.1% at December 31, 2000. The Board of Directors of WHC has granted non-qualified stock options to purchase common stock which, if fully exercised, would reduce the Company's ownership in WHC to approximately 53.1%. (14) Retirement and Deferred Compensation Plans The Company has a noncontributory defined benefit pension plan covering certain of its executives. Retirement benefits are based on years of service, employees' average compensation for the last five years prior to retirement and social security benefits. Currently, the plan is not funded. The Company purchases and is the beneficiary of life insurance policies for each participant enrolled in the plan. The assumptions for the discount rate and the average increase in compensation used in determining the pension expense and funded status information are 7.5% and 4.0%, respectively. Total pension expense for fiscal 2000, 1999, and 1998 was $0.6 million, $0.5 million, and $0.6 million, respectively. The present value of accumulated pension benefits was $2.8 million and $3.0 million at the end of 2000 and 1999, respectively, and is included in "Other liabilities" in the accompanying consolidated balance sheets. The Company has established non-qualified deferred compensation agreements with certain senior executives providing for fixed annual benefits ranging from $175,000 to $250,000 payable upon retirement at age 60 for a period of 25 years. In the event of death before retirement, annual benefits are paid to beneficiaries for a period of 12 1/2 years. Currently, the plan is not funded. The Company purchases and is the beneficiary of life insurance policies for each participant enrolled in the plan. The cost of these agreements is being charged to expense and accrued using a present value method over the expected terms of employment. The charge to expense for fiscal 2000, 1999, and 1998 was $1.5 million, $0.8 million, and $1.5 million, respectively. The liability for deferred 44 compensation was $7.3 million and $6.4 million at fiscal year end 2000 and 1999, respectively, and is included in "Other liabilities" in the accompanying consolidated balance sheets. (15) Income Taxes The provision for income taxes in the consolidated statements of income, consists of the following: 2000 1999 1998* - ------------------------------------------------------------- Federal income taxes: Current $ 5.6 $ 7.7 $ 23.5 Deferred 1.0 3.6 (13.8) --------------------------------- 6.6 11.3 9.7 State income taxes: Current $ 1.7 $ 2.2 $ 4.6 Deferred 0.1 0.4 (1.7) --------------------------------- 1.8 2.6 2.9 Foreign Current $ 5.2 $ 4.9 $ 1.7 Deferred (0.3) (2.9) (0.6) --------------------------------- 4.9 2.0 1.1 --------------------------------- Total $ 13.3 $ 15.9 $ 13.7 - ------------------------------------------------------------- *53 weeks A reconciliation of the statutory U.S. federal tax rate (35%) and the effective income tax rate is as follows: 2000 1999 1998* - ------------------------------------------------------------- Provision using statutory Federal income tax rate $ 11.7 $ 14.0 $ 12.1 State income taxes, net of Federal benefit 1.4 1.7 1.6 Other, net 0.2 0.2 - --------------------------------- $ 13.3 $ 15.9 $ 13.7 - ------------------------------------------------------------- *53 weeks The components of the net current deferred income tax asset are as follows at fiscal year end: 2000 1999 - ------------------------------------------------------------- Amortization of uniforms and accessories $ (2.2) $ (2.1) Accrued vacation pay 3.9 2.8 Other reserves 10.4 9.8 -------------------- Current deferred tax asset, net $ 12.1 $ 10.5 - ------------------------------------------------------------- The components of the net non-current deferred income tax asset at fiscal year end are shown below: 2000 1999 - ------------------------------------------------------------- Income of foreign subsidiaries and affiliates $(21.3) $(20.9) Gain on sale of properties to CPV 8.7 8.4 Deferred compensation 8.5 7.8 Reserve for losses of reinsurance subsidiary 6.5 5.7 Reserve for claims of employee health trust 1.9 4.5 Deferred charges - 0.1 Other, net 3.2 4.3 -------------------- Non-current deferred tax asset, net $ 7.5 $ 9.9 - ------------------------------------------------------------- The exercise of non-qualified stock options which have been granted under the Company's stock option plans gives rise to compensation which is includable in the taxable income of the applicable employees and deducted by the Company for federal and state income tax purposes. Such compensation results from increases in the fair market value of the Company's common stock subsequent to the date of grant. In accordance with APB No. 25, such compensation is not recognized as an expense for financial accounting purposes and related tax benefits are credited directly to additional paid-in-capital. (16) Earnings Per Share The table below shows the amounts used in computing earnings per share in accordance with SFAS No. 128. Common stock equivalents related to stock options if exercised are excluded from diluted earnings (loss) per share calculations if their effect would be anti-dilutive. In fiscal 2000, 1999 and 1998 the total number of stock options excluded because their effect would have been anti-dilutive were 1,569,410, 329,100, and 263,321, respectively (share data in millions). 2000 1999 1998* - ------------------------------------------------------------- Basic Net income $ 16.8 $ 19.6 $ 9.3 ------------------------------ Weighted average common shares outstanding 15.0 14.9 14.8 ------------------------------ Basic earnings per share $ 1.12 $ 1.31 $ 0.63 ------------------------------ Diluted Net income $ 16.8 $ 19.6 $ 9.3 Effect of subsidiaries stock options (0.2) (0.2) (0.4) ------------------------------ Net income $ 16.6 $ 19.4 $ 8.9 ------------------------------ Weighted average common shares outstanding 15.0 14.9 14.8 Assumed exercise of stock options, net of common shares assumed repurchased with the proceeds 0.1 0.2 0.3 ------------------------------ Adjusted weighted average common shares outstanding 15.1 15.1 15.1 ------------------------------ Diluted earnings per share $ 1.10 $ 1.28 $ 0.59 - ------------------------------------------------------------- *53 weeks (17) Commitments and Contingencies In December 1999, a Travis County, Texas grand jury indicted twelve of WHC's former facility employees for various types of sexual misconduct at the Travis County Community Justice Center. Eleven of the twelve indicted former employees already resigned from or had been terminated by WHC as a result of WHC initiated investigations over the course of the prior three years. WHC is not providing counsel to assist in the defense of these twelve individuals. Management does not expect these indictments to have a material financial impact on the Company. The District Attorney in Travis County continues to review WHC documents for alleged document tampering at the Travis County Facility. At this time WHC cannot predict the outcome of this investigation or the potential impact on WHC's financial position, results of operations and cash flow. WHC has experienced adverse claims and settlements, which directly impact WHC's insurance premiums. If the insurance premiums continue to increase through 2001 then WHC's and the Company's results of operations and the financial guidance for 2001 may be significantly impacted. During 1998, WHC entered into a contract with the State of Florida Department of Children and Families ("DCF") to design and construct a new 350 bed South Florida State Psychiatric Hospital for approximately $35 million. WHC also entered into a separate contract to manage the operations of an existing 350 bed facility prior to and during construction of the new facility and to manage the operations of the new facility upon construction completion. The construction phase of the contract is complete. However, during construction, WHC incurred additional costs in excess of $2 million beyond the 45 initial scope of the construction contract through December 31, 2000. WHC is in the process of negotiating with DCF to recover these additional costs. There can be no assurances that WHC will be successful in negotiating for additional funding of this project. Accordingly, WHC has recognized these additional costs as incurred and has not recorded revenue on the pending claim. The Company is presently, and is from time to time, subject to other claims arising in the ordinary course of its business. In certain of such actions, plaintiffs request punitive or other damages that may not be covered by insurance. In the opinion of management, there are no other pending legal proceedings except those disclosures above, for which the potential impact if decided unfavorable to the Company could have a material adverse effect on the consolidated financial statements of the Company. (18) Business Segments The Company's principal segments are grouped based on similarity of business services provided and the type of customer for which these services are offered. These services consist of global security services, correction services and flexible staffing services. The Company is a major provider of global business services including providing security-related and other support services to business and government, developing and managing privatized correctional, detention and public sector mental health services facilities through WHC, a 57% owned public subsidiary, and providing worksite employees and temporary staffing. For segment reporting, the accounts of the Company's captive insurance company have been included in unallocated corporate expenses. Intersegment transactions are accounted for on an arms-length basis and are eliminated in consolidation. Direct general and administrative expenses are allocated based on usage. 2000 1999 1998* - ------------------------------------------------------------- REVENUES: Global security services $1,168.2 $1,041.0 $ 947.2 Correctional services 535.6 438.5 312.8 Staffing services 801.3 672.8 495.1 --------------------------------- Total revenues $2,505.1 $2,152.3 $1,755.1 - ------------------------------------------------------------- OPERATING INCOME: Global security services $ 33.4 $ 27.7 $ 24.2 Correctional services 18.9 26.0 22.5 Staffing services 3.7 3.5 2.7 Unallocated corporate expenses (21.1) (19.3) (17.0) --------------------------------- Total operating income $ 34.9 $ 37.9 $ 32.4 - ------------------------------------------------------------- EQUITY IN INCOME OF AFFILIATES, NET OF TAXES: Global security services $ 1.3 $ 3.2 $ 1.4 Correctional services 4.5 3.3 2.1 --------------------------------- Total equity income $ 5.8 $ 6.5 $ 3.5 - ------------------------------------------------------------- CAPITAL EXPENDITURES: Global security services $ 3.7 $ 3.0 $ 4.6 Correctional services 19.1 39.0 25.0 Staffing services 0.8 0.8 0.9 Unallocated corporate expenses 0.7 1.2 3.4 --------------------------------- Total capital expenditures $ 24.3 $ 44.0 $ 33.9 - ------------------------------------------------------------- DEPRECIATION AND AMORTIZATION EXPENSE: Global security services $ 12.7 $ 12.7 $ 11.5 Correctional services 8.6 5.4 3.6 Staffing services 2.5 2.0 1.5 Unallocated corporate expenses 2.1 2.8 0.9 --------------------------------- Total expenses $ 25.9 $ 22.9 $ 17.5 - ------------------------------------------------------------- IDENTIFIABLE ASSETS at fiscal year end: Global security services $ 181.5 $ 163.3 $ 168.3 Correctional services 223.6 208.2 145.5 Staffing services 85.0 76.1 62.6 Unallocated corporate assets 80.2 73.4 68.6 --------------------------------- Total identifiable assets $ 570.3 $ 521.0 $ 445.0 - ------------------------------------------------------------- * 53 weeks Domestic and International Operations Non-U.S. operations of the Company and its subsidiaries are conducted primarily in South America, the United Kingdom and Australia. No individual foreign subsidiary of the Company represented over 10% of combined revenues in 2000, 1999, or 1998. Minority interest in consolidated foreign subsidiaries has been reflected, net of applicable income taxes, in the accompanying consolidated financial statements. The Company carries its investment in affiliates under the equity method. U.S. income taxes which would be payable upon remittance of affiliates' earnings to the Company are provided currently. Long-lived assets consist of property and equipment. A summary of domestic and international operations is shown below: 2000 1999 1998* - -------------------------------------------------------------- REVENUES: Domestic operations $ 2,206.9 $ 1,914.4 $ 1,548.7 International operations 298.2 237.9 206.4 -------------------------------- Total revenues $ 2,505.1 $ 2,152.3 $ 1,755.1 - -------------------------------------------------------------- OPERATING INCOME: Domestic operations $ 22.0 $ 27.5 $ 26.2 International operations 12.9 10.4 6.2 -------------------------------- Total operating income $ 34.9 $ 37.9 $ 32.4 - -------------------------------------------------------------- EQUITY IN INCOME OF AFFILIATES, NET OF TAXES: Domestic operations $ 1.3 $ 1.4 $ - International operations 4.5 5.1 3.5 -------------------------------- Total equity income $ 5.8 $ 6.5 $ 3.5 - -------------------------------------------------------------- CAPITAL EXPENDITURES: Domestic operations $ 16.4 $ 39.7 $ 29.5 International operations 7.9 4.3 4.4 -------------------------------- Total capital expenditures $ 24.3 $ 44.0 $ 33.9 - -------------------------------------------------------------- DEPRECIATION AND AMORTIZATION EXPENSE: Domestic operations $ 20.6 $ 18.1 $ 12.8 International operations 5.3 4.8 4.7 -------------------------------- Total expenses $ 25.9 $ 22.9 $ 17.5 - -------------------------------------------------------------- LONG-LIVED ASSETS at fiscal year end: Domestic operations $ 61.1 $ 52.7 $ 46.9 International operations 18.3 15.5 9.7 -------------------------------- Total long-lived assets $ 79.4 $ 68.2 $ 56.6 - -------------------------------------------------------------- *53 weeks 46 (19) Selected Quarterly Financial Data (Unaudited) Selected quarterly financial data for the Company and its subsidiaries for the fiscal years ended December 31, 2000, as previously reported (pro forma for fourth quarter only) and restated for SAB No. 101, and January 2, 2000, is as follows:
First Second Third Fourth - ---------------------------------------------------------------------------------------------------------------- 2000 Quarter Quarter Quarter Quarter - ---------------------------------------------------------------------------------------------------------------- As previously reported (pro forma for fourth quarter only): Revenues $ 594.0 $ 617.6 $ 639.9 $ 654.6 Operating income 8.7 8.9 6.6 11.7 Net Income 4.3 5.1 4.1 4.7 Impact of adopting SAB No. 101: Revenues (0.6) (0.3) (1.1) 1.0 Operating income (0.6) (0.3) (1.1) 1.0 Cumulative effect of change in accounting principle (1) (0.8) -- -- -- Net Income (1.4) 0.1 (1.0) 0.9 Restated for SAB No. 101: Revenues 593.4 617.3 638.8 655.6 Operating income 8.1 8.6 5.5 12.7 Cumulative effect of change in accounting principle (1) (0.8) -- -- -- Net Income 2.9 5.2 3.1 5.6 Earnings per share - basic Income before cumulative change in accounting principle 0.25 0.34 0.21 0.37 Cumulative effect of change in accounting principle (0.05) -- -- -- Net Income 0.20 0.34 0.21 0.37 Earnings per share - diluted Income before cumulative change in accounting principle 0.24 0.34 0.21 0.37 Cumulative effect of change in accounting principle (0.05) -- -- -- Net Income $ 0.19 $ 0.34 $ 0.21 $ 0.37 - ---------------------------------------------------------------------------------------------------------------- 1999 - ---------------------------------------------------------------------------------------------------------------- Revenues $ 500.1 $ 530.3 $ 547.5 $ 574.4 Income from operations 7.9 9.0 10.9 10.1 Net income 4.0 4.7 5.4 5.5 Earnings per share - basic 0.27 0.31 0.36 0.37 Earnings per share - diluted $ 0.26 $ 0.30 $ 0.35 $ 0.37 - ----------------------------------------------------------------------------------------------------------------
Note: Each quarter has 13 weeks. The sum of quarterly earnings per share amounts differs from those reflected in the Company's Consolidated Statements of Income due to the weighting of common and common equivalent shares outstanding during each of the respective periods. (1) In the fourth quarter the Company adopted SAB No. 101 resulting in a charge of $0.8 million after-tax (described in Note 2, hereto) and has been recognized retroactively to the first quarter of 2000. 47 Report of Independent Certified Public Accountants The Wackenhut Corporation: We have audited the accompanying consolidated balance sheets of The Wackenhut Corporation (a Florida corporation) and subsidiaries as of December 31, 2000 and January 2, 2000 and the related consolidated statements of income, cash flows and shareholders' equity and comprehensive income for each of the three fiscal years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Wackenhut Corporation and subsidiaries as of December 31, 2000 and January 2, 2000, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. As discussed in Note 2 to the consolidated financial statements, effective January 3, 2000 and December 29, 1997, the Company changed its method of accounting for certain revenue transactions and its accounting for costs of start-up activities, respectively. ARTHUR ANDERSEN LLP West Palm Beach, Florida, February 8, 2001 Management's Responsibility for Financial Statements To the Shareholders of The Wackenhut Corporation: The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles. They include amounts based on judgments and estimates. Representation in the consolidated financial statements and the fairness and integrity of such statements are the responsibility of management. In order to meet management's responsibility, the Company maintains a system of internal controls and procedures and a program of internal audits designed to provide reasonable assurance that the Company's assets are controlled and safeguarded, that transactions are executed in accordance with management's authorization and properly recorded, and that accounting records may be relied upon in the preparation of consolidated financial statements. The consolidated financial statements have been audited by Arthur Andersen LLP, independent certified public accountants, whose appointment was ratified by shareholders. Their report expresses a professional opinion as to whether management's financial statements considered in their entirety present fairly, in conformity with generally accepted accounting principles, the Company's financial position and results of operations. Their audit was conducted in accordance with generally accepted auditing standards. As part of this audit, Arthur Andersen LLP considered the Company's system of internal controls to the degree they deemed necessary to determine the nature, timing and extent of their audit tests which support their opinion on the consolidated financial statements. The audit committee of the board of directors meets periodically with representatives of management, the independent certified public accountants and the Company's internal auditors to review matters relating to financial reporting, internal accounting controls and auditing. Both the internal auditors and the independent certified public accountants have unrestricted access to the audit committee to discuss the results of their reviews. George R. Wackenhut Philip L. Maslowe Chairman of the Board Executive Vice President, Chief Financial Officer Palm Beach Gardens, Florida, February 8, 2001 EX-3.1 2 g67411kex3-1.txt ARTICLES IF INCORPORATION AS AMENDED & RESTATED 1 Exhibit 3.1 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE WACKENHUT CORPORATION Pursuant to Sections 607.1002 and 607.1007 of the Florida Business Corporation Act, the Articles of Incorporation of the undersigned corporation (the "Corporation") are hereby amended and restated in their entirety as follows: ARTICLE I The name of this Corporation shall be: THE WACKENHUT CORPORATION ARTICLE II The purpose for which the Corporation is formed and the principal objects of business to be carried on by it are as follows: (a) To contract for and provide any of the functions of Services of a private investigative agency, uniformed or un-uniformed personnel, management consultation, advice, plans, surveys and systems for the safety, security control, protection and efficiency of persons, business, industrial and governmental firms and agencies. (b) To engage in and carry on the business of manufacturing and producing, buying, selling or otherwise dealing in or with goods, wares and merchandise of every kind and description and to acquire, own, use, sell and convey, mortgage otherwise encumber any real estate or personal property in whole or in part and in any manner whatever to acquire, own, dispose of franchises, licenses, options or rights in any real estate or personal property or other property interests. (c) To engage in and carry on a general brokerage commission, forwarding and exporting and importing business and to act as factors, agents, commission merchants and dealers in the buying, selling or dealing in of goods, wares and merchandise of all kinds and descriptions. (d) To conduct and engage in any business, occupation or enterprise and to exercise any power or authority which may be done by a private corporation organized and existing under and by virtue of Chapter 608, Florida Statute, it being the intention that this Corporation may conduct and transact any business lawfully authorized and not prohibited by said Chapter 608, Florida Statute. 1 2 ARTICLE III The maximum number of shares of stock that the Corporation shall be authorized to issue shall be 60,000,000 shares which are to be divided into two classes as follows: 50,000,000 shares of Common Stock, par value $ 0.10 per share of which 3,858,885 shares are designated as Series A Common Stock and 46,141,115 shares are designated as Series B Common Stock; and 10,000,000 shares of Preferred Stock. The Series A Common Stock and the Series B Common Stock may be issued from time to time as determined by the Board of Directors of the Corporation. The Series A Common Stock and the Series B Common Stock shall be identical in all respects except that the Series B Common Stock shall have no right to vote. The Preferred Stock may be created and issued from time to time in one or more series with such designations, preferences, limitations, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. Shares of one class or series of the Company's capital stock may be issued through a stock dividend or stock split on shares of another class or series of the Company's capital stock. ARTICLE IV The principal place of business of this corporation shall be at 4200 Wackenhut Drive, Palm Beach Gardens, Florida, or at such other place as may be designated by the Board of Directors from time to time. This corporation shall have full power and authority to transact business and to establish offices or agencies at such places as may be in the best interests of this corporation. ARTICLE V This Corporation is to exist perpetually. ARTICLE VI The business of this Corporation shall be conducted by a Board of Directors consisting of not less than three (3) nor more than nineteen (19) members, the exact number to be determined from time to time in the By-Laws of this Corporation. The Board of Directors shall have sole authority to adopt or amend By-Laws for the government of this Corporation. 2 3 ARTICLE VII The Corporation shall have the following powers: (a) To acquire all or any part of the good will, rights, property and business of any person, firm, association or corporation heretofore or hereafter engaged in any business similar to any business which the corporation has the power to conduct and to hold, utilize, enjoy and in any and all manner dispose of the whole or any part of the rights, property and business so acquired, and to assume in connection therewith any liabilities of any person, firm, association or corporation. (b) To apply for, obtain, purchase, or otherwise acquire, any patents, copy rights, licenses, trademarks, trade names, rights, processes, formulas and the like, which may seem capable of being used for any of the purposes of the corporation; and to use, exercise, develop, grant licenses in respect of, sell and otherwise turn to account the same. (c) To carry out all or any part o the aforesaid objects and purposes, and to conduct its business in all or any part of its branches, in any or all states, territories, districts and possessions of the United States of America and in foreign countries. (d) The Corporation shall be authorized to exercise and enjoy all of the powers, rights and privileges granted to or conferred upon corporations organized under the laws of the State of Florida now or hereafter in force, and the enumeration of any powers shall not be deemed to exclude any powers, rights or privileges so granted or conferred. ARTICLE VIII The Board of Directors, by the affirmative vote of a majority of the Directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all Directors for services to the Corporation as directors, officers or otherwise. The authority vested in the Board of Directors by this Article IX shall include, in addition to the authority to establish salaries, the authority to establish the payment of bonuses, stock options and pension and profit-sharing plans. ARTICLE IX No holder of any of the shares of the capital stock of the Corporation shall be entitled as of right to purchase or to subscribe for any unissued stock of any class, or any additional shares of any class, whether presently or hereinafter authorized, and also including without limitation, bonds, certificates of indebtedness, debentures, or other securities convertible into stock of the Corporation or carrying any right to purchase stock of any class. Such unissued stock, or additional authorized issue of any stock, or other 3 4 securities convertible into stock or carrying any right to purchase stock, may be issued and disposed of, pursuant to resolutions of the Board of Directors, to such persons, firms, corporations or associations and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its discretion. The Corporation shall indemnify every person who was or is a party or is or was threatened to be made a party to any action, suit or proceeding whether civil, criminal, administrative or investigative by reason of the fact he is or was a director, officer, employee, or agent, or is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection with such action, suit or proceeding, (except in such cases involving gross negligence or willful misconduct) in the performance of their duties, to the full extent permitted by applicable law. Such indemnification may, in the discretion of the Board of Directors, include advances of expenses in advance of final disposition subject to the provisions of applicable law. Such right of indemnification shall not be exclusive of any right to which any director, officer, employee, agent or controlling stockholder of the Corporation may be entitled as a matter of law. 4 5 The foregoing restated Articles of Incorporation which integrate the original Articles of Incorporation of The Wackenhut Corporation and the amendments thereto, without further modification, were duly adopted at a Quarterly Meeting of the Board of Directors of the Corporation held on February 17, 2000. IN WITNESS WHEREOF, the undersigned President and Chief Operating Officer and the Assistant Secretary of the Corporation have executed these Restated Articles of Incorporation this ________ day of _____________, 2000. ------------------------------ Richard R. Wackenhut President and Chief Executive Officer ------------------------------ Timothy J. Howard Assistant Secretary 5 6 CERTIFICATE OF PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE WACKENHUT CORPORATION The Wackenhut Corporation, a Florida corporation (the "Corporation"), hereby certifies, pursuant to and in accordance with Section 607.1007 of the Florida Business Corporation Act (the"Act"") for the purpose of filing its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Florida, that: 1. The name of the Corporation is The Wackenhut Corporation. 2. The Corporation's Amended and Restated Articles of Incorporation are attached hereto (the "Restated Articles"). 3. The Restated Articles contain no amendments to the Corporation's Articles of Incorporation and require only Board of Directors approval, and the Restated Articles were unanimously adopted and approved by the Corporation's Board of Directors at a duly called meeting on February 17, 2000. IN WITNESS WHEREOF, the undersigned, for the purpose of amending and restating the Corporation's Articles of Incorporation pursuant to the laws of the State of Florida, has executed these Amended and Restated Articles of Incorporation as of ______________________. THE WACKENHUT CORPORATION By: ---------------------------------- Richard R. Wackenhut President and Chief Executive Officer EX-4.1 3 g67411kex4-1.txt CREDIT AGREEMENT DATED 11/13/00 1 Exhibit 4.1 - ------------------------------------------------------------------------------- CREDIT AGREEMENT by and among THE WACKENHUT CORPORATION, as Borrower, BANK OF AMERICA, N.A., as Administrative Agent and as Lender and SCOTIABANC INC., as Syndication Agent and as Lender and FIRST UNION NATIONAL BANK, As Documentation Agent and as Lender and THE LENDERS PARTY HERETO FROM TIME TO TIME November 13, 2000 - ------------------------------------------------------------------------------- BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions and Terms 1.1. Definitions.........................................................................................2 1.2. Rules of Interpretation............................................................................26 1.3. Accounting for Acquisitions........................................................................27 ARTICLE II The Credit Facilities 2.1. Revolving Loans....................................................................................29 2.2. Use of Proceeds....................................................................................31 2.3. Notes..............................................................................................31 2.4. Swing Line.........................................................................................32 ARTICLE III Letters of Credit 3.1. Letters of Credit..................................................................................34 3.2. Reimbursement and Participations...................................................................34 ARTICLE IV Eurodollar Funding, Fees, and Payment Conventions 4.1. Interest Rate Options..............................................................................38 4.2. Conversions and Elections of Subsequent Interest Periods...........................................38 4.3. Payment of Interest................................................................................39 4.4. Prepayments of Eurodollar Rate Loans...............................................................39 4.5. Manner of Payment..................................................................................39 4.6. Fees...............................................................................................40 4.7. Pro Rata Payments..................................................................................41 4.8. Computation of Rates and Fees......................................................................41 4.9. Deficiency Advances; Failure to Purchase Participations............................................41 4.10. Intraday Funding...................................................................................41
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Page ---- ARTICLE V Change in Circumstances 5.1. Increased Cost and Reduced Return..................................................................43 5.2. Limitation on Types of Loans.......................................................................44 5.3. Illegality.........................................................................................45 5.4. Treatment of Affected Loans........................................................................45 5.5. Compensation.......................................................................................45 5.6. Taxes..............................................................................................46 ARTICLE VI Conditions to Making Loans and Issuing Letters of Credit 6.1. Conditions of Initial Advance......................................................................48 6.2. Conditions of Revolving Loans and Letter of Credit.................................................50 ARTICLE VII Representations and Warranties 7.1. Organization and Authority.........................................................................52 7.2. Loan Documents.....................................................................................52 7.3. Solvency...........................................................................................53 7.4. Subsidiaries and Stockholders......................................................................53 7.5. Ownership Interests................................................................................53 7.6. Financial Condition................................................................................53 7.7. Title to Properties................................................................................54 7.8. Taxes..............................................................................................54 7.9. Other Agreements...................................................................................54 7.10. Litigation.........................................................................................54 7.11. Margin Stock.......................................................................................55 7.12. Regulated Company..................................................................................55 7.13. Patents, Etc.......................................................................................55 7.14. No Untrue Statement................................................................................55 7.15. No Consents, Etc...................................................................................55 7.16. Employee Benefit Plans.............................................................................56 7.17. No Default.........................................................................................57 7.18. Environmental Laws.................................................................................57 7.19. Employment Matters.................................................................................57 7.20. RICO...............................................................................................58 ARTICLE VIII Affirmative Covenants 8.1. Financial Reports, Etc.............................................................................59
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Page ---- 8.2. Maintain Properties................................................................................60 8.3. Existence, Qualification, Etc......................................................................60 8.4. Regulations and Taxes..............................................................................61 8.5. Insurance..........................................................................................61 8.6. True Books.........................................................................................61 8.7. Right of Inspection................................................................................61 8.8. Observe all Laws...................................................................................62 8.9. Governmental Licenses..............................................................................62 8.10. Covenants Extending to Other Persons...............................................................62 8.11. Officer's Knowledge of Default.....................................................................62 8.12. Suits or Other Proceedings.........................................................................62 8.13. Notice of Environmental Complaint or Condition.....................................................62 8.14. Environmental Compliance...........................................................................63 8.15. Further Assurances.................................................................................63 8.16. Employee Benefit Plans.............................................................................63 8.17. Nature of Business.................................................................................64 8.18. New Subsidiaries...................................................................................64 ARTICLE IX Negative Covenants 9.1. Financial Covenants................................................................................66 9.2. Acquisitions.......................................................................................66 9.3. Negative Pledge Clauses............................................................................67 9.4. Limitation on Liens................................................................................67 9.5. Indebtedness.......................................................................................68 9.6. Mergers, Consolidations and Sales of Assets........................................................69 9.7. Restricted Payments: Joint Venture Investments.....................................................71 9.8. Limitation on Sale and Leasebacks..................................................................72 9.9. Guaranties.........................................................................................72 9.10. Compliance with ERISA, the Code and Foreign Benefit Laws...........................................72 9.11. Fiscal Year........................................................................................73 9.12. Rate Hedging Obligations...........................................................................73 9.13. Advances to WCC....................................................................................73 ARTICLE X Events of Default and Acceleration 10.1. Events of Default..................................................................................74 10.2. Agent to Act.......................................................................................77 10.3. Cumulative Rights..................................................................................77 10.4. No Waiver..........................................................................................77 10.5. Allocation of Proceeds.............................................................................77
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Page ---- ARTICLE XI The Agent 11.1. Appointment, Powers, and Immunities................................................................79 11.2. Reliance by Agent..................................................................................79 11.3. Defaults...........................................................................................80 11.4. Rights as Lender...................................................................................80 11.5. Indemnification....................................................................................80 11.6. Non-Reliance on Agent and Other Lenders............................................................81 11.7. Resignation of Agent...............................................................................81 ARTICLE XII Miscellaneous 12.1. Assignments and Participations.....................................................................82 12.2. Notices............................................................................................83 12.3. Right of Set-off; Adjustments......................................................................85 12.4. Survival...........................................................................................85 12.5. Expenses...........................................................................................86 12.6. Amendments and Waivers.............................................................................86 12.7. Counterparts; Facsimile Signatures.................................................................86 12.8. Termination........................................................................................87 12.9. Indemnification; Limitation of Liability...........................................................87 12.10. Severability.......................................................................................88 12.11. Entire Agreement...................................................................................88 12.12. Agreement Controls.................................................................................88 12.13. Usury Savings Clause...............................................................................88 12.14. Governing Law; Waiver of Jury Trial................................................................89 EXHIBIT A Applicable Commitment Percentages........................................................A-1 EXHIBIT B Form of Assignment and Acceptance........................................................B-1 EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative.......................C-1 EXHIBIT D-1 Form of Borrowing Notice.................................................................D-1 EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans.............................................D-2-1 EXHIBIT E Form of Interest Rate Selection Notice...................................................E-1 EXHIBIT F-1 Form of Revolving Note.................................................................F-1-1 EXHIBIT F-2 Form of Swing Line Note................................................................F-2-1 EXHIBIT G Form of Opinion of Borrower's Counsel....................................................G-1 EXHIBIT H Compliance Certificate...................................................................H-1 EXHIBIT I Form of Facility Guaranty................................................................I-1
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Page ---- Schedule 1.1 Existing Letters of Credit...............................................................S-1 Schedule 7.4 Subsidiaries and Investments in Other Persons............................................S-2 Schedule 7.6 Indebtedness.............................................................................S-3 Schedule 7.7 Liens....................................................................................S-4 Schedule 7.8 Tax Matters..............................................................................S-5 Schedule 7.10 Litigation...............................................................................S-6 Schedule 7.18 Environmental Matters ...................................................................S-7 Schedule 7.19 Employment Matters.......................................................................S-8
5 7 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of November 13, 2000 (the "Agreement"), is made by and among THE WACKENHUT CORPORATION, a Florida corporation having its principal place of business in Palm Beach Gardens, Florida (the "Borrower"), BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States, in its capacity as a Lender ("Bank of America"), and each other financial institution executing and delivering a signature page hereto and each other financial institution which may hereafter execute and deliver an instrument of assignment with respect to this Agreement pursuant to SECTION 12.1 (hereinafter such financial institutions may be referred to individually as a "Lender" or collectively as the "Lenders"), and BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States, in its capacity as agent for the Lenders (in such capacity, and together with any successor agent appointed in accordance with the terms of SECTION 11.7, the "Agent"); W I T N E S S E T H: WHEREAS, the Borrower has requested that the Lenders make available to the Borrower a revolving credit facility of up to $112,500,000, the proceeds of which are to be used to repay existing indebtedness and for general corporate purposes and which shall include a letter of credit facility in the amount of the revolving credit facility for the issuance of standby letters of credit and a swing line facility of up to $20,000,000; and WHEREAS, the Lenders are willing to make such revolving credit, letter of credit and swing line facilities available to the Borrower upon the terms and conditions set forth herein; NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as follows: 1 8 ARTICLE I DEFINITIONS AND TERMS 1.1. DEFINITIONS. For the purposes of this Agreement, in addition to the definitions set forth above, the following terms shall have the respective meanings set forth below: "Accounting Adjustments" means the adjustments to certain financial computations described in SECTION 1.4. "Acquisition" means the acquisition of (i) a controlling equity interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the holder thereof), whether by purchase of such equity interest or upon exercise of an option or warrant for, or conversion of securities into, such equity interest, or (ii) assets of another Person which constitute all or any material part of the assets of such Person or of a line or lines of business conducted by such Person. "Acquisition Adjustments" means the adjustments to certain financial terms and computations more particularly described in SECTION 1.3. "Advance" means a borrowing under the Revolving Credit Facility consisting of a Base Rate Loan or a Eurodollar Rate Loan. "Affiliate" means any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with the Borrower; or (ii) which beneficially owns or holds 5% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of the Borrower or 5% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting stock, by contract or otherwise. "Applicable Commitment Percentage" means, for each Lender at any time, a fraction, with respect to the Revolving Credit Facility and the Letter of Credit Facility, the numerator of which shall be such Lender's Revolving Credit Commitment and the denominator of which shall be the Total Revolving Credit Commitment, which Applicable Commitment Percentage for each Lender as of the Closing Date is as set forth in EXHIBIT A; PROVIDED that the Applicable Commitment Percentage of each Lender shall be increased or decreased to reflect any assignments to or by such Lender effected in accordance with SECTION 12.1. "Applicable Facility Fee" means that percent per annum, based upon the Consolidated Leverage Ratio for the Four-Quarter Period most 2 9 recently ended, set forth as the Applicable Facility Fee in the Pricing Grid and subject to further adjustment as therein provided. "Applicable Lending Office" means, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender) designated for such Type of Loan on the signature pages hereof or such other office of such Lender (or an affiliate of such Lender) as such Lender may from time to time specify to the Agent and the Borrower by written notice in accordance with the terms hereof as the office by which its Loans of such Type are to be made and maintained. "Applicable Margin" means that percent per annum, which shall be based upon the Consolidated Leverage Ratio for the Four-Quarter Period most recently ended, set forth as the Applicable Margin for Eurodollar Rate Loans and Swing Line Loans in the Pricing Grid and subject to further adjustment as therein provided. "Applications and Agreements for Letters of Credit" means, collectively, the Applications and Agreements for Letters of Credit, or similar documentation, executed by the Borrower from time to time and delivered to the Issuing Bank to support the issuance of Letters of Credit. "Asset Securitization Facility" means the asset backed, commercial paper funded receivables securitization facility among Wackenhut Funding, the Borrower, as Servicer, and Bank of America as Managing Agent, providing for the sale by Wackenhut Funding of fractional undivided interests in trade receivables originated by the Borrower and certain of its Subsidiaries; provided that at no time shall the aggregate face amount of outstanding trade receivables of the Borrower and its Subsidiaries sold or otherwise transferred (in whole or in part) through such program exceed $75,000,000. "Assignment and Acceptance" shall mean an Assignment and Acceptance in the form of EXHIBIT B (with blanks appropriately filled in) delivered to the Agent in connection with an assignment of a Lender's interest under this Agreement pursuant to SECTION 12.1. "Authorized Representative" means any of the Chairman, President, Senior Vice Presidents or any Vice President of the Borrower or, with respect to financial matters, the Chief Financial Officer or Treasurer of the Borrower, or any other Person expressly designated by the Board of Directors of the Borrower (or the appropriate committee thereof) as an Authorized Representative of the Borrower, as set forth from time to time in a certificate in the form of EXHIBIT C. "Bank of America" means Bank of America, N.A. and its successors. "BAS" means Banc of America Securities LLC and its successors. "Base Rate" means, for any day, the rate per annum equal to the sum of the higher of (i) the Federal Funds Rate for such day plus 3 10 one-half of one percent (0.5%) and (ii) the Prime Rate for such day. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. "Base Rate Loan" means a Loan for which the rate of interest is determined by reference to the Base Rate. "Base Rate Refunding Loan" means a Base Rate Loan or Swing Line Loan made either to (i) satisfy Reimbursement Obligations arising from a drawing under a Letter of Credit or (ii) pay Bank of America in respect of Swing Line Outstandings. "Board" means the Board of Governors of the Federal Reserve System (or any successor body). "Borrower's Account" means a demand deposit account number 3750156489 or any successor account with the Agent, which may be maintained at one or more offices of the Agent or an agent of the Agent. "Borrowing Notice" means the notice delivered by an Authorized Representative in connection with an Advance under the Revolving Credit Facility or a Swing Line Loan, in the forms of EXHIBITS D-1 AND D-2, respectively. "Business Day" means, (i) except as expressly provided in clause (ii), any day which is not a Saturday, Sunday or a day on which banks in the States of New York and North Carolina are authorized or obligated by law, executive order or governmental decree to be closed and, (ii) with respect to the selection, funding, interest rate, payment, and Interest Period of any Eurodollar Rate Loan, any day which is a Business Day, as described above, and on which the relevant international financial markets are open for the transaction of business contemplated by this Agreement in London, England, New York, New York and Charlotte, North Carolina. "Capitalized Lease" means any lease the obligation for Lease Payments with respect to which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. "Capitalized Lease Payments" of any Person and as of the date of any determination thereof means the amount at which the aggregate Lease Payments due and to become due under all Capitalized Leases under which such Person is lessee would be reflected as a liability on a consolidated balance sheet of such Person. "Change of Control" means, at any time: (i) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than members of the Wackenhut Family Group either (A) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of Voting Securities of the 4 11 Borrower (or securities convertible into or exchangeable for such Voting Securities) representing 33-1/3% or more of the combined voting power of all Voting Securities of the Borrower (on a fully diluted basis) or (B) otherwise has the ability, directly or indirectly, to elect a majority of the board of directors of the Borrower; (ii) during any period of up to 24 consecutive months, commencing on the Closing Date, individuals who at the beginning of such 24-month period were directors of the Borrower shall cease for any reason (other than the death, disability or retirement of an officer of the Borrower that is serving as a director at such time so long as another officer of the Borrower replaces such Person as a director) to constitute a majority of the board of directors of the Borrower; or (iii) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence on the management or policies of the Borrower. "Chile" means Wackenhut Chile S.A., a SOCIEDAD ANONIMA organized under the laws of the Republic of Chile. "Closing Date" means the date as of which this Agreement is executed by the Borrower, the Lenders and the Agent and on which the conditions set forth in SECTION 6.1 have been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. "Consistent Basis" in reference to the application of GAAP means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of the Borrower referred to as of the Closing Date in SECTION 7.6(A). "Consolidated EBITDA" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the sum of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest Charges, (iii) taxes on income, (iv) amortization, and (v) depreciation, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis, subject to Acquisition Adjustments and Accounting Adjustments. "Consolidated Fixed Charge Coverage Ratio" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the ratio of (i) Consolidated Net Income Available for Fixed Charges, subject to Accounting Adjustments, to (ii) Consolidated Fixed Charges for such period, subject to Accounting Adjustments. 5 12 "Consolidated Fixed Charges" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the sum of (i) all Consolidated Lease Payments (other than Capitalized Lease Payments) payable during such period, and (ii) all Consolidated Interest Charges on all Indebtedness (including the interest component of Lease Payments on Capitalized Leases and the discount factor or other economic equivalent of interest under the Asset Securitization Facility) payable during said period by the Borrower and its Subsidiaries. "Consolidated Indebtedness" means all Indebtedness for Money Borrowed of the Borrower and its Subsidiaries, all determined on a consolidated basis subject to Accounting Adjustments. "Consolidated Interest Charges" means, with respect to any period of computation thereof, the gross interest expense of the Borrower and its Subsidiaries, including without limitation (i) the current amortized portion of debt discounts to the extent included in gross interest expense, including without limitation the discount factor or other economic equivalent of interest arising under the Asset Securitization Facility, (ii) the current amortized portion of all fees (including fees payable in respect of any Rate Hedging Obligation) payable in connection with the incurrence of Indebtedness to the extent included in gross interest expense and (iii) the portion of any payments made in connection with Capitalized Leases allocable to interest expense, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Lease Payments" means as of the date of determination the amount of all Lease Payments of the Borrower and its Subsidiaries for the period of determination, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Leverage Ratio" means, as of the date of computation thereof, the ratio of (i) Consolidated Indebtedness (determined as at such date) to (ii) Consolidated EBITDA (for the Four-Quarter Period ending on (or most recently ended prior to) such date). "Consolidated Net Assets" means as of the date of any determination thereof, the amount of Consolidated Total Assets after deducting all Restricted Investments and all items which in accordance with GAAP would be included on the liability side of a consolidated balance sheet, but excluding as assets deferred income taxes, deferred investment tax credits, capital stock of any class, surplus and Consolidated Indebtedness. "Consolidated Net Income" means, for any period of computation thereof, the gross revenues from operations of the Borrower and its Subsidiaries (including payments received by the Borrower and its Subsidiaries of (i) investment income of Titania and interest income, and (ii) dividends and distributions made in the ordinary course of their businesses by Persons in which investment is permitted pursuant to this Agreement and not related to an extraordinary event), less all operating and non-operating expenses of the Borrower and its Subsidiaries including taxes on income, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; but excluding (for all purposes other than compliance with 6 13 SECTION 9.1(A) hereof) as income: (i) net gains on the sale, conversion or other disposition of capital assets, (ii) net gains on the acquisition, retirement, sale or other disposition of capital stock and other securities of the Borrower or its Subsidiaries, (iii) net gains on the collection of proceeds of life insurance policies, (iv) any write-up of any asset, and (v) any other net gain or credit of an extraordinary nature as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis, subject to Acquisition Adjustments. "Consolidated Net Income Available for Fixed Charges" for any period means the sum of (i) Consolidated Net Income during such period PLUS (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Borrower and its Subsidiaries during such period, and (iii) Consolidated Fixed Charges of the Borrower and its Subsidiaries during such period; all as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis, subject to Acquisition Adjustments. "Consolidated Net Worth" means at any time as of which the amount thereof is to be determined, the sum of the following with respect to the Borrower and its Subsidiaries (on a consolidated basis and excluding intercompany items in accordance with GAAP): (i) the amount of issued and outstanding share capital, PLUS (ii) the amount of additional paid-in capital and retained income (or, in the case of a deficit, minus the amount of such deficit), MINUS (iii) the sum of the following (without duplication of deductions in respect of items already deducted in arriving at surplus and retained earnings): (A) all reserves, except legal reserves and other contingency reserves (i.e., reserves not allocated to specific purposes and not deducted from assets), which are properly treated as appropriations of surplus or retained earnings; (B) any treasury stock, capital stock subscribed and unissued and other contra-equity accounts; and (C) the cumulative amount of any net write-up of asset values after the date of the audit immediately preceding the Closing Date. "Consolidated Total Assets" means, as of any date on which the amount thereof is to be determined, the net book value of all assets of the Borrower and its Subsidiaries as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Total Capitalization" means, as of any date on which the amount thereof is to be determined, the sum of Consolidated Indebtedness plus Consolidated Net Worth. "Continue", "Continuation", and "Continued" shall refer to the continuation pursuant to SECTION 4.2 hereof of a Eurodollar Rate Loan of one Type as a Eurodollar Rate Loan of the same Type from one Interest Period to the next Interest Period. 7 14 "Convert", "Conversion", and "Converted" shall refer to a conversion pursuant to SECTION 4.2 of one Type of Loan into another Type of Loan. "Cost of Acquisition" means, with respect to any Acquisition, as at the date of entering into any agreement therefor, the SUM of the following (without duplication): (i) the value of the capital stock, warrants or options to acquire capital stock of Borrower or any Subsidiary to be transferred in connection therewith, (ii) the amount of any cash and fair market value of other property (excluding property described in clause (i) and the unpaid principal amount of any debt instrument) given as consideration, (iii) the amount (determined by using the face amount or the amount payable at maturity, whichever is greater) of any Indebtedness incurred, assumed or acquired by the Borrower or any Subsidiary in connection with such Acquisition, (iv) all additional purchase price amounts in the form of earnouts and other contingent obligations that should be recorded on the financial statements of the Borrower and its Subsidiaries in accordance with GAAP, (v) all amounts paid in respect of covenants not to compete, consulting agreements that should be recorded on financial statements of the Borrower and its Subsidiaries in accordance with GAAP, and other affiliated contracts in connection with such Acquisition, (vi) the aggregate fair market value of all other consideration given by the Borrower or any Subsidiary in connection with such Acquisition, and (vii) out of pocket transaction costs for the services and expenses of attorneys, accountants and other consultants incurred in effecting such transaction, and other similar transaction costs so incurred. For purposes of determining the Cost of Acquisition for any transaction, (A) the capital stock of the Borrower shall be valued (I) in the case of capital stock that is then designated as a national market system security by the National Association of Securities Dealers, Inc. ("NASDAQ") or is listed on a national securities exchange, the average of the last reported bid and ask quotations or the last prices reported thereon, and (II) with respect to any other shares of capital stock, as determined by the Board of Directors of the Borrower and, if requested by the Agent, determined to be a reasonable valuation by the independent public accountants referred to in SECTION 8.1(A), (B) the capital stock of any Subsidiary shall be valued as determined by the Board of Directors of such Subsidiary and, if requested by the Agent, determined to be a reasonable valuation by the independent public accountants referred to in SECTION 8.1(A), and (C) with respect to any Acquisition accomplished pursuant to the exercise of options or warrants or the conversion of securities, the Cost of Acquisition shall include both the cost of acquiring such option, warrant or convertible security as well as the cost of exercise or conversion. "Credit Parties" means, collectively, the Borrower and each Guarantor. "Default" means any event or condition which, with the giving or receipt of notice or lapse of time or both, would constitute an Event of Default hereunder. "Default Rate" means (i) with respect to each Eurodollar Rate Loan, until the end of the Interest Period applicable thereto, a rate of two percent (2%) above the Eurodollar Rate applicable to such Loan, and thereafter at a rate of interest per annum which shall be two percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans, Swing Line Loans, Reimbursement Obligations, fees, and other amounts 8 15 payable in respect of (x) Obligations or (y) (except as otherwise expressly provided therein) the obligations of any Credit Party other than the Borrower under any of the other Loan Documents, a rate of interest per annum which shall be two percent (2%) above the Base Rate and (iii) in any case, the maximum rate permitted by applicable law, if lower. "Deficiency Advance" has the meaning given such term in SECTION 4.9. "Dollars" and the symbol "$" means dollars constituting legal tender for the payment of public and private debts in the United States of America. "Domestic Subsidiary" means any Subsidiary of the Borrower organized under the laws of the United States of America, any state or territory thereof or the District of Columbia. "Eligible Assignee" means (i) a Lender, (ii) an affiliate of a Lender, and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with SECTION 12.1, the Borrower, such approval not to be unreasonably withheld (provided that the incurrence by the Borrower of additional costs pursuant to SECTION 5.6 as a result of such assignment shall constitute a reasonable basis for withholding such consent) or delayed by the Borrower and such approval to be deemed given by the Borrower (in the absence of notice to the contrary, effective upon receipt) within two Business Days after notice of such proposed assignment has been provided by the assigning Lender to the Borrower; PROVIDED, HOWEVER, that neither the Borrower nor an affiliate of the Borrower shall qualify as an Eligible Assignee. "Employee Benefit Plan" means (i) any employee benefit plan, including any Pension Plan, within the meaning of Section 3(3) of ERISA which (A) is maintained for employees of the Borrower or any of its ERISA Affiliates, or any Subsidiary or is assumed by the Borrower or any of its ERISA Affiliates, or any Subsidiary in connection with any Acquisition or (B) has at any time been maintained for the employees of the Borrower, any current or former ERISA Affiliate, or any Subsidiary and (ii) any plan, arrangement, understanding or scheme maintained by the Borrower or any Subsidiary that provides retirement, deferred compensation, employee or retiree medical or life insurance, severance benefits or any other benefit covering any employee or former employee and which is administered under any Foreign Benefit Law or regulated by any Governmental Authority other than the United States of America. "Environmental Laws" means any federal, state or local statute, law, ordinance, code, rule, regulation, order, decree, permit or license regulating, relating to, or imposing liability or standards of conduct concerning, any environmental matters or conditions, environmental protection or conservation, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; the Superfund Amendments and Reauthorization Act of 1986, as amended; the Resource Conservation and Recovery Act, as amended; the Toxic Substances Control Act, as amended; the Clean Air 9 16 Act, as amended; the Clean Water Act, as amended; together with all regulations promulgated thereunder, and any other "Superfund" or "Superlien" law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "ERISA Affiliate", as applied to the Borrower, means any Person or trade or business which is a member of a group which is under common control with the Borrower, who together with the Borrower, is treated as a single employer within the meaning of Section 414(b) and (c) of the Code. "Eurodollar Rate Loan" means a Loan for which the rate of interest is determined by reference to the Eurodollar Rate. "Eurodollar Rate" means the interest rate per annum calculated according to the following formula: Eurodollar = INTERBANK OFFERED RATE + Applicable Rate -------------------------- Margin 1- Reserve Requirement "Event of Default" means any of the occurrences set forth as such in SECTION 10.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. "Existing Agreement" means the Amended and Restated Revolving Credit and Reimbursement Agreement dated December 30, 1997, as amended, among the Borrower, Bank of America, N.A., as Agent, and the lenders party thereto; "Existing LCs" means the letters of credit issued by Bank of America prior to the Closing Date pursuant to the Existing Agreement and remaining outstanding as of the Closing Date, all as more particularly described on SCHEDULE 1.1 attached hereto. "Facility Termination Date" means such date as all of the following shall have occurred: (a) the Borrower shall have permanently terminated the Revolving Credit Facility and the Swing Line by payment in full of all Revolving Credit Outstandings and Letter of Credit Outstandings and Swing Line Outstandings, together with all accrued and unpaid interest thereon, except for the undrawn portion of Letters of Credit as have been fully cash collateralized in a manner consistent with the terms of SECTION 10.1(B), (b) all Swap Agreements shall have been terminated, expired or cash collateralized, (c) all Revolving Credit Commitments and Letter of Credit Commitments shall have terminated or expired and (d) the Borrower shall have fully, finally 10 17 and irrevocably paid and satisfied in full all Obligations (other than Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Guarantor that may be owing to the Lenders pursuant to the Loan Documents and expressly survive termination of this Agreement); "FASB 133" means Statement of Financial Accounting Standards No. 133. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; PROVIDED that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Agent (in its individual capacity) on such day on such transactions as determined by the Agent. "Fiscal Quarter" means the 12-13 week period of the Borrower and its Subsidiaries for which the Borrower files an SEC Form 10-Q for the first such three periods of each Fiscal Year and an SEC Form 10-K for the last period of its Fiscal Year or if the Borrower is no longer a reporting company under the Securities Exchange Act of 1934, as amended, calendar quarter periods ending March 31, June 30, September 30 and December 31 of each calendar year. "Fiscal Year" means the 52-53 week period of the Borrower and its Subsidiaries for which the Borrower files an SEC Form 10-K or, if the Borrower is no longer a reporting company under the Securities Exchange Act of 1934, as amended, the twelve month period beginning on January 1 and ending on December 31 of each calendar year. "Foreign Benefit Law" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning, any Employee Benefit Plan. "Four-Quarter Period" means a period of four full consecutive Fiscal Quarters of the Borrower and its Subsidiaries, taken together as one accounting period. "GAAP" or "Generally Accepted Accounting Principles" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report. "Governmental Authority" shall mean any Federal, state, municipal, national or other governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or 11 18 pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "Guaranties" by any Person means all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect, guaranteeing any Indebtedness, dividend or other obligation, of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (ii) to advance or supply funds (a) for the purchase or payment of such Indebtedness or obligation, (b) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, or (iii) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness of obligation, or (iv) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof; PROVIDED, HOWEVER, that guarantees by the Borrower of performance of obligations of Subsidiaries under service contracts shall not be deemed Indebtedness. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for Borrowed Money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for Borrowed Money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. "Guarantors" means, at any date, the Wholly-owned Subsidiaries who are required to be parties to a Guaranty at such date. "Guaranty Agreement" means each Guaranty Agreement between one or more Guarantors and the Agent for the benefit of the Agent and the Lenders, delivered as of the Closing Date and substantially in the form of EXHIBIT I and otherwise pursuant to SECTION 8.18, as the same may be amended, modified or supplemented. "Hazardous Material" means and includes any pollutant, contaminant, or hazardous, toxic or dangerous waste, substance or material (including without limitation petroleum products, asbestos-containing materials and lead), the generation, handling, storage, transportation, disposal, treatment, release, discharge or emission of which is subject to any Environmental Law. "Incremental Debt" has the meaning given such term in SECTION 1.3. "Indebtedness" of any Person means and include all obligations of such Person which in accordance with GAAP shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all (i) obligations of such Person for borrowed money or which has been incurred in connection with the acquisition of property or assets, (ii) obligations secured by any Lien upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, (iii) obligations created or arising under any conditional sale or other title retention 12 19 agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property, (iv) Capitalized Lease Payments under any Capitalized Lease, (v) Guaranties of Indebtedness of others, (vi) the Reimbursement Obligations, and (vii) outstanding amounts received by the Borrower or any Subsidiary in exchange for the transfer of interests in trade receivables under the Asset Securitization Facility in excess of the amounts repaid to the purchasers in respect of such purchase price from collections on such trade receivables; PROVIDED, HOWEVER, that guarantees by the Borrower of performance of obligations of Subsidiaries under service contracts shall not be deemed Indebtedness. "Indebtedness for Money Borrowed" means with respect to any Person, without duplication, (i) all Indebtedness of such Person for borrowed money or which has been incurred in connection with the acquisition of assets, including all payments in respect thereof that are required to be made within one year from the date of any determination of Indebtedness, whether or not the obligation to make such payments shall constitute a current liability of the obligor under GAAP, (ii) all Capitalized Lease Payments of such Person, (iii) all Guaranties by such Person of Indebtedness of others, (iv) with respect to Indebtedness of the Borrower in respect of Letters of Credit, the product of (x) the aggregate amounts available for drawing under all outstanding Letters of Credit and (y).50; and (v) to the extent not otherwise included in clauses (i) through (iv) above, outstanding amounts (together with interest paid thereon) received by the Borrower or any Subsidiary in exchange for the transfer of interests in trade receivables under the Asset Securitization Facility. "Interbank Offered Rate" means, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto: (a) the rate per annum equal to the rate determined by the Agent to be the offered rate that appears on the page of the Telerate screen that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of 13 20 such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Rate would be offered by Bank of America's London Branch to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. "Interest Period" means, for each Eurodollar Rate Loan, a period commencing on the date such Eurodollar Rate Loan is made or Converted or Continued and ending, at the Borrower's option, on the date one week or one, two, three or six months thereafter as notified to the Agent by the Authorized Representative in accordance with the terms hereof; PROVIDED that, (i) if an Interest Period (other than an Interest Period of one week) for a Eurodollar Rate Loan would end on a day which is not a Business Day, such Interest Period shall be extended to the next Business Day (unless such extension would cause the applicable Interest Period to end in the succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); and (ii) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month. "Interest Rate Selection Notice" means the written notice delivered by an Authorized Representative in connection with the election of a subsequent Interest Period for any Eurodollar Rate Loan or the Conversion of any Eurodollar Rate Loan into a Base Rate Loan or the Conversion of any Base Rate Loan into a Eurodollar Rate Loan, in the form of EXHIBIT E. "Investments" means all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or Security or by loan, advance, capital contribution or otherwise; PROVIDED, HOWEVER, that "Investments" shall not mean or include routine investments in property to be used or consumed in the ordinary course of business or investments in accounts receivable or notes receivable arising in the ordinary course of business. 14 21 "Issuing Bank" means Bank of America and one other Lender designated in writing to the Agent by the Borrower as issuers of Letters of Credit under ARTICLE III. "Joint Venture Investment" means any Investment in an amount not to exceed $10,000,000 in any Fiscal Year by the Borrower with any other Person or Persons which Investment is made in order to permit the Borrower to make bids with respect to contracts for the providing of services by the Borrower of the type provided by the Borrower and its Subsidiaries as of the Closing Date. "LC Account Agreement" means the LC Account Agreement dated as of the date hereof between the Borrower and the Agent, as amended, modified or supplemented from time to time. "Lease Payments" means and include as of the date of any determination thereof, all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the Property) payable by the Borrower or a Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Borrower or a Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Letter of Credit" means (a) a standby letter of credit issued by the Issuing Bank pursuant to ARTICLE III hereof for the account of the Borrower in favor of a Person advancing credit or securing an obligation on behalf of the Borrower or Titania and (ii) the Existing LCs. "Letter of Credit Commitment" means, with respect to each Lender, the obligation of such Lender to acquire Participations in respect of Letters of Credit and Reimbursement Obligations up to an aggregate amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Letter of Credit Commitment as the same may be increased or decreased from time to time pursuant to this Agreement. "Letter of Credit Facility" means the facility described in ARTICLE III hereof providing for the issuance by the Issuing Bank for the account of the Borrower of Letters of Credit in an aggregate stated amount at any time outstanding not exceeding the Total Letter of Credit Commitment minus outstanding Reimbursement Obligations. "Letter of Credit Outstandings" means, as of any date of determination, the aggregate amount available to be drawn under all Letters of Credit plus Reimbursement Obligations then outstanding. "Lien" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising 15 22 from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, the Borrower and any Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes. "Loan" or Loans" means any of the Revolving Loans or the Swing Line Loan. "Loan Documents" means this Agreement, the Notes, the Guaranty Agreements, the LC Account Agreement, the Applications and Agreements for Letter of Credit, and all other instruments and documents heretofore or hereafter executed or delivered to or in favor of any Lender (including the Issuing Bank) or the Agent in connection with the Loans made and transactions contemplated under this Agreement, as the same may be amended, supplemented or replaced from the time to time. "Material Adverse Effect" means a material adverse effect on (i) the business, properties, operations, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of any Credit Party to pay or perform its respective obligations, liabilities and indebtedness under the Loan Documents as such payment or performance becomes due in accordance with the terms thereof, or (iii) the rights, powers and remedies of the Agent or any Lender under any Loan Document or the validity, legality or enforceability thereof. "Minority Interests" means any shares of stock of any class of a Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more of its Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) Fiscal Years. "Net Proceeds" from any public or private offering of any security (including securities evidencing Indebtedness) means cash payments received by the Borrower or any Subsidiary therefrom as and when received, net of all legal, accounting, banking and underwriting fees and expenses, commissions, discounts and other issuance expenses 16 23 incurred in connection therewith and all taxes required to be paid or accrued as a consequence of such issuance. "Notes" means, collectively, the Swing Line Note and the Revolving Notes. "Obligations" means the obligations, liabilities and Indebtedness of the Borrower with respect to (i) the principal and interest on the Loans as evidenced by the Notes, (ii) the Reimbursement Obligations and otherwise in respect of the Letters of Credit, (iii) all liabilities of Borrower to any Lender (or any affiliate of any Lender) which arise under a Swap Agreement, and (iv) the payment and performance of all other obligations, liabilities and Indebtedness of the Borrower to the Lenders (including the Issuing Bank), the Agent or BAS hereunder, under any one or more of the other Loan Documents or with respect to the Loans. "Operating Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the bylaws, operating agreement, partnership agreement, limited partnership agreement or other applicable documents relating to the operation, governance or management of such entity. "Organizational Action" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, any corporate, organizational or partnership action (including any required shareholder, member or partner action), or other similar official action, as applicable, taken by such entity. "Organizational Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the articles of incorporation, certificate of incorporation, articles of organization, certificate of limited partnership or other applicable organizational or charter documents relating to the creation of such entity. "Outstandings" means, collectively, at any date, the Letter of Credit Outstandings, Swing Line Outstandings and Revolving Credit Outstandings on such date. "Participation" means, (i) with respect to any Lender (other than the Issuing Bank) and a Letter of Credit, the extension of credit represented by the participation of such Lender hereunder in the liability of the Issuing Bank in respect of a Letter of Credit issued by the Issuing Bank in accordance with the terms hereof and (ii) with respect to any Lender (other than Bank of America) and a Swing Line Loan, the extension of credit represented by the participation of such Lender hereunder in the liability of Bank of America in respect of a Swing Line Loan made by Bank of America in accordance with the terms hereof. 17 24 "PBGC" means the Pension Benefit Guaranty Corporation and any successor thereto. "Pension Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (i) is maintained for employees of the Borrower or any of its ERISA Affiliates or is assumed by the Borrower or any of its ERISA Affiliates in connection with any Acquisition or (ii) has at any time been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "Person" means an individual, partnership, corporation, limited liability company, limited liability partnership, trust, unincorporated organization, association, joint venture or a government or agency or political subdivision thereof. "Pricing Grid" means:
APPLICABLE MARGIN ------------------------------ EURODOLLAR SWING LINE APPLICABLE TIER CONSOLIDATED LEVERAGE RATIO RATE LOAN LOAN FACILITY FEE ---- --------------------------- --------- ----------- -------------- I Less than 1.75 to 1.00 .90% 1.25% .35% II Equal to or Greater than 1.75 to 1.00 but Less than 2.50 to 1.00 1.15% 1.00% .35% III Equal to or Greater than 2.50 to 1.00 but Less than 3.25 to 1.00 1.35% .75% .40% IV Equal to or Greater than 3.25 to 1.00 1.75% .25% .50%
The Applicable Margin and Applicable Facility Fee shall be established at the end of each Fiscal Quarter of the Borrower (each, a "Determination Date"). Any change in the Applicable Margin or Applicable Facility Fee following each Determination Date shall be determined based upon the computations set forth in the certificate furnished to the Agent pursuant to SECTION 8.1(A)(II) and SECTION 8.1(B)(II), subject to review and approval of such computations by the Agent, and shall be effective commencing on the fifth Business Day following the date such certificate is received until the fifth Business Day following the date on which a new certificate is delivered or is required to be delivered, whichever shall first occur. From the Closing Date to the fifth Business Day following the date the certificate referred to in the preceding sentence for the fiscal period ended as at the first Determination Date is delivered or is required to be delivered (whichever shall first occur), the Applicable Margin and Applicable Commitment Fee shall be Tier III. Notwithstanding the provisions of the two preceding sentences, if the Borrower shall fail to deliver any such certificate within the time period required by SECTION 8.1, then the Applicable Margin and Applicable Commitment Fee shall be Tier IV from the date such certificate was due until the fifth Business Day following the date the appropriate certificate is so delivered. 18 25 "Prime Rate" means the per annum rate of interest established from time to time by Bank of America as its prime rate, which rate may not be the lowest rate of interest charged by Bank of America to its customers. "Principal Office" means the principal office of Bank of America, presently located at 101 North Tryon Street, 15th Floor, NC1 001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services, or such other office and address as the Agent may from time to time designate. "Rate Hedging Obligations" means, without duplication, any and all obligations of the Borrower or any Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, Dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants and those commonly known as interest rate "swap" agreements; (ii) all other "derivative instruments" as defined in FASB 133 and which are subject to the reporting requirements of FASB 133; and (iii) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing. For purposes of any computation hereunder, each Rate Hedging Obligation shall be valued at the Rate Hedge Value thereof. "Rate Hedge Value" means, with respect to each contract, instrument or other arrangement creating a Rate Hedging Obligation, the net obligations of the Borrower or any Subsidiary thereunder equal to the termination value thereof as determined in accordance with its provisions (if such Rate Hedging Obligation has been terminated) or the mark to market value thereof as determined on the basis of available quotations from any recognized dealer in, or from Bloomberg or other similar service providing market quotations for, the applicable Rate Hedging Obligation (if such Rate Hedging Obligation has not been terminated). "Registrar" means, with respect to any Subsidiary Securities, any Person authorized or obligated to maintain records of the registration of ownership or transfer of ownership of interests in such Subsidiary Securities, and in the event no such Person shall have been expressly designated by the related Subsidiary, shall mean (i) as to any corporation or limited liability company, its Secretary (or comparable official), and (ii) as to any partnership, its general partner (or managing general partner if one shall have been appointed). "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time. 19 26 "Reimbursement Obligation" shall mean at any time, the obligation of the Borrower with respect to any Letter of Credit to reimburse the Issuing Bank and the Lenders to the extent of their respective Participations (including by the receipt by the Issuing Bank of proceeds of Loans pursuant to SECTION 2.1(C)(III)) for amounts theretofore paid by the Issuing Bank pursuant to a drawing under such Letter of Credit. "Required Lenders" means, as of any date, Lenders on such date having Credit Exposures (as defined below) aggregating more than 50% of the aggregate Credit Exposures of all the Lenders on such date. For purposes of the preceding sentence, the amount of the "CREDIT EXPOSURE" of each Lender shall be equal at all times (a) other than following the occurrence and during the continuance of an Event of Default, to its Revolving Credit Commitment, and (b) following the occurrence and during the continuance of an Event of Default, to the sum of (i) the aggregate principal amount of such Lender's Applicable Commitment Percentage of Revolving Credit Outstandings plus (ii) the amount of such Lender's Applicable Commitment Percentage of Letter of Credit Outstandings and Swing Line Outstandings; PROVIDED that, for the purpose of this definition only, (A) if any Lender shall have failed to fund its Applicable Commitment Percentage of any Advance, then the Revolving Credit Commitment of such Lender shall be deemed reduced by the amount it so failed to fund for so long as such failure shall continue and such Lender's Credit Exposure attributable to such failure shall be deemed held by any Lender making more than its Applicable Commitment Percentage of such Advance to the extent it covers such failure, (B) if any Lender shall have failed to pay to the Issuing Bank upon demand its Applicable Commitment Percentage of any drawing under any Letter of Credit resulting in an outstanding Reimbursement Obligation (whether by funding its Participation therein or otherwise), such Lender's Credit Exposure attributable to all Letter of Credit Outstandings shall be deemed to be held by the Issuing Bank until such Lender shall pay such deficiency amount to the Issuing Bank together with interest thereon as provided in SECTION 4.9 and (C) if any Lender shall have failed to pay to Bank of America on demand its Applicable Commitment Percentage of any Swing Line Loan (whether by funding its Participation therein or otherwise), such Lender's Credit Exposure attributable to all Swing Line Outstandings shall be deemed to be held by Bank of America until such Lender shall pay such deficiency amount to Bank of America together with interest thereon as provided in SECTION 4.9. "Reserve Requirement" means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Reserve Requirement. "Restricted Investments" means all Investments in any Person, other than: 20 27 (a) Investments by the Borrower and its Subsidiaries in and to Subsidiaries, including any investment in a corporation which, after giving effect to such investment, will become a Subsidiary; (b) Investments in (i) commercial paper maturing in 270 days or less from the date of issuance and which, at the time of acquisition by the Borrower or any Subsidiary, is accorded one of the two highest ratings by S&P or Moody's.; (ii) Variable Rate Demand Notes of issuers whose commercial paper, at the time of acquisition, is accorded one of the two highest ratings by S&P or Moody's; or (iii) direct obligations of any State of the United States of America or of any political subdivision thereof located in the United States of America and which, at the time of acquisition, is accorded one of the two highest ratings by S&P or Moody's, maturing in twelve months or less from the date of acquisition; (c) Investments in direct obligations of the United States of America, or investments in any Person, which Investments are guaranteed by the full faith and credit of the United States of America, in either case maturing in twelve months or less from the date of acquisition thereof by the Borrower or any Subsidiary; (d) Investments in certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $100,000,000 and whose long-term certificates of deposit are, at the time of acquisition thereof by the Borrower or Subsidiary, rated A by S&P or Moody's; (e) loans or advances in the usual and ordinary course of business to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of the Borrower or any Subsidiary; PROVIDED, HOWEVER that the Borrower may make up to an aggregate at any one time outstanding of up to $300,000 of such loans or advances which are not incidental to carrying on the business of the Borrower or any Subsidiary; and (f) receivables arising from the sale of goods and services in the ordinary course of business of the Borrower and its Subsidiaries; (g) Joint Venture Investments; and (h) provided, however, that with respect to investments made by or on behalf of Titania, the following shall not be Restricted Investments: (1) Certificates of deposit, time deposits and banker's acceptances maturing within one year from the date of acquisition, issued by a bank or trust company organized under the laws of the United States or any state thereof, or any 21 28 foreign bank whose branch is organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $100,000,000 and whose long-term certificates of deposit are, at the time of acquisition, rated at least A by S&P or Moody's; (2) Repurchase Agreements with any domestic bank with debt rated "AA" or better by S&P or "Aa" by Moody's, or any foreign bank rated at least "AA" by S&P and "Aa" by Moody's; or repurchase agreements with such other Persons on such terms as the Borrower and the Agent shall agree in writing; provided the term of all such repurchase agreements is for one year or less; (3) Direct obligations of the United States of America, or Investments in any Person, which Investments are guaranteed by the full faith and credit of the United States of America; (4) Mortgage-backed securities issued by the United States Government or an agency or instrumentality thereof, having at the time of acquisition, a credit rating of at least AA by a nationally recognized rating service; (5) Bonds, notes and other direct obligations (other than those referred to in clause (b), above) of any corporation domiciled in the United States of America, of a State of the United States of America, or of any sovereign or supranational institution whose obligations are denominated in United States dollars, at the time of acquisition rated at least A by a nationally recognized rating service. Obligations of sovereign or supranational institutions at the time of acquisition, shall be rated at least AA by a nationally recognized rating service; (6) Preferred stock obligations of any corporation domiciled in the United States of America, whose obligations at the time of acquisition are rated at least A by a nationally recognized rating service; (7) Shares in mutual funds that invest solely in investments of the types described in clause b(i), clause (b)(iii), clause (3), clause (4), clause (5) and/or clause (6) above and have assets in excess of One Hundred Million Dollars ($100,000,000); (8) Any Investments (other than the Investments set forth in clause (b) and clause (1) through clause (7) inclusive, above), provided that the aggregate fair value for all such investments shall not, at any time, exceed five percent (5%) of the aggregate fair value of all Investments set forth in clause (1) through clause (8) inclusive, above. For the purposes of this subsection (8) only, fair value shall mean the greater of book value or fair market value. 22 29 In valuing any investments for the purpose of applying the limitations set forth in this Agreement, such investments, loans and advances shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For purposes of this Agreement, at any time when a corporation becomes a Subsidiary, all Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Subsidiary, at such time. "Revolving Credit Commitment" means, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower up to an aggregate principal amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Revolving Credit Commitment. "Revolving Credit Facility" means the facility described in SECTION 2.1 hereof providing for Loans to the Borrower by the Lenders in the aggregate principal amount of the Total Revolving Credit Commitment. "Revolving Credit Outstandings" means, as of any date of determination, the aggregate principal amount of all Revolving Loans then outstanding. "Revolving Credit Termination Date" means (i) the Stated Termination Date or (ii) such earlier date of termination of Lenders' obligations pursuant to SECTION 10.1 upon the occurrence of an Event of Default, or (iii) such date as the Borrower may voluntarily and permanently terminate the Revolving Credit Facility by payment in full of all Revolving Credit Outstandings, Swing Line Outstandings and Letter of Credit Outstandings and cancellation of all Letters of Credit, together with all accrued and unpaid interest thereon. "Revolving Loan" means any borrowing pursuant to an Advance under the Revolving Credit Facility in accordance with SECTION 2.1. "Revolving Notes" means, collectively, the promissory notes of the Borrower evidencing Revolving Loans executed and delivered to the Lenders as provided in SECTION 2.3 substantially in the form of EXHIBIT F-1, with appropriate insertions as to amounts, dates and names of Lenders. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. "Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. "Solvent" means, when used with respect to any Person, that at the time of determination: 23 30 (i) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including Contingent Obligations; and (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "Stated Termination Date" means November 12, 2003. "Subordinated Indebtedness" means all unsecured Indebtedness of the Borrower which shall contain or have applicable thereto subordination provisions in form and substance acceptable to the Agent and the Required Lenders. "Subsidiary" means any corporation or other entity in which more than 50% of its outstanding Voting Securities or more than 50% of all equity interests is owned directly or indirectly by the Borrower and/or by one or more of the Borrower's Subsidiaries. Wackenhut Funding shall not be deemed a Subsidiary. "Subsidiary Securities" means the shares of capital stock or the other equity interests issued by or equity participations in any Subsidiary, whether or not constituting a "security" under Article 8 of the Uniform Commercial Code as in effect in any jurisdiction. "Swap Agreement" means one or more agreements between the Borrower and any Person with respect to Indebtedness evidenced by any or all of the Notes, on terms mutually acceptable to Borrower and such Person and approved by the Required Lenders, which agreements create Rate Hedging Obligations; PROVIDED, HOWEVER, that no such approval of the Lenders shall be required to the extent such agreements are entered into between the Borrower and any Lender or any affiliate of any Lender. "Swing Line" means the revolving line of credit established by Bank of America in favor of the Borrower pursuant to SECTION 2.4. "Swing Line Loans" mean loans made by Bank of America to the Borrower pursuant to SECTION 2.4. "Swing Line Note" means the promissory note of the Borrower evidencing the Swing Line executed and delivered to Bank of America as provided in SECTION 2.3 substantially in the form of EXHIBIT F-2. "Swing Line Outstandings" means, as of any date of determination, the aggregate principal amount of all Swing Line Loans then outstanding. 24 31 "Termination Event" means: (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (unless the notice requirement has been waived by applicable regulation); or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4062(e) of ERISA; or (iii) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA; or (iv) the institution of proceedings to terminate a Pension Plan by the PBGC; or (v) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or (ix) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA; or (x) any event or condition with respect to any Employee Benefit Plan which is regulated by any Foreign Benefit Law that results in the termination of such Employee Benefit Plan or the revocation of such Employee Benefit Plan's authority to operate under the applicable Foreign Benefit Law. "Titania" means Titania Insurance Company of America, a corporation organized under the laws of Vermont and a wholly-owned Subsidiary of the Borrower. "Total Letter of Credit Commitment" means an amount not to exceed the Total Revolving Credit Commitment. "Total Revolving Credit Commitment" means a principal amount equal to $112,500,000, as reduced from time to time in accordance with SECTION 2.1(E). "TROL Leases" means all tax retention operating lease agreements between WCC or any subsidiary of WCC, as Lessee, and First Security Bank, N.A., as Lessor, as amended, supplemented or modified from time to time. "Type" shall mean any type of Loan (i.e., a Base Rate Loan or a Eurodollar Rate Loan). "Voting Securities" means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. 25 32 "Wackenhut Family Group" means (i) George R. Wackenhut, Ruth J. Wackenhut, Richard R. Wackenhut and other lineal descendants of George R. Wackenhut, the founder of the Borrower; (ii) the spouses and lineal descendants of the persons named in clause (i); and (iii) the estates or legal representatives of the persons named in clause (i). "Wackenhut Funding" means Wackenhut Funding Corporation, a Delaware corporation. "WCC" means Wackenhut Corrections Corporation, a Florida corporation and a Subsidiary of the Borrower as of the Closing Date. "Wholly-owned" when used in connection with any Subsidiary means a Domestic Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) and all Indebtedness for Money Borrowed shall be owned by the Borrower and/or one or more of its Wholly-owned Subsidiaries. 1.2. RULES OF INTERPRETATION. (a) All accounting terms not specifically defined herein shall have the meanings assigned to such terms and shall be interpreted in accordance with GAAP applied on a Consistent Basis. (b) Each term defined in Articles 1, 8 or 9 of the Florida Uniform Commercial Code shall have the meaning given therein unless otherwise defined herein, except to the extent that the Uniform Commercial Code of another jurisdiction is controlling, in which case such terms shall have the meaning given in the Uniform Commercial Code of the applicable jurisdiction. (c) The headings, subheadings and table of contents used herein or in any other Loan Document are solely for convenience of reference and shall not constitute a part of any such document or affect the meaning, construction or effect of any provision thereof. (d) Except as otherwise expressly provided, references in any Loan Document to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are references to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules in or to such Loan Document. (e) All definitions set forth herein or in any other Loan Document shall apply to the singular as well as the plural form of such defined term, and all references to the masculine gender shall include reference to the feminine or neuter gender, and VICE VERSA, as the context may require. (f) When used herein or in any other Loan Document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, 26 33 refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (g) References to "including" means including without limiting the generality of any description preceding such term, and such term shall not limit a general statement to matters similar to those specifically mentioned. (h) Except as otherwise expressly provided, all dates and times of day specified herein shall refer to such dates and times at Charlotte, North Carolina. (i) Whenever interest rates or fees are established in whole or in part by reference to a numerical percentage expressed as "___%", such arithmetic expression shall be interpreted in accordance with the convention that 1% = 100 basis points. (j) Each of the parties to the Loan Documents and their counsel have reviewed and revised, or requested (or had the opportunity to request) revisions to, the Loan Documents, and any rule of construction that ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Loan Documents and all exhibits, schedules and appendices thereto. (k) Any reference to an officer of the Borrower or any other Person by reference to the title of such officer shall be deemed to refer to each other officer of such Person, however titled, exercising the same or substantially similar functions. (l) All references to any agreement or document as amended, modified or supplemented, or words of similar effect, shall mean such document or agreement, as the case may be, as amended, modified or supplemented from time to time only as and to the extent permitted therein and in the Loan Documents. 1.3. ACCOUNTING FOR ACQUISITIONS. With respect to any Acquisition consummated on or after the Closing Date and prior to the Facility Termination Date, the following shall apply: (a) As to each Acquisition that is accounted for as a "purchase," for each of the four Four-Quarter Periods ending next following the date of such Acquisition, (i) Consolidated EBITDA and Consolidated Net Income Available for Fixed Charges shall include the results of operations of the Person or assets so acquired on a historical pro forma basis as if such Acquisition had been consummated as a "pooling of interests," and which amounts may include such adjustments as are permitted under Regulation S-X of the Securities and Exchange Commission and reasonably satisfactory to the Agent but (ii) for purposes of determining compliance with the provisions of SECTION 9.1(A), any increase in Consolidated Net Income resulting solely from such pro forma treatment of such "purchase" Acquisition shall be disregarded; and 27 34 (b) For each of the four Four-Quarter Periods ending next following the date of each Acquisition, Consolidated Fixed Charges shall include the results of operations of the Person or assets so acquired, which amounts shall be determined on a historical pro forma basis as if such Acquisition had been consummated as a "pooling of interests;" provided, however, Consolidated Interest Expense shall be adjusted on a historical pro forma basis to (i) eliminate interest expense accrued during such period on any Indebtedness repaid in connection with such Acquisition and (ii) include interest expense on any Indebtedness (including Indebtedness hereunder) incurred, acquired or assumed in connection with such Acquisition ("Incremental Debt") calculated (x) as if all such Incremental Debt had been incurred as of the first day of such Four-Quarter Period and (y) at the following interest rates: (I) for all periods subsequent to the date of the Acquisition and for Incremental Debt assumed or acquired in the Acquisition and in effect prior to the date of Acquisition, at the actual rates of interest applicable thereto, and (II) for all periods prior to the actual incurrence of such Incremental Debt, equal to the rate of interest actually applicable to such Incremental Debt hereunder or under other financing documents applicable thereto as at the end of each affected Four-Quarter Period, as the case may be. 1.4. ACCOUNTING ADJUSTMENTS. For the purposes of determining Consolidated EBITDA and the Consolidated Fixed Charge Coverage Ratio there shall be excluded revenues and expenses and other appropriate charges or adjustments attributable to WCC and Chile. For the purposes of determining Consolidated Indebtedness there shall be excluded from Consolidated Indebtedness all Indebtedness for Money Borrowed of WCC and Chile. 28 35 ARTICLE II THE CREDIT FACILITIES 2.1. REVOLVING LOANS. (a) COMMITMENT. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Advances to the Borrower under the Revolving Credit Facility from time to time from the Closing Date until the Revolving Credit Termination Date on a pro rata basis as to the total borrowing requested by the Borrower on any day determined by such Lender's Applicable Commitment Percentage up to but not exceeding the Revolving Credit Commitment of such Lender, PROVIDED, however, that the Lenders will not be required and shall have no obligation to make any such Advance (i) so long as a Default or an Event of Default has occurred and is continuing or (ii) if the Agent has accelerated the maturity of any of the Notes as a result of an Event of Default; PROVIDED further, however, that immediately after giving effect to each such Advance, the amount of Revolving Credit Outstandings plus Letter of Credit Outstandings plus Swing Line Outstandings shall not exceed the Total Revolving Credit Commitment. Within such limits and subject to the other terms and conditions of this Agreement, the Borrower may borrow, repay and reborrow under the Revolving Credit Facility on a Business Day from the Closing Date until, but (as to borrowings and reborrowings) not including, the Revolving Credit Termination Date. (b) AMOUNTS. Except as otherwise permitted by the Lenders from time to time, the amount of Revolving Credit Outstandings plus Letter of Credit Outstandings plus Swing Line Outstandings shall not exceed at any time the Total Revolving Credit Commitment, and, in the event there shall be outstanding any such excess, the Borrower shall immediately make such payments and prepayments as shall be necessary to comply with this restriction. Each Advance under the Revolving Credit Facility, other than Base Rate Refunding Loans and Swing Line Loans, shall be in an amount of at least $1,000,000, and, if greater than $1,000,000, an integral multiple of $500,000. (c) ADVANCES. (i) An Authorized Representative shall give the Agent (1) at least three (3) Business Days' irrevocable telephonic notice of each Eurodollar Rate Loan (whether representing an additional borrowing or the Continuation of a borrowing hereunder or the Conversion of a borrowing hereunder from a Base Rate Loan to a Eurodollar Rate Loan) prior to 11:30 A.M. and (2) irrevocable telephonic notice of each Base Rate Loan (other than Base Rate Refunding Loans to the extent the same are effected without notice pursuant to SECTION 2.1(C)(III) and whether representing an additional borrowing hereunder or the Conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate Loans) prior to 11:30 A.M. on the day of such proposed Revolving Loan. Each such notice shall be effective upon receipt by the Agent, shall specify the amount of the borrowing, the type of Revolving Loan (Base Rate or Eurodollar Rate), the date of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be used in the computation of interest. The Authorized Representative shall provide the Agent written confirmation of each such telephonic notice in the form of a 29 36 Borrowing Notice or Interest Rate Selection Notice (as applicable) with appropriate insertions but failure to provide such confirmation shall not affect the validity of such telephonic notice. Notice of receipt of such Borrowing Notice or Interest Rate Selection Notice, as the case may be, together with the amount of each Lender's portion of an Advance requested thereunder, shall be provided by the Agent to each Lender by telefacsimile transmission with reasonable promptness, but (provided the Agent shall have received such notice by 11:30 A.M.) not later than 1:30 P.M. on the same day as the Agent's receipt of such notice. (ii) Not later than 3:00 P.M. on the date specified for each borrowing under this SECTION 2.1, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Advance or Advances to be made by it on such day available by wire transfer to the Agent in the amount of its pro rata share, determined according to such Lender's Applicable Commitment Percentage of the Revolving Loan or Revolving Loans to be made on such day. Such wire transfer shall be directed to the Agent at the Principal Office and shall be in the form of Dollars constituting immediately available funds. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by delivery of the proceeds thereof to the Borrower's Account or otherwise as shall be directed in the applicable Borrowing Notice by the Authorized Representative and reasonably acceptable to the Agent. (iii) Notwithstanding the foregoing, if a drawing is made under any Letter of Credit, such drawing is honored by the Issuing Bank, and the Borrower shall not immediately fully reimburse the Issuing Bank in respect of such drawing from other funds available to the Borrower, (A) provided that the conditions to making a Revolving Loan as herein provided shall then be satisfied, the Reimbursement Obligation arising from such drawing shall be paid to the Issuing Bank by the Agent without the requirement of notice to or from the Borrower from immediately available funds which shall be advanced as a Base Rate Refunding Loan to the Agent at its Principal Office by each Lender under the Revolving Credit Facility in an amount equal to such Lender's Applicable Commitment Percentage of such Reimbursement Obligation, and (B) if the conditions to making a Revolving Loan as herein provided shall not then be satisfied, each of the Lenders shall fund by payment to the Agent (for the benefit of the Issuing Bank) at its Principal Office in immediately available funds the purchase from the Issuing Bank of their respective Participations in the related Reimbursement Obligation based on their respective Applicable Commitment Percentages of the Total Letter of Credit Commitment. If a drawing is presented under any Letter of Credit in accordance with the terms thereof and the Borrower shall not immediately reimburse the Issuing Bank in respect thereof, then notice of such drawing or payment shall be provided promptly by the Issuing Bank to the Agent and the Agent shall provide notice to each Lender by telephone or telefacsimile transmission. If notice to the Lenders of a drawing under any Letter of Credit is given by the Agent at or before 12:00 noon on any Business Day, each Lender shall either make a Base Rate Refunding Loan or fund the purchase of its Participation as specified above in the amount of such Lender's Applicable Commitment Percentage of such drawing or payment and shall pay such amount to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds before 2:30 P.M. on the same Business Day. If such notice to the Lenders is given by the Agent after 12:00 noon on any Business Day, each Lender shall either make such Base Rate Refunding Loan or fund such purchase before 12:00 noon on the next following Business Day. 30 37 (d) REPAYMENT OF REVOLVING LOANS. The principal amount of each Revolving Loan shall be due and payable to the Agent for the benefit of each Lender in full on the Revolving Credit Termination Date, or earlier as specifically provided herein. The principal amount of any Revolving Loan may be prepaid in whole or in part on any Business Day, upon (A) at least three (3) Business Days' irrevocable telephonic notice in the case of each Revolving Loan that is a Eurodollar Rate Loan from an Authorized Representative (effective upon receipt) to the Agent prior to 11:30 A.M. and (B) irrevocable telephonic notice in the case of each Revolving Loan that is a Base Rate Loan from an Authorized Representative (effective upon receipt) to the Agent prior to 11:30 A.M. on the day of such proposed repayment. The Authorized Representative shall provide the Agent written confirmation of each such telephonic notice but failure to provide such confirmation shall not effect the validity of such telephonic notice. All prepayments of Revolving Loans made by the Borrower shall be in the amount of $1,000,000 or such greater amount which is an integral multiple of $500,000, or the amount equal to all Revolving Credit Outstandings, or such other amount as necessary to comply with SECTION 2.1(B). (e) REDUCTIONS. The Borrower shall, by notice from an Authorized Representative, have the right from time to time but not more frequently than once each calendar month, upon not less than three (3) Business Days' written notice to the Agent, effective upon receipt, to reduce the Total Revolving Credit Commitment. The Agent shall give each Lender, within one (1) Business Day of receipt of such notice, telefacsimile notice, or telephonic notice (confirmed in writing), of such reduction. Each such reduction shall be in the aggregate amount of $5,000,000 or such greater amount which is in an integral multiple of $1,000,000, or the entire remaining Total Revolving Credit Commitment, and shall permanently reduce the Total Revolving Credit Commitment. Each reduction of the Total Revolving Credit Commitment shall be accompanied by payment of the Revolving Loans or Swing Line Loans to the extent that the principal amount of Revolving Credit Outstandings plus Letter of Credit Outstandings plus Swing Line Outstandings exceeds the Total Revolving Credit Commitment after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. 2.2. USE OF PROCEEDS. The proceeds of the Loans made pursuant to the Revolving Credit Facility hereunder shall be used by the Borrower to repay Indebtedness arising under the Existing Agreement, for general working capital needs and other lawful corporate purposes. 2.3. NOTES. (a) REVOLVING NOTES. Revolving Loans made by each Lender shall be evidenced by the Revolving Note payable to the order of such Lender in the respective amount of its Applicable Commitment Percentage of the Total Revolving Credit Commitment, which Revolving Note shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrower. (b) SWING LINE NOTE. The Swing Line Outstandings shall be evidenced by a separate Swing Line Note payable to the order of the Bank of America in the amount of the Swing Line, which Note shall be dated the Closing Date and shall be duly completed, executed and delivered by the Borrower. 31 38 2.4. SWING LINE. (a) Notwithstanding any other provision of this Agreement to the contrary, in order to administer the Revolving Credit Facility in an efficient manner and to minimize the transfer of funds between the Agent and the Lenders, Bank of America shall make available Swing Line Loans to the Borrower prior to the Revolving Credit Termination Date. Bank of America shall not be obligated to make any Swing Line Loan pursuant hereto (i) if to the actual knowledge of Bank of America the Borrower is not in compliance with all the conditions to the making of Revolving Loans set forth in this Agreement, (ii) if after giving effect to such Swing Line Loan, the Swing Line Outstandings exceed $20,000,000, or (iii) if after giving effect to such Swing Line Loan, the sum of the Swing Line Outstandings, Revolving Credit Outstandings and Letter of Credit Outstandings exceeds the Total Revolving Credit Commitment. The Company may, subject to the conditions set forth in the preceding sentence, borrow, repay and reborrow under this SECTION 2.4. Unless notified to the contrary by Bank of America, borrowings under the Swing Line shall be made in the minimum amount of $20,000 or, if greater, in amounts which are integral multiples of $10,000, or in the amount necessary to effect a Base Rate Refunding Loan, upon written request by telefacsimile transmission, effective upon receipt, by an Authorized Representative of the Borrower made to Bank of America not later than 1:00 P.M. on the Business Day of the requested borrowing. Each such Borrowing Notice shall specify the amount of the borrowing and the date of borrowing, and shall be in the form of EXHIBIT D-2, with appropriate insertions. Unless notified to the contrary by Bank of America, each repayment of a Swing Line Loan shall be in an amount which is an integral multiple of $10,000 or the aggregate amount of all Swing Line Outstandings. (b) The interest payable on Swing Line Loans is solely for the account of Bank of America. Swing Line Loans shall bear interest solely at the Base Rate MINUS the Applicable Margin. From and after the occurrence of an Event of Default Swing Line Loans shall accrue interest at the Default Rate, and all accrued and unpaid interest on Swing Line Loans shall be payable, on the dates and in the manner provided in SECTION 4.3 with respect to interest on Base Rate Loans. (c) Upon the making of a Swing Line Loan, each Lender shall be deemed to have purchased from Bank of America a Participation therein in an amount equal to that Lender's Applicable Commitment Percentage of such Swing Line Loan. Upon demand made by Bank of America, each Lender shall, according to its Applicable Commitment Percentage of such Swing Line Loan, promptly provide to Bank of America its purchase price therefor in an amount equal to its Participation therein. Any Advance made by a Lender pursuant to demand of Bank of America of the purchase price of its Participation shall when made be deemed to be (i) provided that the conditions to making Revolving Loans shall be satisfied, a Base Rate Refunding Loan under SECTION 2.1, and (ii) in all other cases, the funding by each Lender of the purchase price of its Participation in such Swing Line Loan. The obligation of each Lender to so provide its purchase price to Bank of America shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. The Borrower, at its option and subject to the terms hereof, may request an Advance pursuant to SECTION 2.1 in an amount sufficient to repay Swing Line Outstandings on any date and the Agent shall provide from the proceeds of such Advance to Bank of America the amount necessary to repay such Swing Line Outstandings (which Bank of America shall then apply to such 32 39 repayment) and credit any balance of the Advance in immediately available funds in the manner directed by the Borrower pursuant to SECTION 2.1(C)(II). The proceeds of such Advances shall be paid to Bank of America for application to the Swing Line Outstandings and the Lenders shall then be deemed to have made Loans in the amount of such Advances. The Swing Line shall continue in effect until the Revolving Credit Termination Date, at which time all Swing Line Outstandings and accrued interest thereon shall be due and payable in full. 33 40 ARTICLE III LETTERS OF CREDIT 3.1. LETTERS OF CREDIT. The Issuing Bank agrees, subject to the terms and conditions of this Agreement, upon request and for the account of the Borrower to issue from time to time for the Borrower or Titania Letters of Credit upon delivery to the Issuing Bank of an Application and Agreement for Letter of Credit relating thereto in form and content acceptable to the Issuing Bank; PROVIDED, that (i) the Issuing Bank shall not be obligated to issue (or renew) any Letter of Credit if it has been notified by the Agent or has actual knowledge that a Default or Event of Default has occurred and is continuing, (ii) the Letter of Credit Outstandings shall not exceed the Total Letter of Credit Commitment, (iii) no Letter of Credit shall be issued (or renewed) if, after giving effect thereto, Letter of Credit Outstandings plus Revolving Credit Outstandings plus Swing Line Outstandings shall exceed the Total Revolving Credit Commitment and (iv) no Issuing Bank may issue a Letter of Credit without first confirming with the Agent, in writing, that upon issuance of such Letter of Credit the requirements of (iii) above be satisfied. No Letter of Credit shall have an expiry date (including all rights of the Borrower or any beneficiary named in such Letter of Credit to require renewal) or payment date occurring later than the seventh Business Day prior to the Stated Termination Date. 3.2. REIMBURSEMENT AND PARTICIPATIONS. (a) The Borrower hereby unconditionally agrees to pay to each Issuing Bank, respectively, immediately on demand at the Principal Office all amounts required to pay all drafts drawn or purporting to be drawn under the Letters of Credit issued by such Issuing Bank and all reasonable expenses incurred by such Issuing Bank in connection with the Letters of Credit, and in any event and without demand to place in possession of the Issuing Bank (which shall include Advances under the Revolving Credit Facility if permitted by SECTION 2.1 and Swing Line Loans if permitted by SECTION 2.4) sufficient funds to pay all debts and liabilities arising under any Letter of Credit. Each Issuing Bank agrees to give the Borrower prompt notice of any request for a draw under a Letter of Credit. Each Issuing Bank may charge any account the Borrower may have with it for any and all amounts such Issuing Bank pays under a Letter of Credit, plus charges and reasonable expenses as from time to time agreed to by such Issuing Bank and the Borrower; provided that to the extent permitted by SECTION 2.1(c)(iii) and SECTION 2.4, amounts shall be paid pursuant to Advances under the Revolving Credit Facility or, if the Borrower shall elect, by Swing Line Loans. The Borrower agrees to pay the Issuing Bank interest on any Reimbursement Obligations not paid when due hereunder at the Default Rate. (b) In accordance with the provisions of SECTION 2.1(C), each Issuing Bank shall notify the Agent of any drawing under any Letter of Credit promptly following the receipt by such Issuing Bank of such drawing. (c) Each Lender (other than the Issuing Bank) shall automatically acquire on the date of issuance thereof, or with respect to Existing LCs on the Closing Date, a Participation in the liability of the Issuing Bank in respect of each Letter of Credit in an amount equal to such Lender's Applicable Commitment Percentage of such liability, and to the extent that the Borrower is obligated to pay the Issuing Bank under SECTION 3.2(A), 34 41 each Lender (other than the Issuing Bank) thereby shall absolutely, unconditionally and irrevocably assume, and shall be unconditionally obligated to pay to the Issuing Bank, its Applicable Commitment Percentage of the liability of the Issuing Bank under such Letter of Credit in the manner and with the effect provided in SECTION 2.1(C)(III). (d) Simultaneously with the making of each payment by a Lender to the Issuing Bank pursuant to SECTION 2.1(C)(III)(B), such Lender shall, automatically and without any further action on the part of the Issuing Bank or such Lender, acquire a Participation in an amount equal to such payment (excluding the portion thereof constituting interest accrued prior to the date the Lender made its payment) in the related Reimbursement Obligation of the Borrower. Each Lender's obligation to make payment to the Agent for the account of the Issuing Bank pursuant to SECTION 2.1(C)(III) and SECTION 3.2(C), and the right of the Issuing Bank to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and shall be made without any offset, abatement, withholding or reduction whatsoever. In the event the Lenders have purchased Participations in any Reimbursement Obligation as set forth above, then at any time payment (in fully collected, immediately available funds) of such Reimbursement Obligation, in whole or in part, is received by the Issuing Bank from the Borrower, the Issuing Bank shall promptly pay to each Lender an amount equal to its Applicable Commitment Percentage of such payment from the Borrower. (e) Promptly following the end of each calendar quarter, each Issuing Bank shall deliver to the Agent a notice describing the aggregate undrawn amount of all Letters of Credit at the end of such quarter. Upon the request of any Lender from time to time, each Issuing Bank shall deliver to the Agent, and the Agent shall deliver to such Lender, any other information reasonably requested by such Lender with respect to each Letter of Credit outstanding. (f) The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in ARTICLE VI, be subject to the conditions that such Letter of Credit be in such form and contain such terms as shall be reasonably satisfactory to the Issuing Bank consistent with the then current practices and procedures of each Issuing Bank with respect to similar letters of credit, and the Borrower shall have executed and delivered such other instruments and agreements relating to such Letters of Credit as each Issuing Bank shall have reasonably requested consistent with such practices and procedures and shall not be in conflict with any of the express terms herein contained. All Letters of Credit shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500 or, if the Issuing Bank shall elect by express reference in an affected Letter of Credit, the International Chamber of Commerce International Standby Practices commonly referred to as "ISP98", or any subsequent amendment or revision of either thereof. (g) The Borrower agrees that any Issuing Bank may, in its sole discretion, accept or pay, as complying with the terms of any Letter of Credit, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in bankruptcy, debtor in possession, 35 42 assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Letter of Credit to draw or issue any drafts or other documents. (h) Without limiting the generality of the provisions of SECTION 12.9, the Borrower hereby agrees to indemnify and hold harmless the Issuing Bank, each other Lender and the Agent from and against any and all claims and damages, losses, liabilities, reasonable costs and expenses which the Issuing Bank, such other Lender or the Agent may incur (or which may be claimed against the Issuing Bank, such other Lender or the Agent) by any Person by reason of or in connection with the issuance or transfer of or payment or failure to pay under any Letter of Credit; provided that the Borrower shall not be required to indemnify any Issuing Bank, any other Lender or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, (i) caused by the willful misconduct or gross negligence of the party to be indemnified or (ii) caused by the failure of the Issuing Bank to pay under any Letter of Credit after the presentation to it of a request for payment strictly complying with the terms and conditions of such Letter of Credit, unless such payment is prohibited by any law, regulation, court order or decree. The indemnification and hold harmless provisions of this SECTION 3.2(H) shall survive repayment of the Obligations, occurrence of the Revolving Credit Termination Date, the Facility Termination Date and expiration or termination of this Agreement. (i) Without limiting Borrower's rights as set forth in SECTION 3.2(H), the obligation of the Borrower to immediately reimburse the Issuing Bank for drawings made under Letters of Credit and such Issuing Bank's right to receive such payment shall be absolute, unconditional and irrevocable, and such obligations of the Borrower shall be performed strictly in accordance with the terms of this Agreement and such Letters of Credit and the related Application and Agreement for any Letter of Credit, under all circumstances whatsoever, including the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, the obligation supported by the Letter of Credit or any other agreement or instrument relating thereto (collectively, the "Related LC Documents"); (ii) any amendment or waiver of or any consent to or departure from all or any of the Related LC Documents; (iii) the existence of any claim, setoff, defense (other than the defense of payment in accordance with the terms of this Agreement) or other rights which the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom any such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other Person, whether in connection with the Loan Documents, the Related LC Documents or any unrelated transaction; (iv) any breach of contract or other dispute between the Borrower and any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other Person; 36 43 (v) any draft, statement or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever so long as any such document appeared to comply with the terms of the Letter of Credit; (vi) the existence, character, quality, quantity, condition, value, or delivery (including the time, place, manner or order thereof) of property described or purportedly described in documents presented in connection with any Letter of Credit or the existence, nature or extent of any insurance relating thereto; (vii) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by the Agent, with or without notice to or approval by the Borrower in respect of any of Borrower's Obligations; or (viii) any other circumstance or happening whatsoever where the Issuing Bank has acted in good faith, whether or not similar to any of the foregoing. 37 44 ARTICLE IV EURODOLLAR FUNDING, FEES, AND PAYMENT CONVENTIONS 4.1. INTEREST RATE OPTIONS. Eurodollar Rate Loans and Base Rate Loans may be outstanding at the same time and, so long as no Default or Event of Default shall have occurred and be continuing, the Borrower shall have the option to elect the Type of Loan and the duration of the initial and any subsequent Interest Periods and to Convert Revolving Loans in accordance with SECTIONS 2.1(C)(I) AND 4.2, as applicable; PROVIDED, HOWEVER, (a) there shall not be outstanding at any one time Eurodollar Rate Loans having more than six (6) different Interest Periods nor shall there be outstanding at any time more than one Interest Period having a term of one week, (b) each Eurodollar Rate Loan (including each Conversion into and each Continuation as a Eurodollar Rate Loan) shall be in an amount of $1,000,000 or, if greater than $1,000,000, an integral multiple of $500,000, and (c) no Eurodollar Rate Loan shall have an Interest Period that extends beyond the Stated Termination Date. If the Agent does not receive a Borrowing Notice or an Interest Rate Selection Notice giving notice of election of the duration of an Interest Period or of Conversion of any Loan to or Continuation of a Loan as a Eurodollar Rate Loan by the time prescribed by SECTIONS 2.1(C)(I) AND 4.2, as applicable, the Borrower shall be deemed to have elected to obtain or Convert such Loan to (or Continue such Loan as) a Base Rate Loan until the Borrower notifies the Agent in accordance with SECTION 4.2. The Borrower shall not be entitled to elect to Continue any Loan as or Convert any Loan into a Eurodollar Rate Loan if a Default or Event of Default shall have occurred and be continuing. 4.2. CONVERSIONS AND ELECTIONS OF SUBSEQUENT INTEREST PERIODS. Subject to the limitations set forth in the definition of "Interest Period" and in SECTION 4.1 and ARTICLE V, the Borrower may: (a) upon delivery of telephonic notice to the Agent (which shall be irrevocable) on or before 11:30 A.M. on any Business Day, Convert any Eurodollar Rate Loan to a Base Rate Loan on the last day of the Interest Period for such Eurodollar Rate Loan; and (b) provided that no Default or Event of Default shall have occurred and be continuing, upon delivery of telephonic notice to the Agent (which shall be irrevocable) on or before 11:30 A.M. three (3) Business Days' prior to the date of such Conversion or Continuation: (i) elect a subsequent Interest Period for any Eurodollar Rate Loan to begin on the last day of the then current Interest Period for such Eurodollar Rate Loan; or (ii) Convert any Base Rate Loan to a Eurodollar Rate Loan on any Business Day. Each such notice shall be effective upon receipt by the Agent, shall specify the amount of the Eurodollar Rate Loan affected, and, if a Continuation as or Conversion into a Eurodollar Rate Loan, the Interest Period to be used in the computation of interest. The Authorized Representative shall provide the Agent written confirmation of each such telephonic notice in the form of a Borrowing Notice or Interest Rate Selection Notice (as applicable) with appropriate insertions but failure to provide such confirmation shall not affect the validity of such telephonic notice. Notice of receipt of such Borrowing Notice 38 45 or Interest Rate Selection Notice, as the case may be, shall be provided by the Agent to each Lender by telefacsimile transmission with reasonable promptness, but (provided the Agent shall have received such notice by 11:30 A.M.) not later than 1:00 P.M. on the same day as the Agent's receipt of such notice. All such Continuations or Conversions of Loans shall be effected pro rata based on the Applicable Commitment Percentages of the Lenders. 4.3. PAYMENT OF INTEREST. The Borrower shall pay interest on the outstanding and unpaid principal amount of each Revolving Loan, commencing on the first date of such Revolving Loan until such Revolving Loan shall be repaid, at the applicable Base Rate or Eurodollar Rate as designated by the Borrower in the related Borrowing Notice or Interest Rate Selection Notice or as otherwise provided hereunder. Interest on each Revolving Loan shall be paid on the earlier of (a) in the case of any Base Rate Loan, quarterly in arrears of the last Business Day of each Fiscal Quarter, commencing on December 29, 2000, until the Revolving Credit Termination Date, at which date the entire principal amount of and all accrued interest on the Revolving Loans shall be paid in full, (b) in the case of any Eurodollar Rate Loan, on last day of the applicable Interest Period for such Eurodollar Rate Loan and if such Interest Period extends for more than three (3) months, at intervals of three (3) months after the first day of such Interest Period, and (c) upon payment in full of the related Revolving Loan; PROVIDED, HOWEVER, that if any Event of Default shall occur and be continuing, all amounts outstanding hereunder shall bear interest thereafter until paid in full at the Default Rate. 4.4. PREPAYMENTS OF EURODOLLAR RATE LOANS. Whenever any payment of principal shall be made in respect of any Loan hereunder, whether at maturity, on acceleration, by optional or mandatory prepayment or as otherwise required or permitted hereunder, with the effect that any Eurodollar Rate Loan shall be prepaid in whole or in part prior to the last day of the Interest Period applicable to such Eurodollar Rate Loan, such payment of principal shall be accompanied by the additional payment, if any, required by SECTION 5.5. 4.5. MANNER OF PAYMENT. (a) Each payment of principal (including any prepayment) and payment of interest and fees, and any other amount required to be paid by or on behalf of the Borrower to the Lenders, the Issuing Bank, the Agent, or Bank of America with respect to any Loan, Letter of Credit, Reimbursement Obligation, or Swing Line Loan, shall be made to the Agent at the Principal Office in Dollars in immediately available funds without condition or deduction for any setoff, recoupment, deduction or counterclaim on or before 12:30 P.M. on the date such payment is due in the case of any Loan, Letter of Credit or Reimbursement Obligation and 1:00 P.M. in the case of a Swing Line Loan. The Agent may, but shall not be obligated to, debit the amount of such payment from any one or more ordinary deposit accounts of the Borrower with the Agent. (b) Any payment made by or on behalf of the Borrower that is not made both in Dollars in immediately available funds and prior to 12:30 P.M. on the date such payment is to be made in the case of any Loan, Letter of Credit or Reimbursement Obligation and 1:00 P.M. in the case of a Swing Line Loan shall constitute a non-conforming payment. Any such non-conforming payment shall not be deemed to be received until the later of (i) the time such funds become 39 46 available funds and (ii) the next Business Day. Any non-conforming payment may constitute or become a Default or Event of Default as otherwise provided herein. Interest shall continue to accrue at the Default Rate on any principal or fees as to which no payment or a non-conforming payment is made from the date such amount was due and payable until the later of (i) the date such funds become available funds or (ii) the next Business Day. (c) In the event that any payment hereunder or under any of the Notes or any other Loan Document becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless provided otherwise under the definition of "Interest Period"; PROVIDED, however, that interest and applicable fees shall continue to accrue during the period of any such extension; and PROVIDED further, however, that in no event shall any such due date be extended beyond the Revolving Credit Termination Date. 4.6. FEES. (a) FACILITY FEE. For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, the Borrower agrees to pay to the Agent, for the pro rata benefit of the Lenders based on their Applicable Commitment Percentages, a facility fee equal to the Applicable Facility Fee multiplied by the Revolving Credit Commitment of each Lender. Such fees shall be due in arrears on the last Business Day of each Fiscal Quarter commencing December 29, 2000 to and on the Revolving Credit Termination Date. Notwithstanding the foregoing, so long as any Lender fails to make available any portion of its Revolving Credit Commitment when requested, such Lender shall not be entitled to receive payment of its pro rata share of such fee until such Lender shall make available such portion. (b) LETTER OF CREDIT FACILITY FEES. The Borrower shall pay to the Agent, for the pro rata benefit of the Lenders based on their Applicable Commitment Percentages, a fee on the aggregate amount available to be drawn on each outstanding Letter of Credit at a rate equal to the Applicable Margin for Eurodollar Rate Loans. Such fees shall be due and payable with respect to each Letter of Credit quarterly in arrears on the last day of each Fiscal Quarter, the first such payment to be made on the first such date occurring after the date of issuance of a Letter of Credit to and on the Revolving Credit Termination Date. (c) LETTER OF CREDIT FRONTING AND ADMINISTRATIVE FEES. The Borrower shall pay to the Issuing Bank a fronting fee of one-eighth percent (.125%) per annum on the aggregate amount available to be drawn on each outstanding Letter of Credit, such fee to be due and payable quarterly in arrears with respect to each Letter of Credit on the dates established in SECTION 4.6(B) for the payment of Letter of Credit facility fees with respect to such Letter of Credit. The Borrower shall also pay to the Issuing Bank such administrative fee and other fees, if any, in connection with the Letters of Credit in such amounts and at such times as the Issuing Bank and the Borrower shall agree from time to time. (d) AGENT FEES. The Borrower agrees to pay to the Agent, for the Agent's individual account, an annual Agent's fee, such fee to be payable in such amounts and at such dates as from time to time agreed to by the Borrower and Agent in writing. 40 47 4.7. PRO RATA PAYMENTS. Except as otherwise specified herein, (a) each payment on account of the principal of and interest on Loans, the fees described in SECTION 4.6(A) AND (B), and Swing Line Loans and Reimbursement Obligations as to which the Lenders have funded their respective Participations which remain outstanding, shall be made to the Agent for the account of the Lenders pro rata based on their Applicable Commitment Percentages, and (b) the Agent will promptly distribute to the Lenders in immediately available funds payments received in fully collected, immediately available funds from the Borrower. 4.8. COMPUTATION OF RATES AND FEES. Except as may be otherwise expressly provided, (i) the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as the case may be, and calculated for actual days elapsed, and (ii) all other interest rates (including the Federal Funds Rate, each Eurodollar Rate, and the Default Rate) and fees shall be computed on the basis of a year of 360 days and calculated for actual days elapsed. 4.9. DEFICIENCY ADVANCES; FAILURE TO PURCHASE PARTICIPATIONS. No Lender shall be responsible for any default of any other Lender in respect to such other Lender's obligation to make any Loan or Advance hereunder or to fund its purchase of any Participation hereunder nor shall the Revolving Credit Commitment or Letter of Credit Commitment of any Lender hereunder be increased as a result of such default of any other Lender. Without limiting the generality of the foregoing or the provisions of SECTION 4.10, in the event any Lender shall fail to advance funds to the Borrower as herein provided, the Agent may in its discretion, but shall not be obligated to, advance under the applicable Note in its favor as a Lender all or any portion of such amount or amounts (each, a "Deficiency Advance") and shall thereafter be entitled to payments of principal of and interest on such Deficiency Advance in the same manner and at the same interest rate or rates to which such other Lender would have been entitled had it made such Advance under its Note; provided that, (i) such defaulting Lender shall not be entitled to receive payments of principal, interest or fees with respect to such Deficiency Advance until such Deficiency Advance (together with interest thereon as provided in clause (ii)) shall be paid by such Lender and (ii) upon payment to the Agent from such other Lender of the entire outstanding amount of each such Deficiency Advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the Agent by a Borrower on each Loan comprising the Deficiency Advance at the Federal Funds Rate, then such payment shall be credited against the applicable Note of the Agent in full payment of such Deficiency Advance and such Borrower shall be deemed to have borrowed the amount of such Deficiency Advance from such other Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by such Borrower thereon. In the event any Lender shall fail to fund its purchase of a Participation after notice from the Issuing Bank or Bank of America as the Swing Line lender, as applicable, such Lender shall pay to the Issuing Bank or Bank of America as the Swing Line lender, as applicable, such amount on demand, together with interest at the Federal Funds Rate on the amount so due from the date of such notice to the date such purchase price is received by the Issuing Bank or Bank of America as the Swing Line lender, as applicable. 4.10. INTRADAY FUNDING. Without limiting the provisions of SECTION 4.9, unless the Borrower or any Lender has notified the Agent not later than 12:00 Noon of the Business Day before the date any payment (including in the case of Lenders any Advance) to be made by it is due, that it does not intend to remit 41 48 such payment, the Agent may, in its discretion, assume that Borrower or each Lender, as the case may be, has timely remitted such payment in the manner required hereunder and may, in its discretion and in reliance thereon, make available such payment (or portion thereof) to the Person entitled thereto as otherwise provided herein. If such payment was not in fact remitted to the Agent in the manner required hereunder, then: (i) if Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Agent the amount of such assumed payment made available to such Lender, together with interest thereon in respect of each day from and including the date such amount was made available by the Agent to such Lender to the date such amount is repaid to the Agent at the Federal Funds Rate; and (ii) if any Lender failed to make such payment, the Agent shall be entitled to recover such corresponding amount forthwith upon the Agent's demand therefor, the Agent promptly shall notify the Borrower, and the Borrower shall promptly pay such corresponding amount to the Agent in immediately available funds upon receipt of such demand. The Agent also shall be entitled to recover interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent, (A) from such Lender at a rate per annum equal to the daily Federal Funds Rate or (B) from the Borrower, at a rate per annum equal to the interest rate applicable to the Loan which includes such corresponding amount. Until the Agent shall recover such corresponding amount together with interest thereon, such corresponding amount shall constitute a Deficiency Advance within the meaning of SECTION 4.9. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder. 42 49 ARTICLE V CHANGE IN CIRCUMSTANCES 5.1. INCREASED COST AND REDUCED RETURN. (a) If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such governmental authority, central bank, or comparable agency: (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Eurodollar Rate Loans, its Note, or its obligation to make Eurodollar Rate Loans, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Agreement or its Note in respect of any Eurodollar Rate Loans (other than taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Reserve Requirement utilized in the determination of the Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Revolving Credit Commitment of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or on the London interbank market any other condition affecting this Agreement or its Note or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining any Loans or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or its Note with respect to any Eurodollar Rate Loans, then the Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. If any Lender requests compensation by the Borrower under this SECTION 5.1(A), the Borrower may, by notice to such Lender (with a copy to the Agent), suspend the obligation of such Lender to make or Continue Loans of the Type with respect to which such compensation is requested, or to Convert Loans of any other Type into Loans of such Type, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of SECTION 5.4 shall be applicable); PROVIDED that such suspension shall not affect the right of such Lender to receive the compensation so requested. 43 50 (b) If any Lender shall have determined that, after the date hereof, the adoption of any applicable law, rule, or regulation regarding capital adequacy or any change therein or in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) Each Lender shall promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this SECTION 5.1 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this SECTION 5.1 shall furnish to the Borrower and the Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. (d) The provisions of this SECTION 5.1 shall continue in effect notwithstanding the Facility Termination Date. 5.2. LIMITATION ON TYPES OF LOANS. If on or prior to the first day of any Interest Period for any Eurodollar Rate Loan: (a) the Agent reasonably determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or (b) the Required Lenders reasonably determine (which determination shall be conclusive) and notify the Agent that the Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders of funding Eurodollar Rate Loans for such Interest Period; then the Agent shall give the Borrower prompt notice thereof specifying the relevant Type of Loans and the relevant amounts or periods, and so long as such condition remains in effect, the Lenders shall be under no obligation to make additional Loans of such Type, Continue Loans of such Type, or to Convert Loans of any other Type into Loans of such Type and the Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected Type, either prepay such Loans or Convert such Loans into another Type of Loan in accordance with the terms of this Agreement. In the event the 44 51 Interbank Offered Rate shall no longer be available to the Lenders, at the request of the Borrower, the Lenders and the Agent shall seek to agree to an alternative reference for establishing the level of interest payable hereunder which is acceptable to the Borrower, the Agent and all Lenders. 5.3. ILLEGALITY. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such Lender shall promptly notify the Borrower thereof and such Lender's obligation to make or Continue Eurodollar Rate Loans and to Convert other Types of Loans into Eurodollar Rate Loans shall be suspended until such time as such Lender may again make, maintain, and fund Eurodollar Rate Loans (in which case the provisions of SECTION 5.4 shall be applicable). 5.4. TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to make a Eurodollar Rate Loan or to Continue, or to Convert Loans of any other Type into, Loans of a particular Type shall be suspended pursuant to SECTION 5.1 OR 5.3 hereof (Loans of such Type being herein called "Affected Loans" and such Type being herein called the "Affected Type"), such Lender's Affected Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required by SECTION 5.3 hereof, on such earlier date as such Lender may specify to the Borrower with a copy to the Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in SECTION 5.1 OR 5.3 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Affected Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Loans of the Affected Type shall be made or Continued instead as Base Rate Loans, and all Loans of such Lender that would otherwise be Converted into Loans of the Affected Type shall be Converted instead into (or shall remain as) Base Rate Loans. If such Lender gives notice to the Borrower (with a copy to the Agent) that the circumstances specified in SECTION 5.1 OR 5.3 hereof that gave rise to the Conversion of such Lender's Affected Loans pursuant to this SECTION 5.4 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Loans of the Affected Type and by such Lender are held pro rata (as to principal amounts, Types, and Interest Periods) in accordance with their respective Revolving Credit Commitments. 5.5. COMPENSATION. Upon the request of any Lender, the Borrower shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of: 45 52 (i) any payment, prepayment, or Conversion of a Eurodollar Rate Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to SECTION 10.1) on a date other than the last day of the Interest Period for such Loan; or (ii) any failure by the Borrower (for any reason, including the failure of any condition precedent specified in ARTICLE VI to be satisfied, other than the failure of such Lender to make a Loan notwithstanding satisfaction of all conditions precedent thereto) to borrow, Convert, Continue, or prepay a Eurodollar Rate Loan on the date for such borrowing, Conversion, Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Agreement. The provisions of this SECTION 5.5 shall continue in effect notwithstanding the Facility Termination Date. 5.6. TAXES. (a) Any and all payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, in the case of each Lender and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or the Agent (as the case may be) is organized or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Lender or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this SECTION 5.6) such Lender or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) the Borrower shall furnish to the Agent, at its address referred to in SECTION 12.2, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) The Borrower agrees to indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this SECTION 5.6) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. 46 53 (d) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 (including Form W-8BEN or W-8EC1) or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the other Loan Documents. (e) For any period with respect to which a Lender has failed to provide the Borrower and the Agent with the appropriate form pursuant to SECTION 5.6(D) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under SECTION 5.6(A) OR 5.6(B) with respect to Taxes imposed by the United States; PROVIDED, HOWEVER, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this SECTION 5.6, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the reasonable judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Within thirty (30) days after the date of any payment of Taxes, the Borrower shall furnish to the Agent the original or a certified copy of a receipt evidencing such payment. (h) The provisions of this SECTION 5.6 shall continue in effect notwithstanding the Facility Termination Date. 47 54 ARTICLE VI CONDITIONS TO MAKING LOANS AND ISSUING LETTERS OF CREDIT 6.1. CONDITIONS OF INITIAL ADVANCE. The obligation of the Lenders to make the initial Advance under the Revolving Credit Facility, and of the Issuing Bank to issue any Letter of Credit, and of Bank of America to make any Swing Line Loan, is subject to the conditions precedent that: (a) the Agent shall have received on the Closing Date, in form and substance satisfactory to the Agent and Lenders, the following: (i) executed originals of each of this Agreement, the Notes, the initial Guaranty Agreements, the LC Account Agreement, the other Loan Documents, together with all schedules and exhibits thereto; (ii) the favorable written opinion or opinions with respect to the Loan Documents and the transactions contemplated thereby of counsel to the Credit Parties dated the Closing Date, addressed to the Agent and the Lenders and satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel to the Agent, substantially in the form of EXHIBIT G; (iii) resolutions of the boards of directors or other appropriate governing body (or of the appropriate committee thereof) of each Credit Party certified by its secretary or assistant secretary as of the Closing Date, approving and adopting the Loan Documents to be executed by such Person, and authorizing the execution and delivery thereof; (iv) specimen signatures of officers or other appropriate representatives executing the Loan Documents on behalf of each of the Credit Parties, certified by the secretary or assistant secretary of such Credit Party; (v) the Organizational Documents of each of the Credit Parties certified as of a recent date by the Secretary of State of its state of organization; (vi) Operating Documents of each of the Credit Parties certified as of the Closing Date as true and correct by its secretary or assistant secretary; (vii) certificates issued as of a recent date by the Secretaries of State of the respective jurisdictions of formation of each of the Credit Parties as to the due existence and good standing of such Person; (viii) appropriate certificates of qualification to do business, good standing and, where appropriate, authority to conduct business under assumed name, issued in respect of the Borrower as of a recent date by the Secretary of State or 48 55 comparable official of each jurisdiction in which the failure to be qualified to do business or authorized so to conduct business could have a Material Adverse Effect; (ix) notice of appointment of the initial Authorized Representative(s); (x) certificate of an Authorized Representative dated the Closing Date demonstrating compliance with the financial covenants contained in SECTIONS 9.1(A) through 9.1(C), SECTION 9.5, SECTION 9.7 and SECTION 9.13 as of the end of the Fiscal Quarter most recently ended prior to the Closing Date, substantially in the form of EXHIBIT H; (xi) evidence of all insurance required by the Loan Documents; (xii) an initial Borrowing Notice and, if elected by the Borrower, Interest Rate Selection Notice; (xiii) evidence that all fees payable by the Borrower on the Closing Date to the Agent, BAS and the Lenders have been paid in full, including the due diligence expenses of the Agent and the fees and expenses of counsel for the Agent to the extent invoiced prior to or on the Closing Date (which may include amounts constituting reasonable estimates of such fees and expenses incurred or to be incurred in connection with the transaction; provided that no such estimate shall thereafter preclude the final settling of accounts as to such fees and expenses); (xiv) Uniform Commercial Code search results showing only those Liens as are acceptable to the Lenders; (xv) evidence of payment of outstanding Indebtedness under the Existing Agreement (other than the Existing Letters of Credit) and termination of the Existing Agreement; and (xvi) such other documents, instruments, certificates and opinions as the Agent or any Lender may reasonably request on or prior to the Closing Date in connection with the consummation of the transactions contemplated hereby; and (b) In the good faith judgment of the Agent and the Lenders: (i) there shall not have occurred or become known to the Agent or the Lenders any event, condition, situation or status since the date of the information contained in the financial and business projections, budgets, pro forma data and forecasts concerning the Borrower and its Subsidiaries delivered to the Agent prior to the Closing Date that has had or could reasonably be expected to result in a Material Adverse Effect; 49 56 (ii) no litigation, action, suit, investigation or other arbitral, administrative or judicial proceeding shall be pending or threatened which could reasonably be likely to result in a Material Adverse Effect; and (iii) the Credit Parties shall have received all approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be required to consummate the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any Governmental Authority or arbitral authority or (B) any agreement, document or instrument to which any of the Credit Parties is a party or by which any of them or their properties is bound, except for such approvals, consents, waivers, filings and notices the receipt, making or giving of which will not have a Material Adverse Effect. 6.2. CONDITIONS OF REVOLVING LOANS AND LETTER OF CREDIT. The obligations of the Lenders to make any Revolving Loans, and the Issuing Bank to issue (or renew) Letters of Credit and Bank of America to make Swing Line Loans, hereunder on or subsequent to the Closing Date are subject to the satisfaction of the following conditions: (a) the Agent or, in the case of Swing Line Loans, Bank of America shall have received a Borrowing Notice if required by ARTICLE II; (b) the representations and warranties of the Credit Parties set forth in ARTICLE VII and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of such Advance, Swing Line Loan or Letter of Credit issuance or renewal, with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the financial statements referred to in SECTION 7.6(A) shall be deemed (solely for the purpose of the representation and warranty contained in such SECTION 7.6(A) but not for the purpose of any cross reference to such SECTION 7.6(A) or to the financial statements described therein contained in any other provision of SECTION 7.6 or elsewhere in ARTICLE VII) to be those financial statements most recently delivered to the Agent and the Lenders pursuant to SECTION 8.1 from the date financial statements are delivered to the Agent and the Lenders in accordance with such Section; (c) in the case of the issuance of a Letter of Credit, the Borrower shall have executed and delivered to the Issuing Bank an Application and Agreement for Letter of Credit in form and content acceptable to the Issuing Bank together with such other instruments and documents as it shall request; (d) at the time of (and after giving effect to) each Advance, Swing Line Loan or the issuance of a Letter of Credit, no Default or Event of Default specified in ARTICLE X shall have occurred and be continuing; and 50 57 (e) immediately after giving effect to: (i) a Revolving Loan, the aggregate principal balance of all outstanding Revolving Loans for each Lender shall not exceed such Lender's Revolving Credit Commitment; (ii) a Letter of Credit or renewal thereof, the aggregate principal balance of all outstanding Participations in Letters of Credit and Reimbursement Obligations (or in the case of the Issuing Bank, its remaining interest after deduction of all Participations in Letters of Credit and Reimbursement Obligations of other Lenders) for each Lender and in the aggregate shall not exceed, respectively, (X) such Lender's Letter of Credit Commitment or (Y) the Total Letter of Credit Commitment; (iii) a Swing Line Loan, the Swing Line Outstandings shall not exceed $20,000,000; and (iv) a Revolving Loan, Swing Line Loan or a Letter of Credit or renewal thereof, the sum of Letter of Credit Outstandings plus Revolving Credit Outstandings plus Swing Line Outstandings shall not exceed the Total Revolving Credit Commitment. 51 58 ARTICLE VII REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants with respect to itself and to its Subsidiaries (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans), that: 7.1. ORGANIZATION AND AUTHORITY. (a) The Borrower and each Subsidiary is a corporation, limited liability company or partnership, as the case may be duly organized and validly existing under the laws of the jurisdiction of its formation; (b) The Borrower and each Subsidiary (x) has the requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, and (y) is qualified to do business in every jurisdiction in which failure so to qualify would have a Material Adverse Effect; (c) The Borrower has the power and authority to execute, deliver and perform this Agreement and the Notes, and to borrow hereunder, and to execute, deliver and perform each of the other Loan Documents to which it is a party; (d) Each Credit Party (other than the Borrower) has the power and authority to execute, deliver and perform the Guaranty Agreement and each of the other Loan Documents to which it is a party; and (e) When executed and delivered, each of the Loan Documents to which any Credit Party is a party will be the legal, valid and binding obligation or agreement, as the case may be, of such Credit Party, enforceable against such Credit Party in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity (whether considered in a proceeding at law or in equity). 7.2. LOAN DOCUMENTS. The execution, delivery and performance by each Credit Party of each of the Loan Documents to which it is a party: (a) have been duly authorized by all requisite Organizational Action of such Credit Party required for the lawful execution, delivery and performance thereof; (b) do not violate any provisions of (i) any applicable law, rule or regulation, (ii) any judgment, writ, order, determination, decree or arbitral award of any Governmental Authority or arbitral 52 59 authority binding on such Credit Party or its properties, or (iii) the Organizational Documents or Operating Documents of such Credit Party; (c) does not and will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time or both, would constitute an event of default, under any contract, indenture, agreement or other instrument or document to which such Credit Party is a party, or by which the properties or assets of such Credit Party are bound; and (d) does not and will not result in the creation or imposition of any Lien upon any of the properties or assets of such Credit Party or any Subsidiary. 7.3. SOLVENCY. Each Credit Party is Solvent after giving effect to the transactions contemplated by the Loan Documents. 7.4. SUBSIDIARIES AND STOCKHOLDERS. The Borrower has no Subsidiaries other than those Persons listed as Subsidiaries in SCHEDULE 7.4 and additional Subsidiaries created or acquired after the Closing Date in compliance with SECTION 8.18; SCHEDULE 7.4 states as of the date hereof the organizational form of each entity, the authorized and issued capitalization of each Subsidiary listed thereon, and the percentage of outstanding shares or other equity interest (including options, warrants and other rights to acquire any interest) of each such class of capital stock or other equity interest owned by Borrower or by any such Subsidiary; the outstanding shares or other equity interests of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable; and Borrower and each such Subsidiary owns beneficially and of record all the shares and other interests it is listed as owning in SCHEDULE 7.4, free and clear of any Lien. 7.5. OWNERSHIP INTERESTS. Borrower owns no interest in any Person other than the Persons listed in SCHEDULE 7.4, equity investments in Persons not constituting Subsidiaries permitted under SECTION 9.7, Wackenhut Funding Corporation and additional Subsidiaries created or acquired after the Closing Date in compliance with SECTION 8.18. 7.6. FINANCIAL CONDITION. (a) The Borrower has heretofore furnished to each Lender an audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at January 2, 2000 and the notes thereto and the related consolidated statements of income, retained earnings and cash flows for the Fiscal Year then ended as examined and certified by Arthur Andersen, LLP, and unaudited consolidated interim financial statements of the Borrower and its consolidated Subsidiaries consisting of a consolidated balance sheet and related consolidated statements of income, retained earnings and cash flows, in each case without notes, for and as of the end of the six month period ending July 2, 2000. Except as set forth therein, such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its Subsidiaries as of the end of such Fiscal Year and six month period and results of their operations and the changes in its stockholders' equity for the Fiscal Year and interim period then ended, 53 60 all in conformity with GAAP applied on a Consistent Basis, subject however, in the case of unaudited interim statements to year end audit adjustments; (b) since the later of (i) the date of the audited financial statements delivered pursuant to SECTION 7.6(A) hereof or (ii) the date of the audited financial statements most recently delivered pursuant to SECTION 8.1(A) hereof, except as disclosed in Borrower's press release dated November 3, 2000 there has not occurred any event, condition or circumstance which has had or could reasonably be expected to have a Material Adverse Effect, nor have the businesses or properties of the Borrower or any Subsidiary been materially adversely affected as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo or act of God; and (c) except as set forth in the financial statements referred to in SECTION 7.6(A) or in SCHEDULE 7.6 or permitted by SECTION 9.5, neither the Borrower nor any Subsidiary has incurred, other than in the ordinary course of business, any material Indebtedness or other commitment or liability which remains outstanding or unsatisfied. 7.7. TITLE TO PROPERTIES. The Borrower and each of its Subsidiaries has good title to all its real and personal properties, subject to no transfer restrictions or Liens of any kind, except for the transfer restrictions and Liens described in SCHEDULE 7.7 and Liens permitted by SECTION 9.4. 7.8. TAXES. Except as set forth in SCHEDULE 7.8, the Borrower and each of its Subsidiaries has filed or caused to be filed all federal, state and local tax returns which are required to be filed by it and, except for taxes and assessments being contested in good faith by appropriate proceedings diligently conducted and against which reserves reflected in the financial statements described in SECTION 7.6(A) or SECTIONS 8.1(A) or (B) and satisfactory to the Borrower's independent certified public accountants have been established, have paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due. 7.9. OTHER AGREEMENTS. No Credit Party is (a) a party to or subject to any judgment, order, decree, agreement, lease or instrument, or subject to other restrictions, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; or (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which such Credit Party is a party, which default has, or if not remedied within any applicable grace period could reasonably be likely to have, a Material Adverse Effect. 7.10. LITIGATION. Except as set forth in SCHEDULE 7.10, there is no action, suit, investigation or proceeding at law or in equity or by or before any governmental instrumentality or agency or arbitral body pending, or, to the knowledge of the Borrower, threatened by or against the Borrower or any 54 61 Subsidiary or affecting the Borrower or any Subsidiary or any properties or rights of the Borrower or any Subsidiary, which could reasonably be likely to have a Material Adverse Effect. 7.11. MARGIN STOCK. The proceeds of the borrowings made hereunder will be used by the Borrower only for the purposes expressly authorized herein. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which violates or which would be inconsistent with Regulation U (12 CFR Part 221) or Regulation X (12 CFR Part 224) of the Board. Neither the Borrower nor any agent acting in its behalf has taken or will take any action which might cause this Agreement or any of the documents or instruments delivered pursuant hereto to violate any regulation of the Board or to violate the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or any state securities laws, in each case as in effect on the date hereof. 7.12. REGULATED COMPANY. No Credit Party is (i) an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.) or (ii) a "holding company" or a "subsidiary company" or "affiliate" of a "holding company" as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. The application of the proceeds of the Loans and repayment thereof by the Borrower and the performance by the Borrower and the other Credit Parties of the transactions contemplated by the Loan Documents will not violate any provision of said Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder, in each case as in effect on the date hereof. 7.13. PATENTS, ETC. The Borrower and each other Credit Party owns or has the right to use, under valid license agreements or otherwise, all material patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights, trade secrets and copyrights necessary to or used in the conduct of its businesses as now conducted and as contemplated by the Loan Documents, without known conflict with any patent, license, franchise, trademark, trade secret, trade name, copyright, other proprietary right of any other Person. 7.14. NO UNTRUE STATEMENT. Neither (a) this Agreement nor any other Loan Document or certificate or document executed and delivered by or on behalf of the Borrower or any other Credit Party in accordance with or pursuant to any Loan Document nor (b) any statement, representation, or warranty provided to the Agent in connection with the negotiation or preparation of the Loan Documents contains any misrepresentation or untrue statement of material fact or omits to state a material fact necessary, in light of the circumstance under which it was made, in order to make any such warranty, representation or statement contained therein not misleading. 7.15. NO CONSENTS, ETC. Neither the respective businesses or properties of the Credit Parties, nor any relationship among the Credit Parties and any other Person, nor any circumstance in connection with the execution, delivery and performance of the Loan Documents and the transactions contemplated thereby, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other 55 62 Person on the part of any Credit Party as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by the Loan Documents, which, if not obtained or effected, would be reasonably likely to have a Material Adverse Effect, or if so, such consent, approval, authorization, filing, registration or qualification has been duly obtained or effected, as the case may be. 7.16. EMPLOYEE BENEFIT PLANS. (a) The Borrower and each ERISA Affiliate is in compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder and in compliance with all Foreign Benefit Laws with respect to all Employee Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined or the Borrower or its Subsidiaries is in the process of obtaining a determination by the Internal Revenue Service to be so qualified, each trust related to such plan has been determined to be exempt under Section 501(a) of the Code, and each Employee Benefit Plan subject to any Foreign Benefit Law has received the required approvals by any Governmental Authority regulating such Employee Benefit Plan. No material liability has been incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (b) Neither the Borrower nor any ERISA Affiliate has (i) engaged in a nonexempt prohibited transaction described in Section 4975 of the Code or Section 406 of ERISA affecting any of the Employee Benefit Plans or the trusts created thereunder which could subject any such Employee Benefit Plan or trust to a material tax or penalty on prohibited transactions imposed under Internal Revenue Code Section 4975 or ERISA, (ii) incurred any accumulated funding deficiency with respect to any Employee Benefit Plan, whether or not waived, or any other liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (iii) failed to make a required contribution or payment to a Multiemployer Plan, (iv) failed to make a required installment or other required payment under Section 412 of the Code, Section 302 of ERISA or the terms of such Employee Benefit Plan, or (v) failed to make a required contribution or payment, or otherwise failed to operate in compliance with any Foreign Benefit Law regulating any Employee Benefit Plan; (c) No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan or Multiemployer Plan, and neither the Borrower nor any ERISA Affiliate has incurred any unpaid withdrawal liability with respect to any Multiemployer Plan; (d) The present value of all vested accrued benefits under each Employee Benefit Plan which is subject to Title IV of ERISA, or 56 63 the funding of which is regulated by any Foreign Benefit Law did not, as of the most recent valuation date for each such plan, exceed the then current value of the assets of such Employee Benefit Plan allocable to such benefits; (e) To the best of the Borrower's knowledge, each Employee Benefit Plan which is subject to Title IV of ERISA or the funding of which is regulated by any Foreign Benefit Law, maintained by the Borrower or any ERISA Affiliate, has been administered in accordance with its terms in all material respects and is in compliance in all material respects with all applicable requirements of ERISA, applicable Foreign Benefit Law and other applicable laws, regulations and rules; (f) The consummation of the Loans and the issuance of the Letters of Credit provided for herein will not involve any prohibited transaction under ERISA which is not subject to a statutory or administrative exemption; and (g) No material proceeding, claim, lawsuit and/or investigation exists or, to the best knowledge of the Borrower after due inquiry, is threatened concerning or involving any Employee Benefit Plan; 7.17. NO DEFAULT. As of the date hereof, there does not exist any Default or Event of Default hereunder. 7.18. ENVIRONMENTAL LAWS. Except as listed on SCHEDULE 7.18, the Borrower and each Subsidiary is in material compliance with all applicable Environmental Laws and has been issued and currently maintains all required material federal, state and local permits, licenses, certificates and approvals. Except as listed on SCHEDULE 7.18, neither the Borrower nor any Subsidiary has been notified of any pending or threatened action, suit, proceeding or investigation, and neither the Borrower nor any Subsidiary is aware of any facts, which (a) calls into question, or could reasonably be expected to call into question, compliance by the Borrower or any Subsidiary with any Environmental Laws, (b) seeks, or could reasonably be expected to form the basis of a meritorious proceeding, to suspend, revoke or terminate any license, permit or approval necessary for the operation of the Borrower's or any Subsidiary's business or facilities or for the generation, handling, storage, treatment or disposal of any Hazardous Materials, or (c) seeks to cause, or could reasonably be expected to form the basis of a meritorious proceeding to cause, any property of the Borrower or any Subsidiary or other Credit Party to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Law. 7.19. EMPLOYMENT MATTERS. (a) Except as described in SCHEDULE 7.19, none of the employees of the Borrower or any Subsidiary is subject to any collective bargaining agreement and there are no strikes, work stoppages, election or decertification petitions or proceedings, unfair labor charges, equal opportunity proceedings, or other material labor/employee related controversies or proceedings pending or, to the best knowledge of the Borrower, threatened against the Borrower or any Subsidiary or between the Borrower or any Subsidiary and any of its employees, other than employee grievances arising in the ordinary course of business which could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and 57 64 (b) Except to the extent a failure to maintain compliance would not have a Material Adverse Effect, the Borrower and each Subsidiary is in compliance in all respects with all applicable laws, rules and regulations pertaining to labor or employment matters, including without limitation those pertaining to wages, hours, occupational safety and taxation and there is neither pending nor threatened any litigation, administrative proceeding nor, to the knowledge of the Borrower, any investigation, in respect of such matters which, if decided adversely, could reasonably be likely, individually or in the aggregate, to have a Material Adverse Effect. 7.20. RICO. Neither the Borrower nor any Subsidiary is engaged in or has engaged in any course of conduct that could subject any of their respective properties to any Lien, seizure or other forfeiture under any criminal law, racketeer influenced and corrupt organizations law, civil or criminal, or other similar laws. 58 65 ARTICLE VIII AFFIRMATIVE COVENANTS Until the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and where applicable will cause each Subsidiary, except as otherwise indicated herein, to: 8.1. FINANCIAL REPORTS, ETC. (a) As soon as practical and in any event within 90 days after the end of each Fiscal Year of the Borrower, deliver or cause to be delivered to the Agent and each Lender (i) a consolidated balance sheet of the Borrower and its Subsidiaries and a consolidated balance sheet of each of WCC and Chile as at the end of such Fiscal Year, and the notes thereto, and the related consolidated statements of income, retained earnings and cash flows, and a consolidating income statement on the equity method for Borrower and its Subsidiaries and the respective notes thereto, for such Fiscal Year, setting forth (other than for consolidating statements) comparative financial statements for the preceding Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis (provided however that the financial statements of Chile shall be prepared in accordance with the accounting standards in effect in the Republic of Chile) and containing, with respect to the consolidated financial statements, opinions of Arthur Andersen, LLP, or other such independent certified public accountants selected by the Borrower and approved by the Agent, which are unqualified as to the scope of the audit performed and as to the "going concern" status of the Borrower and its Subsidiaries and WCC and Chile and their Subsidiaries and without any exception not acceptable to the Required Lenders, and (ii) a certificate of an Authorized Representative demonstrating compliance with SECTIONS 9.1(A) through 9.1(C), SECTION 9.5, SECTION 9.7 and SECTION 9.13 which certificate shall be in the form of EXHIBIT H; (b) as soon as practical and in any event within 45 days after the end of each Fiscal Quarter (except the last Fiscal Quarter of the Fiscal Year), deliver to the Agent and each Lender (i) a consolidated balance sheet of the Borrower and its Subsidiaries and a consolidated balance sheet of each of WCC and Chile as at the end of such Fiscal Quarter, and the related consolidated statements of retained earnings, stockholders' equity and cash flows and a consolidating income statement on the equity method for Borrower and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year through the end of such reporting period, and accompanied by a certificate of an Authorized Representative to the effect that such financial statements present fairly the financial position of the Borrower and its Subsidiaries and WCC and Chile and their Subsidiaries as of the end of such fiscal period and the results of their operations and the changes in their financial position for such fiscal period, in conformity with the standards set forth in SECTION 7.6(A) with respect to interim financial statements, and (ii) a certificate of an Authorized Representative containing computations for such quarter comparable to that required pursuant to SECTION 8.1(A)(II); (c) together with each delivery of the financial statements required by SECTION 8.1(A)(I), deliver to the Agent and each Lender a letter from the Borrower's accountants specified in SECTION 8.1(A)(I) stating that in performing the audit necessary to render an opinion on the financial statements delivered under SECTION 8.1(A)(I), they obtained no knowledge of any Default or Event of 59 66 Default by the Borrower in the fulfillment of the terms and provisions of this Agreement insofar as they relate to financial matters (which at the date of such statement remains uncured); or if the accountants have obtained knowledge of such Default or Event of Default, a statement specifying the nature and period of existence thereof; (d) promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Agent and each Lender a copy of (i) all regular or special reports or effective registration statements which Borrower or any Subsidiary shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) any proxy statement distributed by the Borrower or any Subsidiary to its shareholders, bondholders or the financial community in general, and (iii) any management letter or other report submitted to the Borrower or any Subsidiary by independent accountants in connection with any annual, interim or special audit of the Borrower or any Subsidiary; (e) not later than sixty (60) days following the last Business Day of each Fiscal Year, deliver to the Agent and each Lender a capital and operating expense budget and consolidated financial projections for the Borrower and its Subsidiaries for the next Fiscal Year, prepared in accordance with GAAP applied on a Consistent Basis; (f) promptly, from time to time, deliver or cause to be delivered to the Agent and each Lender such other information regarding Borrower's and any Subsidiary's operations, business affairs and financial condition as the Agent or such Lender may reasonably request. The Agent and the Lenders are hereby authorized to deliver a copy of any such financial or other information delivered hereunder to the Lenders (or any affiliate of any Lender) or to the Agent, to any Governmental Authority having jurisdiction over the Agent or any of the Lenders pursuant to any written request therefor or in the ordinary course of examination of loan files, or to any other Person who shall acquire or consider the assignment of, or acquisition of any participation interest in, any Obligation permitted by this Agreement. 8.2. MAINTAIN PROPERTIES. Maintain all properties necessary to the operations of the Borrower and its Subsidiaries, taken as a whole, in good working order and condition, make all needed repairs, replacements and renewals to such properties, and maintain free from Liens all trademarks, trade names, patents, copyrights, trade secrets, know-how, and other intellectual property and proprietary information (or adequate licenses thereto), in each case as are reasonably necessary to conduct its business as currently conducted or as contemplated hereby, all in accordance with customary and prudent business practices. 8.3. EXISTENCE, QUALIFICATION, ETC. Except as otherwise expressly permitted under SECTION 9.6, do or cause to be done all things necessary to preserve and keep in full force and effect its existence and all material rights and franchises, and maintain its license or qualification to do business as a foreign corporation and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary except where the failure to so qualify would not have a Material Adverse Effect. 60 67 8.4. REGULATIONS AND TAXES. Comply in all material respects with all statutes and governmental regulations and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, would become a Lien against any of its properties, except liabilities being contested in good faith by appropriate proceedings diligently conducted provided that (i) adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP and (ii) any Lien arising in connection with any such contest shall be permitted to exist to the extent provided in SECTION 9.4. 8.5. INSURANCE. The Borrower will maintain, and will cause each Domestic Subsidiary to maintain, insurance coverage by financially sound and reputable insurers accorded a rating by A.M. Best Company, Inc. of A-XII or better at the time of the issuance of any such policy and in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties; PROVIDED, HOWEVER, that (i) if, during the term of any such insurance policy, the rating accorded the insurer shall be less than A-XII, the Borrower will, on the date of renewal of any such policy (or, if such change in rating shall occur within 90 days prior to such renewal date, within 90 days of the date of such change in rating), obtain such insurance policy from an insurer accorded such rating and (ii) notwithstanding the requirements of this SECTION 8.5, the Borrower or any such Subsidiary may (a) maintain self-insurance programs with respect to employee benefits such as medical and disability coverage and casualty risks on its property; PROVIDED that any such programs are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties and the Borrower or the Subsidiary concerned shall maintain adequate and actuarially determined reserves for losses in an amount and manner approved by nationally recognized and reputable independent insurance consultants retained by the Borrower and (b) maintain any insurance policy or program as in effect on the Closing Date with Titania, PROVIDED that such policies or programs maintained with Titania are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties. The Borrower will cause each Subsidiary which is not organized under the laws of the Unites States or any state thereof to maintain in accordance with sound business practice, insurance coverage with financially sound reputable insurers in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties. The Borrower will not permit Titania to enter into insurance or reinsurance relationships with any Person other than the Borrower or any Subsidiary, PROVIDED, that, notwithstanding the foregoing, the Borrower may permit Titania to maintain such relationships at such levels and in such amounts as are in effect on the Closing Date. 8.6. TRUE BOOKS. Keep true books of record and account in which full, true and correct entries will be made of all of its dealings and transactions, and set up on its books such reserves as may be required by GAAP or such other accounting standard as may be applicable to Subsidiaries, other than Domestic Subsidiaries, with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business in general, and include such reserves in interim as well as year-end financial statements. 8.7. RIGHT OF INSPECTION. Permit any Person designated by any Lender or the Agent to visit and inspect any of the properties, corporate books and financial reports of the Borrower or any Subsidiary and to discuss its affairs, 61 68 finances and accounts with its principal officers and independent certified public accountants, all at reasonable times, at reasonable intervals and with reasonable prior notice. The Borrower shall not be required to pay or reimburse the Agent or the Lenders for expenses which the Agent or the Lenders may incur in connection with any such visitation or inspection, PROVIDED, that if such visitation or inspection is made during any period when a Default or an Event of Default shall have occurred and be continuing, the Borrower agrees to reimburse the Agent and Lenders for all such reasonable expenses promptly upon demand. 8.8. OBSERVE ALL LAWS. Conform to and duly observe in all material respects all laws, rules and regulations and all other valid requirements of any Governmental Authority with respect to the conduct of its business except, in the case of Subsidiaries, other than Domestic Subsidiaries, where the failure to do so could not reasonably be expected to have a material adverse effect on the business or financial condition of such Subsidiaries, taken as a whole. 8.9. GOVERNMENTAL LICENSES. Obtain and maintain all licenses, permits, certifications and approvals of all applicable Governmental Authorities as are required for the conduct of its business as currently conducted and as contemplated by the Loan Documents, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 8.10. COVENANTS EXTENDING TO OTHER PERSONS. Except as otherwise provided herein, cause each of its Subsidiaries to do with respect to itself, its business and its assets, each of the things required of the Borrower in SECTIONS 8.2 through 8.9, and 8.18 inclusive. 8.11. OFFICER'S KNOWLEDGE OF DEFAULT. Upon any officer of the Borrower obtaining knowledge of any Default or Event of Default hereunder or under any other obligation of the Borrower or any Subsidiary to any Lender, or any event, development or occurrence which could reasonably be expected to have a Material Adverse Effect, cause such officer or an Authorized Representative to promptly notify the Agent of the nature thereof, the period of existence thereof, and what action the Borrower or such Subsidiary proposes to take with respect thereto. 8.12. SUITS OR OTHER PROCEEDINGS. Upon any officer of the Borrower obtaining knowledge of any litigation or other proceedings being instituted against the Borrower or any Subsidiary, or any attachment, levy, execution or other process being instituted against any assets of the Borrower or any Subsidiary, making a claim or claims in an aggregate amount greater than $5,000,000 not otherwise covered by insurance, promptly deliver to the Agent written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution or other process. 8.13. NOTICE OF ENVIRONMENTAL COMPLAINT OR CONDITION. Promptly provide to the Agent true, accurate and complete copies of any and all notices, complaints, orders, directives, claims or citations received by the Borrower or any Wholly-owned Subsidiary relating to any (a) violation or alleged violation by the Borrower or any Wholly-owned Subsidiary of any applicable Environmental Law; (b) release or threatened release by the Borrower or any Wholly-owned Subsidiary, or by any Person handling, transporting or disposing of any 62 69 Hazardous Material on behalf of the Borrower or any Wholly-owned Subsidiary, or at any facility or property owned or leased or operated by the Borrower or any Wholly-owned Subsidiary, of any Hazardous Material, except where occurring legally pursuant to a permit or license; or (c) liability or alleged liability of the Borrower or any Wholly-owned Subsidiary for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials. 8.14. ENVIRONMENTAL COMPLIANCE. If the Borrower or any Wholly-owned Subsidiary shall receive any letter, notice, complaint, order, directive, claim or citation alleging that the Borrower or any Wholly-owned Subsidiary has violated any Environmental Law, has released any Hazardous Material, or is liable for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, the Borrower and any Wholly-owned Subsidiary shall, within the time period permitted and to the extent required by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or satisfy such liability unless the Borrower or such Wholly-owned Subsidiary is contesting such matter in good faith and has established adequate reserves against such liability. 8.15. FURTHER ASSURANCES. At the Borrower's cost and expense, upon request of the Agent, duly execute and deliver or cause to be duly executed and delivered, to the Agent such further instruments, documents, certificates, financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Agent to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents. 8.16. EMPLOYEE BENEFIT PLANS. (a) With reasonable promptness, and in any event within thirty (30) days thereof, give notice to the Agent of (i) the establishment of any new Pension Plan (which notice shall include a copy of such plan), (ii) the commencement of contributions to any Employee Benefit Plan to which the Borrower or any of its ERISA Affiliates was not previously contributing, (iii) any material increase in the benefits of any existing Employee Benefit Plan, (iv) each funding waiver request filed with respect to any Pension Plan and all communications received or sent by the Borrower or any ERISA Affiliate with respect to such request and (v) the failure of the Borrower or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code (in the case of Employee Benefit Plans regulated by the Code or ERISA) or under any Foreign Benefit Law (in the case of Employee Benefit Plans regulated by any Foreign Benefit Law) by the due date; (b) Promptly and in any event within fifteen (15) days of becoming aware of the occurrence or forthcoming occurrence of any (a) Termination Event which would have a Material Adverse Effect or (b) nonexempt "prohibited transaction," as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Employee Benefit Plan or any trust created thereunder, deliver to the Agent a notice specifying the nature thereof, what action the Borrower 63 70 or any ERISA Affiliate has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; and (c) With reasonable promptness but in any event within fifteen (15) days for purposes of clauses (a), (b) and (c), deliver to the Agent copies of (a) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code, (b) all notices received by the Borrower or any ERISA Affiliate of the PBGC's or any Governmental Authority's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (c) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the Internal Revenue Service with respect to each Employee Benefit Plan and (d) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA which would have a Material Adverse Effect. The Borrower will notify the Agent in writing within five (5) Business Days of the Borrower or any ERISA Affiliate obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA. 8.17. NATURE OF BUSINESS. Neither the Borrower nor any Subsidiary will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Borrower and its Subsidiaries would be substantially changed from the general nature of the business engaged in by the Borrower and its Subsidiaries on the date of this Agreement. 8.18. NEW SUBSIDIARIES. Not later than each date (a "Delivery Date") upon which the officer's certificate described in SECTION 8.1(A) is required to be delivered by the Borrower, cause to be delivered to the Agent for the benefit of the Lenders each of the following documents in respect of each Wholly-owned Subsidiary of the Borrower created or acquired, or any existing Domestic Subsidiary that becomes a Wholly-owned Subsidiary, after the Closing Date, as to whom such documents have not been delivered on a prior Delivery Date (a "New Guarantor"): (i) a Guaranty Agreement duly executed by such New Guarantor substantially in the form attached hereto as EXHIBIT I; (ii) an opinion of counsel to the New Guarantor (which opinion may be rendered by in-house counsel to the Borrower unless the Agent requests as to any particular New Guarantor that outside counsel be engaged to furnish the opinion) dated as of the date of delivery of the Guaranty Agreement provided in the foregoing clause (i) and addressed to the Agent and the Lenders, in form and substance reasonably acceptable to the Agent, which opinion shall include the opinions with respect to the New Guarantor and its Guaranty Agreement as are provided on the Closing Date with respect to Guarantors and Guaranty Agreements 64 71 on such date pursuant to SECTION 6.1(A)(II) hereof, and may include assumptions and qualifications of similar effect to those contained in the opinions of counsel to the Guarantors delivered pursuant to SECTION 6.1(A)(II) hereof); and (iii) current copies of the Organizational Documents and Operating Documents of such New Guarantor, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, partners, or appropriate committees thereof (and, if required by such charter documents, bylaws or by applicable laws, of the shareholders or partners) of such New Guarantor authorizing the actions and the execution and delivery of documents described in clause (i) of this SECTION 8.18 and evidence satisfactory to the Agent (confirmation of the receipt of which will be provided by the Agent to the Lenders) that such New Guarantor is solvent as of such date and after giving effect to the Guaranty. 65 72 ARTICLE IX NEGATIVE COVENANTS Until the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, nor will it permit any Subsidiary (except as provided in SECTION 9.7) to: 9.1. FINANCIAL COVENANTS. (a) CONSOLIDATED NET WORTH. Permit at any time Consolidated Net Worth to be less than (i) 90% of Borrower and Subsidiaries Consolidated Net Worth at the Fiscal Quarter ending October 1, 2000 and (ii) as at the last day of each succeeding Fiscal Quarter of the Borrower and until (but excluding) the last day of the next following Fiscal Quarter of the Borrower, the sum of (A) the amount of Consolidated Net Worth required to be maintained pursuant to this SECTION 9.1(A) as at the end of the immediately preceding Fiscal Quarter, plus, (B) 50% of Consolidated Net Income (with no reduction for net losses for any period but including earnings and losses attributable to outstanding Minority Interest) for the Fiscal Quarter of the Borrower ending on such day, plus (C) 75% of the Net Proceeds to the Borrower from the sale of shares of the Borrower's capital stock received during the Fiscal Quarter of the Borrower ending on such date. The calculation of this covenant shall be based upon the consolidated financial statements of the Borrower and its Subsidiaries, without giving affect to any Accounting Adjustments. (b) RATIO OF INDEBTEDNESS TO CAPITALIZATION. Permit at any time the ratio of Consolidated Indebtedness to Consolidated Total Capitalization to be greater than .50 to 1.00. (C) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Permit at the end of any Four-Quarter Period the Consolidated Fixed Charge Coverage Ratio to be less than 1.50 to 1.00. 9.2. ACQUISITIONS. Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition, unless (i) the Person to be (or whose assets are to be) acquired does not oppose such Acquisition and the line or lines of business of the Person to be acquired are substantially the same as one or more line or lines of business conducted by the Borrower and its Subsidiaries, (ii) no Default or Event of Default shall have occurred and be continuing either immediately prior to or immediately after giving effect to such Acquisition and, if the Cost of Acquisition is in excess of $5,000,000, the Borrower shall have furnished to the Agent and the Lenders (A) pro forma historical financial statements as of the end of the most recently completed Fiscal Year of the Borrower and most recent interim Fiscal Quarter, if applicable giving effect to such Acquisition and (B) a certificate in the form of EXHIBIT H prepared on a historical pro forma basis as of the most recent date for which financial statements have been furnished pursuant to SECTION 7.6(A) or SECTION 8.1(A) OR (B) giving effect to such Acquisition, which certificate shall demonstrate that no Default or Event of Default would exist immediately after giving effect 66 73 thereto, and (iii) the Person acquired shall be a Wholly-owned Subsidiary, or be merged into the Borrower or a Wholly-owned Subsidiary, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquiror shall be the Borrower or a Wholly-owned Subsidiary). 9.3. NEGATIVE PLEDGE CLAUSES. Enter into or cause, suffer or permit to exist any agreement with any Person other than the Agent and the Lenders pursuant to this Agreement or any other Loan Documents which prohibits or limits the ability of any of the Borrower or any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, PROVIDED that the Borrower and any Subsidiary may enter into such an agreement in connection with (a) property acquired with the proceeds of purchase money Indebtedness permitted hereunder, (b) the Asset Securitization Facility, and (c) Indebtedness incurred under WCC's Amended and Restated Credit Agreement dated December 18, 1997. 9.4. LIMITATION ON LIENS. Create or incur, or suffer to be incurred or to exist, any Lien on its or their property, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention, devices, except; (a) Liens for property taxes and assessments or governmental charges of a Governmental Authority or levies and Liens securing claims or demands of mechanics and materialmen arising in the ordinary course of business and in existence less than 90 days from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are being maintained in accordance with GAAP, which Liens are not yet exercisable to effect the sale or seizure of property subject thereto; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Borrower or a Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; (c) Liens incidental to the conduct of business or the ownership of properties and assets (including warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money, PROVIDED in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (d) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Borrower and its Subsidiaries or which customarily 67 74 exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Borrower and its Subsidiaries; (e) Liens existing as of the Closing Date and reflected in SCHEDULE 7.7 hereto, securing Indebtedness of the Borrower or any Subsidiary outstanding on such date; (f) Liens securing Indebtedness of a Guarantor to the Borrower or to another Guarantor; (g) the interests in trade receivables of the purchasers thereof created pursuant to the Asset Securitization Facility, to the extent the same may constitute Liens; (h) Liens incurred after the Closing Date given to secure the payment of the purchase price incurred in connection with the acquisition of fixed assets useful and intended to be used in carrying on the business of the Borrower or a Subsidiary, including Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Borrower or a Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach so long as they were not incurred, extended or renewed in contemplation of such acquisition, PROVIDED that (i) the Lien shall attach solely to the fixed assets acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets whether or not assumed by the Borrower or a Subsidiary shall not exceed an amount equal to 80% (or 100% in the case of Capitalized Leases) of the lesser of the total purchase price or fair market value at the time of acquisition of such fixed assets (as determined in good faith by the Board of Directors of the Borrower), and (iii) all such Indebtedness shall have been incurred within the applicable limitations provided in SECTION 9.1(B) and SECTION 9.5; and (i) Liens of WCC permitted under SECTION 9.4(F) of the Amended and Restated Credit Agreement dated December 18, 1997, as amended, among WCC, Bank of America, N.A., as Agent, and the Lenders party thereto. 9.5. INDEBTEDNESS. Incur, create, assume or permit to exist any Indebtedness, howsoever evidenced, except: (a) Indebtedness existing as of the Closing Date as set forth in SCHEDULE 7.6; PROVIDED, none of the instruments and agreements evidencing or governing such Indebtedness shall be amended, modified or supplemented after the Closing Date to change any terms of subordination, repayment or rights of enforcement, conversion, put, exchange or other rights from such terms and rights as in effect on the Closing Date; (b) Indebtedness owing to the Agent or any Lender in connection with this Agreement, any Note or other Loan Document; 68 75 (c) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (d) Indebtedness of WCC; (e) the purchase of products, merchandise and services in the ordinary course of business; (f) Indebtedness of a Guarantor to the Borrower or to another Guarantor; (g) Indebtedness representing amounts received by the Borrower or any Subsidiary in exchange for the transfer of interests in trade receivables under the Asset Securitization Facility in excess of the amounts repaid to the purchasers in respect of such purchase price from the collections on such trade receivables, which shall at no time exceed $75,000,000 in aggregate amount outstanding; (h) additional Indebtedness not covered in clauses (a) through (g) in an aggregate amount for the Borrower and all Subsidiaries (other than WCC) taken as a whole not greater than $30,000,000. 9.6. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. (a) Consolidate with or be a party to a merger with any other corporation or sell, lease or otherwise dispose of all or any substantial part (as defined in paragraph (d) of this SECTION 9.6) of the assets of the Borrower and its Subsidiaries, PROVIDED, HOWEVER, that: (1) any Subsidiary may merge or consolidate with or into the Borrower or any Wholly-owned Subsidiary so long as in any merger or consolidation involving the Borrower, the Borrower shall be the surviving or continuing corporation; (2) any Person may consolidate or merge with the Borrower or a Subsidiary of the Borrower if at the time of such consolidation or merger and after giving effect thereto no Default or Event of Default shall have occurred and be continuing, and after giving effect to such consolidation or merger the Borrower would be permitted to incur at least $1.00 of additional Consolidated Indebtedness under the provisions of SECTION 9.1(B); (3) any Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Borrower or any Wholly-owned Subsidiary; (4) the Borrower and its Subsidiaries may sell trade receivables or fractional undivided interests therein pursuant to and in accordance with the terms of the Asset Securitization Facility; (5) WCC may enter into TROL Leases; and 69 76 (6) the Borrower may sell for not less than book value the business, assets and operations constituting the food service business of the Borrower and its Subsidiaries. (b) Permit any Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this SECTION 9.6, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) of such Subsidiary to any Person other than the Borrower or a Wholly-owned Subsidiary, except for the purpose of qualifying directors, or except in satisfaction of the validly pre-existing preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Borrower and/or a Subsidiary whereby the Borrower and/or such Subsidiary maintain their same proportionate interest in such Subsidiary. (c) Sell, transfer or otherwise dispose of any shares of stock of any Subsidiary (except (i) the minimal amount necessary to qualify directors and (ii) shares of stock of WCC provided that, after giving effect to any such sale of WCC stock, the Borrower shall own not less than 50% of the stock of every class issued by WCC) or any Indebtedness of any Subsidiary, and will not permit any Subsidiary to sell, transfer or otherwise dispose of (except to the Borrower or a Wholly-owned Subsidiary) any shares of stock or any Indebtedness of any other Subsidiary, unless: (1) simultaneously with such sale, transfer, or disposition, all shares of stock and all Indebtedness of such Subsidiary at the time owned by the Borrower and by every other Subsidiary shall be sold, transferred or disposed of as an entirety; (2) the Board of Directors of the Borrower shall have determined, as evidenced by a resolution thereof, that the purposed sale, transfer or disposition of said shares of stock and Indebtedness is in the best interests of the Borrower; (3) said shares of stock and Indebtedness are sold, transferred or otherwise disposed of to a Person, for a cash consideration and on terms reasonably deemed by the Board of Directors to be adequate and satisfactory; (4) the Subsidiary being disposed of shall not have any continuing investment in the Borrower or any other Subsidiary not being simultaneously disposed of; and (5) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Borrower and its Subsidiaries. (d) As used in this SECTION 9.6, a sale, lease or other disposition of assets shall be deemed to be a "substantial part" of the assets of the Borrower and its Subsidiaries only if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Borrower and its Subsidiaries 70 77 (other than in the ordinary course of business) during the period from and after the Closing Date to and including the date of the sale, lease or disposition in question, computed on a cumulative basis for said entire period, exceeds 10% of Consolidated Net Assets, determined as of the end of the immediately preceding Fiscal Quarter. 9.7. RESTRICTED PAYMENTS: JOINT VENTURE INVESTMENTS. (a) RESTRICTED PAYMENTS. (i) Declare or pay any dividends, either in cash or property, on any shares of its capital stock of any class (except dividends or other distributions payable solely in shares of capital stock of the Borrower); (ii) Directly or indirectly, or through any Subsidiary, purchase, redeem or retire any shares of its capital stock of any class or any warrants, rights or options to purchase or acquire any shares of its capital stock (other than (a) in exchange for or out of the net cash proceeds to the Borrower from the substantially concurrent issue or sale of other shares of capital stock of the Borrower or warrants, rights or options to purchase or acquire any shares of its capital stock, (b) purchases or acquisitions of shares of Voting Securities of the Borrower which were issued pursuant to an employee stock plan, PROVIDED that the aggregate amount expended therefor does not exceed $2,000,000 in any one Fiscal Year of the Borrower, and (c) purchases or acquisitions of shares of Voting Securities and non-voting stock of the Borrower after October 1, 2000 in the open market for an aggregate purchase of not to exceed $5,000,000; PROVIDED further, that such amounts expended shall not exceed that amount necessary in order to maintain beneficial ownership or control, directly or indirectly, of 50.1% (by number of votes) of the Voting Securities of the Borrower by the Wackenhut Family Group); (iii) Make any other payment or distribution, either directly or indirectly or through any Subsidiary, in respect of its capital stock; (iv) Make any payment or distribution, either directly or indirectly or through any Subsidiary, of principal of any Subordinated Indebtedness prior to the date such payment shall be due; or (v) Make any Restricted Investments; (such declarations or payments of dividends, purchases, redemptions or retirements of capital stock and warrants, rights or options, Restricted Investments and all such other distributions being herein collectively called "Restricted Payments"), if after giving effect thereto the aggregate amount of Restricted Payments made during the period from and after October 1, 2000 to and including the date of the making of the Restricted Payment in question, would 71 78 exceed the sum of (i) $5,000,000 plus (ii) 50% of Consolidated Net Income for such period, computed on a cumulative basis for said entire period (or if such Consolidated Net Income is a deficit figure, then minus 100% of such deficit). The Borrower will not declare any dividend which constitutes a Restricted Payment payable more than 90 days after the date of declaration thereof. For the purposes of this SECTION 9.7 the amount of any Restricted Payment declared, paid or distributed in property shall be deemed to be the greater of the book value or fair market value (as determined in good faith by the Board of Directors of the Borrower) of such property at the time of the making of the Restricted Payment in question. Notwithstanding the foregoing, nothing contained in this SECTION 9.7(A) shall limit the right of Subsidiaries of the Borrower to pay dividends or to make distributions to the Borrower. (b) JOINT VENTURE INVESTMENTS. Make any Joint Venture Investment in any Fiscal Year if after giving effect thereto the aggregate value of all Joint Venture Investments of the Borrower and its Subsidiaries would exceed $10,000,000 in such Fiscal Year. 9.8. LIMITATION ON SALE AND LEASEBACKS. Enter into any arrangement whereby the Borrower or any Subsidiary shall sell or transfer any property currently owned by the Borrower or any Subsidiary to any Person other than the Borrower or a Subsidiary and thereupon the Borrower or any Subsidiary shall lease or intend to lease, as trustee, the same property, PROVIDED, that (a) the Borrower may sell and leaseback pursuant to TROL Leases and (b) so long as no Default or Event of Default has occurred and is continuing or would exist as a result of such transaction, the Borrower and its Subsidiaries shall be permitted to enter into sale and leaseback transactions so long as (i) the aggregate net cash proceeds received for all such sales or dispositions does not exceed $1,000,000 during the term of this Agreement and (ii) the purchase price for each such sale and leaseback is no less than the fair market value of the applicable asset at the time of sale. 9.9. GUARANTIES. The Borrower will not, and will not permit any Subsidiary to, come or be liable in respect of any Guaranty, except for (a) the Guaranty Agreements and (b) other Guaranties which in the aggregate do not provide for the guaranty of amounts in an aggregate principal amount exceeding $5,000,000 at any time. 9.10. COMPLIANCE WITH ERISA, THE CODE AND FOREIGN BENEFIT LAWS. With respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan: (a) permit the occurrence of any Termination Event which would result in a liability on the part of the Borrower or any ERISA Affiliate to the PBGC or to any Governmental Authority; or (b) permit the present value of all benefit liabilities under all Pension Plans to exceed the current value of the assets of such Pension Plans allocable to such benefit liabilities; or 72 79 (c) permit any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; or (d) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; or (e) engage, or permit any Borrower or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code for which a civil penalty pursuant to Section 502(I) of ERISA or a tax pursuant to Section 4975 of the Code may be imposed; or (f) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits or establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower or any ERISA Affiliate to a Multiemployer Plan; or (g) fail, or permit the Borrower or any ERISA Affiliate to fail, to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code, all applicable Foreign Benefit Laws and all other applicable laws and the regulations and interpretations thereof. 9.11. FISCAL YEAR. Change its Fiscal Year. 9.12. RATE HEDGING OBLIGATIONS. Incur any Rate Hedging Obligations or enter into any agreements, arrangements, devices or instruments relating to Rate Hedging Obligations, except for Rate Hedging Obligations incurred to limit risks of currency or interest rate fluctuations to which the Borrower and its Subsidiaries are otherwise subject by virtue of the operations of their businesses, and not for speculative purposes. 9.13. ADVANCES TO WCC AND CHILE. Make or maintain loans or advances to WCC or Chile, enter into Guaranties for the benefit of WCC or Chile, make capital contributions to WCC or Chile or purchase securities from WCC or Chile, if, after giving effect to any such transaction, the aggregate amount of such outstanding loans and advances, guaranteed obligations, capital contributions and securities purchases shall exceed in the case of WCC $10,000,000 in the aggregate and in the case of Chile $5,000,000 in the aggregate (excluding existing Letters of Credit of up to $20,000,000 issued by the Issuing Bank for the benefit of Chile). 73 80 ARTICLE X EVENTS OF DEFAULT AND ACCELERATION 10.1. EVENTS OF DEFAULT. If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority), that is to say: (a) if default shall be made in the due and punctual payment of the principal of any Loan, Reimbursement Obligation or other Obligation, when and as the same shall be due and payable whether pursuant to any provision of ARTICLE II or ARTICLE III or ARTICLE IV, at maturity, by acceleration or otherwise; or (b) if default shall be made in the due and punctual payment of any amount of interest on any Loan, Reimbursement Obligation or other Obligation or of any fees or other amounts payable to any of the Lenders or the Agent on the date on which the same shall be due and payable; or (c) if default shall be made in the performance or observance of any covenant set forth in SECTION 8.7, 8.11, 8.12, 8.18 or ARTICLE IX; (d) if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in this Agreement or the Notes (other than as described in clauses (a), (b) or (c) above) and such default shall continue for thirty (30) or more days after the earlier of receipt of notice of such default by the Authorized Representative from the Agent or an officer of the Borrower becomes aware of such default, or if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in any of the other Loan Documents (beyond any applicable grace period, if any, contained therein) or in any instrument or document evidencing or creating any obligation, guaranty, or Lien in favor of the Agent or any of the Lenders or delivered to the Agent or any of the Lenders in connection with or pursuant to this Agreement or any of the Obligations (beyond any applicable grace period, if any, contained therein), or if any Loan Document ceases to be in full force and effect (other than as expressly provided for hereunder or thereunder or with the express written consent of the Agent), or if without the written consent of the Lenders, this Agreement or any other Loan Document shall be disaffirmed or shall terminate, be terminable or be terminated or become void or unenforceable for any reason whatsoever (other than as expressly provided for hereunder or thereunder or with the express written consent of the Agent); or (e) if there shall occur (i) a default, which is not waived, in the payment of any principal, interest, premium or other amount with respect to any Indebtedness (other than the Loans and other Obligations) of the Borrower or any Subsidiary in an amount or Rate Hedge Value, as applicable, not less than $100,000 in the aggregate outstanding, or (ii) a default, which is not waived, in the 74 81 performance, observance or fulfillment of any term or covenant contained in any agreement or instrument under or pursuant to which any such Indebtedness or Rate Hedging Obligation may have been issued, created, assumed, guaranteed or secured by the Borrower or any Subsidiary, or (iii) with respect to any Rate Hedging Obligation, any termination event shall occur as to which the Borrower or any Subsidiary is the "affected party" under the agreement or instrument governing such Rate Hedging Obligation, or (iv) any other event of default as specified in any agreement or instrument under or pursuant to which any such Indebtedness may have been issued, created, assumed, guaranteed or secured by the Borrower or any Subsidiary, and such default or event of default or termination shall continue for more than the period of grace, if any, therein specified, or such default or event of default or termination event shall permit the holder of or counterparty to any such Indebtedness (or any agent or trustee acting on behalf of one or more holders or counterparties) to accelerate the maturity of any such Indebtedness or terminate any agreement or instrument governing any such Rate Hedging Obligation; or (f) if any representation, warranty or other statement of fact contained in any Loan Document or in any writing, certificate, report or statement at any time furnished to the Agent or any Lender by or on behalf of the Borrower or any Subsidiary pursuant to or in connection with any Loan Document, or otherwise, shall be false or misleading in any material respect when given; or (g) if the Borrower or any Subsidiary shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency statute; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute; or (h) if a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of the Borrower or any Subsidiary or of the whole or any substantial part of its properties and such order, judgment or decree continues unstayed and in effect for a period of sixty (60) days, or approve a petition filed against the Borrower or any Subsidiary seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state, which petition is not dismissed within sixty (60) days; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of the Borrower or any Subsidiary or of the whole or any substantial part of its properties, which control is not relinquished within sixty (60) days; or if there is commenced against the Borrower or any Subsidiary any proceeding or petition seeking reorganization, arrangement or similar relief under the federal bankruptcy laws or any other 75 82 applicable law or statute of the United States of America or any state which proceeding or petition remains undismissed for a period of sixty (60) days; or if the Borrower or any Subsidiary takes any action to indicate its consent to or approval of any such proceeding or petition; or (i) if (i) one or more judgments or orders where the amount not covered by insurance (or the amount as to which the insurer denies liability) is in excess of $100,000 is rendered against the Borrower or any Subsidiary, or (ii) there is any attachment, injunction or execution against any of the Borrower's or Subsidiaries' properties for any amount in excess of $100,000 in the aggregate; and such judgment, attachment, injunction or execution remains unpaid, unstayed, undischarged, unbonded or undismissed for a period of thirty (30) days; or (j) if the Borrower or any Subsidiary shall, other than in the ordinary course of business (as determined by past practices), suspend all or any part of its operations material to the conduct of the business of the Borrower or such Subsidiary for a period of more than 60 days; or (k) if there shall occur and not be waived an Event of Default as defined in any of the other Loan Documents; or (l) The Wackenhut Family Group shall own or control, directly or indirectly, less than 33.33% of the Voting Securities of the Borrower or there shall occur a Change of Control; then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall have not been waived, (A) either or both of the following actions may be taken: (i) the Agent may, and at the direction of the Required Lenders shall, declare any obligation of the Lenders and the Issuing Bank to make further Revolving Loans and Swing Line Loans or to issue additional Letters of Credit terminated, whereupon the obligation of each Lender to make further Revolving Loans, of Bank of America to make further Swing Line Loans, and of the Issuing Bank to issue additional Letters of Credit, hereunder shall terminate immediately, and (ii) the Agent shall at the direction of the Required Lenders, at their option, declare by notice to the Borrower any or all of the Obligations to be immediately due and payable, and the same, including all interest accrued thereon and all other obligations of the Borrower to the Agent and the Lenders, shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived, anything contained herein or in any instrument evidencing the Obligations to the contrary notwithstanding; PROVIDED, however, that notwithstanding the above, if there shall occur an Event of Default under clause (g) or (h) above, then the obligation of the Lenders to make Revolving Loans, of Bank of America to make Swing Line Loans, and of the Issuing Bank to issue Letters of Credit hereunder shall automatically terminate and any and all of the Obligations shall be 76 83 immediately due and payable without the necessity of any action by the Agent or the Required Lenders or notice to the Agent or the Lenders; (B) The Borrower shall, upon demand of the Agent or the Required Lenders, deposit cash with the Agent in an amount equal to the amount of any Letter of Credit Outstandings, as collateral security for the repayment of any future drawings or payments under such Letters of Credit, and such amounts shall be held by the Agent pursuant to the terms of the LC Account Agreement; and (C) the Agent and each of the Lenders shall have all of the rights and remedies available under the Loan Documents or under any applicable law. 10.2. AGENT TO ACT. In case any one or more Events of Default shall occur and not have been waived, subject to the provisions of ARTICLE XI, the Agent may, and at the direction of the Required Lenders shall, proceed to protect and enforce their rights and remedies contained herein or in any other Loan Document, or as may be otherwise available at law or in equity. 10.3. CUMULATIVE RIGHTS. No right or remedy herein conferred upon the Lenders or the Agent is intended to be exclusive of any other rights or remedies contained herein or in any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. 10.4. NO WAIVER. No course of dealing between the Borrower and any Lender or the Agent or any failure or delay on the part of any Lender or the Agent in exercising any rights or remedies under any Loan Document or otherwise available to it shall operate as a waiver of any rights or remedies and no single or partial exercise of any rights or remedies shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or of the same right or remedy on a future occasion. 10.5. ALLOCATION OF PROCEEDS. If an Event of Default has occurred and not been waived, and the maturity of the Notes has been accelerated pursuant to ARTICLE X hereof, all payments received by the Agent hereunder, in respect of any principal of or interest on the Obligations or any other amounts payable by the Borrower hereunder, shall be applied by the Agent in the following order: (a) amounts due to the Lenders and the Issuing Bank pursuant to SECTIONS 4.6(A), 4.6(B), 4.6(C), AND 12.5; (b) amounts due to the Agent pursuant to SECTION 4.6(D); (c) payments of interest on Loans, Swing Line Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders (with amounts payable in respect of Swing Line Outstandings being included in such calculation and paid to Bank of America); 77 84 (d) payments of principal of Loans, Swing Line Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders (with amounts payable in respect of Swing Line Outstandings being included in such calculation and paid to Bank of America); (e) payments of cash amounts to the Agent in respect of outstanding Letters of Credit pursuant to SECTION 10.1(B); (f) amounts due to the Issuing Bank, the Agent, the Lenders and others pursuant to SECTIONS 3.2(H) and 12.9; (g) payments of all other amounts due under any of the Loan Documents, if any, to be applied for the ratable benefit of the recipients, including amounts due to any of the Lenders or their affiliates in respect of Obligations consisting of liabilities under any Swap Agreement with any of the Lenders or their affiliates on a pro rata basis according to the amounts owed; and (h) any surplus remaining after application as provided for herein, to the Borrower or otherwise as may be required by applicable law. 78 85 ARTICLE XI THE AGENT 11.1. APPOINTMENT, POWERS, AND IMMUNITIES. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent (which term as used in this sentence and in SECTION 11.5 and the first sentence of SECTION 11.6 hereof shall include its affiliates and its own and its affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by any Credit Party or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Credit Party or the satisfaction of any condition or to inspect the property (including the books and records) of any Credit Party or any of its Subsidiaries or affiliates; and (d) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The term "Agent" as used in the Loan Documents shall not connote any fiduciary or other implied obligation under applicable law, and is used solely as a matter of market custom to connote an administrative relationship between independent contracting parties. 11.2. RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telefacsimile) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Credit Party), independent accountants, and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until the Agent receives and accepts an Assignment 79 86 and Acceptance executed in accordance with SECTION 12.1 hereof. As to any action not expressly mandated by this Agreement, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding on all of the Lenders; PROVIDED, HOWEVER, that the Agent shall not be required to take any action unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. 11.3. DEFAULTS. The Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless the Agent has received written notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agent shall (subject to SECTION 11.2 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders, PROVIDED THAT, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders. 11.4. RIGHTS AS LENDER. With respect to its Revolving Credit Commitment and the Loans made by it and Letters of Credit issued by it, Bank of America (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. Bank of America (and any successor acting as Agent) and its affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Credit Party or any of its Subsidiaries or affiliates as if it were not acting as Agent, and Bank of America (and any successor acting as Agent) and its affiliates may accept fees and other consideration from any Credit Party or any of its Subsidiaries or affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. 11.5. INDEMNIFICATION. The Lenders agree to indemnify the Agent and each of its Affiliates, and their respective officers, employees and agents (each, an "Agent Indemnitee") (to the extent not reimbursed under SECTION 12.9 hereof, but without limiting the obligations of the Borrower under such Section) ratably in accordance with their respective Revolving Credit Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against any Agent Indemnitees (including by any Lender) in any way relating to or arising out of any Loan Document or the transactions contemplated 80 87 thereby or any action taken or omitted by any Agent Indemnitee under any Loan Document; PROVIDED that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified; provided further, however, that no action or omission taken or occurring at the direction of the Required Lenders shall constitute either gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs or expenses payable by the Borrower under SECTION 12.5, to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Borrower. The agreements contained in this SECTION 11.5 shall survive payment in full of the Loans and all other amounts payable under this Agreement. 11.6. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Credit Parties and their Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Credit Party or any of its Subsidiaries or affiliates that may come into the possession of the Agent or any of its affiliates. 11.7. RESIGNATION OF AGENT. The Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a commercial bank organized under the laws of the United States of America having combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this ARTICLE XI shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 81 88 ARTICLE XII MISCELLANEOUS 12.1. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Revolving Note, and its Revolving Credit Commitment); PROVIDED, HOWEVER, that (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof; (iii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its rights and obligations under this Agreement and its Revolving Note (except that any assignment by Bank of America shall not include its rights, benefits or duties as the Issuing Bank or as the provider of Swing Line Loans); and (iv) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance in the form of EXHIBIT B hereto, together with any Revolving Note subject to such assignment and a processing fee of $3,500. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the consummation of any assignment pursuant to this Section, the assignor, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Revolving Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with SECTION 5.6. (b) The Agent shall maintain at its address referred to in SECTION 12.2 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitment of, and principal amount of the Revolving Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 82 89 (c) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of EXHIBIT B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (d) Each Lender may sell participations to one or more Persons in all or a portion of its rights, obligations or rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment or its Loans); PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in ARTICLE V and the right of set-off contained in SECTION 12.3, and (iv) the Borrower shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to its Loans and its Note and to approve any amendment, modification, or waiver of any provision of this Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Note, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Note, or extending its Revolving Credit Commitment). (e) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (f) Any Lender may furnish any information concerning the Borrower or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants). (g) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrower which are contained in the Loan Documents shall inure to the benefit of the successors and permitted assigns of the Agent, the Lenders, or any of them. The Borrower may not assign or otherwise transfer to any other Person any right, power, benefit, or privilege (or any interest therein) conferred hereunder or under any of the other Loan Documents, or delegate (by assumption or otherwise) to any other Person any duty, obligation, or liability arising hereunder or under any of the other Loan Documents, and any such purported assignment, delegation or other transfer shall be void. 12.2. NOTICES. Any notice shall be conclusively deemed to have been received by any party hereto and be effective (i) on the day on which delivered (including hand delivery by commercial courier service) to such party (against receipt therefor), (ii) on the date of transmission to such party, in the case 83 90 of notice by telefacsimile (where the proper transmission of such notice is either acknowledged by the recipient or electronically confirmed by the transmitting device), or (iii) on the fifth Business Day after the day on which mailed to such party, if sent prepaid by certified or registered mail, return receipt requested, in each case delivered, transmitted or mailed, as the case may be, to the address or telefacsimile number, as appropriate, set forth below or such other address or number as such party shall specify by notice hereunder: (a) if to the Borrower: The Wackenhut Corporation 4200 Wackenhut Drive, Suite 100 Palm Beach Gardens, Florida 33410 Attn: Ann Svoboda, Treasury Telephone: (561) 691-6723 Telefacsimile: (561) 691-6456 with a copy to: The Wackenhut Corporation 4200 Wackenhut Drive, Suite 100 Palm Beach Gardens, Florida 33410 Attn: Philip Maslowe, Chief Financial Officer Telephone: (561) 691-6458 Telefacsimile: (561) 691-____ (b) if to the Agent: Bank of America, N.A. 101 North Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telephone: (704) 386-____ Telefacsimile: (704) 386-9923 with a copy to: Bank of America, N.A. 100 North Tryon Street, 17th Floor NC1-007-17-15 Charlotte, North Carolina 28255 Attention: Jack Williams Telephone: (704) 388-3234 Telefacsimile: (704) 388-0960 84 91 (c) if to the Lenders: At the addresses set forth on the signature pages hereof and on the signature page of each Assignment and Acceptance; (d) if to any other Credit Party, at the address set forth on the signature page of the Guaranty Agreement executed by such Credit Party, as the case may be. 12.3. RIGHT OF SET-OFF; ADJUSTMENTS. (a) Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its affiliates) to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this SECTION 12.3 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. (b) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of the Loans owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender or is repaid in whole or in part by such benefitted Lender in good faith settlement of a pending or threatened avoidance claim, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery or settlement payment, but without interest. The Borrower agrees that any Lender so purchasing a participation from a Lender pursuant to this SECTION 12.3 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Person were the direct creditor of the Borrower in the amount of such participation. 12.4. SURVIVAL. All covenants, agreements, representations and warranties made herein shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit and the execution and delivery to the Lenders of this Agreement and the Notes and shall continue in full force and 85 92 effect so long as any of Obligations remain outstanding or any Lender has any Revolving Credit Commitment hereunder or the Borrower has continuing obligations hereunder unless otherwise provided herein. 12.5. EXPENSES. The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the syndication, preparation, execution, delivery, administration, modification, and amendment of this Agreement, the other Loan Documents, and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of counsel for the Agent (including the cost of internal counsel) with respect thereto and with respect to advising the Agent as to its rights and responsibilities under the Loan Documents. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable attorneys' fees and expenses and the cost of internal counsel), in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of the Loan Documents and the other documents to be delivered hereunder. 12.6. AMENDMENTS AND WAIVERS. Any provision of this Agreement or any other Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower or other applicable Credit Party party to such Loan Document and either the Required Lenders or (as to Loan Documents other than the Credit Agreement) the Agent on behalf of the Required Lenders (and, if ARTICLE XI or the rights or duties of the Agent are affected thereby, by the Agent); PROVIDED that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase the Revolving Credit Commitments of the Lenders, (ii) reduce the principal of or rate of interest on any Revolving Loan or any fees or other amounts payable hereunder, (iii) postpone any date fixed for the payment of any scheduled installment of principal of or interest on any Loan or any fees or other amounts payable hereunder or for termination of any Revolving Credit Commitment, or (iv) change the percentage of the Revolving Credit Commitment or of the unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this SECTION 12.6 or any other provision of this Agreement or (v) release any Guarantor except as expressly contemplated in the Loan Documents; and PROVIDED, FURTHER, that no such amendment or waiver that affects the rights, privileges or obligations of Bank of America as provider of Swing Line Loans, shall be effective unless signed in writing by Bank of America or that affects the rights, privileges or obligations of the Issuing Bank as issuer of Letters of Credit, shall be effective unless signed in writing by the Issuing Bank. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances, except as otherwise expressly provided herein. No delay or omission on any Lender's or the Agent's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default. 12.7. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such fully-executed counterpart. Signatures on communications and other documents may be transmitted by facsimile only with the consent of the Agent in its sole and absolute discretion in each instance. The effectiveness of any such signatures accepted by the Agent shall, subject to applicable law, have the same force and 86 93 effect as manual signatures and shall be binding on all parties. The Agent may also require that any such signature be confirmed by a manually-signed hard copy thereof. Each party hereto hereby adopts as an original executed signature page each signature page hereafter furnished by such party to the Agent (or an agent of the Agent) bearing (with the consent of the Agent) a facsimile signature by or on behalf of such party. Nothing contained in this Section shall limit the provisions of SECTION 11.2. 12.8. TERMINATION. This Agreement shall terminate on the Facility Termination Date, except that (a) those provisions which by the express terms thereof continue in effect notwithstanding the Facility Termination Date, and (b) obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable, shall continue in effect. Notwithstanding the foregoing, if after receipt of any payment of all or any part of the Obligations, the Agent, the Issuing Bank or any Lender (including the Swing Line Lender) is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, a diversion of trust funds or for any other reason or elects to repay any such amount in good faith settlement of a pending or threatened avoidance claim, (i) this Agreement, including the provisions pertaining to Participations in Letters of Credit, Reimbursement Obligations, and Swing Line Loans, shall continue in full force (or be reinstated, as the case may be) and the Borrower shall be liable to, and shall indemnify and hold the Agent, the Issuing Bank or such Lender harmless for, the amount of such payment surrendered until the Agent, the Issuing Bank or such Lender shall have been finally and irrevocably paid in full, and (ii) in the event any portion of any amount so required to be surrendered by the Agent or the Issuing Bank or the Swing Line Lender shall have been distributed to the Lenders, the Lenders shall promptly repay such amounts to the Agent or the Issuing Bank or the Swing Line Lender on demand therefor. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent, the Issuing Bank or the Lenders in reliance upon such payment, and any such contrary action so taken shall be without prejudice to the Agent's, the Issuing Bank's or the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. 12.9. INDEMNIFICATION; LIMITATION OF LIABILITY. (a) The Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their affiliates and their respective officers, directors, employees, agents, and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith) the Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans, except to the extent such claim, damage, loss, liability, cost, or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. 87 94 In the case of an investigation, litigation or other proceeding to which the indemnity in this SECTION 12.9 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it, any of its Subsidiaries, any Guarantor, or any security holders or creditors thereof arising out of, related to or in connection with the transactions contemplated herein, except to the extent that such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have directly resulted from such Indemnified Party's gross negligence or willful misconduct. (b) The agreements and obligations of the Borrower contained in this SECTION 12.9 shall continue in effect notwithstanding the Facility Termination Date. 12.10. SEVERABILITY. If any provision of this Agreement or the other Loan Documents shall be determined to be illegal or invalid as to one or more of the parties hereto, then such provision shall remain in effect with respect to all parties, if any, as to whom such provision is neither illegal nor invalid, and in any event all other provisions hereof shall remain effective and binding on the parties hereto. 12.11. ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments and other communications between or among the parties, both oral and written, with respect thereto. 12.12. AGREEMENT CONTROLS. In the event that any term of any of the Loan Documents other than this Agreement conflicts with any express term of this Agreement, the terms and provisions of this Agreement shall control to the extent of such conflict. 12.13. USURY SAVINGS CLAUSE. Notwithstanding any other provision herein, the aggregate interest rate charged under any of the Notes, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate (as such term is defined below). If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as defined below), the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Borrower shall pay to the Agent an amount equal to the difference between the 88 95 amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of the Lenders and the Borrower to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Borrower. As used in this paragraph, the term "Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. 12.14. GOVERNING LAW; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (b) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF BROWARD, STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN SECTION 12.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA. (d) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY 89 96 IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (f) THE BORROWER HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [Signatures on following pages] 90 97 Signature Page 7 of 7 Wackenhut Corp 2000 Credit Agreement 369437.17 (Final) IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written. THE WACKENHUT CORPORATION WITNESS: /s/ WELLINGTON MENDOZA By: /s/ ANN SVOBODA - ------------------------------- ------------------------------ Print Name: Wellington Mendoza Name: Ann Svoboda Title: Assistant Treasurer /s/ LISA BROWN - ------------------------------- Print Name: Lisa Brown Signature Page 1 of 7 98 BANK OF AMERICA, N.A., as Agent for the Lenders By: /s/ ROBERT MAURIELLO ----------------------------------------- Name: Robert Mauriello Title: Vice President BANK OF AMERICA, N.A. By: /s/ ROBERT MAURIELLO ----------------------------------------- Name: Robert Mauriello Title: Vice President Lending Office for Base Rate Loans: Bank of America, N.A. 101 North Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telephone: (704) 386- Telefacsimile: (704) 386-9923 Wire Transfer Instructions: Bank of America, N.A. ABA# 053000196 Account No.: ------------------------- Reference: The Wackenhut Corporation Attention: Agency Services Lending Office for Eurodollar Rate Loans: Bank of America, N.A. 101 North Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: --------------------------- Telephone: (704) 386- Telefacsimile: (704) 386-9923 Wire Transfer Instructions: Bank of America, N.A. ABA# 053000196 Account No.: ------------------------- Reference: The Wackenhut Corporation Attention: Agency Services Signature Page 2 of 7 99 SCOTIABANC INC. By: /s/ FRANK F. SANDLER ----------------------- Name: Frank F. Sandler Title: Director Lending Office: 600 Peachtree Street, N.E. Suite 2700 Atlanta, Georgia 30308 Wire Transfer Instructions: The Bank of Nova Scotia New York, New York ABA #026002532 Attention: Further Credit #0735639 ScotiaBanc Inc. Reference: The Wackenhut Corporation Signature Page 3 of 7 100 FIRST UNION NATIONAL BANK By: /s/ ROBERT D. BRIDGES ------------------------------ Name: Robert D. Bridges Title: Senior Vice President Lending Office: 1950 W. Hillsboro Boulevard, 2nd Floor Deerfield Beach, Florida 33442 Wire Transfer Instructions: First Union National Bank Charlotte, North Carolina ABA #053000216 Account #145916-2008 Commercial Loan Participations Attention: Cindy Petry - 904-489-6095 Reference: The Wackenhut Corporation Signature Page 4 of 7 101 SUNTRUST BANK By: /s/ WILLIAM H. CRAWFORD ---------------------------- Name: William H. Crawford Title: Vice President Lending Office: 201 4th Avenue, North Nashville, Tennessee 37219 Wire Transfer Instructions: SunTrust Bank Nashville, Tennessee ABA #064 000 046 Account #9191004800 Account Name: Commercial Loan Wires Attention: Leigh Anne Gregory Reference: Wackenhut Corp. Obligor #9198646451 Signature Page 5 of 7 102 DRESDNER BANK LATEINAMERIKA AG, MIAMI AGENCY By: /s/ ALAN HILLS /s/ FRANK HUTHNANCE ---------------------------------------------- Name: Alan Hills Frank Huthnance Title: Vice President Vice President Lending Office: 801 Brickell Avenue Suite 1100 Miami, Florida 33131 Wire Transfer Instructions: Dresdner Bank ABA #063-100-277 Account #137-694-2752 Account Name: Dresdner Bank Lateinamerika AG Miami Agency Credit Risk Management Attention: Frank Olaechea Reference: The Wackenhut Corporation Signature Page 6 of 7 103 BANCO SANTANDER PR By: /s/ JOSE ENRIQUE GUZMAN VIRELLA ----------------------------------- Name: Jose Enrique Guzman Virella Title: Senior Officer Lending Office: 207 Ponce de Leon Avenue Banco Santander Building Hato Rey, Puerto Rico 00918 Wire Transfer Instructions Banco Santander Puerto Rico San Juan, Puerto Rico ABA #021502341 Attention: Jose Enrique Guzman Corporate Banking Group Reference: The Wackenhut Corporation Signature Page 7 of 7 104 EXHIBIT A Applicable Commitment Percentages APPLICABLE REVOLVING CREDIT COMMITMENT LENDER COMMITMENT PERCENTAGE - ------ ---------------- ---------- Bank of America, N.A $ 25,000,000.00 22.222222222% Scotiabanc Inc. $ 22,500,000.00 20.000000000% First Union National Bank $ 22,500,000.00 20.000000000% SunTrust Bank $ 20,000,000.00 17.777777778% Dresdner Bank Lateinamerika AG $ 15,000,000.00 13.333333333% Banco Santander PR $ 7,500,000.00 6.666666667% --------------- --------------- $112,500,000.00 100% A-1 105 EXHIBIT B Form of Assignment and Acceptance Reference is made to the Credit Agreement dated as of November 13, 2000 (the "Credit Agreement") among The Wackenhut Corporation, a Florida corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement) and Bank of America, N.A., as agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on SCHEDULE 1 agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, WITHOUT RECOURSE and without representation or warranty except as expressly set forth herein, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement and the other Loan Documents as of the date hereof equal to the percentage interest specified on SCHEDULE 1 of all outstanding rights and obligations under the Credit Agreement and the other Loan Documents.* After giving effect to such sale and assignment, the Assignee's Revolving Credit Commitment and the amount of the Revolving Loans owing to the Assignee will be as set forth on SCHEDULE 1. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Credit Party or the performance or observance by any Credit Party of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; and (iv) attaches the Revolving Note held by the Assignor and requests that the Agent exchange such Revolving Note for new Revolving Notes payable to the order of the Assignee in an amount equal to the Revolving Credit Commitment assumed by the Assignee pursuant hereto and to the Assignor in an amount equal to the Revolving Credit Commitment retained by the Assignor, if any, as specified on SCHEDULE 1. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in SECTION 8.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to - ----------------- * In the case of Bank of America as Assignor, excluding any rights, benefits, or duties as provider of Swing Line Loans or an Issuing Bank. B-1 106 make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service or other forms required under SECTION 5.6. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Agent, unless otherwise specified on SCHEDULE 1. 5. Upon such acceptance and recording by the Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Revolving Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Revolving Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Florida. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of SCHEDULE 1 to this Assignment and Acceptance by telefacsimile shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused SCHEDULE 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. B-2 107 Schedule 1 Percentage interest assigned: ________% Assignee's Revolving Credit Commitment: $_______ Aggregate outstanding principal amount of Revolving Loans assigned: $_______ Principal amount of Revolving Note payable to Assignee: $_______ Principal amount of Revolving Note payable to Assignor: $_______ Effective Date (if other than date of acceptance by Agent): *_______, ____ [NAME OF ASSIGNOR], as Assignor By: ---------------------------------------- Title: Dated: , 200 -------------------- ----- [NAME OF ASSIGNEE], as Assignee By: ---------------------------------------- Title: Domestic Lending Office: Eurodollar Lending Office: - ---------------- * This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to the Agent. B-3 108 Accepted [and Approved] ** this ___ day of ___________, 200_ BANK OF AMERICA, N.A., as Agent By: -------------------------------------------------- Title: [Approved this ____ day of ____________, 200_ THE WACKENHUT CORPORATION By: ]** -------------------------------------------------- Title: - -------------- ** Required if the Asignee is an Eligible Assignee solely by reason of clause (iii) of the definition of "Eligible Assignee". B-4 109 EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative Reference is hereby made to the Credit Agreement dated as of November 13, 2000 (the "Agreement") among The Wackenhut Corporation, a Florida corporation (the "Borrower"), the Lenders (as defined in the Agreement), and Bank of America, N.A., as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower hereby nominates, constitutes and appoints each individual named below as an Authorized Representative under the Loan Documents, and hereby represents and warrants that (i) set forth opposite each such individual's name is a true and correct statement of such individual's office (to which such individual has been duly elected or appointed), a genuine specimen signature of such individual and an address for the giving of notice, and (ii) each such individual has been duly authorized by the Borrower to act as Authorized Representative under the Loan Documents: Name and Address Office Specimen Signature - ---------------- ------------- ------------------- - ---------------- - ---------------- - ---------------- ------------- ------------------- - ---------------- - ---------------- Borrower hereby revokes (effective upon receipt hereof by the Agent) the prior appointment of ________________ as an Authorized Representative. This the ___ day of __________________, ____. THE WACKENHUT CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- C-1 110 EXHIBIT D-1 Form of Borrowing Notice To: Bank of America, N.A., as Agent 101 North Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704)386-9923 Reference is hereby made to the Credit Agreement dated as of November 13, 2000 (the "Agreement") among The Wackenhut Corporation (the "Borrower"), the Lenders (as defined in the Agreement), and Bank of America, N.A., as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to the Agent that Loans of the type and amount set forth below be made on the date indicated: TYPE OF LOAN INTEREST AGGREGATE (CHECK ONE) PERIOD(1) AMOUNT(2) DATE OF LOAN(3) --------- ------ ------ --------------- REVOLVING LOAN Base Rate Loan ----------- ---------- ------------------- Eurodollar Rate Loan ----------- ---------- ------------------- - ----------------------- (1) For any Eurodollar Rate Loan, one, two, three or six months. (2) Must be $1,000,000 or if greater an integral multiple of $500,000, unless a Base Rate Refunding Loan. (3) At least three (3) Business Days later if a Eurodollar Rate Loan. The Borrower hereby requests that the proceeds of Loans described in this Borrowing Notice be made available to the Borrower as follows: [INSERT TRANSMITTAL INSTRUCTIONS] . The undersigned hereby certifies that: 1. No Default or Event of Default has occurred and is continuing either now or after giving effect to the borrowing described herein; and D-1-1 111 2. All the representations and warranties set forth in ARTICLE VII of the Agreement and in the Loan Documents (other than those expressly stated to refer to a particular date) are true and correct as of the date hereof except that the reference to the financial statements in SECTION 7.6(A) of the Agreement shall be deemed (solely for the purpose of the representation and warranty contained in such SECTION 7.6(A) but not for the purpose of any cross reference to such SECTION 7.6(A) or to the financial statements described therein contained in any other provision of SECTION 7.6 or elsewhere in ARTICLE VII) to refer to those financial statements most recently delivered to you pursuant to SECTION 8.1 of the Agreement (it being understood that any financial statements delivered pursuant to SECTION 8.1(B) have not been certified by independent public accountants). 3. All conditions contained in the Agreement to the making of any Loan requested hereby have been met or satisfied in full . THE WACKENHUT CORPORATION BY: ------------------------------------------- Authorized Representative DATE: ----------------------------------------- D-1-2 112 EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans To: Bank of America, N.A., 101 North Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704)386-9923 Reference is hereby made to the Credit Agreement dated as of November 13, 2000 (the "Agreement") among The Wackenhut Corporation (the "Borrower"), the Lenders (as defined in the Agreement), and Bank of America, N.A., as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to Bank of America that a Swing Line Loan of the amount set forth below be made on the date indicated: AMOUNT(1) DATE OF LOAN __________________ __________, ____ - ----------------------- (1) Must be $50,000 or if greater an integral multiple of $20,000, unless a Base Rate Refunding Loan. The Borrower hereby requests that the proceeds of Swing Line Loans described in this Borrowing Notice be made available to the Borrower as follows: [INSERT TRANSMITTAL INSTRUCTIONS] . The undersigned hereby certifies that: 1. No Default or Event of Default has occurred and is continuing either now or after giving effect to the borrowing described herein; and 2. All the representations and warranties set forth in ARTICLE VII of the Agreement and in the Loan Documents (other than those expressly stated to refer to a particular date) are true and correct as of the date hereof except that the reference to the financial statements in SECTION 7.6(A) of the Agreement shall be deemed (solely for the purpose of the representation and warranty contained in such SECTION 7.6(A) but not for the purpose of any cross reference to such SECTION 7.6(A) or to the financial statements described D-2-1 113 therein contained in any other provision of SECTION 7.6 or elsewhere in ARTICLE VII) to refer to those financial statements most recently delivered to you pursuant to SECTION 8.1 of the Agreement (it being understood that any financial statements delivered pursuant to SECTION 8.1(B) have not been certified by independent public accountants). 3. All conditions contained in the Agreement to the making of any Loan requested hereby have been met or satisfied in full. THE WACKENHUT CORPORATION By: -------------------------------------- Authorized Representative DATE: ------------------------------------ D-2-2 114 EXHIBIT E Form of Interest Rate Selection Notice To: Bank of America, N.A., as Agent 101 North Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-9923 Reference is hereby made to the Credit Agreement dated as of November 13, 2000 (the "Agreement") among The Wackenhut Corporation (the "Borrower"), the Lenders (as defined in the Agreement), and Bank of America, N.A., as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to the Agent of the following selection of a type of Loan and Interest Period: TYPE OF LOAN INTEREST AGGREGATE (CHECK ONE) PERIOD(1) AMOUNT(2) DATE OF LOAN(3) --------- ------ ------ --------------- REVOLVING LOAN Base Rate Loan ---------- ------------- -------------------- Eurodollar Rate Loan ---------- ------------- -------------------- - ----------------------- (1) For any Eurodollar Rate Loan, one, two, three or six months. (2) Must be $1,000,000 or if greater an integral multiple of $500,000, unless a Base Rate Refunding Loan. (3) At least three (3) Business Days later if a Eurodollar Rate Loan. THE WACKENHUT CORPORATION By: --------------------------------------- Authorized Representative DATE: ------------------------------------- E-1 115 EXHIBIT F-1 Form of Revolving Note Promissory Note (Revolving Loan) $-------------- ---------, -------------- ________, 2000 FOR VALUE RECEIVED, The Wackenhut Corporation, a Florida corporation having its principal place of business located in Palm Beach Gardens, Florida (the "Borrower"), hereby promises to pay to the order of _______________________________________________ (the "Lender"), in its individual capacity, at the office of BANK OF AMERICA, N.A., as agent for the Lenders (the "Agent"), located at 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the Agent may designate in writing) at the times set forth in the Credit Agreement dated as of November 13, 2000 among the Borrower, the financial institutions party thereto (collectively, the "Lenders") and the Agent (the "Agreement" --all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement), in lawful money of the United States of America, in immediately available funds, the principal amount of ___________ DOLLARS ($__________) or, if less than such principal amount, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Agreement on the Revolving Credit Termination Date or such earlier date as may be required pursuant to the terms of the Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates provided in ARTICLES II AND IV of the Agreement. All or any portion of the principal amount of Loans may be prepaid or required to be prepaid as provided in the Agreement. If payment of all sums due hereunder is accelerated under the terms of the Agreement or under the terms of the other Loan Documents executed in connection with the Agreement, the then remaining principal amount and accrued but unpaid interest thereon evidenced by this Revolving Note shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Revolving Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees, and interest due hereunder thereon at the rates set forth above. Interest hereunder shall be computed as provided in the Agreement. This Revolving Note is one of the Revolving Notes referred to in the Agreement and is issued pursuant to and entitled to the benefits and security of F-1-1 116 the Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Revolving Loans evidenced hereby were or are made and are to be repaid. This Revolving Note is subject to certain restrictions on transfer or assignment as provided in the Agreement. This Revolving Note shall be governed by and construed in accordance with the laws of the State of Florida. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law all defenses based on suretyship or impairment of collateral and the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issued against any other of them and returned unsatisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, also their right, if any, to require the holder hereof to hold as security for this Revolving Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, diligence or any other formality are hereby waived by all parties bound hereon. [SIGNATURE PAGE FOLLOWS.] F-1-2 117 IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. THE WACKENHUT CORPORATION WITNESS: By: - ------------------------ ------------------------------------------- Name: ----------------------------------------- Title: - ------------------------ ---------------------------------------- F-1-3 118 EXHIBIT F-2 Form of Swing Line Note Promissory Note (Swing Line Loan) $---------------- --------, -------- ___________, 2000 FOR VALUE RECEIVED, The Wackenhut Corporation, a Florida corporation having its principal place of business located in Palm Beach Gardens, Florida (the "Borrower"), hereby promises to pay to the order of BANK OF AMERICA, N.A. ("Bank of America"), in its individual capacity, at Bank of America's offices located at 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as Bank of America may designate) at the times set forth in the Credit Agreement dated as of November 13, 2000 among the Borrower, the financial institutions party thereto (collectively, the "Lenders") and Bank of America, N.A., as agent for the Lenders (the "Agent") (as amended, supplemented or otherwise modified from time to time, the "Agreement" -- all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement), in lawful money of the United States of America, in immediately available funds, the principal amount of _______________________ DOLLARS ($____________) or if less than such principal amount, the aggregate unpaid principal amount of all Swing Line Loans made by Bank of America to the Borrower pursuant to the Agreement on the Revolving Credit Termination Date or such earlier date as may be required pursuant to the terms of the Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates provided in ARTICLES II AND IV of the Agreement. All or any portion of the principal amount of Swing Line Loans may be prepaid as provided in the Agreement. If payment of all sums due hereunder is accelerated under the terms of the Agreement or under the terms of the other Loan Documents executed in connection with the Agreement, the then remaining principal amount and accrued but unpaid interest shall bear interest which shall be payable on demand at the Default Rate until such principal and interest have been paid in full. Further, in the event of such acceleration, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees, and interest thereon at the rates set forth above. Interest hereunder shall be computed on the basis of a 360 day year for the actual number of days in the interest period. F-2-1 119 This Note is the Swing Line Note referred to in the Agreement and is issued pursuant to and entitled to the benefits and security of the Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Swing Line Loans evidenced hereby were or are made and are to be repaid. This Note is subject to certain restrictions on transfer or assignment as provided in the Agreement. This Note shall be governed by and construed in accordance with the laws of the State of Florida. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law all defenses based on suretyship or impairment of collateral and the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issued against any other of them and returned unsatisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, also their right, if any, to require the holder hereof to hold as security for this Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, diligence or any other formality are hereby waived by all parties bound hereon. [SIGNATURE PAGE FOLLOWS.] F-2-2 120 IN WITNESS WHEREOF, the Borrower has caused this Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. THE WACKENHUT CORPORATION WITNESS: By: - ---------------------------- --------------------------------------- Name: ------------------------------------- Title: - ---------------------------- ------------------------------------ F-2-3 121 EXHIBIT G Form of Opinion of Borrower's Counsel November 13, 2000 Bank of America, N.A., as Agent and Each of the Lenders Party to the Credit Agreement Referenced Below Bank of America Corporate Center Charlotte, North Carolina 28255-0065 RE: $95,000,000 REVOLVING CREDIT AND LETTER OF CREDIT FACILITIES AMONG BANK OF AMERICA, N.A., AS AGENT, THE LENDERS PARTY THERETO AND THE WACKENHUT CORPORATION Ladies and Gentlemen: We have acted as counsel to The Wackenhut Corporation, a Florida corporation (the "Borrower"), and the following Persons (the "Guarantors"): __________, __________ and __________ in connection with the negotiation, execution, and delivery of the Credit Agreement of even date herewith among you, the Lenders and the Borrower (the "Credit Agreement"; capitalized terms not otherwise defined herein shall have the meanings provided therefor in the Credit Agreement); and the execution and delivery of the other Transaction Documents (as defined below) by the Borrower and one or more Guarantors, pursuant to which the Lenders are providing the Revolving Credit Facility in the amount of $________, including the $________ Letter of Credit Facility and the $________ Swing Line, each constituting part of the Revolving Credit Facility, and the other transactions contemplated under the Credit Agreement. This opinion is being delivered in accordance with the conditions set forth in SECTION 6.1 of the Credit Agreement. As such counsel, we have reviewed originals, or copies certified or otherwise authenticated or out satisfaction, of the following documents as executed and delivered as of the date hereof (collectively, the "Transaction Documents"): 1. the Credit Agreement; 2. the Notes; G-1 122 3. the Guaranty Agreement; [and 4. Add description of other Loan Documents by reference to Credit Agreement defined terms] For purposes of the opinions expressed below, we have assumed that all natural persons executing the Transaction Documents have legal capacity to do so; that all signatures (other than those of representatives of the Borrower and the Guarantors on the Transaction Documents) on all documents submitted to us are genuine; that all documents submitted to us as originals (other than the Transaction Documents) are authentic; and that all documents submitted to us as certified copies or photocopies conform to the originals of such documents, which themselves are authentic. For purposes of giving this opinion, we have examined such corporate and other records of the Borrower and the Guarantors, certificates of public officials, certificates of appropriate officers or other representatives of the Borrower and the Guarantors, and such other documents, and have made such inquiries as we have deemed appropriate. Based upon and subject to the foregoing, it is our opinion that: 1. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of its state of formation and is duly qualified to transact business as a foreign corporation and is in good standing in the following jurisdictions: ____________________________, and in each other jurisdiction in which, in light of the nature of the business transacted by it or the property owned by it, such qualification is necessary and the failure so to qualify might impair title to any property material to its operations or its right to enforce any material contract against others, or expose it to any substantial liability or impairment of rights or defenses in such jurisdiction. The Borrower has full [corporate] power and authority to own its assets and conduct the businesses in which it is now engaged and as are expressly contemplated by the Transaction Documents, and has full [corporate] power and authority to enter into each of the Transaction Documents to which it is a party and to perform its obligations thereunder and consummate the transactions contemplated therein. 2. Each of the Transaction Documents to which the Borrower is a party has been duly authorized by the Board of Directors of the Borrower (and by any required shareholder action), has been duly executed and delivered by the Borrower, and constitutes the legal, valid and binding obligation, agreement, instrument or conveyance, as the case may be, of the Borrower, enforceable against the Borrower in accordance with its respective terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and other similar laws relating to or affecting creditors' rights generally and by the application of general equitable principles (whether considered in proceedings at law or in equity). 3. Each Credit Party (other than the Borrower) is a corporation [, limited liability company or limited partnership, as the case may be,] duly organized, validly existing and in good standing under the laws of its G-2 123 respective state of its formation and is duly qualified to transact business as a foreign entity and is in good standing in the following respective jurisdictions: _________________________________, and in each other jurisdiction in which, in light of the nature of the business transacted by such Credit Party and the property owned by it, such qualification is necessary and the failure to so qualify might impair title to any property material to the operations of such Credit Party or such Credit Party's right to enforce any material contract against others, to expose such Credit Party to any substantial liability or impairment of rights or defenses in such jurisdiction. Each Credit Party (other than the Borrower) has full corporate power and authority to own its assets and conduct the businesses in which it is now engaged and as expressly contemplated in the Transaction Documents, and has full corporate power and authority to enter into each of the Transaction Documents to which it is a party and to perform its obligations thereunder and consummate the transactions contemplated therein. 4. Each of the Transaction Documents to which each Credit Party (other than the Borrower) is a party has been duly authorized by the Board of Directors [, managers, or general partners] of such Credit Party[, as the case may be] (and by any required shareholder[, member or limited partner] action[, as applicable]), has been duly executed and delivered by such Credit Party, and constitutes the legal, valid and binding obligation, agreement or instrument, as the case may be, of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and other similar laws relating to or affecting creditors' rights generally and by the application of general equitable principles (whether considered in proceedings at law or in equity). 5. Neither the execution or delivery of, nor performance by the Borrower or any other Credit Party of its obligations under, the Transaction Documents (a) does or will conflict with, violate or constitute a breach of (i) any of the Organizational Documents or Operating Documents of the Borrower or any other Credit Party, (ii) any laws, rules or regulations applicable to the Borrower or any other Credit Party, or (iii) any contract, agreement, indenture, lease, instrument, commitment, judgment, writ, determination, order, decree or arbitral award, of which we have knowledge after due inquiry of appropriate representatives of the Credit Parties, to which the Borrower, any other Credit Party or any other Subsidiary is a party or by which the Borrower, any other Credit Party or any other Subsidiary or any of their properties is bound, (b) requires the prior consent of, notice to, license from or filing with any Governmental Authority which has not been duly obtained or made on or prior to the date hereof, or (c) does or will result in the creation or imposition of any lien, pledge, charge or encumbrance of any nature upon or with respect to any of the properties of the Borrower, any Credit Party or any other Subsidiary, except for the Liens in your favor expressly created pursuant to the Transaction Documents. 6. Insofar as we have knowledge of the operations and affairs of the Credit Parties and upon due inquiry of appropriate representatives of the Credit Parties, there is no pending or overtly threatened, action, suit, investigation or proceeding (including, without limitation, any action, suit, investigation, or proceeding under any environmental or labor law) before or by any court, or governmental department, commission, board, bureau, instrumentality, agency or arbitral authority, (i) which calls into question the validity or enforceability of any of the Transaction Documents, or the titles to their respective offices or authority of any officers[, members, or partners, as applicable] of the G-3 124 Borrower or any other Credit Party or (ii) an adverse result in which could reasonably be expected to have a Material Adverse Effect. 7. Insofar as we have knowledge of the operations and affairs of the Credit Parties and upon due inquiry of appropriate representatives of the Credit Parties, there exists no event, circumstance or condition (except that we express no opinion as to financial reporting or accounting matters) which, immediately upon giving effect to the Transaction Documents, would constitute a Default or Event of Default under the Credit Agreement. 8. None of the transactions contemplated by the Credit Agreement, including, without limitation, the use of the proceeds of the Loans provided for in the Transaction Documents, will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, any regulations issued pursuant thereto, or regulations T, U or X of the Board of Governors of the Federal Reserve System. 9. The rate or rates of interest provided for in the Transaction Documents, including all late payment charges and the Default Rate provided for therein, do not and will violate or conflict with, or give rise to any defense to payment of the Obligations or to any claim, counterclaim, setoff or recoupment under, any usury or other law or regulation of the State of ________ governing the maximum rate of interest or amount of other charges that may be charged or incurred in transactions of the type contemplated under the Transaction Documents. 10. No documentary, stamp, intangibles, excise or other tax is payable to any Governmental Authority of the State of Florida in connection with the execution, delivery, enforcement, recording or filing of any of the Transaction Documents, other than routine per page filing fees in connection with the filing of Uniform Commercial Code financing statements and court costs and fees that may be or become payable in connection with the enforcement of the Transaction Documents. 11. Solely by reason of (i) the execution and delivery of, and performance by the parties thereto under, the Transaction Documents, (ii) the acceptance of the Notes and the receipt of payments in respect of the Obligations, or (iii) the enforcement of rights and remedies by the Agent of any Lender under the Transaction Documents, neither the Agent nor any Lender is or shall (a) be required to qualify to do business in the State of Florida or (b) be subject to the payment of any franchise or income tax or other tax imposed by the State of Florida or any agency thereof payable in respect of payments received under the Transaction Documents. Our opinions contained herein are rendered solely in connection with the transactions contemplated under the Transaction Documents and may not be relied upon in any manner by any Person other than the addressees hereof, any successor or assignee of any addressee (including successive assignees) and any Person who shall acquire a participation interest in the interest of any Lender (collectively, the "Reliance Parties"), or by any Reliance Party for any other purpose. Our opinions herein shall not be quoted or otherwise included, summarized or referred to in any publication or document, in whole or in part, for any purpose whatsoever, or furnished to any Person other than a Reliance Party (or a Person considering whether to become a Reliance Party), except as may be required of any Reliance Party by applicable law or regulation or in accordance with any auditing or oversight function or request of regulatory agencies to which a Reliance Party is subject. G-4 125 EXHIBIT H Compliance Certificate Bank of America, N.A., as Agent 101 North Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-9923 Bank of America, N.A., as Agent 100 N. Tryon Street NC1-007-17-15 Charlotte, North Carolina 28255 Attention: ______________________ Telefacsimile: (704) 388-0960 Reference is hereby made to the Credit Agreement dated as of November 13, 2000 (the "Agreement") among The Wackenhut Corporation, a Florida corporation (the "Borrower"), the Lenders (as defined in the Agreement) and Bank of America, N.A., as Agent for the Lenders ("Agent"). Capitalized terms used but not otherwise defined herein shall have the respective meanings therefor set forth in the Agreement. The undersigned, a duly authorized and acting Authorized Representative, hereby certifies to you as of __________ (the "Determination Date") as follows: 1. Calculations: A. Compliance with SECTION 9.1(A): Consolidated Net Worth 1. Consolidated Net Worth at the last day of the Most recent Fiscal Quarter $__________ 2. Consolidated Net Income x 50% $__________ 3. Net proceeds of sale of Borrower's capital Stock x 75% $__________ 4. Sum of A.1 + A.2 + A.3 $__________ 5. Actual Consolidated Net Worth $__________ H-1 126 REQUIRED: LINE A.5 MUST NOT BE LESS THAN LINE A.4 B. Compliance with SECTION 9.1(B) and 9.5: Indebtedness (including WCC and Chile) 1. Consolidated Indebtedness $__________ 2. Indebtedness for Money Borrowed of WCC and Chile $__________ 3. B.1 - B.2 $__________ 4. Consolidated Net Worth $__________ 5. Ratio of B.3 to B.4 ___ to 1.00 6. Outstanding trade receivables subject to Asset Securitization Facility $__________ 7. additional Indebtedness described in SECTION 9.5(H) $__________ REQUIRED: LINE B.5 MUST NOT EXCEED .50. LINE B.6 MUST NOT EXCEED $75,000,000. LINE B.7 MUST NOT EXCEED $30,000,000. C. Compliance with SECTION 9.1(C): Consolidated Fixed Charge Coverage Ratio 1. Consolidated Net Income $__________ 2. Income taxes deducted in arriving at C.1 $__________ 3. Consolidated Fixed Charges $__________ 4. C.1 + C.2 + C.3 $__________ 5. Ratio of C.4 to C.3 ____ to 1.00 REQUIRED: LINE C.5 MUST NOT BE LESS THAN 1.50 TO 1.00 D. Compliance with SECTION 9.7: Restricted Payments 1. Restricted Payments since October 1, 2000 $__________ 2. Consolidated Net Income since October 1, 2000 x .50 $__________ H-2 127 3. D.2 + $5,000,000 $__________ 4. D.3 - D.1 $__________ REQUIRED: LINE D.4 MUST BE EQUAL TO OR GREATER THAN 0. E. Compliance with SECTION 9.14: Advances to Excluded Subsidiaries 1. Loans and advances to, Guaranties, capital contributions to, investments in: (a) WCC $__________ (b) Chile $__________ REQUIRED: LINE E.1(A) MUST NOT EXCEED $1,500,000. LINE E.1(B) MUST NOT EXCEED $__________. 2. No Default A. To the best knowledge of the undersigned, since __________ (the date of the last similar certification), (a) the Borrower has not defaulted in the keeping, observance, performance or fulfillment of its obligations pursuant to any of the Loan Documents; and (b) no Default or Event of Default specified in ARTICLE X of the Agreement has occurred and is continuing. B. If a Default or Event of Default has occurred since __________ (the date of the last similar certification), the Borrower proposes to take the following action with respect to such Default or Event of Default: ____________________________________________________ ______________________________________________________________________ (NOTE, if no Default or Event of Default has occurred, insert "Not Applicable"). 3. Additional Subsidiaries Listed on the Schedule of Additional Persons attached hereto is a true and correct description of all Subsidiaries in respect of which the Borrower is required pursuant to SECTION 8.18 of the Agreement to deliver or cause to be delivered a Guaranty Agreement and related documents not later than the date of this Certificate, and all documents so required to be delivered in respect of each such Persons are delivered to you simultaneously herewith. H-3 128 The Determination Date is the date of the last required financial statements submitted to the Lenders in accordance with SECTION 8.18 of the Agreement. IN WITNESS WHEREOF, I have executed this Certificate this _____ day of __________, ____. By: ----------------------------------------- Authorized Representative Name: --------------------------------------- Title: -------------------------------------- H-4 129 EXHIBIT I Form of Guaranty THIS GUARANTY AGREEMENT (this "Guaranty Agreement"), dated as of __________, 2000, is made by the undersigned (the "Guarantor" and, together with other Subsidiaries of the Borrower who have heretofore or hereafter guaranteed the Borrower's Liabilities, as defined below, collectively, the "Guarantors") to BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States, as agent (in such capacity, the "Agent") for each of the lenders (the "Lenders" and collectively with the Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. W I T N E S S E T H: WHEREAS, the Secured Parties have agreed to provide to The Wackenhut Corporation (the "Borrower") certain credit facilities, including a revolving credit facility with a letter of credit and swing line sublimit pursuant to the terms of that certain Credit Agreement dated as of November 13, 2000, among the Borrower, the Agent and the Lenders (as from time to time amended, modified, supplemented or restated, the "Credit Agreement"); and WHEREAS, the Guarantor is, directly or indirectly, a Wholly-owned Subsidiary of the Borrower and will materially benefit from the Loans and Advances made and to be made, and the Letters of Credit issued and to be issued, under the Credit Agreement; and WHEREAS, the Guarantor is required to enter into this Guaranty Agreement pursuant to the terms of the Credit Agreement; and WHEREAS, a material part of the consideration given in connection with and as an inducement to the execution and delivery of the Credit Agreement by the Secured Parties was the obligation of the Borrower to cause the Guarantor to enter into this Guaranty Agreement, and the Secured Parties are unwilling to continue to extend and maintain the credit facilities provided under the Loan Documents unless the Guarantor enters into this Guaranty Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows: 1. GUARANTY. The Guarantor hereby jointly and severally, unconditionally, absolutely, continually and irrevocably guarantees to the Agent for the benefit of the Secured Parties the payment and performance in full of the Borrower's Liabilities (as defined below). For all purposes of this Guaranty Agreement, "Borrower's Liabilities" means: (a) the Borrower's prompt payment in full, when due or declared due and at all such times, of all Obligations and all other amounts pursuant to the terms of the Credit Agreement, the Notes, and all I-1 130 other Loan Documents heretofore, now or at any time or times hereafter owing, arising, due or payable from the Borrower to any one or more of the Secured Parties, including principal, interest, premiums and fees (including, but not limited to, loan fees and reasonable attorneys' fees and expenses); (b) the Borrower's prompt, full and faithful performance, observance and discharge of each and every agreement, undertaking, covenant and provision to be performed, observed or discharged by the Borrower under the Credit Agreement and all other Loan Documents; and (c) the Borrower's prompt payment in full, when due or declared due and at all such times, of Rate Hedging Obligations now or hereafter arising under Swap Agreements. The Guarantor's obligations to the Secured Parties under this Guaranty Agreement are hereinafter referred to as the "Guarantor's Obligations". Notwithstanding the foregoing, the liability of the Guarantor individually with respect to its Guarantor's Obligations shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. The Guarantor agrees that it is jointly and severally, directly and primarily liable (subject to the limitation in the immediately preceding sentence) for the Borrower's Liabilities. 2. PAYMENT. If the Borrower shall default in payment or performance of any of the Borrower's Liabilities, whether principal, interest, premium, fee (including, but not limited to, loan fees and reasonable attorneys' fees and expenses), or otherwise, when and as the same shall become due, and after expiration of any applicable grace period, whether according to the terms of the Credit Agreement, by acceleration, or otherwise, or upon the occurrence and during the continuance of any Event of Default under the Credit Agreement, then any or all of the Guarantors will, upon demand thereof by the Agent, fully pay to the Agent, for the benefit of the Secured Parties, subject to any limitation on each Guarantor's Obligations set forth in Section 1 hereof, an amount equal to all the Borrower's Liabilities then due and owing. 3. ABSOLUTE RIGHTS AND OBLIGATIONS. This is a guaranty of payment and not of collection. The Guarantor's Obligations under this Guaranty Agreement shall be joint and several, absolute and unconditional, subject to the limitation set forth in Section 1 hereof, irrespective of, and the Guarantor hereby expressly waives, to the extent permitted by law, any defense to its obligations under this Guaranty Agreement by reason of: (a) any lack of legality, validity or enforceability of the Credit Agreement, of any of the Notes, of any other Loan Document, or of any other agreement or instrument creating, providing security for, or otherwise relating to any of the Guarantor's Obligations, any of the Borrower's Liabilities, or any other guaranty of any of the Borrower's Liabilities (the Loan Documents and all such other agreements and instruments being collectively referred to as the "Related Agreements"); (b) any action taken under any of the Related Agreements, any exercise of any right or power therein conferred, any failure or omission to enforce any right conferred thereby, or any waiver of any covenant or condition therein provided; I-2 131 (c) any acceleration of the maturity of any of the Borrower's Liabilities, of the Guarantor's Obligations of any other Guarantor, or of any other obligations or liabilities of any Person under any of the Related Agreements; (d) any release, exchange, non-perfection, lapse in perfection, disposal, deterioration in value, or impairment of any security for any of the Borrower's Liabilities, for any of the Guarantor's Obligations of any Guarantor, or for any other obligations or liabilities of any Person under any of the Related Agreements; (e) any dissolution of the Borrower or any Guarantor or any other party to a Related Agreement, or the combination or consolidation of the Borrower or any Guarantor or any other party to a Related Agreement into or with another entity or any transfer or disposition of any assets of the Borrower or any Guarantor or any other party to a Related Agreement; (f) any extension (including without limitation extensions of time for payment), renewal, amendment, restructuring or restatement of, and any acceptance of late or partial payments under, the Credit Agreement, any of the Notes or any other Loan Document or any other Related Agreement, in whole or in part; (g) the existence, addition, modification, termination, reduction or impairment of value, or release of any other guaranty (or security therefor) of the Borrower's Liabilities (including without limitation the Guarantor's Obligations of any other Guarantor and obligations arising under any other Guaranty Agreement by any other Credit Party now or hereafter in effect); (h) any waiver of, forbearance or indulgence under, or other consent to any change in or departure from any term or provision contained in the Credit Agreement, any other Loan Document or any other Related Agreement, including without limitation any term pertaining to the payment or performance of any of the Borrower's Liabilities, any of the Guarantor's Obligations of any other Guarantor, or any of the obligations or liabilities of any party to any other Related Agreement; (i) any other circumstance whatsoever (with or without notice to or knowledge of any Guarantor) which may or might in any manner or to any extent vary the risks of the Guarantor, or might otherwise constitute a legal or equitable defense available to, or discharge of, a surety or a guarantor, including without limitation any right to require or claim that resort be had to the Borrower or any other Credit Party or to any collateral in respect of the Borrower's Liabilities or Guarantor's Obligations. It is the express purpose and intent of the parties hereto that this Guaranty Agreement and the Guarantor's Obligations hereunder shall be absolute and unconditional under any and all circumstances and shall not be discharged except by payment as herein provided, subject to the limitation on each Guarantor's Obligations set forth in Section 1 above. I-3 132 4. CURRENCY AND FUNDS OF PAYMENT. All Guarantor's Obligations will be paid in lawful currency of the United States of America and in immediately available funds, regardless of any law, regulation or decree now or hereafter in effect that might in any manner affect the Borrower's Liabilities, or the rights of any Secured Party with respect thereto as against the Borrower, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower of any or all of the Borrower's Liabilities. 5. EVENTS OF DEFAULT. Without limiting the provisions of Section 2 hereof, in the event that there shall occur and be continuing an Event of Default, then notwithstanding any collateral or other security or credit support for the Borrower's Liabilities, at the Agent's election and without notice thereof or demand therefor, the Guarantor's Obligations shall immediately be and become due and payable after the expiration of grace periods, if any. 6. SUBORDINATION. Until this Guaranty Agreement is terminated in accordance with Section 23 hereof, the Guarantor hereby unconditionally subordinates all present and future debts, liabilities or obligations now or hereafter owing to the Guarantor (i) of the Borrower, to the payment in full of the Borrower's Liabilities, (ii) of every other Guarantor (an "obligated guarantor"), to the payment in full of the Guarantor's Obligations of such obligated guarantor, and (iii) of each other Person now or hereafter constituting a Credit Party, to the payment in full of the obligations of such Credit Party owing to any Secured Party and arising under the Loan Documents. All amounts due under such subordinated debts, liabilities, or obligations shall, upon the occurrence and during the continuance of an Event of Default, be collected and, upon request by the Agent, paid over forthwith to the Agent for the benefit of the Secured Parties on account of the Borrower's Liabilities, the Guarantor's Obligations, or such other obligations, as applicable, and, after such request and pending such payment, shall be held by the Guarantor as agent and bailee of the Secured Parties separate and apart from all other funds, property and accounts of the Guarantor. 7. SUITS. The Guarantor from time to time shall pay to the Agent for the benefit of the Secured Parties, on demand, at the Agent's place of business set forth in the Credit Agreement or such other address as the Agent shall give notice of to the Guarantor, the Guarantor's Obligations as they become or are declared due, and in the event such payment is not made forthwith, the Agent may proceed to suit against any one or more or all of the Guarantors. At the Agent's election, one or more and successive or concurrent suits may be brought hereon by the Agent against any one or more or all of the Guarantors, whether or not suit has been commenced against the Borrower, any other Guarantor, or any other Person and whether or not the Secured Parties have taken or failed to take any other action to collect all or any portion of the Borrower's Liabilities or have taken or failed to take any actions against any collateral securing payment or performance of all or any portion of the Borrower's Liabilities, and irrespective of any event, occurrence, or condition described in Section 3 hereof. 8. SET-OFF AND WAIVER. The Guarantor waives any right to assert against any Secured Party as a defense, counterclaim, set-off or cross claim to any claim under this Guaranty Agreement, any defense (legal or equitable) or other claim which the Guarantor may now or at any time hereafter have against the Borrower or the Secured Parties without waiving any other defenses, set-offs, counterclaims, cross claims or other claims against any Secured Party or other I-4 133 Person otherwise available to the Guarantor. The Guarantor agrees that each Secured Party shall have a lien for all the Guarantor's Obligations upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts, now or hereafter pledged, mortgaged, transferred or assigned to such Secured Party or otherwise in the possession or control of such Secured Party for any purpose (other than solely for safekeeping) for the account or benefit of the Guarantor, including any balance of any deposit account or of any credit of the Guarantor with the Secured Party, whether now existing or hereafter established, and hereby authorizes each Secured Party from and after the occurrence of an Event of Default at any time or times with or without prior notice to apply such balances or any part thereof to such of the Guarantor's Obligations to the Secured Parties then due and in such amounts as provided for in the Credit Agreement or otherwise as they may elect. For the purposes of this SECTION 8, all remittances and property shall be deemed to be in the possession of a Secured Party as soon as the same may be put in transit to it by mail or carrier or by other bailee. 9. WAIVER OF NOTICE; SUBROGATION. (a) The Guarantor hereby waives to the extent permitted by law notice of the following events or occurrences: (i) acceptance of this Guaranty Agreement; (ii) the Lenders' heretofore, now or from time to time hereafter making Loans and issuing Letters of Credit and otherwise loaning monies or giving or extending credit to or for the benefit of the Borrower, whether pursuant to the Credit Agreement or the Notes or any other Loan Document or Related Agreement or any amendments, modifications, or supplements thereto, or replacements or extensions thereof; (iii) presentment, demand, default, non-payment, partial payment and protest; and (iv) any other event, condition, or occurrence described in SECTION 3 hereof. The Guarantor agrees that each Secured Party may heretofore, now or at any time hereafter do any or all of the foregoing in such manner, upon such terms and at such times as each Secured Party, in its sole and absolute discretion, deems advisable, without in any way or respect impairing, affecting, reducing or releasing the Guarantor from its Guarantor's Obligations, and the Guarantor hereby consents to each and all of the foregoing events or occurrences. (b) The Guarantor hereby agrees that payment or performance by the Guarantor of its Guarantor's Obligations under this Guaranty Agreement may be enforced by the Agent on behalf of the Secured Parties upon demand by the Agent to the Guarantor without the Agent being required, the Guarantor expressly waiving to the extent permitted by law any right it may have to require the Agent, to (i) prosecute collection or seek to enforce or resort to any remedies against the Borrower or any other Guarantor or any other guarantor of the Borrower's Liabilities, or (ii) seek to enforce or resort to any remedies with respect to any security interests, Liens or encumbrances granted to the Agent or any Lender or other party to a Related Agreement by the Borrower, any other Guarantor or any other Person on account of the Borrower's Liabilities or any guaranty thereof, IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY THE GUARANTOR THAT DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE AGENT, AND THE PROVISIONS HEREOF ENFORCED BY THE AGENT, EFFECTIVE AS OF THE FIRST DATE I-5 134 ANY EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER THE CREDIT AGREEMENT AFTER GRACE PERIODS, IF ANY, FOR THE EVENT OF DEFAULT. (c) The Guarantor further agrees with respect to this Guaranty Agreement that it shall have no right of subrogation, reimbursement, contribution or indemnity, nor any right of recourse to security for the Borrower's Liabilities unless and until 93 days immediately following the Facility Termination Date shall have elapsed without the filing or commencement, by or against any Credit Party, of any state or federal action, suit, petition or proceeding seeking any reorganization, liquidation or other relief or arrangement in respect of creditors of, or the appointment of a receiver, liquidator, trustee or conservator in respect to, such Credit Party or its assets. This waiver is expressly intended to prevent the existence of any claim (within the meaning of Section 101 of the United States Bankruptcy Code) in respect to such subrogation, reimbursement, contribution or indemnity by the Guarantor against the estate of any other Credit Party, in the event of a subsequent case involving any other Credit Party. If an amount shall be paid to the Guarantor on account of such rights at any time prior to termination of this Guaranty Agreement in accordance with the provisions of SECTION 23 hereof, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Agent, for the benefit of the Secured Parties, to be credited and applied upon the Guarantor's Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement or otherwise as the Secured Parties may elect. The agreements in this subsection shall survive repayment of all of the Guarantor's Obligations, the termination or expiration of this Guaranty Agreement in any manner, including but not limited to termination in accordance with SECTION 23 hereof, and occurrence of the Facility Termination Date. 10. EFFECTIVENESS; ENFORCEABILITY. This Guaranty Agreement shall be effective as of the date first above written and shall continue in full force and effect until termination in accordance with SECTION 23 hereof. Any claim or claims that the Secured Parties may at any time hereafter have against the Guarantor under this Guaranty Agreement may be asserted by the Agent on behalf of the Secured Parties by written notice directed to the Guarantor in accordance with SECTION 25 hereof. 11. REPRESENTATIONS AND WARRANTIES. The Guarantor warrants and represents to the Agent, for the benefit of the Secured Parties, that it is duly authorized to execute, deliver and perform this Guaranty Agreement; that this Guaranty Agreement has been duly executed and delivered on behalf of the Guarantor by its duly authorized representatives; that this Guaranty Agreement is legal, valid, binding and enforceable against the Guarantor in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; and that the Guarantor's execution, delivery and performance of this Guaranty Agreement do not violate or constitute a breach of any of its Operating Documents or Organizational Documents, any agreement or instrument to which the Guarantor is a party, or any law, order, regulation, decree or award of any governmental authority or arbitral body to which it or its properties or operations is subject. I-6 135 12. EXPENSES. The Guarantor agrees to be jointly and severally liable for the payment of all reasonable fees and expenses, including reasonable attorneys' fees, incurred by any Secured Party in connection with the enforcement of this Guaranty Agreement, whether or not suit be brought. 13. REINSTATEMENT. The Guarantor agrees that this Guaranty Agreement shall continue to be effective or be reinstated, as the case may be, at any time after payment received by any Secured Party in respect of any Borrower's Liabilities is rescinded or must be restored for any reason, or is repaid by any Secured Party in whole or in part in good faith settlement of any pending or threatened avoidance claim. 14. ATTORNEY-IN-FACT. To the extent permitted by law, the Guarantor hereby appoints the Agent, for the benefit of the Secured Parties, as the Guarantor's attorney-in-fact for the purposes of carrying out the provisions of this Guaranty Agreement and taking any action and executing any instrument which the Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is coupled with an interest and is irrevocable; PROVIDED, that the Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default after expiration of grace periods, if any, for such Event of Default. 15. RELIANCE. The Guarantor represents and warrants to the Agent, for the benefit of the Secured Parties, that: (a) the Guarantor has adequate means to obtain on a continuing basis (i) from the Borrower, information concerning the Borrower and the Borrower's financial condition and affairs and (ii) from other reliable sources, such other information as it deems material in deciding to provide this Guaranty Agreement ("Other Information"), and has full and complete access to the Borrower's books and records and to such Other Information; (b) the Guarantor is not relying on any Secured Party or its or their employees, directors, agents or other representatives or affiliates, to provide any such information, now or in the future; (c) the Guarantor has been furnished with and reviewed the terms of the Credit Agreement and such other Loan Documents as it has requested, is executing this Guaranty Agreement freely and deliberately, and understands the obligations and financial risk undertaken by providing this Guaranty Agreement; (d) the Guarantor has relied solely on the Guarantor's own independent investigation, appraisal and analysis of the Borrower, the Borrower's financial condition and affairs, the "Other Information", and such other matters as it deems material in deciding to provide this Guaranty Agreement and is fully aware of the same; and (e) the Guarantor has not depended or relied on any Secured Party or its or their employees, directors, agents or other representatives or affiliates, for any information whatsoever concerning the Borrower or the Borrower's financial condition and affairs or any other matters material to the Guarantor's decision to provide this Guaranty Agreement, or for any counseling, guidance, or special consideration or any promise therefor with respect to such decision. The Guarantor agrees that no Secured Party has any duty or responsibility whatsoever, now or in the future, to provide to the Guarantor any information concerning the Borrower or the Borrower's financial condition and affairs, or any Other Information, other than as expressly provided herein, and that, if the Guarantor receives any such information from any Secured Party or its or their I-7 136 employees, directors, agents or other representatives or affiliates, the Guarantor will independently verify the information and will not rely on any Secured Party or its or their employees, directors, agents or other representatives or affiliates, with respect to such information. 16. RULES OF INTERPRETATION. The rules of interpretation contained in SECTIONS 1.2(C) through 1.2(l) and SECTION 12.12 of the Credit Agreement shall be applicable to this Guaranty Agreement and are hereby incorporated by reference. All representations and warranties contained herein shall survive the delivery of documents and any extension of credit referred to herein or guaranteed hereby. 17. ENTIRE AGREEMENT. This Guaranty Agreement, together with the Credit Agreement and other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior negotiations, agreements, understandings, inducements, commitments or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. Except as provided in SECTION 23, neither this Guaranty Agreement nor any portion or provision hereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 18. BINDING AGREEMENT; ASSIGNMENT. This Guaranty Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective heirs, legal representatives, successors and assigns to the same extent that the assignment by the respective party of its rights and obligations under the Credit Agreement is permitted thereby; provided, however, that the Guarantor shall not be permitted to assign any of its rights, powers, duties or obligations under this Guaranty Agreement or any other interest herein without the prior written consent of the Agent. Without limiting the generality of the foregoing sentence of this Section 18, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including ARTICLE XI thereof (concerning the Agent) and SECTION 12.1 thereof concerning assignments and participations. All references herein to the Agent shall include any successor thereof. 19. SWAP AGREEMENTS. All obligations of the Borrower under Swap Agreements to which any Lender or its affiliates are a party shall be deemed to be Borrower's Liabilities, and each Lender or affiliate of a Lender party to any such Swap Agreement shall be deemed to be a Secured Party hereunder with respect to such Borrower's Liabilities; PROVIDED, HOWEVER, that such obligations shall cease to be Borrower's Liabilities at such time as such Person (or affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. 20. SEVERABILITY. The provisions of this Guaranty Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability I-8 137 shall not affect the validity or enforceability of any other provision hereof, but this Guaranty Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 21. COUNTERPARTS. This Guaranty Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Guaranty Agreement to produce or account for more than one such counterpart executed by the Guarantor against whom enforcement is sought. 22. INDEMNIFICATION. Without limitation of SECTION 12.9 of the Credit Agreement or any other indemnification provision in any Loan Document, the Guarantor agrees to indemnify and hold harmless each Secured Party and each of their affiliates and their respective officers, directors, employees, agents, and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of defense in connection therewith) the Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans or other extension of credit under the Loan Documents, except to the extent such claim, damage, loss, liability, cost, or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 22 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Guarantor or any other Credit Party, any of their respective directors, shareholders or creditors, or an Indemnified Party or any other Person, or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Guarantor agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it, any of its subsidiaries or affiliates, or any security holders or creditors thereof arising out of, related to or in connection with the transactions contemplated herein, except to the extent that such liability is held in a final non-appealable judgment by a court of competent jurisdiction to have directly resulted from such Indemnified Party's gross negligence or willful misconduct. The agreements in this Section 22 shall survive repayment of all of the Guarantor's Obligations and the termination or expiration of this Guaranty Agreement in any manner, including but not limited to termination upon occurrence of the Facility Termination Date. 23. TERMINATION. Subject to reinstatement pursuant to Section 13 hereof, this Guaranty Agreement and all of the Guarantor's Obligations hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate on the Facility Termination Date. 24. REMEDIES CUMULATIVE; LATE PAYMENTS. All remedies hereunder are cumulative and are not exclusive of any other rights and remedies of the Agent or any other Secured Party provided by law or under the Credit Agreement, the other Loan Documents or other applicable agreements or instruments. The making of the Loans and other extensions of credit to the Borrower pursuant to the I-9 138 Credit Agreement shall be conclusively presumed to have been made or extended, respectively, in reliance upon the Guarantor's guaranty of the Borrower's Liabilities pursuant to the terms hereof. Any amounts not paid when due under this Guaranty Agreement shall bear interest at the Default Rate. 25. NOTICES. Any notice required or permitted hereunder shall be given, (a) with respect to the Guarantor, at the address of the Borrower indicated in SECTION 12.2 of the Credit Agreement and (b) with respect to the Agent or any other Secured Party, at the Agent's address indicated in SECTION 12.2 of the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in SECTION 12.2 of the Credit Agreement. 26. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (b) THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF BROWARD, STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE GUARANTOR EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE GUARANTOR HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) THE GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS FOR NOTICES TO THE GUARANTOR IN EFFECT PURSUANT TO SECTION 25 HEREOF, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA. (d) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE THE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN THE COURTS OF ANY JURISDICTION WHERE THE GUARANTOR OR ANY OF THE GUARANTOR'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY I-10 139 SUCH JURISDICTION, THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE GUARANTOR AND THE AGENT ON BEHALF OF THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT ANY SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (F) THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [Signature page follows.] I-11 140 Wackenhut Corp 2000 Credit Agreement 369437.17 (Final) IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Guaranty Agreement as of the day and year first written above. __________________________________________ WITNESS: By:________________________________________ ____________________________ Name: ___________________________________ Print Name:__________________ Title: ___________________________________ ______________________________ Print Name:__________________ I-12 141 AGENT: BANK OF AMERICA, N.A., as Agent for the Lenders By:__________________________________________ Name: ____________________________________ Title: ____________________________________ I-13 142 SCHEDULE 1.1 Existing Letters of Credit S-1 143 SCHEDULE 7.4 Subsidiaries and Investments in Other Persons S-2 144 SCHEDULE 7.6 Indebtedness S-3 145 SCHEDULE 7.7 Liens S-4 146 SCHEDULE 7.8 Tax Matters S-5 147 SCHEDULE 7.10 Litigation S-6 148 SCHEDULE 7.18 Environmental Matters S-7 149 SCHEDULE 7.19 Employment Matters S-8 EX-4.3 4 g67411kex4-3.txt AMENDMENT NO.1 TO CREDIT AGREEMENT 1 Exhibit 4.3 AMENDMENT AGREEMENT NO. 1 TO CREDIT AGREEMENT THIS AMENDMENT AGREEMENT is made and entered into as of this 12th day of December, 2000, by and among THE WACKENHUT CORPORATION, a Florida corporation (herein called the "Borrower"), BANK OF AMERICA, N.A. (the "Agent"), as Agent for the lenders (the "Lenders") party to the Credit Agreement dated November 13, 2000 among such Lenders, Borrower and the Agent (the "Agreement") and the Lenders whose names are subscribed hereto. W I T N E S S E T H: WHEREAS, the Borrower, the Agent and the Lenders have entered into the Agreement pursuant to which the Lenders have agreed to make revolving loans to the Borrower in the aggregate principal amount of up to $112,500,000 as evidenced by the Notes (as defined in the Agreement) and to issue Letters of Credit for the benefit of the Borrower; and WHEREAS, as a condition to the making of the loans pursuant to the Agreement the Lenders have required that all Wholly-owned Subsidiaries of the Borrower, including Titania, guarantee payment of all Obligations of the Borrower arising under the Agreement; and WHEREAS, the Borrower has determined that Titania is prohibited from guaranteeing the Obligations of the Borrower under state law regulations applicable to Titania, and the Borrower has requested that the Agreement be amended and that Titania be released as a Guarantor and the Agent and the Lenders, subject to the terms and conditions hereof, are willing to make such amendment and release, as provided herein; NOW, THEREFORE, the Borrower, the Agent and the Lenders do hereby agree as follows: 1. DEFINITIONS. The term "Agreement" as used herein and in the Loan Documents (as defined in the Agreement) shall mean the Agreement as hereinafter amended and modified. Unless the context otherwise requires, all terms used herein without definition shall have the definition provided therefor in the Agreement. 2. AMENDMENT. Subject to the conditions set forth herein, the Agreement is hereby amended, effective as of the date hereof, as follows: (a) The definition of "Guarantors" in SECTION 1.1 is hereby amended in its entirety so that as amended it shall read as follows: "`Guarantors' means, at any date, the Wholly-owned Subsidiaries who are required to be parties to a Guaranty at such date; provided that Titania shall not be required to be a Guarantor.'" 1 2 (b) SECTION 9.6(A)(6) is hereby amended in its entirety so that as amended it shall read as follows: "(6) the Borrower may sell for not less than book value the (i) business assets and operations constituting the food service business of the Borrower and its Subsidiaries and (ii) assets of or stock in Chile." (c) SECTION 9.7 is hereby amended by adding a new subsection (c) thereto which shall read as follows: "(c) INVESTMENTS IN TITANIA. Notwithstanding any provision of the definition of "Restricted Investment" or SECTION 9.7(A) to the contrary, at no time shall the aggregate amount of Investments in Titania by the Borrower and its Subsidiaries exceed $1,000,000." (d) SECTION 9.13 is hereby amended by (i) deleting the Dollar amount "$5,000,000" appearing therein and inserting in lieu thereof the Dollar amount "$20,000,000" and (ii) deleting the word "existing" in the parenthetical phrase at the end of such Section. 3. SUBSIDIARY CONSENTS. Each Subsidiary of the Borrower that has delivered a Guaranty to the Agent, other than Titania, has joined in the execution of this Amendment Agreement for the purpose of (i) agreeing to the amendment to the Agreement and (ii) confirming its guarantee of payment of all the Obligations. 4. RELEASE. Each Lender by its execution of this Amendment Agreement consents to and hereby releases Titania from its guaranty of the Obligations. 5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants that: (a) The representations and warranties made by Borrower in Article VII of the Agreement are true on and as of the date hereof; (b) There has been no material adverse change in the condition, financial or otherwise, of the Borrower and its Subsidiaries since the date of the most recent financial reports of the Borrower received by each Lender under SECTION 7.6 thereof, other than changes in the ordinary course of business, none of which has been a material adverse change; (c) The business and properties of the Borrower and its Subsidiaries are not and have not been adversely affected in any substantial way as the result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo, riot, activities of armed forces, war or acts of God or the public enemy, or cancellation or loss of any major contracts; and 2 3 (d) No event has occurred and no condition exists which, upon the consummation of the transaction contemplated hereby, constitutes a Default or an Event of Default on the part of the Borrower under the Agreement, the Notes or any other Loan Document either immediately or with the lapse of time or the giving of notice, or both. 6. CONDITIONS. This Amendment Agreement shall become effective upon the Borrower delivering to the Agent seven (7) counterparts of this Amendment Agreement duly executed by the Agent, the Lenders, and the Borrower and consented to by each of the Guarantors. 7. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, conditions, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and no one of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as in this Amendment Agreement otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made by any other party to the other. None of the terms or conditions of this Amendment Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 8. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. [Remainder of page intentionally left blank.] 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. BORROWER: THE WACKENHUT CORPORATION By: /s/ PHILIP L. MASLOWE ------------------------------ Name: Philip L. Maslowe Title: Chief Financial Officer 4 5 GUARANTORS: TITANIA ADVERTISING, INCORPORATED TWC/FL/01, INC. TWC/FL/02, INC. WACKENHUT INTERNATIONAL, INCORPORATED WACKENHUT SERVICES, INCORPORATED WACKENHUT AIRLINE SERVICES, INC. AMERICAN GUARD & ALERT, INCORPORATED By: /s/ PHILIP L. MASLOWE -------------------------------- Name: Philip L. Maslowe Title: Vice President 5 6 GUARANTORS: WACKENHUT EDUCATIONAL SERVICES, INC. WACKENHUT MONITORING SYSTEMS, INC. DIVERSIFIED CORRECTIONAL SERVICES, INCORPORATED WACKENHUT.COM ONLINE STORE, INC. SAVE-A-FRIEND, INC. WACKENHUT FINANCIAL, INC. TUHNEKCAW, INC. TITANIA INSURANCE COMPANY OF AMERICA, INC. By: /s/ IAN GREEN ---------------------------------------- Name: Ian Green Title: Vice President 6 7 GUARANTORS: WACKENHUT RESOURCES, INCORPORATED WRI EMPLOYERS INSURANCE, INC. KING STAFFING, INC. KING TEMPORARY STAFFING, INC. KING BENEFITS, INC. KING EMPLOYEE SERVICES, INC. WORKFORCE ALTERNATIVE, INC. OASIS OUTSOURCING, INC. OASIS OUTSOURCING II, INC. OASIS OUTSOURCING III, INC. OASIS OUTSOURCING IV, INC. OASIS OUTSOURCING BENEFITS, INC. By: /s/ TERRY P. MAYOTTE ---------------------------------------- Name: Terry P. Mayotte Title: Treasurer WRI STAFFING, INC. WRI II, INC. By: /s/ TERRY P. MAYOTTE ---------------------------------------- Name: Terry P. Mayotte Title: Chief Financial Officer PROFESSIONAL EMPLOYEE MANAGEMENT, INC. PROFESSIONAL EMPLOYEE MANAGEMENT II, INC. PROFESSIONAL EMPLOYEE MANAGEMENT III, INC. PROFESSIONAL EMPLOYEE MANAGEMENT IV, INC. PROFESSIONAL EMPLOYEE MANAGEMENT BENEFITS, INC. PROFESSIONAL EMPLOYEE MANAGEMENT SERVICES, INC. By: /s/ TERRY P. MAYOTTE ---------------------------------------- Name: Terry P. Mayotte Title: Vice President 7 8 GUARANTORS: WACKENHUT SERVICES, LLC By: /s/ JACK C. FAULKNER ---------------------------------------- Name: Jack C. Faulkner Title: Secretary 8 9 GUARANTORS: WACKENHUT OF NEVADA, INC. By: /s/ ALAN B. BERNSTEIN ---------------------------------------- Name: Alan B. Bernstein Title: President 9 10 BANK OF AMERICA, N.A., as Agent for the Lenders By: /s/ JOHN E. WILLIAMS ----------------------- Name: John E. Williams Title: Managing Director BANK OF AMERICA, N.A., By: /s/ JOHN E. WILLIAMS ----------------------- Name: John E. Williams Title: Managing Director 10 11 SCOTIABANC INC. By: /s/ FRANK F. SANDLER ----------------------- Name: Frank F. Sandler Title: Director 11 12 FIRST UNION NATIONAL BANK By: /s/ MARY A. MORGAN --------------------------- Name: Mary A. Morgan Title: Senior Vice President 12 13 SUNTRUST BANK By: /s/ WILLIAM H. CRAWFORD --------------------------- Name: William H. Crawford Title: Vice President 13 14 DRESDNER BANK LATEINAMERIKA AG, MIAMI AGENCY By: /s/ ALAN HILLS /s/ FRANK HUTHNANCE ------------------------------------------- Name: Alan Hills Frank Huthnance Title: Vice President Vice President 14 15 BANCO SANTANDER PR By: /s/ JOSE ENRIQUE GUZMAN-VIRELLA ----------------------------------- Name: Jose Enrique Guzman-Virella Title: Senior Corporate Officer 15 EX-4.4 5 g67411kex4-4.txt AMENDED & RESTATED TRANSFER & ADMINISTRATIVE AGRMT 1 Exhibit 4.4 AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT Dated as of January 26, 2001 THIS IS AN AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT, among WACKENHUT FUNDING CORPORATION, a Delaware corporation (the "Transferor") and its successors and assigns, THE WACKENHUT CORPORATION, a Florida corporation, individually and as Servicer ("Wackenhut" or the "Servicer"), ENTERPRISE FUNDING CORPORATION, a Delaware corporation ("Enterprise" or the "Purchaser") and its successors assigns, and BANK OF AMERICA, N.A. (as successor to NationsBank, N.A.), a national banking association ("Bank of America"), as agent for Enterprise and the Bank Investors (in such capacity, the "Agent") and as a Bank Investor amending and restating that certain Transfer and Administration Agreement dated as of December 30, 1997 among the Transferor, the Servicer, Enterprise, Bank of America as agent for Enterprise and the Bank Investors and as a Bank Investor (collectively, the "Parties"), as amended by the First Amendment to Transfer and Administration Agreement dated as of March 24, 1998, among the Parties, the Second Amendment to Transfer and Administration Agreement dated as of December 23, 1998, among the Parties, the Third Amendment to the Transfer and Administration Agreement dated as of January 29, 1999, among the Parties, the Fourth Amendment to the Transfer and Administration Agreement dated as of January 28, 2000, among the Parties and the Fifth Amendment to the Transfer and Administration Agreement, dated as of March 31, 2000 among the Parties (collectively, the "Original Agreement," and said agreement as amended and restated hereby, the "Agreement"). Unless otherwise indicated, capitalized terms used in this Agreement are defined in Appendix A. Background 1. The Originator has originated, and in the future will originate, Receivables in the ordinary course of its business, and the Originator has sold, and from time to time in the future will sell such Receivables to the Seller pursuant to the Purchase and Sale Agreement. 2. The Seller will from time to time sell such Receivables (together with Receivables originated by the Seller from time to time in the ordinary course of its business) to the Transferor pursuant to the terms of the Receivables Purchase Agreement. 2 3. Transferor has requested the Purchaser and the Bank Investors to purchase, and the Purchaser may agree, and the Bank Investors have agreed, to purchase, subject to the terms and conditions contained in this Agreement, undivided interests in such Receivables, referred to herein as Undivided Interests, from Transferor from time to time during the term of this Agreement. 4. Transferor, the Purchaser and the Bank Investors also desire that, subject to the terms and conditions of this Agreement, certain of the daily Collections in respect of the Undivided Interests in the Receivables be reinvested in Receivables through the sale by the Transferor to the Purchaser or the Bank Investors, as the case may be, of additional Undivided Interests in the Receivables, such daily reinvestment of Collections to be effected by an automatic daily adjustment to the Purchaser's Undivided Interest or Bank Investor's as the case may be, and to be intended to permit the Purchaser or the Bank Investors, as the case may be, to maintain its Purchaser's Investment fully invested in uncollected Pool Receivables. 5. One of the Bank Investors under the Original Agreement has determined not to renew its Commitment under the Original Agreement and its Commitment will be assumed by Bank of America in its capacity as Bank Investor. 6. Bank of America has been requested, and is willing, to act as the Agent for the Purchaser and the Bank Investors. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I THE COMMITMENT SECTION 1.1. Commitment. On the terms and subject to the conditions set forth in this Agreement (including Article V): (a) Purchases. Upon the terms and subject to the conditions herein set forth the Transferor may, at its option, convey, transfer and assign to the Agent, on behalf of the Purchaser or the Agent, on behalf of the Bank Investors, as applicable, and the Agent, on behalf of the Purchaser may, provided the Purchase Termination Date shall not have occurred, at the Purchaser's option, or the Agent, on behalf of the Bank Investors, provided that the Purchase 2 3 Termination Date shall not have occurred and that the Bank Investors shall have previously accepted the assignment by the Purchaser of all of its interest in the Undivided Interests, shall, if so requested by the Transferor, accept such conveyance, transfer and assignment from the Transferor, without recourse except as provided herein, undivided percentage ownership interests in the Receivables, together with Related Security, Collections and Proceeds with respect thereto (each such conveyance, transfer and assignment, a "Purchase"). Each Purchase shall be in accordance with Section 1.3(b). Under no circumstances shall Reinvestments be deemed to be Purchases. (b) Reinvestments. Pursuant to Section 3.1, during the period from the date hereof to the Purchase Termination Date, Servicer shall cause certain of the Collections in respect of the Undivided Interests to be applied to the purchase of additional undivided interests in Pool Receivables, thereby resulting in an appropriate readjustment of such Undivided Interests. Each such purchase of an additional undivided interest pursuant to Section 3.1 is herein called a "Reinvestment". The Bank Investors' obligation to make such Purchases and Reinvestments is herein called the "Commitment" and the amount thereof shall be equal to the Maximum Purchase Limit. SECTION 1.2. Purchase and Reinvestment Limits. Under no circumstances shall the Agent, on behalf of the Purchaser or the Bank Investors, as applicable, make any Purchase or Reinvestment to the extent that, after giving effect to such Purchase or Reinvestment, as the case may be: (a) Purchase Limit. The Aggregate Purchaser Investments would exceed an amount (the "Purchase Limit") equal to the lesser of (x) $75,000,000 as such amount may be reduced pursuant to Section 1.7 (the "Maximum Purchase Limit"), and (y) the then Net Pool Balance; or (b) Required Allocations Limit. The Aggregate Required Allocations would exceed an amount (the "Required Allocations Limit") equal to 100% of the Net Pool Balance (as defined in Section 2.3); or (c) The sum of the Aggregate Purchaser Investments plus the Interest Component of all outstanding Related Commercial Paper would exceed the Facility Limit. 3 4 SECTION 1.3. Making Purchases from the Transferor. (a) Notice of Purchase. Each Purchase from the Transferor shall be made by the Agent on behalf of the Purchaser or the Agent on behalf of the Bank Investors, as applicable, and shall be made on notice from the Transferor to the Agent received by the Agent not later than 11:00 a.m. (New York time) on the Business Day next preceding the date of such proposed Purchase; it being understood and agreed that once any proposed Purchase hereunder is acquired on behalf of the Bank Investors, the Agent, on behalf of such Bank Investors, shall be required to purchase, and the Purchaser shall be required to sell, all Undivided Interests held by the Agent on behalf of the Purchaser in accordance with Section 13.5 and thereafter no additional Purchases shall be acquired on behalf of the Purchaser hereunder. If such notice is received after 11:00 a.m. (New York time) by the Agent, such notice shall be deemed provided on the next following Business Day. Each such notice of a proposed Purchase shall specify the desired amount and date of such Purchase and the desired duration of the initial Yield Periods for the resulting Undivided Interests. The Agent shall select the duration of such initial, and each subsequent, Yield Period with regard to the Purchaser's Investment Percentage of such Purchase in its discretion; provided that the Agent shall use reasonable efforts, taking into account market conditions, to accommodate the Transferor's preferences. (b) Amount of Purchase. The amount of each Purchase shall be equal to the lesser of (x) the amount proposed by the Transferor pursuant to Section 1.3(a) and (y) the maximum amount permitted for the Purchaser or the Bank Investors, as the case may be under Section 1.2. (c) Funding of Purchase. On the date of each Purchase, upon satisfaction of the applicable conditions set forth in Article V, the Purchaser or each Bank Investor, as the case may be, shall make available to the Agent at the address of its office set forth on the signature pages hereto, the dollar amount of the Purchase Price, in the case of the Purchaser, or in the case of the Bank Investors, the amount of each Bank Investor's Percentage of such Purchase Price (determined pursuant to Section 13.5(a)) in same day funds, and the Agent will make such funds immediately available to the Transferor at such office. SECTION 1.4. [Reserved] SECTION 1.5. Commitment Termination Date. (a) The "Commitment Termination Date" shall be January 25, 2002 (herein, as the same may be extended, called the "Scheduled Commitment Termination Date"). 4 5 (b) The then Scheduled Commitment Termination Date may be extended from time to time beginning with January 25, 2002, by written notice of request given by the Transferor to the Agent at least 75 days before the then Scheduled Commitment Termination Date, and written notice of acceptance given by the Agent and the Bank Investors to the Transferor not later than 15 days prior to such Scheduled Commitment Termination Date. No such extension shall be effective unless the Agent shall provide such notice of acceptance to the Transferor. SECTION 1.6. Purchase Termination Date. (a) As to the Purchaser or any Bank Investor, the "Purchase Termination Date" with respect to such entity shall be the earlier to occur of (i) the Commitment Termination Date, (ii) the day the Purchase Termination Date is declared or occurs pursuant to Section 11.2, (iii) the date of termination of the Commitment with respect to Purchases by the Purchaser pursuant to subsection (b) hereof, and (iv) the date the Purchase Limit is reduced to zero. (b) The Commitment shall terminate with respect to Purchases by the Purchaser and the Purchaser shall have no obligation to make any further Purchases or Reinvestments hereunder, on the date of termination of the commitment of any (i) Enterprise Liquidity Provider under an Enterprise Liquidity Agreement or (ii) Enterprise Credit Support Provider under an Enterprise Credit Support Agreement. The Purchaser agrees to give the Transferor (with a copy to the Agent) at least 30 days' prior written notice, unless circumstances shall not permit such 30 days' notice, of the termination of the Commitment with respect to Purchases by the Purchaser pursuant to the foregoing sentence, but failure to give or delay in giving such notice shall not prevent or delay such termination. (c) The provisions of Section 3.1 or Section 3.2, as applicable, shall apply with respect to the Purchaser's Investment until such time as the Purchaser has or the Bank Investors, as applicable, have received the return of the Aggregate Purchaser's Investment, Earned Discount thereon and all other amounts due to the Purchaser or the Bank Investors, as the case may be, at which time the Purchaser's or the Bank Investors', as the case may be, rights and obligations under this Agreement shall terminate. SECTION 1.7. Voluntary Termination of Commitment or Reduction of Maximum Purchase Limit. The Transferor may, upon at least five Business Days' notice to the Agent, terminate the Commitment in whole or reduce in part the unused portion of the Maximum Purchase Limit; provided, however that (a) each partial 5 6 reduction shall be in an amount equal to $5,000,000 or an integral multiple thereof and (b) after giving effect to such reduction, the remaining Maximum Purchase Limit will not be less than $20,000,000 provided however, that no reduction of the Maximum Purchase Limit shall occur without a corresponding reduction of the Facility Limit, that in an amount equal to the product of (i) the amount of the proposed reduction in the Maximum Purchase Limit and (ii) 1.02, provided further however, that in no event shall the Facility Limit be reduced below an amount equal to the greater of (A) the product of (i) the Maximum Purchase Limit and (ii) 1.02 and (B) the Aggregate Purchaser's Investments . SECTION 1.8. Limitation of Ownership Interest. Nothing in this Agreement shall be interpreted as providing the Purchaser or any Bank Investor with an ownership interest in Receivables that are not Pool Receivables. SECTION 1.9. Special Undivided Interests. The Transferor shall maintain with the Purchaser or with the Bank Investors, as the case may be, at least one Undivided Interest, the Purchaser's Investment in which shall be no less than $4,000,000 (unless otherwise agreed by the Agent) and which shall have a related Yield Period of no more than 35 days ending on the twenty-fourth day of each calendar month (or if such day is not a Business Day, the next succeeding Business Day) and beginning on the day immediately succeeding the last day of the previous Yield Period (provided that the first Yield Period shall begin on the date of the first Purchase hereunder). If on any day the Undivided Interest required to be maintained with the Purchaser or with the Bank Investors pursuant to this Section 1.9 shall for any reason have a Purchaser's Investment of less than $4,000,000, the Agent shall manage the Yield Periods related to the Purchaser's Investment other Undivided Interests in a manner such that within 60 days of such day the Purchaser's Investment of such Undivided Interest required to be maintained pursuant to this Section 1.9 shall again equal $4,000,000. SECTION 1.10. Benefits of Agreement. In the event the Bank Investors acquire Undivided Interests hereunder, each Bank Investor shall be equally and ratably entitled to the benefits of this Agreement, the other Agreement Documents and the Receivables Pool, the Related Security and the Collections without preference, priority or distinction on account of the actual timing of the filing of any financing statements under the UCC, all in accordance with the terms and provisions of this Agreement and the other Agreement Documents. 6 7 ARTICLE II UNDIVIDED INTEREST AND PURCHASER'S SHARE SECTION 2.1. Undivided Interest. (a) Definition and Computation of Undivided Interest. For purposes of this Agreement, "Undivided Interest" for the Purchaser and/or Bank Investors, as applicable, means, as the context may require (i) an undivided ownership interest, in a percentage determined from time to time as provided in clause (ii) below, in (A) all then outstanding Pool Receivables, (B) all Related Security with respect to such Pool Receivables, and (C) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security; and (ii) at any time, the quotient, expressed as a percentage, obtained by dividing the Required Allocation for such Undivided Interest by the Net Pool Balance. Each Undivided Interest shall be computed as follows: UI = RA = PI + DF + DR + LR + SFR --- ------------------------------- NPB NPB
where: UI = the Undivided Interest at any time; RA = the Required Allocations of such undivided Interest at such time, which shall be an amount at any time equal to the amount of the numerator of the fraction set forth above; PI = the Purchaser's Investment of such Undivided Interest at such time as determined pursuant to Section 2.2; DF = the Discount Factor of such Undivided Interest at such time, as determined pursuant to Part I of Appendix B; DR = the Dilution Reserve of such Undivided Interest at such time, as determined pursuant to Part II of Appendix B; LR = the Loss Reserve of such Undivided Interest at such time, as determined pursuant to Part II of Appendix B; 7 8 SFR = the Servicer's Fee Reserve of such Undivided Interest at such time, as determined pursuant to Part III of Appendix B; and NPB = the Net Pool Balance at such time, as determined pursuant to Section 2.3. The "related" Undivided Interest with respect to any of the foregoing items shall mean the Undivided Interest as to which such item is calculated. (b) Frequency of Computation of Purchaser's Interest. Each Undivided Interest shall initially be computed as of the opening of business of Servicer on the date of Purchase of such Undivided Interest from the Transferor, and such Undivided Interest shall be recomputed upon receipt of each Periodic Report. The Agent on behalf of the Purchaser or the Bank Investors, as the case may be, may at any time request Servicer to recompute its Undivided Interests. In addition, until such Undivided Interest shall be reduced to zero, such Undivided Interest shall be deemed to be automatically recomputed as of the close of business of Servicer on each day (other than a day on which an actual recomputation is done), and, as so recomputed, shall constitute the percentage ownership interest in Pool Receivables held by the Purchaser or the Bank Investors, as the case may be, on such day. Such Undivided Interest shall become zero at such time as the Purchaser, or the Bank Investors, as the case may be, shall have received the accrued Earned Discount for such Undivided Interest, shall have recovered the Purchaser's Investment of such Undivided Interest and shall have received all other amounts payable to the Purchaser or the Bank Investors, as applicable, pursuant to this Agreement in respect of such Undivided Interest and Servicer shall have received the accrued Servicer's Fee for such Undivided Interest. Such Undivided Interest shall remain constant from the time as of which any such computation or recomputation is made until the time as of which the next such recomputations if any, shall be made. SECTION 2.2. Purchaser's Investment. (a) Subject to subsections (b) and (c), the "Purchaser's Investment" of an Undivided Interest owned by the Purchaser or any Bank Investor at any time means an amount equal to: (i) the aggregate of the amounts theretofore paid by the Purchaser or the Bank Investors, to the Transferor (and, in the case of the Bank Investors, to the Purchaser) for the acquisition of such Undivided Interest (A) by Purchase pursuant to Sections 1.1(a) 8 9 and 1.3 and (B) by Reinvestments pursuant to Sections 1.1(b) and 3.1, and (C) in the case of the Bank Investors, pursuant to Section 13.5, less (ii) the aggregate amount of Collections theretofore received and distributed on account of the Purchaser's Investment pursuant to Sections 3.1 and 3.2 (other than any portion allocable to Earned Discount pursuant to Sections 3.1 and 3.2 hereof). (b) Solely for purposes of calculating the Earned Discount (and each component thereof) with respect to a portion of an Undivided Interest purchased or funded by an Enterprise Liquidity Provider or Enterprise Credit Support Provider pursuant to the proviso to the definition of "Earned Discount" in Appendix B: (i) "Purchaser's Investment" of any portion of an Undivided Interest owned by an Enterprise Liquidity Provider or otherwise funded pursuant to an Enterprise Liquidity Agreement shall be deemed to be the amount paid to Enterprise by such Enterprise Liquidity Provider as the purchase price of, or the original principal amount loaned with respect to, such portion (less any portion of such purchase price or principal amount allocable to Earned Discount accrued and unpaid at the time of purchase or funding by such Enterprise Liquidity Provider), as reduced from time to time by Collections indefeasibly received and distributed to such Enterprise Liquidity Provider on account of such purchase price or principal amount (other than any portion allocable to Earned Discount pursuant to Sections 3.1 and 3.2 hereof); (ii) "Purchaser's Investment" of any portion of an Undivided Interest funded under an Enterprise Credit Support Agreement shall be deemed to be the principal amount of the advance or drawing under such Enterprise Credit Support Agreement with respect to such portion (less the amount, if any, of such advance or drawing used to fund Earned Discount accrued and unpaid at the time of the making of such advance or drawing), as reduced by any payments indefeasibly made by Enterprise or the Enterprise Liquidity Provider to the Enterprise Credit Support Provider in reimbursement of such drawing or repayment of such advance, as the case may be (less any amount allocable to such accrued and unpaid Earned Discount); and 9 10 (iii) "Purchaser's Investment" of any other portion of an Undivided Interest shall mean such Purchaser's Investment of such Undivided Interest less the sum of such Purchaser's Investments of all portions of such Undivided Interest described in clauses (i) and (ii) above, calculated in accordance with such clauses (i) and (ii), as applicable. (c) The Purchaser's Investment shall not be considered reduced by any distribution of any portion of Collections if at any time such distribution is rescinded or must otherwise be returned for any reason. (d) The "related" Purchaser's Investment with regard to a Yield Period or Undivided Interest (or portion thereof) means the Purchaser's Investment calculated with regard to such Yield Period or Undivided Interest (or such portion), as the case may be. SECTION 2.3. Net Pool-Balance. (a) The "Net Pool Balance" at any time means an amount equal to: (i) the aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at such time, minus (ii) the aggregate (for all Obligors) of the amounts by which (x) the Unpaid Balance of all Pool Receivables of each Obligor exceeds (y) the Concentration Limit for such Obligor at such time. (b) "Concentration Limits": (i) the aggregate Concentration Limit for any Obligor or Government Obligor at any time means the greater of (x) the Special Concentration Limit, if any, for such Obligor and (y) 2.0% of the Aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at such time; (ii) the aggregate Concentration Limit for all Obligors with respect to Receivables originated by Wackenhut Airline Services, Inc. shall be 10% of the Aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at any time; (iii) the aggregate Concentration Limit for all Obligors with respect to Receivables for which the related service has not yet been rendered by the Seller or an Originator shall be 2% of the Aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at any time; 10 11 (iv) the aggregate Concentration Limit for all Government Obligors shall be 15% of the Aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at any time; and (v) the aggregate Concentration Limit for all Obligors with respect to Receivables which are required to be paid in full not less than 31 days nor more than 60 days after the billing thereof, shall be 10% of the Aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at any time, provided, however, that the Agent may, in its sole discretion, determine to reduce this percentage to 0% at any time upon three (3) days prior written notice to the Transferor and Servicer. (c) "Special Concentration Limit" for any Obligor means the amount designated from time to time as such by the Agent with regard to any Obligor in a writing delivered to the Transferor (it being understood that the most recent writing at any time delivered to the Transferor shall supersede each previous writing); provided however, that the Special Concentration Limits in effect as of the date hereof shall be as set forth on Schedule 2.3(b) hereto. (d) In the case of any Obligor which is an Affiliate of any other Obligor, the Concentration Limit, the Special Concentration Limit, if any, and the aggregate Unpaid Balance of Pool Receivables of such Obligors shall be calculated as if such Obligors were one Obligor. SECTION 2.4. Shares. (a) Aggregate Purchaser's Share. The Purchaser's, or the Bank Investors', as the case may be, "Aggregate Purchaser's Share" of Collections of Pool Receivables received (or deemed received) by the Transferor or Servicer on any day means an amount calculated by the Servicer (subject to recalculation by any Agent) equal to the product of: (i) the amount of all Collections of Pool Receivables received (or deemed received) by the Transferor or Servicer on such day, times (ii) the Aggregate Required Allocations divided by the Net Pool Balance. (b) Purchaser's Share. With respect to each Undivided Interest, the related "Purchaser's Share" of Collections of Pool 11 12 Receivables received (or deemed received) by the Transferor or Servicer on any day means an amount equal to the product of: (i) the Aggregate Purchaser's Share of Collections for such day, times (ii) (A) if such day is not a Run Off Day, the quotient of (1) such Undivided Interest on such day, expressed as a decimal divided by (2) all of the Undivided Interests on such day, expressed as a decimal, (B) if such day is a Run Off Day, the quotient of (1) such Undivided Interest on the first Run Off Day to have occurred during the then current Run Off Period, expressed as a decimal, divided by (2) all of the Undivided Interests on such day, expressed as a decimal; provided that after such time as an Undivided Interest shall equal zero, the Purchaser's Share of Collections therefor shall also equal zero, and (C) each Bank Investor shall share pro rata in the Aggregate Purchaser's Share. ARTICLE III SETTLEMENTS SECTION 3.1. Non-Run Off Settlement Procedures for Collections. (a) Daily Procedure. On each day (other than a Run Off Day) in any Yield Period for any Undivided Interest, Servicer shall deem an amount equal to the Purchaser's Share but not in excess of the Aggregate Purchaser's Share (as determined in Section 2.4) of Collections of Pool Receivables received or deemed received on such day to be received in respect of such Undivided Interest; and (i) out of the Purchaser's Share of such Collections, hold in trust for the benefit of the Purchaser or the Bank Investors, as the case may be, of such Undivided Interest an amount equal to the related Earned Discount and related Servicer's Fee accrued through such day and not previously so held for the benefit of the Purchaser or the Bank Investors, as the case may be, (ii) apply an amount equal to the remainder of the Purchaser's Share of such Collections (the "Remaining Collections") to reduce the Purchaser's Investment of 12 13 such Undivided Interest (it being understood that such amount need not be physically paid to the Purchaser or the Bank Investors under this clause (ii)), (iii) subject to Section 3.3, after such reduction, (A) apply such Remaining Collections to the Reinvestment, for the benefit of the Purchaser or the Bank Investor, as the case may be, of additional undivided interests in Pool Receivables by recomputation of such Undivided Interest pursuant to Section 2.1 as of the end of such day, thereby increasing the Purchaser's Investment, and (B) pay to the Transferor such Remaining Collections. The recomputed Undivided Interest shall constitute the percentage ownership interest in Pool Receivables on such day held by the Purchaser or the Bank Investors, as the case may be, with regard to such Undivided Interest. (b) Settlement Date Procedure. On the Settlement Date for each Undivided Interest, for each day in the related Yield Period of such Settlement Period that is not a Run Off Day for such Undivided Interest, out of the related Purchaser's Share of Collections for each such Undivided Interest, Servicer shall deposit to the Agent's account for the Purchaser, or the Bank Investors, whichever then holds such Undivided Interest, as described in Section 3.5, the amounts set aside as described in Section 3.1(a)(i) and the amounts, if any, set aside pursuant to Section 3.3(b) or (c) for payment to the Agent on such Settlement Date; provided, however, that if the Agent gives its consent (which consent may be revoked at any time), Servicer may retain amounts which would otherwise be deposited in respect of Servicer's Fee, in which case no distribution shall be made in respect of Servicer's Fee under clause (c) below. (c) Order of Application. Upon receipt by the Agent of funds distributed pursuant to subsection (b) in respect of an Undivided Interest owned by the Purchaser or the Bank Investors, as the case may be, the Agent shall distribute such funds first, (i) to the Purchaser or the Bank Investors, as applicable, in payment of the accrued and unpaid Earned Discount and Program Fee for such Undivided Interest until paid in full, then (ii) to Servicer in payment of the accrued and unpaid Servicer's Fee payable with respect to such Undivided Interest until paid in full, and (iii) in the case of any amounts set aside pursuant to Section 3.3(b) or (c), to the Purchaser or the Bank Investors, as applicable, in reduction of the Purchaser's Investment therein. 13 14 SECTION 3.2. Run Off-Settlement Procedures for Collections. (a) Daily Procedure. On each Run Off Day occurring in any Yield Period for an Undivided Interest, Servicer shall set aside and hold in trust for the Purchaser or the Bank Investors, as appropriate, the Purchaser's Share of the Collections of Pool Receivables in respect of such Undivided Interest for such Run Off Day but not in excess of the Aggregate Purchaser's Share and, if requested in writing by the Agent (in its sole discretion), by depositing such Collections within one Business Day of the Servicer's receipt thereof into a bank account at the Agent on behalf of the Purchaser or the Bank Investors in which no other funds shall be deposited. (b) Settlement Date Procedure. On each Settlement Date for each Undivided Interest, if one or more Run Off Days for such Undivided Interest occurred during the related Yield Period for the Settlement Period ending on such Settlement Date for such Undivided Interest, Servicer shall deposit to the account of the Agent for the benefit of the Purchaser or the Bank Investors then owning such Undivided Interest, as described in Section 3.5, the amounts set aside pursuant to Section 3.2(a) out of the Purchaser's Share of Collections during such Settlement Period, but not to exceed the sum of (i) the accrued and unpaid Earned Discount, (ii) the Purchaser's Investment of such Undivided Interest, (iii) the aggregate of other amounts owed hereunder by the Transferor to the Purchaser, any Bank Investor or the Agent in respect of such Undivided Interest, and (iv) the accrued Servicer's Fee payable with respect to such Undivided Interest. If no Termination Event or Unmatured Termination Event shall have occurred and be continuing, any amounts set aside pursuant to the first sentence of this Section 3.2 and not required to be deposited to the Agent's account pursuant to the next preceding sentence shall be paid to the Transferor by Servicer. (c) Order of Application. Upon receipt by the Agent of funds deposited to its account pursuant to Section 3.2(b), the Agent shall distribute such funds (i) to the Purchaser or the Bank Investors, as the case may be, or to the Agent (as the case may be) (A) in payment of the accrued and unpaid Earned Discount and Program Fee for such Undivided Interest, (B) in reduction of the Purchaser's Investment of such Undivided Interest and (C) in payment of any other amounts owed by the Transferor hereunder to the Purchaser or the Agent, in each case until reduced to zero, and (ii) to Servicer in payment of the accrued and unpaid Servicer's Fee payable with respect to such Undivided Interest, also until reduced to zero. If there shall be insufficient funds on deposit for the Agent to distribute funds in payment in full of the aforementioned amounts, the Agent shall distribute funds 14 15 on deposit, first, in payment of the Earned Discount and Program Fee for such Undivided Interest, second, in payment of the Servicer's Fee payable with respect to such Undivided Interest, if any, (if Servicer is not the Transferor or an Affiliate of the Transferor), third, in reduction of Purchaser's Investment of such Undivided Interest, fourth, in payment of any other amounts payable to the Purchaser, any Bank Investor, or to the Agent hereunder, and fifth, in payment of the Servicer's Fee payable with respect to such Undivided Interest (if Servicer is the Transferor or an Affiliate of the Transferor). SECTION 3.3. Special Settlement Procedures: Reduction of Purchaser's Investment, Etc. (a) Deemed Collections. If on any day: (i) the Unpaid Balance of any Pool Receivable is: (A) reduced as a result of any defective, rejected or returned merchandise or services, any cash discount, or any adjustment by the Transferor, any Originator or Seller or any Affiliate of the Transferor or any Originator or Seller; or (B) reduced or cancelled as a result of a setoff in respect of any claim by the Obligor thereof against the Transferor, any Originator or Seller or any Affiliate of the Transferor or any Originator or Seller (whether such claim arises out of the same or a related or an unrelated transaction); or (C) reduced on account of the obligation of the Transferor to pay to the related Obligor any rebate or refund; or (ii) any of the representations or warranties of the Transferor set forth in Section 6.1(l) or (p) is no longer true with respect to a Pool Receivable, then, on such day, Servicer shall be deemed to have received a Collection of such Pool Receivable: (I) in the case of clause (i) above, in the amount of such reduction or cancellation; and (II) in the case of clause (ii) above, in the amount of the Unpaid Balance of such Pool Receivable. 15 16 (b) Unreinvested Collections. Collections that may not be reinvested by means of Reinvestments in an Undivided Interest on account of the application of the Required Allocations Limit or the Purchase Limit pursuant to Section 1.2 shall be so reinvested as soon as it is possible to do so without violating such Required Allocations Limit or Purchase Limit, as the case may be. To the extent and so long as such Collections may not be so reinvested, Servicer shall hold such Collections ratably in trust for the benefit of the Purchaser or the Bank Investors, as the case may be, and, if requested by the Agent, in a separate deposit account with the Agent containing only the Purchaser's Share of such Collections and no other funds, for payment to the Agent on the next following Settlement Date for application to the next maturing Undivided Interests. (c) The Transferor's Reduction of Aggregate Purchaser's Investment. If at any time the Transferor shall wish to cause the reduction of the Aggregate Purchaser's Investment (but not to commence the liquidation, or reduction to zero, of all Undivided Interests), the Transferor may do so as follows: (i) the Transferor shall give the Agent at least three Business Days' prior written notice thereof (including the amount of such proposed reduction and the proposed date on which such reduction will commence) and, if applicable, shall cause the reduction to be allocated ratably among the Bank Investors such that each Bank Investor shall receive its pro rata share of the aggregate amount of such proposed reductions; (ii) on the proposed date of commencement of such reduction and on each day thereafter, Servicer shall refrain from reinvesting Remaining Collections in Undivided Interests, until the amount thereof not so reinvested shall equal the desired amount of reduction for the Purchaser or the Bank Investors, as the case may be; and (iii) Servicer shall hold such Collections for the benefit of the Purchaser or the Bank Investors, as the case may be, for the payment to the Agent for each Undivided Interest proposed to be reduced in connection herewith, in which such Collections are accumulated, and such amounts shall be applied to reduce the Purchaser's Investment in such Undivided Interests in accordance with the provisos hereto and with regard to any Undivided Interest, the related Purchaser's Investment of such Undivided Interest shall be deemed reduced 16 17 in the amount to be paid to the Agent only when in fact finally so paid; provided that, (A) any such reduction may only be effected on the last day of the related Yield Period for any Undivided Interest the related Purchaser's Investment in which has been requested to be reduced and only to the extent that after giving effect to any such reduction the remaining Purchaser's Investment in such Undivided Interest shall not be less than $1,000,000 (unless the Purchaser's Investment of such Undivided Interest shall thereby be reduced to zero) and shall be in an integral multiple of $100,000, (B) if the Transferor shall commence any voluntary reduction in a Yield Period containing all or a portion of any Run Off Period, Collections not so reinvested shall be treated as if collected on the next following Run Off Day, (C) the Transferor shall use reasonable efforts to attempt to choose a reduction amount, and the date of commencement thereof, so that such reduction shall commence and conclude in the same Yield Period, and (D) if two or more Undivided Interests of the Purchaser or any Bank Investor shall be outstanding at the time of any proposed reduction, such proposed reduction shall be applied, unless the Agent shall consent otherwise, to the Undivided Interest with the shortest remaining Yield Period. (d) Allocations of Obligor's Payments. Except as provided in Section 3.3(a) or as otherwise required by law or the underlying Contract, all Collections received from an Obligor of any Receivable shall be applied to Receivables then outstanding of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable; provided, however, that, if payment is designated by such Obligor for application to specific Receivables, it shall be applied to such specified Receivables. 17 18 (e) Deposit to Collection Account. Notwithstanding anything herein to the contrary, the Agent may require the Transferor and Servicer (or their designees or successors) at any time (such instruction shall be deemed given upon the occurrence and continuance of a Termination Event), to deposit all Collections of Pool Receivables received (including, without limitation, received by any Lock-Box Bank) to an account established at the Agent (the "Collection Account") within one Business Day of receipt thereof. Such Collections shall be applied by the Agent in accordance with the provisions of this Agreement, including Sections 3.1, 3.2 or 3.3 hereof. Servicer (or its designee or successor) shall notify the Agent of the amount of funds deposited in the Collection Account not received from Pool Receivables and the Agent shall remit such funds as soon as practicable after such notification to such account as Servicer (or its designee or successor) shall designate. SECTION 3.4. Reporting. (a) On or prior to the twentieth day of each month (or if such day is not a Business Day, the next succeeding Business Day), Servicer shall prepare and forward to the Agent a Periodic Report (including a certification that no Termination Event or Unmatured Termination Event shall have occurred) relating to all Undivided Interests owned by the Purchaser or the Bank Investors, as applicable, as of the close of business of Servicer on the next preceding Month End Date. (b) On or prior to each Settlement Date, the Transferor will advise the Agent and, if Wackenhut is not the Servicer, the Servicer of each Run Off Day occurring during the Settlement Period ending on such Settlement Date. (c) On or prior to each Purchase or Reinvestment hereunder, the Transferor shall permanently mark in the computer records for each Receivable subject to such Purchase or Reinvestment that such Receivable is subject to the interest of the Agent, on behalf of the Purchaser or the Bank Investors hereunder, as the case may be. SECTION 3.5. Payments and Computations, Etc. (a) Unless otherwise required pursuant to this Agreement, all amounts to be paid or deposited by the Transferor hereunder shall be paid or deposited in accordance with the terms hereof no later than noon (New York time) on the day when due in lawful money of the United States of America in same day funds to accounts indicated in writing by the Agent. If the Agent shall have received such funds by noon (New York time), it shall forward the portion of the funds deposited that are due to the Purchaser or the Bank 18 19 Investors by 3:00 p.m. (New York time) on such day and if received after noon (New York time), on the next following Business Day. (b) The Transferor or Servicer, as applicable, shall, to the extent permitted by law, pay to the Agent interest on all amounts not paid or deposited when due hereunder at 2% per annum above the Alternate Reference Rate, payable on demand; provided, however, that such interest rate shall not at any time exceed the maximum rate permitted by applicable law. Such interest shall be retained by the Agent except to the extent that such failure to make a timely payment or deposit has continued beyond the date for distribution by the Agent of such overdue amount to the Purchaser or the Bank Investors, if any, or any other Person having an interest in such overdue amount, in which case such interest accruing after such date shall be for the account of, and distributed by the Agent, to such Persons ratably in accordance with their respective interests in such overdue amount. (c) All computations of interest, Earned Discount, Negative Spread Fee and any other fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) elapsed. SECTION 3.6. Dividing or Combining Undivided Interests. (a) Division of Undivided Interests. The Agent may at any time, as of the last day of any Yield Period for any then existing Undivided Interest owned by the Purchaser or any Bank Investor, as the case may be, divide such existing Undivided Interest on such last day into two or more new Undivided Interests, each such new Undivided Interest having a Purchaser's Investment as designated by the Agent and all such new Undivided Interests collectively having aggregate Purchaser's Investments equal to the Purchaser's Investment of such existing Undivided Interest. (b) Combination of Undivided Interests. The Agent may at any time, as of the last day of any Yield Period for two or more existing Undivided Interests owned by the Purchaser or the Bank Investors, as the case may be, on or before the date of any proposed Purchase of an Undivided Interest pursuant to Sections 1.1 and 1.4 by the Purchaser or the Bank Investors, as the case may be, on such last day or such date of Purchase, as the case may be, combine into one new Undivided Interest such existing and/or proposed Undivided Interests or any combination thereof, such new Undivided Interest having a Purchaser's Investment equal 19 20 to the aggregate Purchaser's Investments of such Undivided Interests so combined. (c) Effect of Division or Combination. On and after any division or combination of Undivided Interests as described above, each of the new Undivided Interests resulting from such division, or the new Undivided Interest resulting from such combination, as the case may be, shall be a separate Undivided Interest having a Purchaser's Investment as set forth above, and shall take the place of such existing Undivided Interest or Undivided Interests or proposed Undivided Interest, as the case may be, in each case under and for all purposes of this Agreement. SECTION 3.7. Treatment of Collections and Deemed Collections. The Transferor shall forthwith deliver to Servicer all Collections deemed received by the Transferor pursuant to Section 3.3(a), and Servicer shall hold or distribute such Collections as Earned Discount, accrued Servicer's Fee, repayment of Purchaser's Investment, etc., to the same extent as if such Collections had actually been received on the date of such delivery to Servicer. If Collections are then being paid to the Agent, or lock boxes or accounts directly or indirectly owned or controlled by the Agent, Servicer shall forthwith cause such deemed Collections to be ratably paid to the Agent or to such lock boxes or accounts, as applicable. So long as the Transferor shall hold any Collections or deemed Collections required to be paid to Servicer or to the Agent, it shall hold such Collections in trust and separate and apart from its own funds and shall clearly mark its records to reflect such trust. ARTICLE IV FEES AND YIELD PROTECTION SECTION 4.1. Fees. (a) Agent's Fees. Fees payable to the Purchaser or the Agent for services performed in its capacity as Agent or as Agent for the benefit of the Purchaser or the Bank Investors, as the case may be, shall be due and payable on such dates and in such amounts as set forth in the letter dated January 29, 1999 from the Transferor and The Wackenhut Corporation to the Agent and the Purchaser (the "Fee Letter"). (b) Note Fee. From the date hereof until the date, on or after the Commitment Termination Date, on which the Aggregate Total Investments shall be reduced to zero, the Transferor shall pay to the Agent for the account of the Purchaser, a note issu- 20 21 ance fee ("Note Fee") in an amount equal to the product of (x) the greater of $15, or the note fee actually paid or payable by the Purchaser to the issuing agent and depositary for the Commercial Paper Notes for the authentication and delivery of each Commercial Paper Note, as notified by the Agent on behalf of the Purchaser to the Transferor and Servicer from time to time, times (y) the number of Commercial Paper Notes issued by the Purchaser to fund its Undivided Interests hereunder during the period for which such Note Fee is payable, as notified by the Agent on behalf of the Purchaser to the Transferor and Servicer; provided that, if such Commercial Paper Notes shall at any time become "book-entry" Notes, the "Note Fee" therefor shall equal $30 per trade. Such Note Fee shall be paid in arrears on the first Business Day of each month for the preceding calendar month for the number of Commercial Paper Notes issued to fund the Undivided Interests owned by the Purchaser during the preceding calendar month for which no Note Fee shall have theretofore been paid. The Agent, on behalf of the Purchaser, shall notify the Transferor and Servicer at least one Business Day prior to the end of each calendar month of the number of Commercial Paper Notes issued by the Purchaser to fund its Undivided Interests hereunder during such calendar month. (c) Dealer Fee. The dealer fee is set forth in the Fee Letter. SECTION 4.2. Yield Protection. (a) If (i) Regulation D or (ii) any Regulatory Change occurring after the date hereof: (A) shall subject an Affected Party to any tax, duty or other charge with respect to any Undivided Interest owned by or funded by it or any obligations or right to make Purchases or Reinvestments or to provide funding therefor, or shall change the basis of taxation of payments to the Affected Party of any Purchaser's Investments or Earned Discount owned by, owed to or funded by it or any other amounts due under this Agreement in respect of any Undivided Interest owned by or funded by it or its obligations or rights, if any, to make Purchases or Reinvestments or to provide funding therefor (except for changes in the rate of tax on the overall net income of such Affected Party imposed by the United States of America, by the jurisdiction in which such Affected Party's principal executive office is located and, if such Affected Party's principal executive office is not in the United States of America, by the jurisdiction where such Affected Party's principal office in the United States is located); or 21 22 (B) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Federal Reserve Board, but excluding any reserve included in the determination of Earned Discount), special deposit or similar requirement against assets of any Affected Party, deposits or obligations with or for the account of any Affected Party or with or for the account of any affiliate (or entity deemed by the Federal Reserve Board to be an affiliate) of any Affected Party, or credit extended by any Affected Party; or (C) shall change the amount of capital maintained or required or requested or directed to be maintained by any Affected Party; or (D) shall impose any other condition affecting any Undivided Interest owned or funded by any Affected Party, or its obligations or rights, if any, to make Purchases or Reinvestments or to provide funding therefor; or (E) shall impose on any Affected Party any other expense (including attorneys' fees and litigation costs); and the result of any of the foregoing is or would be: (x) to increase the cost to (or in the case of Regulation D referred to above, to impose a cost on) (I) an Affected Party funding or making or maintaining any Purchases or Reinvestments, any purchases, reinvestments, or loans or other extensions of credit under this Agreement, the Enterprise Liquidity Agreement or Enterprise Credit Support Agreement, as applicable or any commitment of such Affected Party with respect to any of the foregoing, or (II) any Agent for continuing its, or the Transferor's, or any Originator's relationship with the Purchaser or any Bank Investor, as the case may be; or (y) to reduce the amount of any sum received or receivable by an Affected Party under this Agreement or the Certificate of Assignments, or under the Enterprise Liquidity Agreement or the Enterprise Credit Support Agreement with respect thereto; or 22 23 (z) in the sole determination of such Affected Party, to reduce the rate of return on the capital of an Affected Party as a consequence of its obligations hereunder or arising in connection herewith to a level below that which such Affected Party could otherwise have achieved, then within thirty days after demand by such Affected Party (which demand shall be accompanied by a statement setting forth the basis of such demand), the Transferor shall pay directly to such Affected Party such additional amount or amounts as will compensate such Affected Party for such additional or increased cost or such reduction; provided that, such demand shall be made only with regard to amounts accruing not more than six months prior to the earlier of (x) such demand being made upon the Transferor and (y) notification of the Transferor pursuant to paragraph (b) below. (b) Each Affected Party will promptly notify the Transferor and the Agent of any event of which it has knowledge which will entitle such Affected Party to compensation pursuant to this Section 4.2; provided, however, no failure to give or delay in giving such notification shall adversely affect the rights of any Affected Party to such compensation. (c) In determining any amount provided for or referred to in this Section 4.2, an Affected Party may use any reasonable averaging and attribution methods that it (in its sole discretion) shall deem applicable. Any Affected Party when making a claim under this Section 4.2 shall submit to the Transferor a statement as to such increased cost or reduced return (including calculation thereof in reasonable detail), which statement shall, in the absence of manifest error, be conclusive and binding upon the Transferor. ARTICLE V CONDITIONS OF PURCHASES SECTION 5.1. Conditions Precedent to Effectiveness of this Agreement. The effectiveness of this Agreement is subject to the condition precedent that the Agent shall have received, the following, each (unless otherwise indicated) dated the date of such proposed effectiveness and in form and substance satisfactory to the Agent: (a) [Reserved]; 23 24 (b) A Good Standing Certificate for the Transferor and Wackenhut issued by the Secretary of State or a similar official of the Transferor's and Wackenhut's jurisdiction of incorporation and certificates of qualification as a foreign corporation issued by the Secretaries of State or other similar officials of each jurisdiction when such qualification is material to the transactions contemplated by this Agreement or the Amendment No. 1 to the Receivables Purchase Agreement, in each case, dated a date reasonably prior to such date; (c) A certificate of the Secretary or Assistant Secretary of each of the Transferor and Wackenhut certifying the names and true signatures of the officers authorized on its behalf to sign this Agreement, Amendment No. 1 to the Receivables Purchase Agreement, and the other documents to be delivered by them hereunder (on which certificate the Agent, the Purchaser and each Bank Investor may conclusively rely until such time as the Agent shall receive from the Transferor or Wackenhut, as applicable, a revised certificate meeting the requirements of this subsection (c)); (d) The Articles of Incorporation of each of the Transferor and Wackenhut, duly certified by the Secretary of State or similar official of the jurisdiction of its organization, as of a recent date acceptable to each Agent, together with a copy of the By-laws of each of the Transferor and Wackenhut, duly certified by the Secretary or an Assistant Secretary of the Transferor and Wackenhut; (e) A search report provided in writing to the Agent by LEXIS Document Services (or its equivalent), listing all effective financing statements that name the Transferor, the Seller or any Originator as debtor and that are filed in the jurisdictions in which UCC filings were made pursuant to the Original Agreement and in such other jurisdictions that the Agent shall reasonably request, together with copies of such financing statements (none of which shall cover any Receivables or Contracts or interests therein or Collections or proceeds of any thereof); (f) A favorable opinion of associate General Counsel for the Transferor and Wackenhut, in substantially the form of Schedule 5.1(h); 24 25 (g) A favorable opinion of Akerman, Senterfitt & Eidson, P.A., covering certain bankruptcy and insolvency matters in form and substance satisfactory to Purchaser's counsel; (h) Such powers of attorney as are sufficient to enable the Agent to collect all amounts due under any and all Pool Receivables and to endorse and negotiate amounts delivered to the Lock Box, as necessary; (i) A Periodic Report as of the most recent Month End Date; (j) Evidence (i) of the execution and delivery by Wackenhut and the Transferor of Amendment No. 1 to the Receivables Purchase Agreement and (ii) that each of the conditions precedent to the execution, delivery and effectiveness of the Receivables Purchase Agreement has been satisfied; (k) Evidence of the payment of all fees required to be paid prior to closing. SECTION 5.2. Conditions Precedent to All Purchases and Reinvestments. Each Purchase (including the initial Purchase) and each Reinvestment hereunder shall be subject to the further conditions precedent ("Conditions Precedent") that on the date of such Purchase or Reinvestment the following statements shall be true (and the Transferor by accepting the amount of such Purchase or by receiving the proceeds of such Reinvestment shall be deemed to have certified that): (a) the representations and warranties contained in Section 6.1 and Section 6.2 and in the Purchase and Sale Agreement and in the Receivables Purchase Agreement are correct in all material respects on and as of such day as though made on and as of such day and shall be deemed to have been made on such day except for those representations and warranties made solely with respect to an earlier date which shall be correct in all material respects as of such date; (b) no event has occurred and is continuing, or would result from such Purchase or Reinvestment, that constitutes a Termination Event or Unmatured Termination Event; 25 26 (c) after giving effect to each proposed Purchase or Reinvestment, (i) Aggregate Purchaser's Investments will not exceed the Purchase Limit, and (ii) Aggregate Required Allocations will not exceed the Required Allocations Limit and (iii) the sum of the Aggregate Purchaser's Investment plus the Interest Component of all outstanding Related Commercial Paper would not exceed the Facility Limit; and (d) the Commitment Termination Date shall not have occurred; provided, however, the absence of the occurrence and continuance of an Unmatured Termination Event shall not be a Condition Precedent to any reinvestment being made with the proceeds of Collections that were, on the same day, applied in reduction of the Aggregate Total Investments. SECTION 5.3. Additional Condition Precedent to Purchases. Each Purchase (including the initial Purchase) shall be subject to the further condition precedent that the Purchase Termination Date shall not have occurred. SECTION 5.4. Condition Subsequent. Within thirty (30) days of the date hereof, the Agent, the Purchaser, the Servicer and the Transferor will execute lock box agreements and related documents with each of the Lock Box Banks in form and substance reasonably satisfactory to the Agent and the Purchaser. Failure to enter into such agreements shall result in the occurrence of a Termination Event. ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.1. Representations and Warranties of the Transferor. The Transferor represents and warrants as follows: (a) Organization and Good Standing. The Transferor has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted, and had at all relevant times, and now has, all necessary power, authority, and legal right to acquire and own the Pool Receivables. 26 27 (b) Due Qualification. The Transferor is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualification, licenses or approvals. (c) Power and Authority; Due Authorization. The Transferor (i) has all necessary power, authority and legal right to (A) execute and deliver this Agreement, the Certificate of Assignments and other Agreement Documents to which it is a party, (B) carry out the terms of the Agreement Documents, and (C) sell and assign undivided Interest on the terms and conditions herein provided and (ii) has duly authorized by all necessary corporate action the execution, delivery and performance of this Agreement and the other Agreement Documents to which it is a party and the sale and assignment of the Undivided Interests on the terms and conditions herein provided. (d) Valid Sale; Binding obligations. This Agreement constitutes a valid sale, transfer, and assignment of Undivided Interests to the Agent, on behalf of the Purchaser or the Bank Investors, as the case may be, enforceable against creditors of, and purchasers from, the Transferor; and this Agreement constitutes, and each other Agreement Document to be signed by the Transferor when duly executed and delivered will constitute, a legal, valid and binding obligation of the Transferor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors, rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) No Violation. The consummation of the transactions contemplated by this Agreement and the other Agreement Documents and the fulfillment of the terms hereof will not (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the articles of incorporation or by-laws of the Transferor, or any indenture, loan agreement, receivables purchase agreement, mortgage, deed of 27 28 trust, or other agreement or instrument to which the Transferor is a party or by which it or any of its properties is bound, (ii) result in the creation or imposition of any Adverse Claim upon any of the Transferor's properties pursuant to the terms of any such indenture, loan agreement, receivables purchase agreement, mortgage, deed of trust, or other agreement or instrument, other than this Agreement and the Certificate of Assignments, or (iii) violate any law or order, rule, or regulation applicable to the Transferor of any court or of any federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Transferor or any of its properties. (f) No Proceedings. There are no proceedings or investigations pending, or to its knowledge threatened, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement, the Certificate of Assignments or any other Agreement Documents, (ii) seeking to prevent the sale and assignment of any Undivided Interest, the issuance of the Certificate of Assignments or the consummation of any of the other transactions contemplated by this Agreement or any other Agreement Document, (iii) seeking any determination or ruling that might materially and adversely affect (A) the performance by the Transferor or Servicer of its obligations under this Agreement, or (B) the validity or enforceability of this Agreement, the Certificate of Assignments, any other Agreement Document, the Receivables or the Contracts or (iv) seeking to adversely affect the federal income tax attributes of the Purchases hereunder or the Certificate of Assignments. (g) Not an Investment Company. The Transferor is not, and is not controlled by, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such Act. (h) Bulk Sales Act. No transaction contemplated hereby requires compliance with any bulk sales act or similar law. (i) Government Approvals. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is 28 29 required for the due execution, delivery and performance by the Transferor of this Agreement, the Certificate of Assignments or any other Agreement Document, except for the filing of the UCC Financing Statements referred to in Article V, all of which, at the time required in Article V, shall have been duly made and shall be in full force and effect. (j) Litigation. No injunction, decree or other decision has been issued or made by any court, governmental agency or instrumentality thereof that prevents, and to its knowledge no threat by any person has been made to attempt to obtain any such decision that would prevent, the Transferor from conducting a significant part of its business operations, except as described in Schedule 6.1(j). (k) Margin Regulations. The use of all funds obtained by the Transferor under this Agreement will not conflict with or contravene any of Regulations T, U and X promulgated by the Board of Governors of the Federal Reserve System from time to time. (l) Quality of Title. Each Pool Receivable, together with the related Contract and all purchase orders and other agreements related to such Pool Receivable, is owned by the Transferor free and clear of any Adverse Claim (other than any Adverse Claim arising solely as the result of any action taken by the Purchaser or any Bank Investor, as the case may be (or any assignee thereof) or by the Agent) and restriction on assignment, except as provided herein; when the Purchaser or any Bank Investor, as the case may be, makes a Purchase, it or they or the Agent shall have acquired and shall continue to have maintained a valid and perfected first priority undivided percentage ownership interest to the extent of its Undivided Interest in each Pool Receivable and in the Related Security and Collections with respect thereto, free and clear of any Adverse Claim (other than any Adverse Claim arising solely as the result of any action taken by the Purchaser or any Bank Investor (or any assignee thereof) or by the Agent) except as provided hereunder; and no effective financing statement or other instrument similar in effect covering any Pool Receivable, any interest therein, the Related Security or Collections with respect thereto is on file in any recording office except such as may be filed (i) in favor of the Trans- 29 30 feror in accordance with the Contracts, (ii) in favor of the Purchaser or any Bank Investor or the Agent in accordance with this Agreement or in connection with any Adverse Claim arising solely as the result of any action taken by the Purchaser or any Bank Investor (or any assignee thereof) or by the Agent; or (iii) in favor of Bank of America, or any successor, as described in Section 11.1. (m) Accurate Reports. No Periodic Report (if prepared by the Transferor, or to the extent that information contained therein was supplied by the Transferor), information, Exhibit, financial statement, document, book, record or report furnished or to be furnished by the Transferor to the Agent or the Purchaser or any Bank Investor in connection with this Agreement was or will be inaccurate in any material respect as of the date it was or will be dated or (except as otherwise disclosed to the Agent, the Purchaser or any Bank Investor, as the case may be, at such time) as of the date so furnished, or contained or will contain any material misstatement of fact or omitted or will omit to state a material fact or any fact necessary to make the statements contained therein not materially misleading. (n) Offices. The chief place of business and chief executive office of the Transferor are located at the address of the Transferor referred to on the signature page hereof, and the offices where the Transferor keeps all of its books, records, and documents evidencing Pool Receivables, the related Contracts and all purchase orders and other agreements related to such Pool Receivables are located at the addresses specified in Schedule 6.1(n) (or at such other locations, notified to the Agents in accordance with Section 7.1(f), in jurisdictions where all action required by Section 8.5 has been taken and completed). (o) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks, together with the account numbers of the lock-box accounts of the Transferor or Servicer at such Lock-Box Banks, are specified in Schedule 6.2(o) (or have been notified to the Agents in accordance with Section 7.3(d)). (p) Eligible Receivables. Each Receivable included in the Net Pool Balance as an Eligible Receiv- 30 31 able on the date of any Purchase or Reinvestment shall be an Eligible Receivable on such date. (q) Servicing Programs. Any and all programs used by the Transferor or the Servicer in the servicing of the Receivables Pool are owned by the Transferor or the Servicer, as applicable, and not leased or licensed. (r) Transfers. No purchase of an interest in Receivables by the Purchaser or a Bank Investor from the Transferor or by the Transferor from Wackenhut constitutes a fraudulent transfer or fraudulent conveyance or is otherwise void or voidable under similar laws or principles, the doctrine of equitable subordination or for any other reason. (s) Purchase and Sale Agreement. Each of the representations and warranties made by each Originator in the Purchase and Sale Agreement and by The Wackenhut Corporation in the Receivables Purchase Agreement are true and correct in all material respects as of the date or dates made. (t) Solvency. Immediately after giving effect to the Transferor's, the Seller's and the Originator's obligations now or hereafter arising pursuant to any Agreement Document and to each transaction contemplated thereby, the Transferor, the Seller and each Originator will each be Solvent. (u) Use of Proceeds. Neither the Transferor nor any Originator will use the proceeds of the Purchases hereunder to acquire a security in a transaction subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended. (v) Tax. The Transferor has filed each and every tax return required to be filed by it in each jurisdiction in which it is required to do so and has paid in each such jurisdiction all taxes required to be paid by it on a consolidated basis. (w) Tradenames, Etc. As of the date hereof: (A) the Transferor's chief executive office is located at the address set forth under its signature to this Agreement; and (B) the Transferor has, within the last five (5) years, used only the tradenames identified in 31 32 Schedule 6.1(w) hereto, and, within the last five (5) years, has not changed its name, merged with or into or consolidated with any other corporation or been the subject of any proceeding under Title 11, United States Code (Bankruptcy). (x) No Termination Event. No event has occurred and is continuing and no condition exists which constitutes a Termination Event or an Unmatured Termination Event. (y) ERISA. The Transferor is in compliance in all material respects with ERISA and there exists no lien in favor of the Pension Benefit Guaranty Corporation on any of the Receivables. SECTION 6.2. Representations and Warranties of the Servicer. The Servicer, represents and warrants to the Purchaser and to the Bank Investors that: (a) Organization and Good Standing. Servicer has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its organization, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted, and had at all relevant times, and now has, all necessary power, authority, and legal right to acquire, own and sell the Pool Receivables. (b) Due Qualification. Servicer is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualification, licenses or approvals. (c) Power and Authority; Due Authorization. Servicer (i) has all necessary power, authority and legal right to (A) execute and deliver this Agreement, the Receivables Purchase Agreement and the Purchase and Sale Agreement and other Agreement Documents, (B) carry out the terms of the Agreement Documents to which it is a party, and (C) sell and assign the Receivables to the Transferor pursuant to the Receivables Purchase Agreement on the terms and conditions therein provided and (ii) has duly authorized by all necessary corporate action the execution, delivery and performance of this 32 33 Agreement, the Receivables Purchase Agreement, the Purchase and Sale Agreement and the other Agreement Documents to which it is a party and the sale and assignment of the Receivables to the Transferor pursuant to the Receivables Purchase Agreement on the terms and conditions therein provided. (d) Valid Sale; Binding Obligations. The Receivables Purchase Agreement constitutes a valid sale, transfer, and assignment of the Receivables to the Transferor, enforceable against creditors of, and purchasers from, Wackenhut; and this Agreement constitutes, and each other Agreement Document to be signed by Wackenhut (in whatever capacity) when duly executed and delivered will constitute, a legal, valid and binding obligation of Wackenhut enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors, rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) No Violation. The consummation of the transactions contemplated by this Agreement and the other Agreement Documents and the fulfillment of the terms hereof will not (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, its articles of incorporation or by-laws, or any indenture, loan agreement, receivables purchase agreement, mortgage, deed of trust, or other agreement or instrument to which it is a party or by which it or any of its properties is bound, (ii) result in the creation or imposition of any Adverse Claim upon any of its properties pursuant to the terms of any such indenture, loan agreement, receivables purchase agreement, mortgage, deed of trust, or other agreement or instrument, other than the Receivables Purchase Agreement and this Agreement, or (iii) violate any law or order, rule, or regulation applicable to it of any court or of any federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over Wackenhut or any of its properties. (f) No Proceedings. There are no proceedings or investigations pending, or to its knowledge threatened, 33 34 before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement, the Receivables Purchase Agreement, the Purchase and Sale Agreement or any other Agreement Documents, (ii) seeking to prevent the sale and assignment of the Receivables to the Transferor pursuant to the Receivables Purchase Agreement or the consummation of any of the other transactions contemplated by this Agreement or any other Agreement Document, (iii) seeking any determination or ruling that might materially and adversely affect (A) the performance by it (in whatever capacity) of its obligations under this Agreement, the Receivables Purchase Agreement or any other Agreement Document to which it is a party, or (B) the validity or enforceability of this Agreement, the Receivables Purchase Agreement, any other Agreement Document, the Receivables or the Contracts or (iv) seeking to adversely affect the federal income tax attributes of the Purchases hereunder or the Certificate of Assignments. (g) Government Approvals. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by Wackenhut of this Agreement, the Receivables Purchase Agreement or any other Agreement Document, except for the filing of the UCC Financing Statements referred to in Article V, all of which, at the time required in Article V, shall have been duly made and shall be in full force and effect. (h) Financial Condition. (i) The Servicer has heretofore furnished to the Agent an audited consolidated balance sheet of the Servicer and its consolidated subsidiaries as at January 2, 2000 and the notes thereto and the related consolidated statements of income, retained earnings and cash flows for the fiscal year then ended as examined and certified by Arthur Andersen, LLP, and unaudited consolidated interim financial statements of the Servicer and its consolidated subsidiaries consisting of a consolidated balance sheet and related consolidated statements of income, retained earnings and cash flows, in each case without notes, for and as of the end of the nine month period ending October 1, 2000. Except as set forth therein, such financial statements 34 35 (including the notes thereto) present fairly the financial condition of the Servicer and its consolidated subsidiaries as of the end of such fiscal year and nine month period and results of their operations and the changes in its stockholder's equity for the fiscal year and interim period then ended, all in conformity with generally accepted accounting principles consistently applied, subject however, in the case of unaudited interim statements to year end audit adjustments. (ii) since the later of (A) the date of the audited financial statements delivered pursuant to sub- section (i) above hereof or (B) the date of the audited financial statements most recently delivered pursuant to Section 7.5(a) and (b) hereof, except as disclosed in Servicer's press releases dated November 3, 2000 and November 30, 2000, there has not occurred any event, condition or circumstance which has had or could reasonably be expected to have a material adverse effect, nor have the businesses or properties of the Servicer or any subsidiary been materially adversely affected as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo or act of God; and (iii) except as set forth in the financial statements referred to in subsection (i) above, neither the Servicer nor any subsidiary has incurred, other than in the ordinary course of business, any material Indebtedness or other commitment or liability which remains outstanding or unsatisfied. (i) Credit and Collection Policy. Since January 5, 1995, there have been no material changes in the Credit and Collection Policy other than as permitted hereunder. Since such date, no material adverse change has occurred in the overall rate of collection of the Receivables. (j) Collections and Servicing. Since January 5, 1995, there has been no material adverse change in the ability of the Servicer to service and collect the Receivables. (k) Not an Investment Company. The Servicer is not, and is not controlled by, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such Act. 35 36 (l) Litigation. No injunction, decree or other decision has been issued or made by any court, governmental agency or instrumentality thereof that prevents, and to its knowledge no threat by any person has been made to attempt to obtain any such decision that would prevent, it from conducting a significant part of its business operations, except as described in Schedule 6.2(j). (m) Accurate Reports. No Periodic Report (if prepared by it, or to the extent that information contained therein was supplied by it), information, Exhibit, financial statement, document, book, record or report furnished or to be furnished by it to the Agent or the Purchaser or any Bank Investor in connection with this Agreement was or will be inaccurate in any material respect as of the date it was or will be dated or (except as otherwise disclosed to the Agent, the Purchaser or any Bank Investor, as the case may be, at such time) as of the date so furnished, or contained or will contain any material misstatement of fact or omitted or will omit to state a material fact or any fact necessary to make the statements contained therein not materially misleading. (n) Offices. The chief place of business and chief executive office of the Servicer are located at its address referred to on the signature page hereof, and the offices where the Servicer keeps all of its books, records, and documents evidencing Pool Receivables, the related Contracts and all purchase orders and other agreements related to such Pool Receivables are located at the addresses specified in Schedule 6.2(n) (or at such other locations, notified to the Agent in accordance with Section 7.1(f), in jurisdictions where all action required by Section 8.5 has been taken and completed). (o) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks, together with the account numbers of the lock-box accounts of the Servicer at such Lock-Box Banks, are specified in Schedule 6.2(o) (or have been notified to the Agent in accordance with Section 7.3(d)). (p) Servicing Programs. Any and all programs used by the Servicer in the servicing of the Receivables Pool are owned by it and not leased or licensed. 36 37 (q) No Termination Event. No event has occurred and is continuing and no condition exists which constitutes a Termination Event or an Unmatured Termination Event. ARTICLE VII GENERAL COVENANTS OF THE TRANSFEROR AND SERVICER SECTION 7.1. Affirmative Covenants of the Transferor. From the date hereof until the date, following the Commitment Termination Date, on which all Undivided Interests shall be reduced to zero, the Transferor will, unless the Agent shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply in all material respects with all applicable laws, rules, regulations and orders with respect to the Pool Receivables and related Contracts. (b) Preservation of Corporate Existence. Preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification would materially adversely affect (i) the interests of the Agent, the Purchaser or any Bank Investor hereunder or (ii) the ability of the Transferor or Servicer to perform their respective obligations hereunder. (c) Field Reviews. (i) At any time and from time to time during regular business hours, permit the Agent, or its agents or representatives, (A) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Transferor relating to Pool Receivables, including, without limitation, the related Contracts and purchase orders and other agreements, and (B) to visit the offices and properties of the Transferor for the purpose of examining such materials described in clause (i)(A) next above, and to discuss matters relating to Pool Receivables or the Transferor's performance hereunder with any of the officers or employees of the Transferor having knowledge of such 37 38 matters; and (ii) without limiting the provisions of clause (i)(A) next above, from time to time on request of the Agent, permit Coopers & Lybrand or other certified public accountants or other auditors reasonably acceptable to the Agent to conduct, at the Transferor's expense, a review of the Transferor's books and records with respect to the Pool Receivables. (d) Keeping of Records and Books of Account. Maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Pool Receivables in the event of the destruction of the originals thereof), and keep and maintain, all documents, books, records and other information reasonably necessary or advisable for the collection of all Pool Receivables (including, without limitation, records adequate to permit the daily identification of each new Pool Receivable and all Collections of and adjustments to each existing Pool Receivable); such records to be retained by Servicer for such periods as are usual and customary and in accordance with the Credit and Collection Policy. (e) Performance and Compliance with Receivables and Contracts. At its expense timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Pool Receivables and all purchase orders and other agreements related to such Pool Receivables. (f) Location of Records; Jurisdiction. Keep its chief place of business and chief executive office, and the offices where it keeps its records concerning the Pool Receivables, all related Contracts and all purchase orders and other agreements related to such Pool Receivables (and all original documents relating thereto), at the addresses) of the Transferor referred to in Section 6.1(n) or, upon 30 days' prior written notice to each Agent, at such other locations in jurisdictions where all action required by Section 8.5 shall have been taken and completed. In addition, the Transferor shall provide not less than thirty (30) days written notice to the Agent and the Bank Investors prior to effecting any change in its jurisdiction of organization. 38 39 (g) Credit and Collection Policies. Comply in all material respects with the Credit and Collection Policy in regard to each Pool Receivable and the related Contract. (h) Minimum Net Worth. The Transferor shall at all times maintain a minimum Net Worth of not less than an amount equal to the sum of (i) the Aggregate Unpaid Balance of all Defaulted Receivables and (ii) the sum of the Aggregate Unpaid Balance of the three largest Receivables of the Obligors; provided, however, that in any case, the minimum Net Worth shall never be less than 15% of the Aggregate Unpaid Balance of the Receivables. (i) Collections. Instruct all Obligors to cause all Collections of Pool Receivables to be deposited directly with a Lock-Box Bank. (j) Sale Treatment. The Transferor will not account for (including for accounting and tax purposes), or otherwise treat, the transactions contemplated by the Receivables Purchase Agreement in any manner other than as a sale of Receivables by the Seller to the Transferor. In addition, the Transferor shall disclose (in a footnote or otherwise) in all of its financial statements (including any such financial statements consolidated with any other Persons' financial statements) the existence and nature of the Transaction contemplated hereby and by the Receivables Purchase Agreement and the interest of the Agent, on behalf of the Company and the Bank Investors, in the Receivables. (k) Separate Business. The Transferor shall at all times (a) to the extent the Transferor's office is located in the offices of Wackenhut or any Affiliate of Wackenhut, pay fair market rent for its executive office space located in the offices of Wackenhut or any Affiliate of Wackenhut, (b) have at all times at least two members of its board of directors which are not and have never been employees, officers or directors of Wackenhut or any Affiliate of Wackenhut or of any major creditor of Wackenhut or any Affiliate of Wackenhut and are persons who are familiar and have experience with asset securitization, (c) maintain the Transferor's books, financial statements, accounting records and other corporate documents and records separate from those of Wackenhut or any other entity, (d) not commingle the Transferor's assets with those of Wackenhut or any other entity, (e) not sell, exchange or otherwise convey any of its assets in any inter-company transactions except for fair 39 40 market value in an arms length transaction approved by a majority of its board of directors (including Independent Directors, as defined in the Transferor's "Certificate of Incorporation"), (f) act solely in its corporate name and through its own authorized officers and agents, (g) make investments directly or by brokers engaged and paid by the Transferor or its agents (provided that if any such agent is an Affiliate of the Transferor it shall be compensated at a fair market rate for its services), (h) separately manage the Transferor's liabilities from those of Wackenhut or any Affiliates of Wackenhut and pay its own liabilities, including all administrative expenses, from its own separate assets, except that Wackenhut may pay the organizational expenses of the Transferor, and (i) pay from the Transferor's assets all obligations and indebtedness of any kind incurred by the Transferor. The Transferor shall abide by all corporate formalities, including the maintenance of current minute books, and the Transferor shall cause its financial statements to be prepared in accordance with generally accepted accounting principles in a manner that indicates the separate existence of the Transferor and its assets and liabilities. The Transferor shall (i) pay all its liabilities, (ii) not assume the liabilities of Wackenhut or any Affiliate of Wackenhut, (iii) not lend funds or extend credit to Wackenhut or any affiliate of Wackenhut except pursuant to the Receivables Purchase Agreement in connection with the purchase of Receivables thereunder and (iv) not guarantee the liabilities of Wackenhut or any Affiliates of Wackenhut. The officers and directors of the Transferor (as appropriate) shall make decisions with respect to the business and daily operations of the Transferor independent of and not dictated by any controlling entity. The Transferor shall not engage in any business not permitted by its Certificate of Incorporation as in effect on the Closing Date. (l) Corporate Documents. The Transferor shall only amend, alter, change or repeal Articles of its Certificate of Incorporation with the prior written consent of the Agent. (m) Rights under Receivables Purchase Agreement. Exercise all of its rights under or in connection with the Receivables Purchase Agreement to the fullest extent thereof except to the extent otherwise consented to in writing by the Agent. 40 41 SECTION 7.2. Reporting Requirements of the Transferor. From the date hereof until the date, following the Commitment Termination Date, on which all Undivided Interests shall be reduced to zero and all other amounts owing hereunder shall have been paid, the Transferor will, unless the Agent shall otherwise consent in writing, furnish to the Agent: (a) Financial Reporting. The Transferor will maintain, or cause to be maintained, a system of accounting established and administered in accordance with GAAP, and furnish to the Agent: (i) Quarterly Financial Statements. As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Transferor, copies of the Transferor's quarterly financial reports, certified by the vice president and treasurer, chief financial officer or chief accounting officer of the Transferor; together with a certificate from such officer certifying that no Termination Event or Unmatured Termination Event has occurred and containing a computation of, and showing compliance with, the financial restrictions contained in Section 7; (ii) Annual Reporting. Within ninety (90) days after the close of the Transferor's fiscal year, financial statements, prepared in accordance with GAAP for the Transferor, including balance sheets as of the end of such period, related statements of operations, shareholder's equity and cash flows, and reviewed by a nationally recognized accounting firm reasonably acceptable to the Agent and accompanied by a certificate of said accountants that, in the course of the foregoing, they have obtained no knowledge of any Termination Event or Unmatured Termination Event, or if, in the opinion of such accountants, any Termination Event or Unmatured Termination Event shall exist, stating the nature and status thereof. (iii) Compliance Certificate. Within forty-five (45) days after the close of the first three quarterly periods of the Transferor's fiscal year and together with the financial statements required hereunder, a compliance certificate signed by the Transferor's chief financial officer stating that to the best of such Person's knowledge, no Termination Event or Unmatured Termination Event exists, or if any Termination Event 41 42 or Unmatured Termination Event exists, stating the nature and status thereof. (iv) Shareholders Statements and Reports. Promptly upon the furnishing thereof to the shareholders of or the Transferor, copies of all financial statements, reports and proxy statements so furnished. (b) Reports to Holders and Exchanges. In addition to the reports required by subsection (a) next above, promptly upon the Agent's request, copies of any reports specified in such request which the Transferor sends to any of its security holders, and any reports or registration statements that Servicer files with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registrations of securities for selling security holders; (c) ERISA. Promptly after the filing or receiving thereof, copies of all reports and notices with respect to any Reportable Event defined in Article IV of ERISA which the Transferor, the Seller or any Originator files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which the Transferor, the Seller or any Originator receives from the Pension Benefit Guaranty Corporation; (d) Termination Events. As soon as possible and in any event within five days after the occurrence of each Termination Event and each Unmatured Termination Event, written statement of the vice president and treasurer, chief financial officer or chief accounting officer of the Transferor setting forth details of such Event and the action that the Transferor proposes to take with respect thereto; (e) Litigation. As soon as possible and in any event within three Business Days of the Transferor's knowledge thereof, notice of (i) any litigation, investigation or proceeding which may exist at any time which could have a material adverse effect on the business, operations, property or financial condition of the Transferor, the Seller or any Originator or impair the ability of the Transferor or the Servicer to perform its obligations under this Agreement and (ii) any material adverse development in previously disclosed litigation; (f) Purchase and Sale Agreement/Receivables Purchase Agreement. Promptly after receipt thereof, copies of all 42 43 documents and other information delivered by either of the Originator or the Seller to the Transferor pursuant to either the Purchase and Sale Agreement or the Receivables Purchase Agreement; and (g) Other. Promptly, from time to time, such other information (including a listing by Obligor of all Pool Receivables), documents, records or reports respecting the Receivables or the condition or operations, financial or otherwise, of the Transferor as the Agent may from time to time reasonably request in order to protect the interests of the Agent or any Purchaser under or as contemplated by this Agreement. SECTION 7.3. Negative Covenants of the Transferor. From the date hereof until the date, following the Commitment Termination Date, on which all Undivided Interests shall be reduced to zero and all other amounts owing hereunder shall have been paid, the Transferor will not, without the prior written consent of the Agent: (a) Sales, Liens, Etc. Except as otherwise provided herein, sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Pool Receivable or related Contract or Related Security, or any interest therein, or any lock-box account to which any Collections of any Pool Receivable are sent, or any right to receive income from or in respect of any of the foregoing. (b) Extension or Amendment of Receivables. Except as otherwise permitted in Section 8.2, extend, amend or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any Contract related thereto unless such extension, amendment or modification (i) does not conflict with the Credit and Collection Policy and (ii) does not affect the collectibility of the related Receivable. (c) Change in Business or Credit and Collection Policy. Make any change in the character of its business or in the Credit and Collection Policy. (d) Change in Payment Instructions to Obligors. Add or terminate any bank as a Lock-Box Bank from those listed in Schedule 6.2(o) or make any change in its instructions to Obligors regarding payments to be made to Servicer or Servicer or payments to be made to any Lock-Box Bank, unless 43 44 the Agent shall have received notice of such addition, termination or change and duly executed copies of Lock-Box Agreements with each new Lock-Box Bank in a form satisfactory to the Agent. (e) Amendments to Purchase and Sale Agreement/Receivables Purchase Agreement. Amend, supplement, waive the application of any provision of, amend and restate or otherwise modify the Purchase and Sale Agreement or the Receivables Purchase Agreement except in each case (i) in accordance with the terms thereof and (ii) with the prior written consent of the Agent. (f) Corporate Identity. At any time change its name, identity, corporate structure or location unless at least 10 days prior thereto the Transferor shall have delivered to the Agent UCC financing statements or other statements amending or otherwise modifying UCC financing statements filed hereunder in order to maintain a first perfected ownership interest in favor of the Agent on behalf of the Purchaser and the Bank Investors hereunder. SECTION 7.4. Affirmative Covenants of Servicer. From the date hereof until the date, following the Commitment Termination Date, on which all Undivided Interests shall be reduced to zero, Servicer will, unless the Agent shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply in all material respects with all applicable laws, rules, regulations and orders with respect to the Pool Receivables and related Contracts. (b) Preservation of Corporate Existence. Preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification would materially adversely affect (i) the interests of the Agent or the Purchaser or any Bank Investor hereunder or (ii) the ability of Servicer or the Transferor to perform their respective obligations hereunder or under the Receivable Purchase Agreement. 44 45 (c) Field Reviews. (i) At any time and from time to time during regular business hours, permit the Agent, or its agents or representatives, (A) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of Servicer relating to Pool Receivables, including, without limitation, the related Contracts and purchase orders and other agreements, and (B) to visit the offices and properties of Servicer for the purpose of examining such materials described in clause (i)(A) next above, and to discuss matters relating to Pool Receivables or Servicer's performance hereunder with any of the officers or employees of Servicer having knowledge of such matters; and (ii) without limiting the provisions of clause (i)(A) next above, from time to time on request of the Agent, permit Coopers & Lybrand or other certified public accountants or other auditors acceptable to the Agent to conduct, at Servicer's expense, a review of Servicer's books and records with respect to the Pool Receivables. (d) Keeping of Records and Books of Account. Maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Pool Receivables in the event of the destruction of the originals thereof), and keep and maintain, all documents, books, records and other information reasonably necessary or advisable for the collection of all Pool Receivables (including, without limitation, records adequate to permit the daily identification of each new Pool Receivable and all Collections of and adjustments to each existing Pool Receivable); such records to be retained by Servicer for such periods as are usual and customary and in accordance with the Credit and Collection Policy. (e) Performance and Compliance with Receivables and Contracts. At its expense timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Pool Receivables and all purchase orders and other agreements related to such Pool Receivables. (f) Location of Records. Keep its chief place of business and chief executive office, and the offices 45 46 where it keeps its records concerning the Pool Receivables, all related Contracts and all purchase orders and other agreements related to such Pool Receivables (and all original documents relating thereto), at the addresses) of Servicer referred to in Section 6.2(n) or, upon 30 days' prior written notice to each Agent, at such other locations in jurisdictions where all action required by Section 8.5 shall have been taken and completed. In addition, the Servicer shall provide not less than thirty (30) days written notice to the Agent and the Bank Investors prior to effecting any change in its jurisdiction of organization. (g) Credit and Collection Policies. Comply in all material respects with the Credit and Collection Policy in regard to each Pool Receivable and the related Contract. (h) Collections. Instruct all Obligors to cause all Collections of Pool Receivables to be deposited directly with a Lock-Box Bank. SECTION 7.5. Reporting Requirements of Servicer. From the date hereof until the date, following the Commitment Termination Date, on which all Undivided Interests shall be reduced to zero and all other amounts owing hereunder shall have been paid, the Servicer will, unless the Agent shall otherwise consent in writing, furnish to the Agent: (a) Quarterly Financial Statements. As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Servicer, copies of the Servicer quarterly financial reports, on Form 10-Q, as filed with the Securities and Exchange Commission (or if the Servicer is no longer required to file such Form 10-Q, the Servicer shall furnish such financial reports containing the information typically found on Form 10-Q, certified by the vice president and treasurer, chief financial officer or chief accounting officer of the Servicer; together with a certificate from such officer certifying that no Termination Event or Unmatured Termination Event has occurred and containing a computation of, and showing compliance with, the financial restrictions contained in Section 7.6; (b) Annual Financial Statements. As soon as available and in any event within 90 days after the end of each fiscal year of the Servicer, a copy of the Servicer's Annual Re- 46 47 port, on Form 10-K, as filed with the Securities and Exchange Commission (or if the Servicer is no longer required to file such Form 10-K, the Servicer shall furnish such financial reports containing information typically found on Form 10-K) and as reported on by nationally recognized independent certified public accountants on a consolidated (for the Originator only) basis; together with a copy of the year-end financial statements of each Originator (which need not be reported by independent certified accountants); and together with a certificate from vice president and treasurer, chief financial officer or chief accounting officer of the Servicer certifying that no Termination Event or Unmatured Termination Event has occurred and containing a computation of, and showing compliance with, the financial restrictions contained in Section 7.6; (c) Reports to Holders and Exchanges. In addition to the reports required by subsection (a) next above, promptly upon the Agent's request, copies of any reports specified in such request which the Servicer sends to any of its security holders, and any reports or registration statements that the Servicer files with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registrations of securities for selling security holders; (d) ERISA. Promptly after the filing or receiving thereof, copies of all reports and notices with respect to any Reportable Event defined in Article IV of ERISA which the Servicer or any Originator files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which the Servicer or any Originator receives from the Pension Benefit Guaranty Corporation; (e) Termination Events. As soon as possible and in any event within five days after the occurrence of each Termination Event and each Unmatured Termination Event, written statement of the vice president and treasurer, chief financial officer or chief accounting officer of the Servicer setting forth details of such Event and the action that the Servicer proposes to take with respect thereto; (f) Litigation. As soon as possible and in any event within three Business Days of the Servicer's knowledge thereof, notice of (i) any litigation, investigation or proceeding which may exist at any time which could have a material adverse effect on the business, operations, prop- 47 48 erty or financial condition of the Servicer or any Originator or impair the ability of the Servicer to perform its obligations under this Agreement and (ii) any material adverse development in previously disclosed litigation; and (g) Agreed Upon Procedures. On or before 120 days after the end of each fiscal year of the Servicer, beginning with the fiscal year ending December 31, 2000, the Servicer shall cause a firm of independent public accountants (who may also render other services to the Servicer or the Transferor) to furnish a report to the Agent to the effect that they have (i) confirmed the Net Pool Balance as of the end of each Yield Period during such fiscal year, (ii) confirmed that the Receivables treated by the Servicer as Eligible Receivables in fact satisfied the requirements of the definition thereof contained herein, and (iii) such other matters as may be requested by the Agent in its reasonable discretion; except, in each case for (a) such exceptions as such firm shall believe to be immaterial (which exceptions need not be enumerated) and (b) such other exceptions as shall be set forth in such statement. (h) Other. Promptly, from time to time, such other information (including a listing by Obligor of all Pool Receivables), documents, records or reports respecting the Receivables or the condition or operations, financial or otherwise, of the Servicer as the Agent may from time to time reasonably request in order to protect the interests of such Agent or any Purchaser under or as contemplated by this Agreement. SECTION 7.6. Negative Covenants of the Servicer. From the date hereof until the date, following the Commitment Termination Date, on which all Undivided Interests shall be reduced to zero and all other amounts owing hereunder shall have been paid, the Servicer will not, without the prior written consent of the Agent: (a) Sales, Liens, Etc. Except as otherwise provided herein, sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Pool Receivable or related Contract or Related Security, or any interest therein, or any lock-box account to which any Collections of any Pool Receivable are sent, or any right to receive income from or in respect of any of the foregoing. 48 49 (b) Extension or Amendment of Receivables. Except as otherwise permitted in Section 8.2, extend, amend or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any Contract related thereto unless such extension, amendment or modification (i) does not conflict with the Credit and Collection Policy and (ii) does not affect the collectibility of the related Receivable. (c) Change in Business or Credit and Collection Policy. Make any change in the character of its business or in the Credit and Collection Policy. (d) Change in Payment Instructions to Obligors. Add or terminate any bank as a Lock-Box Bank from those listed in Schedule 6.2(o) or make any change in its instructions to Obligors regarding payments to be made to the Servicer or the Servicer or payments to be made to any Lock-Box Bank, unless the Agent shall have received notice of such addition, termination or change and duly executed copies of Lock-Box Agreements with each new Lock-Box Bank in a form satisfactory to the Agent. (e) Mergers, Consolidations and Sales of Assets. (i) Consolidate with or be a party to a merger with any other corporation or sell, lease or otherwise dispose of all or any substantial part (as defined in paragraph (iv) of this Section 7.6(e)) of the assets of the Servicer and its Subsidiaries, provided, however, that: (A) any Subsidiary may merge or consolidate with or into the Servicer or any Wholly-owned Subsidiary so long as in any merger or consolidation involving the Servicer, the Servicer shall be the surviving or continuing corporation; provided further however, that under no circumstances shall the Transferor be permitted to merge with the Servicer; (B) any Person may consolidate or merge with the Servicer or a Subsidiary of the Servicer if at the time of such consolidation or merger and after giving effect thereto no Unmatured Termination Event or Termination Event shall have occurred and be continuing, and after giving effect to such consolidation or merger the Servicer would 49 50 be permitted to incur at least $1.00 of additional Consolidated Indebtedness; (C) any Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Servicer or any Wholly-owned Subsidiary; (D) WCC may enter into TROL Leases; and (E) the Servicer may sell for not less than book value the (i) business, assets and operations constituting the food service business of the Servicer and its Subsidiaries or (ii) assets of, or stock in, Chile. (ii) Permit any Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this Section 7.6(e), any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) of such Subsidiary to any Person other than the Servicer or a Wholly-owned Subsidiary, except for the purpose of qualifying directors, or except in satisfaction of the validly pre-existing preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Servicer and/or a Subsidiary whereby the Servicer and/or such Subsidiary maintain their same proportionate interest in such Subsidiary. (iii) Sell, transfer or otherwise dispose of any shares of stock of any Subsidiary except (A) the minimal amount necessary to qualify directors and (B) shares of stock of WCC provided that, after giving effect to any such sale of WCC stock, the Servicer shall own not less than 50% of the stock of every class issued by WCC or any Indebtedness of any Subsidiary, and will not permit any Subsidiary to sell, transfer or otherwise dispose of (except to the Servicer or a Wholly-owned Subsidiary) any shares of stock or any Indebtedness of any other Subsidiary, unless: (1) simultaneously with such sale, transfer, or disposition, all shares of stock and all Indebtedness of such Subsidiary at the time owned by the Servicer and by every other Subsid- 50 51 iary shall be sold, transferred or disposed of as an entirety; (2) the Board of Directors of the Servicer shall have determined, as evidenced by a resolution thereof, that the purposed sale, transfer or disposition of said shares of stock and Indebtedness is in the best interests of the Servicer. (3) said shares of stock and Indebtedness are sold, transferred or otherwise disposed of to a Person, for a cash consideration and on terms reasonably deemed by the Board of Directors to be adequate and satisfactory; (4) the Subsidiary being disposed of shall not have any continuing investment in the Servicer or any other Subsidiary not being simultaneously disposed of; and (5) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Servicer and its Subsidiaries. (iv) As used in this Section 7.6(e), a sale, lease or other disposition of assets shall be deemed to be a "substantial part" of the assets of the Servicer and its Subsidiaries only if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Servicer and its Subsidiaries (other than in the ordinary course of business) during the period from and after the Closing Date to and including the date of the sale, lease or disposition in question, computed on a cumulative basis for said entire period, exceeds 10% of Consolidated Net Assets, determined as of the end of the immediately preceding Fiscal Quarter. (f) Acquisitions. Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition, unless (i) the Person to be (or whose assets are to be) acquired does not oppose such Acquisition and the line or lines of business of the Person to be acquired are substantially the same as one or more line or 51 52 lines of business conducted by the Servicer and its Subsidiaries, (ii) no Unmatured Termination Event or Termination Event shall have occurred and be continuing either immediately prior to or immediately after giving effect to such Acquisition and, if the Cost of Acquisition is in excess of $5,000,000, the Servicer shall have furnished to the Agent and the Bank Investors (A) pro forma historical financial statements as of the end of the most recently completed Fiscal Year of the Servicer and most recent interim Fiscal Quarter, if applicable giving effect to such Acquisition and (B) a certificate prepared on a historical pro forma basis as of the most recent date for which financial statements have been furnished pursuant to Section 7.5 giving effect to such Acquisition, which certificate shall demonstrate that no Unmatured Termination Event or Termination Event would exist immediately after giving effect thereto, and (iii) the Person acquired shall be a Wholly-owned Subsidiary, or be merged into the Servicer or a Wholly-owned Subsidiary, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquiror shall be the Servicer or a Wholly-owned Subsidiary). (g) Corporate Identity. At any time change its name, identity, corporate structure or location unless at least 10 days prior thereto the Servicer shall have delivered to the Agent UCC financing statements or other statements amending or otherwise modifying UCC financing statements filed hereunder in order to maintain a first perfected ownership interest in favor of the Transferor pursuant to the Receivables Purchase Agreement. (h) Source of Business. At any time permit more than 50% of the Servicer's aggregate consolidated revenues to be derived from businesses other than from the protective and/or correctional services business. SECTION 7.7. Financial Covenants of the Servicer. (Additional terms used in this Section and not defined in Appendix A shall have the meanings ascribed to such terms in the Revolving Credit Agreement). (A) Consolidated Net Worth. The Servicer will at all times keep and maintain Consolidated Net Worth at an amount not less than (i) 90% of the Servicer and its Subsidiaries Consolidated Net Worth at October 1, 2000 and (ii) as at the last day of each succeeding Fiscal Quarter of the Servicer and until 52 53 (but excluding) the last day of the next following Fiscal Quarter of the Servicer, the sum of (A) the amount of Consolidated Net Worth required to be maintained pursuant to this Section 7.7 as at the end of the immediately preceding Fiscal Quarter, plus, (B) 50% of Consolidated Net Income (with no reduction for net losses for any period but including earnings and losses attributable to outstanding Minority Interest) for the Fiscal Quarter of the Servicer ending on such day, plus (C) 75% of the Net Proceeds to the Servicer from the sale of shares of the Servicer's capital stock received during the Fiscal Quarter of the Servicer ending on such date. The calculation of this covenant shall be based upon the consolidated financial statements of the Servicer and its Subsidiaries, without giving effect to any Accounting Adjustments. (B) Limitations on Total Debt. (i) The Servicer will not at any time permit the ratio of Consolidated Indebtedness to Consolidated Total Capitalization to be greater than .50 to 1.00. (ii) The Servicer and its Subsidiaries (other than WCC) will not, at any time, issue, incur, assume, be or become liable in respect of any Indebtedness other than (i) Indebtedness representing amounts received by the Servicer or any Subsidiary in exchange for the transfer of interests in trade receivables arising under this Agreement, (ii) the purchase of products, merchandise and services in the ordinary course of business, (iii) Indebtedness outstanding on the Closing Date, (iv) Indebtedness of a Guarantor to the Servicer or to another Guarantor, (v) Indebtedness arising under the Revolving Credit Agreement, (vi) the endorsement of registrable instruments for deposit or collection or similar transactions in the ordinary course of business, and (vii) other Indebtedness in an aggregate amount for the Servicer and all Subsidiaries (other than WCC) taken as a whole not greater than $30,000,000. (C) Fixed Charge Coverage Ratio. The Servicer will at all times keep and maintain at the end of any Four-Quarter Period the Consolidated Fixed Charge Coverage Ratio to be less than 1.50 to 1.00. 53 54 ARTICLE VIII ADMINISTRATION AND COLLECTION SECTION 8.1. Designation of Servicer. Wackenhut as Initial Servicer. The servicing, administering and collection of the Pool Receivables shall be conducted by the Person designated as Servicer hereunder ("Servicer") from time to time in accordance with this Section 8.1. Until the Agent gives a Successor Notice (as defined in Section 8.2, Wackenhut is hereby designated as, and hereby agrees to perform the duties and obligations of, Servicer pursuant to the terms hereof. SECTION 8.2. Successor Notice: Servicer Transfer Event. Upon Wackenhut's receipt of a notice from the Agent of the Agent's designation of a new Servicer (a "Successor Notice"), Wackenhut agrees that it will terminate its activities as Servicer hereunder in a manner that the Agent reasonably believes will facilitate the transition of the performance of such activities to the new Servicer, and the Agent (or its designee) shall assume, until a new Servicer is appointed or designated, each and all of Wackenhut's said obligations to service and administer such Receivables, on the terms and subject to the conditions herein set forth, and Wackenhut shall use its best efforts to assist the Agent (or its designee) in assuming such obligations. The Agent will not give Wackenhut a Successor Notice until after the occurrence of any Termination Event listed in any of clauses (a), (e), (f), (g), (h), (i), (1) or (k) of Section 10.1 or any event which, in the reasonable opinion of the Agent, could have a material adverse effect on Wackenhut's ability to perform its obligations as Servicer hereunder (any such Termination Event or other event being herein called a "Servicer Transfer Event"), in which case such Successor Notice may be given at any time in the Agent's discretion. If Wackenhut disputes the occurrence of a Servicer Transfer Event, Wackenhut may take appropriate action to resolve such dispute; provided that Wackenhut must terminate its activities hereunder as Servicer and allow the newly designated Servicer to perform such activities on the date provided by the Agent as described above, notwithstanding the commencement or continuation of any proceeding to resolve the aforementioned dispute. The Agent may at any time after the occurrence of a Servicer Transfer Event designate any other Person as successor Servicer hereunder. If at any time the Agent shall be servicing hereunder, upon the transfer of servicing by the Agent to any successor Servicer, the Agent shall no longer perform the duties of Servicer and shall have no further obligations or liabilities whatsoever in respect thereof. 54 55 SECTION 8.3. Subcontracts. Servicer may, with the prior consent of the Agent, subcontract with any other person for servicing, administering or collecting the Pool Receivables, provided that Servicer shall remain liable for the performance of the duties and obligations of Servicer pursuant to the terms hereof. SECTION 8.4. Duties of Servicer. Appointment; Duties in General. Each of the Transferor, Purchaser, each Bank Investor and the Agent hereby appoints as its agent the Servicer, as from time to time designated pursuant to Section 8.1, to enforce its rights and interests in and under the Pool Receivables, the Related Security and the Contracts. Servicer shall take or cause to be taken all such actions as may be necessary or advisable in accordance with the Credit and Collection Policy or otherwise at the direction or with the consent of the Agent to collect each Pool Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence. Servicer shall adopt the Credit and Collection Policy for the servicing of the Pool Receivables. SECTION 8.5. Allocation of Collections; Segregation. Servicer shall set aside for the account of the Transferor, the Purchaser and each Bank Investor, their respective allocable shares of the Collections of Pool Receivables in accordance with Sections 3.1 and 3.2 but shall not be required (unless otherwise requested by the Agent, and subject to Section 3.7) to segregate the funds constituting such portions of such Collections, or to segregate the respective allocable shares of Enterprise and the Enterprise Liquidity Provider and the Enterprise Credit Support Provider, as applicable, prior to the remittance thereof in accordance with said Sections. If instructed by the Agent, Servicer shall segregate and deposit with the Agent such allocable shares of Collections of Pool Receivables, set aside for the Purchaser, the Bank Investors, the Enterprise Liquidity Provider and Enterprise Credit Support Provider and any other assignee from the Purchaser or any Bank Investor of any Undivided Interest, on the first Business Day following receipt by Servicer of such Collections in immediately available funds. SECTION 8.6. Modification of Receivables. So long as no Termination Event or Unmatured Termination Event shall have occurred and be continuing, the Servicer, may, strictly in accordance with the Credit and Collection Policy, (i) extend the maturity or adjust the Unpaid Balance of any Defaulted Receivable as it may determine to be appropriate to maximize Collections thereof; provided that, after giving effect to such extension of maturity, the Aggregate Required Allocations will not exceed the 55 56 Required Allocations Limit, and (ii) adjust the Unpaid Balance of any Receivable to reflect the reductions or cancellations described in the first sentence of Section 3.3(a). SECTION 8.7. Documents and Records. The Transferor shall, and shall cause the Seller, to deliver to Servicer, and Servicer shall hold in trust for the Transferor, each Originator, the Purchaser and the Bank Investors, in accordance with their respective interests, all documents, instruments and records (including, without limitation, computer tapes or disks) that evidence or relate to Pool Receivables. SECTION 8.8. Certain Duties to the Transferor. Servicer shall, as soon as practicable following receipt, turn over to the Transferor (i) that portion of Collections of Pool Receivables representing its undivided interest therein, less, all reasonable and appropriate out-of-pocket costs and expenses of Servicer of servicing, collecting and administering the Pool Receivables to the extent not covered by the Servicer's Fee received by it, and (ii) the Collections of any Receivable which is not a Pool Receivable. Servicer, shall, as soon as practicable upon demand, deliver to the Transferor all documents, instruments and records in its possession that evidence or relate to Receivables of the Transferor other than Pool Receivables, and copies of documents, instruments and records in its possession that evidence or relate to Pool Receivables. SECTION 8.9. Lock-Box Accounts. Upon the occurrence of any Lock-Box Control Event (as such term is defined in the Letter Agreement (Segregation of Funds) dated as of December 30, 1997, as amended, between Wackenhut and Bank of America), Servicer shall deliver to the Agent, in its capacity as Lock-Box Segregation Agent thereunder, on a daily basis, a list, referred to in such Letter Agreement as the Identification List, setting forth those Collections held by Servicer and by each Lock-Box Bank and received as of the preceding Business Day, and designating such Collections as Collections in respect of Pool Receivables or as Collections not subject to this Agreement. The Segregation Agent's duties shall be governed solely by the terms of such Letter Agreement and no other duties or terms shall be implied therein. SECTION 8.10. Rights of the Agent. (a) Notice to Obligors. At any time the Agent, in its discretion, after notice to the Transferor or Servicer, may notify the Obligors of Pool Receivables, or any of them, of the ownership of Undivided Interests by the Purchaser or the Bank Investors, as the case may be. 56 57 (b) Notice to Lock-Box Banks. At any time following the earliest to occur of (i) the occurrence of a Termination Event, (ii) any of the Conditions Precedent shall not be satisfied and the Agent shall have requested implementation of the Settlement procedures set forth in Section 3.2, and (iii) the warranty in Section 6.1(l) shall no longer be true, the Agent is hereby authorized to give notice to the Lock-Box Banks, as provided in the Lock-Box Agreements, of the transfer to the Agent of dominion and control over the lock-box accounts to which the Obligors of Pool Receivables make payments. The Transferor hereby transfers to the Agent, effective when the Agent shall give notice to the Lock-Box Banks as provided in the Lock-Box Agreements, the exclusive dominion and control over such lock-box accounts, and shall take any further action that the Agent may reasonably request to effect such transfer. SECTION 8.11. Rights on Servicer Transfer Event. At any time following the designation of a Servicer other than the Transferor pursuant to Section 8.1: (a) The Agent may direct the Obligors of Pool Receivables, or any of them, to pay all amounts payable under any Pool Receivable directly to the Agent or its designee. (b) Servicer shall, and shall direct each Originator to, at the Agent's request and at the Servicer's expense, give notice of such ownership to each said Obligor and direct that payments be made directly to the Agent or its designee. (c) The Transferor shall, and shall direct each Originator to, at the Agent's request (with the written consent of the Agent), (A) assemble all of the documents, instruments and other records (including, without limitation, computer programs, tapes and disks) which evidence the Pool Receivables, and the related Contracts and Related Security, or which are otherwise necessary or desirable to collect such Pool Receivables, and shall make the same available to the Agent at a place selected by the Agent or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Pool Receivables in a manner acceptable to the Agent and shall, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Agent or its designee. (d) Each of the Transferor, the Purchaser and the Bank Investors, as the case may be, hereby authorizes the Agent to take any and all steps in the Transferor's name and 57 58 on behalf of the Transferor and the Purchaser, the Bank Investors, as the case may be, which are necessary or desirable, in the determination of the Agent, to collect all amounts due under any and all Pool Receivables, including, without limitation, endorsing the Transferor's name on checks and other instruments representing Collections and enforcing such Pool Receivables and the related Contracts. SECTION 8.12. Responsibilities of the Transferor. Anything herein to the contrary notwithstanding: (a) None of the Agent, the Purchaser nor any Bank Investor shall have any obligation or liability with respect to any Pool Receivables, Contracts related thereto or any other related purchase orders or other agreements, nor shall any of them be obligated to perform any of the obligations of the Transferor, Wackenhut or any Originator thereunder. (b) The Transferor hereby grants to the Servicer and the Agent, for the benefit of the Purchaser and the Bank Investors, as the case may be, an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of the Transferor all steps which are necessary or advisable to endorse, negotiate or otherwise realize on any writing or other right of any kind held or transmitted by the Transferor or transmitted or received by the Purchaser or any Bank Investor, as the case may be (whether or not from the Transferor) in connection with any Receivable after the occurrence of any default by the Transferor hereunder or the occurrence of any Termination Event. SECTION 8.13. Further Action Evidencing Purchases. (a) The Transferor will, and will cause the Seller to, from time to time, at its expense, promptly execute and deliver all further instruments and documents, and take all further action that any Agent may reasonably request in order to perfect, protect or more fully evidence the Purchases hereunder and the resulting Undivided Interests, or to enable the Purchaser, the Bank Investors or the Agent to exercise or enforce any of their respective rights hereunder or under the Certificate of Assignments. Without limiting the generality of the foregoing, the Transferor will upon the request of any Agent: execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate and will maintain such procedures as are necessary to permit daily identification of Pool Receivables and Eligible Receivables. 58 59 (b) The Transferor hereby authorizes the Agent to file one or more financing or continuation statements on behalf of and for the benefit of the Agent, the Purchaser or the Bank Investors, as the case may be, and amendments thereto and assignments thereof, relative to all or any of the Pool Receivables and the Related Security now existing or hereafter arising in the name of the Transferor. If the Transferor fails to perform any of its agreements or obligations under this Agreement, the Agent may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the expenses of the Agent incurred in connection therewith shall be payable by the Transferor as provided in Section 13.1. (c) Without limiting the generality of subsection (a), the Transferor will, not earlier than six (6) months and not later than three (3) months from the fifth anniversary of the date of filing of the financing statements filed in connection with the Original Agreement or any other financing statement filed pursuant to this Agreement or in connection with any Purchase hereunder, unless the Commitment Termination Date shall have occurred and all Undivided Interests shall have been reduced to zero: (i) execute and deliver and file or cause to be filed an appropriate continuation statement with respect to such financing statement; and (ii) deliver or cause to be delivered to the Agent an opinion of the counsel for the Transferor (or other counsel for the Transferor reasonably satisfactory to the Agent), in form and substance reasonably satisfactory to the Agent, confirming and updating the opinion delivered pursuant to Section 5.1(i) of the Original Agreement with respect to UCC matters and otherwise to the effect that all of the Undivided Interests hereunder continue to be first and prior perfected security interests. SECTION 8.14. Application of Collections. Any payment by an Obligor in respect of any indebtedness owed by it to the Transferor shall, except as otherwise specified by an Obligor or otherwise required by contract or law and unless the Agent instructs otherwise, be applied as a Collection of any Pool Receivable or Receivables of an Obligor to the extent of any amounts then due and payable thereunder before such payment is applied to any other indebtedness of an Obligor. 59 60 ARTICLE IX SECURITY INTEREST SECTION 9.1. Grant of Security Interest. To secure all obligations of the Transferor arising in connection with this Agreement, the Certificate of Assignments and each other Agreement Document to which it is a party, whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent, Indemnified Amounts, payments on account of Collections received or deemed to be received, fees and Earned Discount, in each case pro rata according to the respective amounts thereof, the Transferor hereby assigns and grants the Agent, on behalf of the Purchaser and each Bank Investor, a security interest in all of the Transferor's (i) right, title and interest (including specifically any undivided interest retained by the Transferor hereunder) now or hereafter existing in, to and under all the Pool Receivables, the Related Security and all Collections with regard thereto and (ii) rights, remedies, powers and privileges under and in respect of the Receivables Purchase Agreement. SECTION 9.2. Further Assurances. The provisions of Section 8.13 shall apply to the security interest granted under Section 9.1 as well as to the Purchases and all Undivided Interests hereunder. SECTION 9.3. Remedies. Upon the occurrence of a Termination Event, the Agent shall have, with respect to the collateral granted pursuant to Section 9.1, and in addition to all other rights and remedies available to the Purchaser, the Bank Investors, or the Agent under this Agreement or other applicable law, all the rights and remedies of a secured party upon default under the UCC. ARTICLE X [RESERVED] ARTICLE XI TERMINATION SECTION 11.1. Termination Events. If any of the following events ("Termination Events") shall occur: 60 61 (a) Servicer (if Wackenhut) shall fail to perform or observe any term, covenant or agreement hereunder (other than as referred to in clause (ii) next following) and such failure shall remain unremedied for five Business Days or (ii) Servicer (if Wackenhut) or the Transferor (if not Servicer) shall fail to make any payment or deposit to be made by it hereunder when due; or (b) Any representation or warranty made or deemed to be made by the Transferor, Servicer or any Originator (or any of their respective officers) under or in connection with this Agreement, any other Agreement Document, or any Periodic Report or other information or report delivered pursuant hereto shall prove to have been false or incorrect in any material respect when made and, if such condition shall be amenable to remedy, such condition shall continue unremedied for a period of ten Business Days after (i) written notice thereof by the Agent or (ii) the Transferor, Servicer or such Originator has actual knowledge thereof; or (c) The Transferor, Servicer, Wackenhut or any Originator shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or any other Agreement Document, on their respective parts to be performed or observed and any such failure shall remain unremedied for five Business Days after the date on which the Transferor, Servicer, Wackenhut or such Originator knew or should have known of such failure; or (d) A default shall have occurred and be continuing under any instrument or agreement evidencing, securing or providing for the issuance of indebtedness for borrowed money in excess of $100,000 of, or guaranteed by, the Transferor, Servicer, Wackenhut, any Originator or of any Affiliate of either thereof, which default if unremedied, uncured, or unwaived (with or without the passage of time or the giving of notice or both) would permit acceleration of the maturity of such indebtedness and such default shall have continued unremedied, uncured or unwaived for a period long enough to permit such acceleration and any notice of default required to permit acceleration shall have been given; or any default under any agreement or instrument relating to the purchase of receivables of the Transferor, Wackenhut, any Originator or of any Affiliate of either thereof, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default is to terminate, or permit the termination of, the commitment of any party to such agreement or instrument to 61 62 purchase receivables or the right of the Transferor to reinvest in receivables the principal amount paid by any party to such agreement or instrument for interest in receivables; or (e) An Event of Bankruptcy shall have occurred and remained continuing with respect to the Transferor, Servicer, Wackenhut any Originator or any Affiliate of any thereof; or (f) Any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings not disclosed in writing by the Transferor to the Agent, prior to the date of execution and delivery of this Agreement is pending against the Transferor, Servicer, Wackenhut, any Originator or any Affiliate of any thereof, or (ii) any material development not so disclosed has occurred in any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings so disclosed, which, in the case of clause (i) or (ii), in the opinion of the Agent, is likely to materially adversely affect the financial position or business of the Transferor, Servicer, any Originator or any Affiliate of any thereof or impair the ability of the Transferor or Servicer to perform its obligations under this Agreement; or (g) After any Settlement Date, the Aggregate Required Allocations shall exceed the Required Allocations Limit; or (h) The Losses to Liquidations Ratio exceeds 2%; or (i) Three-Month Default Ratio at any time exceeds 6%; or (j) Three-Month Dilution Ratio at any time exceeds 2.5%; or (k) There shall have occurred any event which materially adversely affects the collectibility of the Pool Receivables or there shall have occurred any other event which materially adversely affects the ability of the Transferor, any Originator or Servicer to collect Pool Receivables or the ability of the Transferor or Servicer to perform hereunder or the warranty in Section 6.1(n) shall not be true at any time; or (l) The Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Internal Revenue 62 63 Code with regard to any of the assets of the Transferor, Servicer, the Seller, any Originator or any Affiliate and such lien shall not have been released within 30 days, or the Pension Benefit Guaranty Corporation shall, or shall indicate its intention to, file notice of a lien pursuant to Section 4068 of the Employee Retirement Income Security Act of 1974 with regard to any of the assets of the Transferor, Servicer, the Seller or any Originator; or (m) A Purchase and Sale Termination Event shall have occurred; or (n) The Wackenhut Family shall at any time, directly or indirectly, control less than 33 1/3% of the voting securities of the Transferor, the Seller, Servicer or any Originator; or (o) The Agent on behalf of the Purchaser and the Bank Investors, fail for any reason to have a perfected first priority security interest as described in Section 9.1; or (p) The Aggregate Required Allocations shall at any time exceed the Required Allocations Limit. SECTION 11.2. Remedies. (a) Optional Termination. Upon the occurrence of a Termination Event (other than a Termination Event described in subsection (a), (e), (f), or (p) of Section 11.1), the Agent may, or at the request of the Bank Investors, shall, by notice to the Transferor and the Purchaser declare the Purchase Termination Date to have occurred. (b) Automatic Termination. Upon the occurrence of a Termination Event described in subsection (a), (e), (f) or (p) of Section 11.1, the Purchase Termination Date shall be deemed to have occurred automatically upon the occurrence of such event; provided, however, that with respect to any proceeding instituted against the Transferor pursuant to 11 U.S.C. ss.303 (an "Involuntary Federal Proceeding"), the settlement procedures described in Section 3.2 shall become applicable upon the commencement of such Proceeding and no further Purchases or Reinvestments of Collections shall be made; and provided, further, that if such Involuntary Federal Proceeding is dismissed within 60 days after its commencement, and if no other Termination Event has occurred, then following such dismissal, the Commitment shall be reinstated as if the Purchase Termination Date had not occurred upon the commencement of such Involuntary Federal Proceeding. 63 64 (c) Termination Events. The Agent shall not be deemed to have knowledge or notice of the occurrence of an Unmatured Termination Event or a Termination Event unless the Agent has received written notice from the Transferor specifying such Unmatured Termination Event or Termination Event and stating that such notice is a 'Notice of Termination Event'. In the event that the Agent receives such a notice of the occurrence of an Unmatured Termination Event or Termination Event, the Agent shall give prompt notice thereof to the Purchaser and the Bank Investors. The Agent shall (subject to Section 12.2 hereof) take such action with respect to such Unmatured Termination Event or Termination Event as shall reasonably be directed by the Purchaser and the Bank Investors, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Unmatured Termination Event or Termination Event as it shall deem advisable in the best interest of the Purchaser and the Bank Investors. (d) Additional Remedies. Upon any termination of the Facility pursuant to this Section 11.2, the Agent, the Purchaser and the Bank Investors shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC of each applicable jurisdiction and other applicable laws, which rights shall be cumulative. Without limiting the foregoing or the general applicability of Article XIII hereof, the occurrence of a Termination Event shall not deny to the Agent, the Purchaser or any Bank Investor any remedy in addition to termination of the Commitment to which the Agent, the Purchaser or any Bank Investor may be otherwise appropriately entitled, whether at law or in equity. ARTICLE XII THE AGENT SECTION 12.1. Authorization and Action. The Purchaser and each Bank Investor hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to such Agent by the terms hereof, together with ,such powers as are reasonably incidental thereto. The provisions of this Article XII are solely for the benefit of the Agent, the Purchaser and the Bank Investors, and the Transferor shall not have any rights as a third-party beneficiary or otherwise under any of the provisions hereof. In performing its functions and duties hereunder, the Agent shall act solely as the agent for the Purchaser and the Bank Investors, as the case may be, 64 65 and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Transferor or any Originator or any of their respective successors and assigns. The Agent (which term as used in this sentence shall include its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for the Purchaser or any other Bank Investor; (b) shall not be responsible to the Purchaser or any Bank Investor for any recital, statement, representation, or warranty (whether written or oral) made in, or in connection with, any Agreement Documents or any certificate or other document referred to or provided for in, or received by any of them under any Agreement Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Agreement Document, or any other document referred to or provided for herein or for any failure by any of the Transferor, or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by the Transferor or the satisfaction of any condition or to inspect the property (including the books and records) of the Transferor or any of its Subsidiaries or affiliates; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Agreement Document; and (e) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Agreement Document, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. SECTION 12.2. Agents' Reliance, Etc. The Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telecopy) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any of the Transferor or the Servicer), independent accountants, and other experts selected by the Agent. As to any matters not expressly provided for by this Agreement, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Bank Investors, and such instructions shall be binding on all of the Bank Investors; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or 65 66 that is contrary to any Agreement Document or applicable law or unless it shall first be indemnified to its satisfaction by the Bank Investors against any and all liability and expense which may be incurred by it by reason of taking any such action. SECTION 12.3. Agents and Affiliates. Bank of America and its Affiliates may generally engage in any kind of business with the Transferor, Servicer, any Originator or any Obligor, any of their respective Affiliates and any Person who may do business with or own securities of the Transferor or any Obligor or any of their respective Affiliates, all as if Bank of America was not the Agent and without any duty to account therefor to the Purchaser, any Bank Investor or any other holder of an interest in Pool Receivables. SECTION 12.4. Resignation of Agent. The Agent may resign at any time by giving notice thereof to the Purchaser, the Bank Investors and the Transferor. Upon any such resignation, the Agent and the Bank Investors which hold 50% or more by aggregate principal balance of the Facility Limit shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Agent or the Bank Investors which hold 50% or more by aggregate principal balance of the Facility Limit and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Purchaser and the Bank Investors, appoint a successor Agent which shall be a commercial bank organized under the laws of the United States of America having combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article XII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. ARTICLE XIII BANK COMMITMENT; ASSIGNMENT OF PURCHASER'S INTEREST SECTION 13.1. Rights as Bank Investor. With respect to its Bank Commitment, Bank of America (and any successor acting as Agent) in its capacity as a Bank Investor hereunder shall have the same rights and powers hereunder as any other Bank Investor and may 66 67 exercise the same as though it were not acting as the Agent, and the term "Bank Investor" or "Bank Investors" shall, unless the context otherwise indicates, include the Agent in its individual capacity. Bank of America (and any successor acting as Agent) and its affiliates may (without having to account therefor to the Purchaser or any Bank Investor) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any of the Transferor and the Agent or any of their Subsidiaries or affiliates as if it were not acting as Agent, and Bank of America (and any successor acting as Agent) and its affiliates may accept fees and other consideration from any of the Transferor and its affiliates and the Agent or any of their Subsidiaries or affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Purchaser or any Bank Investor. SECTION 13.2. Indemnification of the Agent. The Bank Investors agree to indemnify the Agent (to the extent not reimbursed by the Transferor), ratably in accordance with their Pro Rata portions of the Undivided Interests, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent (including by the Purchaser or any Bank Investor) in any way relating to or arising out of this Agreement or any other Agreement Document or any of the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under this Agreement or any other Agreement Document, provided that no Bank Investors shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person indemnified. Without limitation of the foregoing, the Bank Investors agree to reimburse the Agent, ratably in accordance with their Pro Rata portions of the Undivided Interests promptly upon demand for any out-of-pocket expenses (including attorneys' fees) incurred by the Agent in connection with the administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement and the other Agreement Documents, to the extent that such expenses are incurred in the interests of or otherwise in respect of the Bank Investors hereunder and/or thereunder and to the extent that the Agent is not reimbursed for such expenses by the Transferor. The agreements contained in this Section 13.2 shall survive payment in full of the Undivided Interests and all other amounts payable under this Agreement. 67 68 SECTION 13.3. Non-Reliance. The Purchaser and each Bank Investor agrees that it has, independently and without reliance on the Agent or the Purchaser or any Bank Investor, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Transferor and the Agent and their Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent, the Purchaser or any Bank Investor, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Agreement Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Purchaser and the Bank Investors by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of the Transferor or the Agent or any of their Subsidiaries or affiliates that may come into the possession of the Agent or any of its affiliates. SECTION 13.4. Payments by the Agent. Unless specifically allocated to a Bank Investor pursuant to the terms of this Agreement, all amounts received by the Agent on behalf of the Bank Investors shall be paid by the Agent to the Bank Investors (at their respective accounts specified in their respective Assignment and Assumption Agreements) in accordance with their respective related pro rata interests in the Undivided Interest, on the Business Day received by the Agent, unless such amounts are received after 12:00 noon on such Business Day, in which case the Agent shall use its reasonable efforts to pay such amounts to the Bank Investors on such Business Day, but, in any event, shall pay such amounts to the Bank Investors in accordance with their respective related pro rata interests in the Undivided Interest, not later than the following Business Day. SECTION 13.5. Bank Commitment; Assignment to Bank Investors. (a) Bank Commitment. At any time on or prior to the Commitment Termination Date, in the event that the Purchaser does not effect a Purchase as requested under Section 2.1 then at any time, the Transferor shall have the right to require the Purchaser to assign its interest in the Aggregate Purchaser's Investment in whole to the Bank Investors pursuant to this Section 13.5. In addition, if at any time on or prior to the Commitment Termination Date the Purchaser elects to give notice to the Transferor of a Reinvestment Termination Date, the Transferor hereby requests and directs that the Purchaser assign its interest in the Aggregate Purchaser's Investment in whole to the Bank 68 69 Investors pursuant to this Section 13.5 and the Transferor hereby agrees to pay the amounts described in Section 13.6(d) below. Upon any such election by the Purchaser or any such request by the Transferor, the Purchaser shall make such assignment to the Bank Investors and the Bank Investors shall thereupon be deemed to have accepted such assignment and shall assume all of the Purchaser's obligations hereunder. In connection with any assignment from the Purchaser to the Bank Investors pursuant to this Section 13.5, each Bank Investor shall, by the close of business (New York time) on the date of such notice of assignment, pay to the Purchaser (in immediately available funds) an amount equal to its Assignment Amount (it being understood that notwithstanding the foregoing assignment of the Aggregate Purchasers Investment, the Bank Investors, as assignees, continue to be obligated to fund Advances under Section 1.3 in accordance with the terms thereof and shall not have the right to elect the commencement of the amortization of the Purchasers Investment pursuant to the definition of "Reinvestment Termination Date" notwithstanding that the Purchaser had such right). Upon any such assignment, the amount set forth on the signature pages hereto next to each bank Investor's name shall be deemed to be the final Commitment amount with respect to such Bank Investor. Upon any assignment by the Purchaser to the Bank Investors contemplated hereunder, the Purchaser shall cease to make any additional Purchases hereunder. (b) Assignment. No Bank Investor may assign all or a portion of its interest in the Purchaser's Investment, the Receivables, and Collections, Related Security and Proceeds with respect thereto and its rights and obligations hereunder to any Person unless approved in writing by the Transferor, the Purchaser and the Agent. In the case of an assignment by a Bank Investor to another Person, the assignor shall deliver to the assignee(s) an Assignment and Assumption Agreement in substantially the form of Schedule 13.5(b) attached hereto, duly executed, assigning to the assignee a pro rata interest in the Purchaser's Investment, the Receivables, and Collections, Related Security and Proceeds with respect thereto and the assignor's rights and obligations hereunder and the assignor shall promptly execute and deliver all further instruments and documents, and take all further action, that the assignee may reasonably request, in order to protect, or more fully evidence the assignee's right, title and interest in and to such interest and to enable the Agent, on behalf of such assignee, to exercise or enforce any rights hereunder and under the other Agreement Documents to which such assignor is or, immediately prior to such assignment, was a party. Upon any such assignment, (i) the assignee shall have all of the rights and obligations of the assignor hereunder and under the other Agreement Documents to which such assignor is or, immediately prior to such assignment, was a 69 70 party with respect to such interest for all purposes of this Agreement and under the other Agreement Documents to which such assignor is or, immediately prior to such assignment, was a party (it being understood that the Bank Investors, as assignees, shall (x) be obligated to fund Purchases under Section 1.3(c) in accordance with the terms thereof, notwithstanding that the Purchaser was not so obligated and (y) not have the right to elect the commencement of the amortization of the Purchaser's Investment pursuant to the definition of 'Reinvestment Termination Date', notwithstanding that the Purchaser had such right) and (ii) the assignor shall relinquish its rights with respect to such interest for all purposes of this Agreement and under the other Agreement Documents to which such assignor is or, immediately prior to such assignment, was a party. No such assignment shall be effective unless a fully executed copy of the related Assignment and Assumption Agreement shall be delivered to the Agent and the Transferor. All costs and expenses of the Agent and the assignor and assignee incurred in connection with any assignment hereunder shall be borne by the Transferor and not by the assignor or any such assignee. No Bank Investor shall assign any portion of its Commitment hereunder without also simultaneously assigning an equal portion of its interest in the Liquidity Provider Agreement. (c) Effects of Assignment. By executing and delivering an Assignment and Assumption Agreement, the assignor and assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Assumption Agreement, the assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, the other Agreement Documents or any other instrument or document furnished pursuant hereto or thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value or this Agreement, the other Agreement Documents or any such other instrument or document; (ii) the assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Transferor or the Agent or the performance or observance by the Transferor or the Agent of any of their respective obligations under this Agreement, the other Agreement Documents or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, and such other instruments, documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Assumption Agreement and to purchase such interest; (iv) such assignee will, independently and without reliance upon the Agent, or any of its Affiliates, or the assignor 70 71 and based on such agreements, documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Agreement Documents; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement, the other Agreement Documents and any other instrument or document furnished pursuant hereto or thereto as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto and to enforce its respective rights and interests in and under this Agreement, the other Agreement Documents, the Receivables, and the Contracts; (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Agreement Documents are required to be performed by it as the assignee of the assignor; and (vii) such assignee agrees that it will not institute against the Purchaser any proceeding of the type referred to in Section 15.6 prior to the date which is one year and one day after the payment in full of all Commercial Paper issued by the Purchaser. (d) The Transferor's Obligation to Pay Certain Amounts; Additional Assignment Amount. The Transferor shall pay to the Agent, for the account of the Purchaser, in connection with any assignment by the Purchaser to the Bank Investors pursuant to Section 13.5, an aggregate amount equal to the Discount Factor to accrue through the end of each outstanding Yield Period plus all other Aggregate Unpaids (other than the Aggregate Purchaser's Investment). To the extent that such Discount Factor relates to interest or discount on Related Commercial Paper, if the Transferor fails to make payment of such amounts at or prior to the time of assignment by the Purchaser to the Bank Investors, such amount shall be paid by the Bank Investors (in accordance with their respective Pro Rata portion) to the Purchaser as additional consideration for the interests assigned to the Bank Investors and the amount of the "Aggregate Purchaser's Investment" hereunder held by the Bank Investors shall be increased by an amount equal to the additional amount so paid by the Bank Investors. (e) Downgrade of Bank Investor. If at any time prior to any assignment by the Purchaser to the Bank Investors as contemplated pursuant to this Section 13.5, the short term debt rating of any Bank Investor shall be "A-2" or "P-2" from Standard & Poor's or Moody's, respectively, with negative credit implications, such Bank Investor, upon request of the Agent, shall, within 30 days of such request, assign its rights and obligations hereunder to another financial institution (which institution's short term debt shall be rated at least "A-2" and "P-2" from Standard & Poor's and Moody's, respectively, and which shall not be so rated with negative credit 71 72 implications). If the short term debt rating of a Bank Investor shall be "A-3" or "P-3", or lower, from Standard & Poor's or Moody's, respectively (or such rating shall have been withdrawn by Standard & Poor's or Moody's), such Bank Investor, upon request of the Agent, shall, within five (5) Business Days of such request, assign its rights and obligations hereunder to another financial institution (which institution's short term debt shall be rated at least "A-2" and "P-2" from Standard & Poor's and Moody's, respectively, and which shall not be so rated with negative credit implications). In either such case, if any such Bank Investor shall not have assigned its rights and obligations under this Agreement within the applicable time period described above, the Purchaser shall have the right to require such Bank Investor to accept the assignment of such Bank Investor's Pro Rata portion of the Pool Balance; such assignment shall occur in accordance with the applicable provisions of this Section 13.5(d). Such Bank Investor shall be obligated to pay to the Purchaser, in connection with such assignment, in addition to the Pro Rata portion of the Aggregate Purchaser's Investment, an amount equal to the interest component of the outstanding Commercial Paper Notes issued to fund the portion of the Aggregate Purchaser's Investment being assigned to such Bank Investor, as reasonably determined by the Agent. Notwithstanding anything contained herein to the contrary, upon any such assignment to a downgraded Bank Investor as contemplated pursuant to the immediately preceding sentence, the aggregate available amount of the Facility Limit, solely as it relates to new Purchases by the Purchaser, shall be reduced by the amount of unused Commitment of such downgraded Bank Investor; it being understood and agreed, that nothing in this sentence or the two preceding sentences shall affect or diminish in any way any such downgraded Bank Investor's Commitment to the Transferor or such downgraded Bank Investor's other obligations and liabilities hereunder and under the other Agreement Documents. (f) Administration of Agreement after Assignment. After any assignment by the Purchaser to the Bank Investors pursuant to this Section 13.5 (and the payment of all amounts owing to the Purchaser in connection therewith), all rights of the Agent set forth herein shall be deemed to be afforded to the Agent on behalf of the Bank Investors instead of the Purchaser. In the event that the aggregate of the Assignment Amounts paid by the Bank Investors pursuant to Section 13.5(a) is less than the Aggregate Purchaser's Investments on the date of such assignment, then to the extent payments made hereunder in respect of the Aggregate Purchaser's Investments exceed the aggregate of the Assignment Amounts, such excess shall be remitted by the Agent to Bank of America, or such other person acting as collateral agent in respect of the Purchaser's Commercial Paper Note program. 72 73 SECTION 13.6. Restrictions on Assignments. Except as otherwise contemplated by Section 13.5, neither the Transferor nor the Purchaser may assign its rights hereunder or any interest herein without the prior written consent of the Agent, and the Purchaser may not assign any Undivided Interest (or portion thereof) to any Person without the prior written consent of the Transferor; provided, however, that: (a) Enterprise may assign or grant a security interest in, any Undivided Interest (or portion thereof) owned by it to Bank of America, the Enterprise Liquidity Provider or the Enterprise Credit Support Provider (or any successor thereof by merger, consolidation or otherwise), any Affiliate of Enterprise (including any securitization vehicle managed by Bank of America) or such Enterprise Liquidity Provider or Enterprise Credit Support Provider (which may then assign any such Undivided Interest (or portion thereof) so assigned or any interest therein to such party or parties as it may choose); and without limiting the foregoing, the Purchaser may, from time to time, with prior or concurrent notice to Transferor and Collection Agent, in one transaction or a series of transactions, assign all or a portion of the Purchaser's Investment and its rights and obligations under this Agreement and any other Agreement Documents to which it is party to a Conduit Assignee. Upon and to the extent of such assignment by the Purchaser to a Conduit Assignee, (i) such Conduit Assignee shall be the owner of the assigned portion of the Purchaser's Investment, (ii) the related administrative and or managing agent for such Purchaser will act as the Administrative Agent for such Conduit Assignee, with all corresponding rights and powers, express or implied, granted to the Administrative Agent hereunder or under the other Agreement Documents, (iii) such Conduit Assignee and its liquidity support provider(s) and credit support provider(s) and other related parties shall have the benefit of all the rights and protections provided to the Purchaser and its Enterprise Liquidity Support Provider(s) and Enterprise Credit Support Provider(s), respectively, herein and in the other Agreement Documents (including, without limitation, any limitation on recourse against such Purchaser or related parties, any agreement not to file or join in the filing of a petition to commence an insolvency proceeding against such Purchaser, and the right to assign to another Conduit Assignee as provided in this paragraph), (iv) such Conduit Assignee shall assume all (or the assigned or assumed portion) of the Purchaser's obligations, if any, hereunder and any other Agreement Document, and the Purchaser shall be released from such obligations, in each case to the extent of such assign- 73 74 ment, and the obligations of the Purchaser and such Conduit Assignee shall be several and not joint, (v) all distributions in respect of the Purchaser's Investment shall be made to the applicable agent or administrative agent, as applicable, on behalf of the Purchaser and such Conduit Assignee on a pro rata basis according to their respective interests, (vi) the definition of the term "Commercial Paper Rate" with respect to the portion of the Purchaser's Investment funded with commercial paper issued by the Purchaser from time to time shall be determined in the manner set forth in the definition of "Commercial Paper Rate" applicable to the Purchaser on the basis of the interest rate or discount applicable to commercial paper issued by such Conduit Assignee (rather than the Purchaser), (vii) the defined terms and other terms and provisions of this Agreement and the other Agreement Documents shall be interpreted in accordance with the foregoing, and (viii) if requested by the Agent or administrative agent with respect to the Conduit Assignee, the parties will execute and deliver such further agreements and documents and take such other actions as the Agent or administrative agent may reasonably request to evidence and give effect to the foregoing. No assignment by the Purchaser to a Conduit Assignee of all or any portion of the Purchaser's Investment shall in any way diminish the related Bank Investors' obligation under Section 13.5 to fund any Reinvestment not funded by the Purchaser or such Conduit Assignee or to acquire from the Purchaser or such Conduit Assignee all or any portion of the Purchaser's Investment. (b) The Purchaser may assign and grant a security interest in any interest in, to and under any Undivided Interest owned by it, this Agreement and the other Agreement Documents to Bank of America, as collateral agent or collateral trustee, and any successor in such capacity, to secure each such Purchaser's obligations under or in connection with its Commercial Paper Notes, the Enterprise Liquidity Agreement, the Enterprise Credit Support Agreement and certain other obligations of the Purchaser incurred in connection with the funding of the Purchases and Reinvestments hereunder, which assignment and grant of a security interest shall not be considered an "assignment" for purposes of Section 13.5(b), or, prior to the enforcement of such security interest, for purposes of any other provision of this Agreement. (c) The Transferor agrees to advise the Agent within five Business Days after notice to the Transferor of any proposed assignment by the Purchaser of any Undivided Interest (or portion thereof), not otherwise permitted under 74 75 subsection (a), of the Transferor's consent or non-consent to such assignment. If the Transferor does not consent to such assignment, the Purchaser may immediately assign such Undivided Interest (or portion thereof), to Bank of America, the Enterprise Liquidity Provider or the Enterprise Credit Support Provider or any Affiliate of Bank of America, the Enterprise Liquidity Provider or the Enterprise Credit Support Provider. All of the aforementioned assignments shall be upon such terms and conditions as the Purchaser and the assignee may mutually agree. SECTION 13.7. Rights of Assignee. Upon the assignment by the Purchaser of any Undivided Interest (or portion thereof) owned by it in accordance with this Article XIII, (a) the assignee receiving such assignment shall have all of the rights of the Purchaser hereunder with respect to such Undivided Interest (or such parties thereof) and (b) all references to the Purchaser in Section 4.2 shall be deemed to apply to such assignee to the extent of its interest the Purchaser's Investment and the related Collections. SECTION 13.8. Authorization of Agent. The Purchaser authorizes the Agent to, and the Agent agrees that it shall, endorse the Certificate(s) of the Purchaser to reflect any assignments made pursuant to this Article XIII or otherwise. SECTION 13.9. Notice of Assignment. The Purchaser shall provide notice to the Transferor and the Agent of any assignment of any Undivided Interest (or portion thereof) by the Purchaser to any assignee. SECTION 13.10. Evidence of Assignment; Endorsement of Certificate. Any assignment of any Undivided Interest (or portion thereof) to any Person may be evidenced by an instrument of assignment in the form of Schedule 13.5(b) or by such other instruments) or documents) as may be satisfactory to the Purchaser, the Agent and the assignee. The Purchaser authorizes the Agent to, and the Agent agrees that it shall, endorse its Certificate of Assignments to reflect any assignments made pursuant to this Article XIII or otherwise. SECTION 13.11. Rights of Support Providers. The Transferor hereby agrees that, upon notice to the Transferor, the Enterprise Liquidity Provider, the Enterprise Credit Support Provider and the collateral agent or collateral trustee referred to in Section 13.1 (collectively, the "Assignee Parties", each an "Assignee Party"), or any of them, may exercise all the rights of Bank of America (or Enterprise) respectively hereunder, with 75 76 respect to Undivided Interests, and Collections with respect thereto, which have been assigned (or in which a security interest has been granted) to such Assignee Party, with respect to all Undivided Interests (or portions thereof), and Collections with respect thereto, which are owned by Enterprise (and not subject to an assignment or a separate security interest in favor of the Enterprise Liquidity Provider or Enterprise Credit Support Provider), and all other rights and interests of Enterprise, in, to or under this Agreement or any other Agreement Document. Without limiting the foregoing, upon such notice such Assignee Party may request Servicer to segregate its allocable shares of Collections, in accordance with Section 8.2(a), may give a Successor Notice pursuant to Section 8.1(a), may give or require the Agent to give notice to the Lock-Box Banks as referred to in Section 8.3(a), and may direct the Obligors of Pool Receivables to make payments in respect thereof directly to an account designated by them (provided that such Assignee Party shall designate a single account for the making of such payments with respect to any Pool Receivable), in each case, to the same extent as Bank of America (or Enterprise) might have done. ARTICLE XIV INDEMNIFICATION SECTION 14.1. Indemnities by the Transferor and Servicer. (a) General Indemnity. Without limiting any other rights which any such Person may have hereunder or under applicable law, the Transferor hereby agrees to indemnify each of the Agent, the Purchasers, the Enterprise Liquidity Support Provider, the Enterprise Credit Support Provider, Bank of America, each of and Bank of America's Affiliates, their respective successors, transferees, participants and assigns and all officers, directors, shareholders, controlling persons, employees and agents of any of the foregoing (each an "Indemnified Party"), forthwith on demand from and against any and all damages, losses, claims, liabilities and related costs and expenses, including reasonable attorneys fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or relating to this Agreement or the ownership or funding of any Undivided Interest or in respect of any Receivable or any Contract, excluding, however, (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party or (b) recourse (except as otherwise specifically provided in this Agreement) for Defaulted Receivables or delinquent receivables. Without limiting the 76 77 foregoing, the Transferor shall indemnify each Indemnified Party for Indemnified Amounts arising out of or relating to: (i) the transfer by the Transferor of any interest in any Receivable other than the transfer of an Undivided Interest to the Agent on behalf of the Purchaser or the Bank Investors, as the case may be, pursuant this Agreement and the grant of a security interest to the Agent on behalf of Purchaser and the Bank Investors pursuant to Section 9.1; (ii) the breach of any representation or warranty made by the Transferor or the Seller (or any of their officers) under or in connection with this Agreement, any other Agreement Document to which such entity is a party, any Periodic Report or any other information or report delivered by the Transferor pursuant hereto, which shall have been false or incorrect in any material respect when made or deemed made and any losses, if any, relating to Receivables included in the Receivables Pool as Eligible Receivables that were 60 days or more past due on the date of their inclusion and any amounts relating to dilutions on Eligible Receivables included in the Receivables Pool; (iii) the failure by the Transferor or the Seller to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, or the nonconformity of any Pool Receivable or the related Contract with any such applicable law, rule or regulation; (iv) the failure to vest and maintain vested in the Agent, on behalf of the Purchaser and the Bank Investors, an undivided percentage ownership interest, to the extent of each Undivided Interest owned by them hereunder, in the Receivables in, or purporting to be in, the Receivables Pool, free and clear of any Adverse Claim, other than an Adverse Claim arising solely as a result of an act of the Agent, on behalf of the Purchaser or any Bank Investor, or any assignee therefrom (when used in this clause (iv), an Adverse Claim shall include any lien for taxes whether accrued and payable or not), whether existing at the time of any Purchase or Reinvestment of Undivided Interest or at any time thereafter; (v) the failure to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool, whether at the time of any Purchase or Reinvestment or at any time thereafter; 77 78 (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy) of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool (including, without limitation, a defense based on such Receivable's or the related Contract's not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services; (vii) any products liability claim or personal injury or property damage suit or other similar or related action arising out of or in connection with merchandise or services that are the subject of any Pool Receivable; or (viii) any tax or governmental fee or charge (including, without limitation, all intangibles and similar taxes and all other taxes, but not including taxes upon or measured by net income or any portion thereof), all interest and penalties thereon or with respect thereto, and all out-of-pocket costs and expenses, including the reasonable fees and expenses of counsel in defending against the same, which may arise by reason of the purchase or ownership of any Undivided Interest, or any other interest in the Pool Receivables or in any goods which secure any such Pool Receivables. (b) Servicer Indemnity. Without limiting any other rights which any such Person may have hereunder or under applicable law, the Servicer hereby agrees to indemnify each Indemnified Party, forthwith on demand from and against any and all Indemnified Amounts awarded against or incurred by any of them arising out of or relating to this Agreement or the ownership, servicing or funding of any Undivided Interest or in respect of any Receivable or any Contract, excluding, however, (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party and (b) recourse (except as otherwise specifically provided in this Agreement) for Defaulted Receivables and Delinquent Accounts. Without limiting the foregoing, the Servicer shall indemnify each Indemnified Party for Indemnified Amounts arising out of or relating to: (i) the breach of any representation or warranty made by the Servicer (or any of its officers) under or in connection with this Agreement, any other Agreement Document to which Servicer is a party, any Periodic Report or any other information or report delivered by the Servicer pursuant hereto, which shall have been false or incorrect in any 78 79 material respect when made or deemed made and any losses, if any, relating to Receivables included in the Receivables Pool as Eligible Receivables that were 60 days or more past due on the date of their inclusion and any amounts relating to dilutions on Eligible Receivables included in the Receivables Pool; (ii) the failure by the Servicer to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, or the nonconformity of any Pool Receivable or the related Contract with any such applicable law, rule or regulation; and (iii) any failure of the Servicer to perform its duties or obligations in accordance with the provisions of Article VIII. SECTION 14.2. Contest of Tax Claim; After-Tax Basis. If any Indemnified Party shall have notice of any attempt to impose or collect any tax or governmental fee or charge for which indemnification will be sought from the Transferor under Section 14.1(a)(viii), such Indemnified Party shall give prompt and timely notice of such attempt to the Transferor and the Transferor shall have the right, at its expense, to conduct or participate in any proceedings resisting or objecting to the imposition or collection of any such tax, governmental fee or charge. Indemnification hereunder shall be in an amount necessary to make the Indemnified Party whole after taking into account any tax consequences to the Indemnified Party of the payment of any of the aforesaid taxes and the receipt of the indemnity provided hereunder or of any refund of any such tax previously indemnified hereunder, including the effect of such tax or refund on the amount of tax measured by net income or profits which is or was payable by the Indemnified Party. SECTION 14.3. Contribution. If for any reason the indemnification provided in Section 14.1 is unavailable to an Indemnified Party or is insufficient to hold an Indemnified Party harmless, then the Transferor shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by such Indemnified Party on the one hand and the Transferor on the other hand but also the relative fault of such Indemnified Party as well as any other relevant equitable considerations. 79 80 ARTICLE XV MISCELLANEOUS SECTION 15.1. Amendments, Etc. Any provision of this Agreement or any other Agreement Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Transferor, the Servicer, the Purchaser and the Agent, as applicable (and, if Article IX or the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by each Bank Investor directly affected thereby, (i) increase the Commitment of a Bank Investor, (ii) reduce the Aggregate Purchaser's Investment or rate of interest to accrue thereon or any fees or other amounts payable hereunder, (iii) postpone any date fixed for the payment of any Scheduled distribution in respect of Aggregate Purchaser's Investment or interest with respect thereto or any fees or other amounts payable hereunder or for termination of any Commitment, (iv) change the percentage of the Commitments or the number of Bank Investors, which shall be required for the Bank Investors or any of them to take any action under this Section or any other provision of this Agreement, (v) release all or substantially all of the property with respect to which a security or ownership interest therein has been granted hereunder to the Agent or the Bank Investors,(vi) extend or permit the extension of the Commitment Termination Date, (vii) amend the definition of "Loss Reserve," "Dilution Reserve" or "Servicer's Fee Reserve," (viii) change the Concentration Limits or (ix) waive any Termination Events. In the event the Agent requests the Purchaser's or a Bank Investor's consent pursuant to the foregoing provisions and the Agent does not receive a consent (either positive or negative) from the Purchaser or such Bank Investor within 10 Business Days of the Purchaser's or Bank Investor's receipt of such request, then the Purchaser or such Bank Investor (and its percentage interest hereunder) shall be disregarded in determining whether the Agent shall have obtained sufficient consent hereunder. SECTION 15.2. Notices, Etc. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including Telex and facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or by Telex, or by facsimile, to the intended party at the address or Telex or facsimile number of such party set forth under its name on the signature pages hereof or at such other address or Telex or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective, (a) if personally delivered, when received, (b) if sent by certified mail, three Business Days after having been deposited in the mail, postage prepaid, (c) if sent by overnight courier, one 80 81 Business Day after having been given to such courier, (d) if transmitted by Telex, when sent, answerback confirmed, and (e) if transmitted by facsimile, when sent, receipt confirmed by telephone or electronic means, except that notices and communications pursuant to Article I shall not be effective until received. SECTION 15.3. No Waiver; Remedies. No failure on the part of the Agent, Bank of America, any Affected Party, any Indemnified Party, the Purchaser, any Bank Investor or any other holder of any Undivided Interest to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Without limiting the foregoing, each of Bank of America and any Enterprise Liquidity Provider or Enterprise Credit Support Provider is hereby authorized by the Transferor at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Bank of America, Enterprise Liquidity Provider or Enterprise Credit Support Provider to or for the credit or the account of the Transferor, now or hereafter existing under this Agreement, to the payment of any amounts owed by the Transferor hereunder to the Agent, any Affected Party, any Indemnified Party or the Purchaser, any Bank Investor or their respective successors and assigns; provided, however, that none of Bank of America, Enterprise Liquidity Provider or Enterprise Credit Support Provider shall, through the exercise of such setoff or otherwise, obtain payment with respect to any amounts due to it (or their respective successors and assigns) which results in its or their receiving more than their pro rata share of the aggregate of such amounts due hereunder. SECTION 15.4. Binding Effect; Survival. This Agreement shall be binding upon and inure to the benefit of the Transferor, the Servicer, the Agent, the Purchaser, the Bank Investors and their respective successors and assigns, and the provisions of Section 4.2 and Article XIV shall inure to the benefit of the Affected Parties and the Indemnified Parties, respectively, and their respective successors and assigns; provided, however, nothing in the foregoing shall be deemed to authorize any assignment not permitted by Section 13.1. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time, after the Commitment Termination Date, as all Undivided Interests shall have been reduced to zero. The rights and remedies with respect to any breach of any representa- 81 82 tion and warranty made by the Transferor or the Servicer pursuant to Article VI and the indemnification and payment provisions of Article XIV and Sections 4.2, 15.5 and 15.7 shall be continuing and shall survive any termination of this Agreement. SECTION 15.5. Costs, Expenses and Taxes. In addition to its obligations under Article XIV, the Transferor agrees to pay on demand: (a) all costs and expenses incurred by the Agent, the Purchaser, each Bank Investor, Bank of America, the Enterprise Liquidity Provider, the Enterprise Credit Support Provider and their respective Affiliates in connection with the negotiation, preparation, execution and delivery, the administration (including periodic auditing) or the enforcement of, or any actual or claimed breach of, or any amendment to or waiver of any provision contained in this Agreement, the Certificate of Assignments and the other Agreement Documents, including, without limitation (i) the reasonable fees and expenses of counsel to any of such Persons incurred in connection with any of the foregoing or in advising such Persons as to their respective rights and remedies under any of the Agreement Documents, and (ii) all reasonable out-of-pocket expenses (including reasonable fees and expenses of independent accountants) incurred in connection with any review of the Transferor's books and records either prior to the execution and delivery hereof or pursuant to Section 7.1(c); and (b) all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, the Certificate of Assignments or the other Agreement Documents, and agrees to indemnify each Indemnified Party against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 15.6. No Proceedings. The Transferor, the Servicer, Wackenhut (individually and not as Servicer) and Bank of America, individually and as Agent and each Bank Investor, each hereby agrees that it will not institute against the Purchaser or any Bank Investor or join any other Person in instituting against the Purchaser any insolvency proceeding (namely, any proceeding of the type referred to in the definition of Event of Bankruptcy) so long as any Commercial Paper Notes issued by the Purchaser shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such Commercial Paper Notes shall have been outstanding. The foregoing shall not limit the Trans- 82 83 feror's right to file any claim in or otherwise take any action with respect to any insolvency proceeding that was instituted by any Person other than the Transferor. SECTION 15.7. Bank of America Program Confidentiality. Each party hereto (other than Bank of America) acknowledges that Bank of America regards the structure of the transactions contemplated by this Agreement, and by the Enterprise Liquidity Agreement and Enterprise Credit Support Agreement and its other program documents referred to therein, to be proprietary, and each such party severally agrees that: (a) unless Bank of America shall otherwise agree in writing, and except as provided in subsection (b), such party will not disclose to any other person or entity: (i) any information regarding, or copies of, this Agreement or any transaction contemplated hereby, (ii) any information regarding the organization or business of Enterprise generally, or (iii) any information regarding Bank of America which is designated by Bank of America to such party in writing or otherwise as confidential or not otherwise available to the general public; (b) such party will make the Information available to only such of its officers, directors, employees and agents who (A) in the good faith belief of such party, have a need to know such Information, (B) are informed by such party of the confidential nature of the Information and the terms of this Section 15.7, and (C) are subject to confidentiality restrictions consistent with this Section 15.7; (c) such party will use the Information solely for the purposes of evaluating, administering and enforcing the transactions contemplated by this Agreement and making any necessary business judgments with respect thereto; and (d) such party will, upon demand, return (and cause its representatives to return) to Bank of America, or to such other Information Provider as shall have furnished it with any Information, all documents or other written material received from Bank of America or such other Information Provider which constitute or contain any Information described in subclause (B) or (C) of clause (i) above and all copies of such documents or other material in its possession or in the possession 83 84 of any of its representatives, and will not retain any copy, summary or extract thereof on any storage medium whatsoever. (e) Notwithstanding clause (i) of subsection (a), each party may disclose any Information: (i) to its attorneys, consultants and auditors who (A) in the good faith belief of such party, have a need to know such Information, (B) are informed by such party of the confidential nature of the Information and the terms of this Section 15.7, and (C) are subject to confidentiality restrictions consistent with this Section 15.7, (ii) to any other party to this Agreement, for the purposes contemplated hereby or to any rating agency then rating the Commercial Paper Notes, (iii) as may be required by any municipal, state, federal or other regulatory body having or claiming to have jurisdiction over such party, in order to comply with any law, order, regulation, regulatory request or ruling applicable to such party, or (iv) Subject to subsection (c), in the event such party is legally compelled (by interrogatories, requests for information or copies, subpoena, civil investigative demand or similar process) to disclose such Information. (f) In the event that any party hereto or any one to whom such party or its representatives transmits the Information is requested or becomes legally compelled (by interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any of the Information, such party will (or will cause its representatives to): provide Bank of America with prompt written notice so that (A) Enterprise, Bank of America, or any other Information Provider may seek a protective order or other appropriate remedy, or (B) Bank of America may, if it so chooses, agree that such party (or its representatives) may disclose such Information pursuant to such request or legal compulsion. (g) unless Bank of America agrees that such Information may be disclosed, make a timely objection to the request or compulsion to provide such Information on the basis 84 85 that such Information is confidential and subject to the agreements contained in this Section 15.7; (h) take any action as Bank of America or any other Information Provider may reasonably request to seek a protective order or other appropriate remedy, provided that, in connection therewith, such party shall have first received such assurances as it may reasonably request that Bank of America or such other Information Provider shall reimburse such party's or its representatives' reasonable costs and expenses or provide such other assistance as such party or its representatives may reasonably require; and (i) in the event that such protective order or other remedy is not obtained, or Bank of America agrees that such Information may be disclosed, furnish only that portion of the Information which is legally required to be furnished, and, provided such party (or its representative) is reimbursed or assisted as referred to in clause (iii) above, exercise best efforts to obtain reliable assurance that confidential treatment will be accorded the Information. This Section 15.7 shall survive termination of this Agreement. SECTION 15.8. Confidentiality of the Transferor Information. (a) Each party hereto (other than the Transferor) acknowledges that certain of the information provided to such party by or on behalf of the Transferor in connection with this Agreement and the transactions contemplated hereby is or may be confidential, and each such party severally agrees that, unless the Transferor shall otherwise agree in writing, and except as provided in subsection (b), such party will not disclose to any other person or entity: (i) any information regarding, or copies of, any Periodic Reports, and any non-public financial statements, reports and other information, furnished by the Transferor to the Purchaser, any Bank Investor or the Agent pursuant to Section 3.4, 6.1(j), 7.1(c) or 7.2, or (ii) any other information regarding the Transferor, Servicer, Seller and any Originator which is designated by the Transferor to such party in writing or otherwise as confidential; 85 86 the information referred to in clauses (i) and (ii), above, furnished by the Transferor or any attorney for or other representative of the Transferor (each a "Transferor Information Provider"), is collectively referred to as the "Transferor Information;" provided, however, the "Transferor Information" shall not include: (i) any information which is or becomes generally available to the general public or to such party on a nonconfidential basis from a source other than the Transferor or any other Transferor Information Provider, or which was known to such party on a nonconfidential basis prior to its disclosure by the Transferor or any other Transferor Information Provider), or (ii) general information regarding the nature of this Agreement, the basic terms hereof (including without limitation the amount and nature of the Purchaser's Investments or any Bank Investor's hereunder and of the recourse or other credit enhancement provided by the Transferor hereunder), the nature, amount and status of the Pool Receivables, and the current and/or historical ratios of losses to liquidations and/or outstandings with respect to the Receivables Pool, and the identity of the Transferor. (b) Notwithstanding subsection (a), each party may disclose any Transferor Information: (i) to any of such party's attorneys, consultants and auditors, and to such of the Enterprise Liquidity Provider, Enterprise Credit Support Provider, assignee, any dealer or placement agent for the Purchaser's commercial paper, and any actual or potential assignees of, or participants in, any of the rights or obligations of the Purchaser, Enterprise Liquidity Provider or Enterprise Credit Support Provider, Bank of America under or in connection with this Agreement, who (A) in the good faith belief of such party, have a need to know such the Transferor Information, (B) are informed by such party of the confidential nature of the Transferor Information and the terms of this Section 15.8, and (C) are subject to confidentiality restrictions generally consistent with this Section 15.8, (ii) to any rating agency that maintains a rating for the Purchaser's commercial paper or is considering the issuance of such a rating, for the purposes of reviewing the credit of the Purchaser in connection with such rating, 86 87 (iii) to any other party to this Agreement, for the purposes contemplated hereby, (iv) as may be required by any municipal, state, federal or other regulatory body having or claiming to have jurisdiction over such party, in order to comply with any law, order, regulation, regulatory request or ruling applicable to such party, or (v) subject to subsection (c), in the event such party is legally compelled (by interrogatories, requests for information or copies, subpoena, civil investigative demand or similar process) to disclose such the Transferor Information. (c) In the event that any party hereto (other than the Transferor) or any of its representatives is requested or becomes legally compelled (by interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any of the Transferor Information, such party will (or will cause its representatives to): (i) provide the Transferor with prompt written notice so that (A) the Transferor or any other the Transferor Information Provider may seek a protective order or other appropriate remedy, or (B) the Transferor may, if it so chooses, agree that such party (or its representatives) may disclose such the Transferor Information pursuant to such request or legal compulsion; (ii) unless the Transferor agrees that such the Transferor Information may be disclosed, make a timely objection to the request or compulsion to provide such the Transferor Information on the basis that such the Transferor Information is confidential and subject to the agreements contained in this Section 15.8; (iii) take any action as the Transferor or any other the Transferor Information Provider may reasonably request to seek a protective order or other appropriate remedy, provided that, in connection therewith, such party shall have first received such assurances as it may reasonably request that the Transferor or such other the Transferor Information Provider shall reimburse such party's or its representatives, reasonable costs and expenses or provide such other assistance as such party or its representatives may reasonably require; and 87 88 (iv) in the event that such protective order or other remedy is not obtained, or the Transferor agrees that such the Transferor Information may be disclosed, furnish only that portion of the Transferor Information which is legally required to be furnished, and, provided such party (or its representative) is reimbursed or assisted as referred to in clause (iii) above, exercise best efforts to obtain reliable assurance that confidential treatment will be accorded the Transferor Information. This Section 15.8 shall survive termination of this Agreement. SECTION 15.9. Captions and Cross References. The various captions (including, without limitation, the table of contents) in this Agreement are provided solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. Unless otherwise indicated, references in this Agreement to any Section, Appendix, Schedule or Exhibit are to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the case may be, and references in any Section, subsection, or clause to any subsection, clause or subclause are to such subsection, clause or subclause of such Section, subsection or clause. SECTION 15.10. Integration. This Agreement contains a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire Agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings. SECTION 15.11. Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. SECTION 15.12. Waiver Of Jury Trial. THE TRANSFEROR AND SERVICER HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT THE CERTIFICATE OF ASSIGNMENTS, ANY OTHER AGREEMENT DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY BE IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, THE CERTIFICATE OF ASSIGNMENTS OR ANY OTHER AGREEMENT DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY TRIAL. 88 89 SECTION 15.13. Consent To Jurisdictions Waiver Of Immunities. EACH OF THE TRANSFEROR AND SERVICER, THE PURCHASER, EACH BANK INVESTOR AND AGENT HEREBY ACKNOWLEDGES AND AGREES THAT: (a) IT IRREVOCABLY (i) SUBMITS TO THE JURISDICTION, FIRST, OF ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS NOT AVAILABLE, OF ANY NEW YORK STATE COURT, IN EITHER CASE SITTING IN NEW YORK CITY, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW YORK STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, AND (iii) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. (b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT. SECTION 15.14. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. SECTION 15.15. Purchaser's Liabilities. The obligations of the Purchaser hereunder are solely the corporate obligations of the Purchaser and no personal liability shall attach to or be incurred by Global Securitization Services LLC or any stockholder, employee, officer, director or incorporator of the Purchaser, and the Transferor and Servicer expressly waive any claim based on such personal liability. No recourse shall be had for an obligation or claim arising out of or based upon this Agreement against Global Securitization Services LLC or against any stockholder, employee, officer, director or incorporator of the Purchaser. This Section 15.15 shall not relieve any such Person of any liability it might otherwise have for its own gross negligence or willful misconduct. SECTION 15.16. Agent's Liabilities. The obligations of the Agent hereunder are solely the corporate obligations of such Agent and no personal liability shall attach to or be incurred by the Agent or any stockholder, employee, officer, director or incorporator of the Agent, and the Transferor and Servicer 89 90 expressly waive any claim based on such personal liability. No recourse shall be had for an obligation or claim arising out of or based upon this Agreement against Bank of America or against any stockholder, employee, officer, director or incorporator of either of them; provided that, this Section 15.16 shall not relieve any such Person of any liability it might otherwise have for its own gross negligence or willful misconduct. SECTION 15.17. Delegation of Servicer's Duties. Wackenhut, as Servicer, may at any time, with the consent of the Agent, delegate to an Affiliate of Wackenhut any of its servicing obligations hereunder, provided however that no such delegation shall operate to relieve the Servicer of any of its liabilities hereunder. SECTION 15.18. Characterization of the Transactions Contemplated by this Agreement. It is the intention of the parties hereto that the transactions contemplated hereby constitute the sale of the Undivided Interests, conveying good title thereto free and clear of any Liens to the Purchaser and the Bank Investors, as the case may be and that the Undivided Interests not be part of the Transferor's estate in an Event of Bankruptcy. If, notwithstanding the foregoing, the transactions contemplated hereby are deemed a financing, the parties intend that the Transferor shall be deemed to have granted to the Agent, for the benefit of the Purchaser and the Bank Investors and the Transferor hereby grants to the Agent, for the benefit of the Purchaser and the Bank Investors, a first priority perfected security interest in all of the Transferor's right, title and interest in, to and under the Receivables, together with Related Security and Collections with respect thereto and under the Receivables Purchase Agreement, and that this Agreement shall constitute a security agreement under applicable law. - SIGNATURE PAGES FOLLOW - 90 91 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. WACKENHUT FUNDING CORPORATION, as the Transferor By -------------------------------------------- Title ------------------------------------------ 4200 Wackenhut Drive, No. 100 Palm Beach Gardens, Florida 33410 Facsimile: (561) 691-6648 Attention: Corey Glover Telephone: (561) 622-5656 THE WACKENHUT CORPORATION, as Servicer By -------------------------------------------- Title ------------------------------------------ 4200 Wackenhut Drive, No. 100 Palm Beach Gardens, Florida 33410 Facsimile: (561) 691-6648 Attention: Corey Glover Telephone: (561) 622-5656 ENTERPRISE FUNDING CORPORATION, as Purchaser By -------------------------------------------- Title ------------------------------------------ c/o Global Securitization Services 114 West 47(th) Street, Suite 1715 New York, New York 10036 Attention: Kevin Burns Telephone: (212) 302-5151 Facsimile: (212) 302-8767 92 BANK OF AMERICA, N.A., as Agent By: -------------------------------------------- Title: Vice President IL1-231-16-05 231 South LaSalle Street Chicago, Illinois 60697-1407 Attention: Global Asset Backed Securitization Willem van Beek Telephone: (312) 828-3119 Facsimile: (312) 923-0273 Commitment: BANK OF AMERICA, N.A., $51,000,000 as Bank Investor By: -------------------------------------------- Title: Vice President IL1-231-16-05 231 South LaSalle Street Chicago, Illinois 60697-1407 Attention: Global Asset Backed Securitization Willem van Beek Telephone: (312) 828-3119 Facsimile: (312) 923-0273 Commitment: The Bank of Nova Scotia, $25,500,000 as Bank Investor By: -------------------------------------------- Title: ----------------------------------------- 600 Peachtree Street, N.E. Suite 2700 Atlanta, Georgia 30308 Telephone: (404) 877-1500 Facsimile: (404) 888-8998 93 APPENDIX A DEFINITIONS This is Appendix A to the Amended and Restated Transfer and Administration Agreement dated as of January 26, 2001 among Wackenhut Funding Corporation, The Wackenhut Corporation, and Enterprise Funding Corporation, Bank of America, N.A., as Agent and the Bank Investors (as amended, supplemented or otherwise modified from time to time, this "Agreement"). Each reference in this Appendix A to any Section, Appendix or Exhibit refers to such Section of or Appendix or Exhibit to this Agreement. A. Defined Terms. As used in this Agreement, unless the context requires a different meaning, the following terms have the meanings indicated herein below (terms used but not defined herein shall have the meanings set forth in the Revolving Credit Agreement): "Adjusted Average Maturity" has the meaning set forth in Appendix B. "Agent" has the meaning set forth in the preamble. "Adverse Claim" means a lien, security interest, charge, or encumbrance, or other right or claim of any Person other than (a) a potential claim or right (that has not yet been asserted) of a trustee appointed for an Obligor in connection with any Event of Bankruptcy or (b) an unfiled lien for taxes accrued but not yet payable. "Affected Party" means each of the Purchaser, any Bank Investor, the Enterprise Liquidity Provider, each Enterprise Credit Support Provider, any other Person providing credit or liquidity support to the Purchaser, or any Bank Investor any permitted assignee of any Purchaser, any Bank Investor, Enterprise Liquidity Provider, Enterprise Credit Support Provider or such other Person, any assignee of any of the Purchaser's obligations to any Enterprise Liquidity Provider, any Enterprise Credit Support Provider, any holder of a participation interest in the rights and obligations of any Enterprise Liquidity Provider or Enterprise Credit Support Provider, the Agent, Bank of America, and any holding company of Bank of America. "Affiliate" when used with respect to a Person, means any other Person controlling, controlled by, or under common control with, such Person. "Aggregate Unpaids" means, at any time, an amount equal to the sum of (i) the aggregate Earned Discount at such time, (ii) the A-1 94 Aggregate Total Investment at such time, and (iii) all other amounts owed (whether due or accrued) hereunder by the Transferor to the Purchaser, the Bank Investors, or the Agent at such time. "Agreement Documents" means this Agreement, the Purchase and Sale Agreement, the Receivables Purchase Agreement, the Certificate of Assignments and the other documents to be executed and delivered in connection herewith. "Aggregate Purchaser's Investments" means, at any time, with respect to the Purchaser or the Bank Investors, as the case may be, the sum of the Dollar amount of all of the Purchaser's Investments. "Aggregate Purchaser's Share" shall have the meaning set forth in Section 2.5. "Aggregate Required Allocations" at any time means the sum of all Required Allocations of all Undivided Interests. "Aggregate Unpaid Balance" has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement. "Alternate Reference Rate" has the meaning set forth in Appendix B. "Assignment Amount" with respect to a Bank Investor shall mean at any time an amount equal to the lesser of (i) such Bank Investor's Pro Rata portion of the Aggregate Purchaser's Investment at such time and (ii) such Bank Investor's pro rata portion of the aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool and (iii) such Bank Investor's unused Commitment. "Assignment and Assumption Agreement" means an Assignment and Assumption Agreement substantially in the form of Schedule 13.5(b) attached hereto. "Average Maturity" has the meaning set forth in Appendix B. "Bank Commitment" means (i) with respect to each Bank Investor party hereto, the commitment of such Bank Investor to make acquisitions from the Transferor or the Purchaser in accordance herewith in an amount not to exceed the dollar amount set forth opposite such Bank Investor's signature on the signature page hereto under the heading "Commitment", minus the dollar amount of any Commitment or portion thereof assigned pursuant to an Assignment and Assumption Agreement plus the dollar amount of any increase to such Bank Investor's Commitment consented to by such Bank Investor prior to the time of determination, (ii) with respect to any assignee of a Bank Investor A-2 95 party hereto taking pursuant to an Assignment and Assumption Agreement, the commitment of such assignee to make acquisitions from the Transferor or the Purchaser not to exceed the amount set forth in such Assignment and Assumption Agreement minus the dollar amount of any Commitment or portion thereof assigned pursuant to an Assignment and Assumption Agreement prior to such time of determination and (iii) with respect to any assignee of an assignee referred to in clause (ii), the commitment of such assignee to make acquisitions from the Transferor or the Purchaser not to exceed the amount set forth in an Assignment and Assumption Agreement between such assignee and its assign. "Bank Rate" has the meaning set forth in Appendix B. "Business Day" means a day on which both (a) Bank of America at its office in Charlotte, North Carolina is open for business and (b) commercial banks in New York City are not authorized or required to be closed for business. "Certificate of Assignments" means each certificate of assignment, by the Transferor to a Purchaser, in the form of Schedule 5.1(a), evidencing an Undivided Interest. "Collection Account" shall have the meaning set forth in Section 3.3(e). "Collections" means, with respect to any Receivable, all funds which either (a) are received by the Transferor, any Originator or Servicer from or on behalf of the related Obligors in payment of any amounts owed (including, without limitation, purchase prices, finance charges, interest and all other charges) in respect of such Receivable, or applied to such amounts owed by such Obligors (including, without limitation, insurance payments that the Transferor, each Originator or Servicer applies in the ordinary course of its business to amounts owed in respect of such Receivable and net proceeds of sale or other disposition repossessed goods or other collateral or property of the Obligor or any other party directly or indirectly liable for payment of such Receivable and available to be applied thereon), or (b) are deemed to have been received by the Transferor, any Originator or any other Person as a Collection pursuant to Section 3.3; provided that, prior to such time as Wackenhut shall cease to be Servicer, late payment charges, collection fees and extension fees shall not be deemed to be Collections. "Commercial Paper Notes" means short-term promissory notes issued or to be issued by the Purchaser to fund its investments in accounts receivable or other financial assets. A-3 96 "Commercial Paper Rate" has the meaning set forth in Appendix B. "Commitment" has the meaning set forth in Section 1.1. "Commitment Termination Date" has the meaning set forth in Section 1.5(a). "Concentration Limit" has the meaning set forth in Section 2.3(b). "Conditions Precedent" has the meaning set forth in Section 5.2. "Conduit Assignee" shall mean any commercial paper conduit administered by Bank of America and designated by Bank of America from time to time to accept an assignment from the Purchaser of all or a portion of the Purchaser's Investment. "Contract" means any writing evidencing a Receivable. "Credit and Collection Policy" shall mean the Servicer's credit and collection policy or policies and practices, relating to Contracts and Receivables existing on the date hereof and referred to in Section 8.2(a) and described in Schedule A-1, and as modified from time to time in compliance with Section 7.3(c). "Defaulted Receivable" means, without duplication, a Receivable: (a) as to which any payment, or part thereof, remains unpaid for 120 days from the original invoice date for such Receivable, (b) with regard to which an Event of Bankruptcy has occurred and remains continuing, (c) as to which payments have been extended, or the terms of payment thereof rewritten, or (d) which consistent with the Credit and Collection Policy, would be fully reserved against or required to be sent to attorneys or collection agencies or would be charged-off the Transferor's or Servicer's books as uncollectible. "Delinquent Receivable" means a Receivable that is not a Defaulted Receivable and: (a) as to which any payment, or part thereof, remains unpaid for 60 days or more from the original invoice date for such Receivable; or (b) which, consistent with the Credit and Collection Policy, would be classified as delinquent by the Transferor. "Designated Obligor" means, at any time, all Obligors of the Transferor except any such Obligor as to which the Agent has, at least three Business Days prior to the date of determination, given written notice to the Transferor that such Obligor shall not be considered a Designated Obligor. A-4 97 "Discount Factor" has the meaning set forth in Appendix B. "Dollars" and the symbol "$" means dollars constituting legal tender for the payment of public and private debts in the United States of America. "Earned Discount" has the meaning set forth in Appendix B. "Eligible Receivable" means, at any time, a Receivable: (a) which has been originated by an Originator and sold to Wackenhut pursuant to (and in accordance with) the Purchase and Sale Agreement and has been sold by Wackenhut to the Transferor pursuant to (and in accordance with) the Receivables Purchase Agreement, and to which the Transferor has good title thereto, free and clear of all adverse claims; (b) which (together with the Collections), has been the subject of either a valid transfer and assignment from the Transferor to the Agent, on behalf of the Purchaser and the Bank Investors, all of the Transferor's right, title and interest therein or the grant of a first priority security interest therein (and in the Collections and Related Security) effective until the termination of this Agreement; (c) with regard to which the related service has been rendered and all other obligations performed by the Transferor or an Originator (except as permitted by Schedule 2.3(b)), as applicable, and which is generated by the Transferor and the applicable Originator in the ordinary course of their respective business of providing Services and is required to be paid in full by the related Obligor within 60 days of the billing thereof; (d) which, (i) if the perfection of the Agent's, on behalf of the Purchaser and the Bank Investors, undivided ownership interest therein is governed by the laws of a jurisdiction where the Uniform Commercial Code -- Secured Transactions is in force, constitutes an account or general intangible as defined in the Uniform Commercial Code as in effect in such jurisdiction, and (ii) if the perfection of the Agent's undivided ownership interest therein is governed by the law of any jurisdiction where the Uniform Commercial Code -- Secured Transactions is not in force, the Transferor has furnished to the Agent such opinions of counsel and other evidence as has reasonably been requested, establishing to the reasonable satisfaction of the Agent that the Agent's undivided ownership interest and other rights with respect thereto are not significantly less protected and favorable than such rights under the Uniform Commercial code; A-5 98 (e) which is a domestic Receivable, the Obligor of which is a United States resident, and is not an Affiliate of any of the Transferor or, the Servicer or any other party hereto (other than Bank of America); (f) the Obligor of which is a Designated Obligor; (g) the Obligor of which is not the private sector Obligor of Defaulted Receivables aggregating more than 15% of such Obligor's total obligations to the Transferor and each Originator; (h) which is not a Defaulted Receivable; (i) with regard to which the warranty of the Transferor in Section 6.1(l) is true and correct; (j)(x) the sale of an undivided interest in which does not require the consent of or notice to the related Obligor under the related Contract and does not contravene or conflict with any law, and (y) in the case of Receivables generated by an Originator, the sale of which to the Transferor does not contravene or conflict with any law; (k) which is an account receivable representing all or part of the sales price of merchandise, insurance and services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended; (l) which arises out of a current transaction, or the proceeds of which have been or are to be used for current transactions, within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended; (m) which is denominated and payable only in Dollars in the United States; (n) which arises under a Contract that has been duly authorized and that, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable enforceable against such Obligor in accordance with its terms and is not subject to any dispute, offset, counterclaim or defense whatsoever (except the discharge in bankruptcy of such Obligor); (o) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, truth in lending, fair credit billing, A-6 99 fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no party to the Contract related thereto is in violation of any such law, rule or regulation in any material respect if such violation would impair the collectibility of such Receivable; (p) which (i) satisfies all applicable requirements of the Credit and Collection Policy and (ii) complies with such other criteria and requirements (other than those relating to the collectibility of such Receivable) as the Agents may from time to time specify to the Transferor following thirty days, notice; (q) as to which the Agent has not notified the Transferor that the Agent has determined, in its sole discretion, that such Receivable (or class of Receivables) is not acceptable for purchase hereunder; (r) which, if originated by Wackenhut, was originated in The Wackenhut Corporation or Wackenhut Airline Services, Inc.; (s) which does not include any amount payable for sales taxes, Payroll taxes or any other tax; and (t) the related Obligor of which is not, directly or indirectly, an Affiliate of the Transferor or any Originator. "Enterprise Credit Support Agreement" means any agreement between Enterprise and the Enterprise Credit Support Provider evidencing the obligation of the Enterprise Credit Support Provider to provide credit support to Enterprise in connection with the issuance by Enterprise of Commercial Paper. "Enterprise Credit Support Provider" means any Person or Persons who are providing or will provide credit support to Enterprise in connection with the issuance by Enterprise of Commercial Paper Notes, together with the successors and assigns of any such Person or Persons. "Enterprise Liquidity Agreement" means any agreement between Enterprise and the Enterprise Liquidity Provider evidencing the obligation of the Liquidity Provider to provide liquidity support to Enterprise in connection with the issuance by Enterprise of Commercial Paper Notes, as such agreement may be modified, amended, supplemented or restated from time to time. "Enterprise Liquidity Provider" means any Person or Persons who are providing or will provide liquidity support to Enterprise in connection with the issuance by Enterprise of Commercial Paper Notes, A-7 100 together with the successors and assigns of any such Person or Persons. "ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Rate (Reserve Adjusted)" has the meaning set forth in Appendix B. "Eurodollar Rate" means the interest rate per annum calculated according to the following formula: Eurodollar = Interbank Offered Rate + Applicable Rate 1 - Applicable Reserve Requirement Margin "Event of Bankruptcy" shall be deemed to have occurred with respect to a Person if either: (a) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or (b) such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for, such Person or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its Debts generally as they become due, or, if a corporation or similar entity, its board of directors shall vote to implement any of the foregoing. A-8 101 "Facility" has the meaning set forth in Section 1.1 of the Purchase and Sale Agreement. "Facility Fee" has the meaning set forth in the Fee Letter. "Facility Limit" means an amount equal to $76,500,000. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto or to the functions thereof. "Fee Letters" has the meaning set forth in Section 4.1(a). "GAAP" or "Generally Accepted Accounting Principles" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report. "Government Obligor" means a department, agency, bureau, division or instrumentality of the United States of America or any state thereof or the District of Columbia or any county or municipal government chartered or otherwise existing by authority of any of the foregoing, or any department, agency, bureau, division or instrumentality thereof obligated to make payments with respect to a Receivable. "Gross Revenues" for any period means the gross revenues, determined in accordance with generally accepted accounting principles, of Wackenhut and its Subsidiaries for such period, determined on a consolidated basis after eliminating revenues attributable to outstanding Minority Interests. "Headquarters" shall mean the Transferor's office located at 4200 Wackenhut Drive, No. 100, Palm Beach Gardens, Florida 33410. "Indemnified Amounts" has the meaning set forth in Section 14.1. "Indemnified Party" has the meaning set forth in Section 14.1. "Initial Purchaser" means the Transferor as Initial Purchaser under the Purchase and Sale Agreement. "Information" has the meaning set forth in Section 15.7. "Information Provider" has the meaning set forth in Section 15.7. A-9 102 "Interest Component" shall mean, (i) with respect to any Related Commercial Paper issued on an interest-bearing basis, the interest payable on such Related Commercial Paper at its maturity and (ii) with respect to any Related Commercial Paper issued on a discount basis, the portion of the face amount of such Related Commercial Paper representing the discount incurred in respect thereof (including any dealer commissions to the extent included as part of such discount). "Investments" means all investments, in cash or by delivery of Property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or Security or by loan, advance, capital contribution or otherwise; provided, however, that "Investments" shall not mean or include routine investments in Property to be used or consumed in the ordinary course of business or investments in accounts receivable or notes receivable arising in the ordinary course of business. In valuing any investments for the purpose of applying the limitations set forth in this Agreement, such investments, loans and advances shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For purposes of this Agreement, at any time when a corporation becomes a Subsidiary, all Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Subsidiary, at such time. "Involuntary Federal Proceeding" has the meaning set forth in Section 10.2(b). "Letter of Credit" or "Letters of Credit" shall have the meaning set forth in the Revolving Credit Agreement. "Lock-Box Agreement" means a letter agreement, in substantially the form of Schedule 5.1(h), between the Transferor and any Lock-Box Bank. "Lock-Box Bank" means any of the banks holding one or more lock-box accounts for receiving Collections from Pool Receivables. "Losses" means, at any time, with respect to the Receivables Pool, the sum of (x) all Receivables theretofore fully reserved against by the Transferor or Servicer plus (y), without duplication, all Receivables theretofore sent to attorneys or collection agencies to be collected plus (z), without duplication, all Receivables theretofore charged-off the Transferor's or Servicer's books as uncollectible. A-10 103 "Losses to Liquidations Ratio" means the percentage that (x) Losses during the three fiscal month period ending on the most recent Month End Date on all Pool Receivables owned by the Transferor was of (y) Collections of such Pool Receivables during such period. "Loss Reserve Discount" has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement. "Maximum Purchase Limit" has the meaning set forth in clause (x) of Section 1.2(a). "Month End Date" means the last day of each fiscal month. "Negative Spread Fee" has the meaning set forth in Appendix B. "Net Pool Balance" has the meaning set forth in Section 2.3(a). "Note Fee" has the meaning set forth in Section 4.1(e). "Obligor" means a Person (including any Affiliate of such Person) obligated to make payments with respect to a Receivable. "Originator" means, at any time, each Subsidiary of the Seller at such time a signatory to the Purchase and Sale Agreement. "Originator Receivable" means the indebtedness owed to any Originator by any Obligor (without giving effect to any purchase under the Purchase and Sale Agreement by The Wackenhut Corporation and any purchase under the Receivables Purchase Agreement by Wackenhut Funding Corporation, in each case, at any time) under a Contract. "Periodic Report" means a report in substantially the form of Schedule 3.4(a). "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or limited liability partnership, government or any agency or political subdivision thereof or any other entity. "Pool Receivable" means a Receivable in the Receivables Pool. "Program Fee" shall have the meaning set forth in the Fee Letter; provided, however, that if at any time the certificate furnished to the Agent pursuant to Sections 7.5(a) or (b) hereof shall disclose that Consolidated Indebtedness exceeds 40% of Consolidated Total Capitalization and does not exceed 50% of Consolidated Total Capitalization, then 0.25% shall be added to the Program Fee set forth A-11 104 in the Fee Letter (such incremental amount, the "Step-up Fee") effective for the full fiscal quarter immediately following the calculation date of such covenant. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. "Purchase" has the meaning set forth in Section 1.1(a). "Purchase and Sale Agreement" means that certain Amended and Restated Purchase and Sale Agreement dated as of December 30, 1997 between the Seller as Initial Purchaser and Wackenhut Airline Services, Inc. and each other Affiliate of the Seller from time to time a party thereto, as the same may be amended and otherwise modified from time to time. "Purchase and Sale Indemnified Amounts" has the meaning set forth in Section 9.1 of the Purchase and Sale Agreement "Purchase and Sale Indemnified Parties" has the meaning set forth in forth in Section 9.1 of the Receivable Purchase Agreement. "Purchase Limit" has the meaning set forth in Section 1.2(a). "Purchase Price" has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement. "Purchase Termination Date" has the meaning set forth in Section 1.6. "Purchaser" has the meaning set forth in the preamble. "Purchaser Rate" has the meaning set forth in Appendix B. "Purchaser's Investment" has the meaning set forth in Section 2.2. "Purchaser's Share" has the meaning set forth in Section 2.4. "Rate Variance Factor" has the meaning set forth in Appendix B. "Receivable" means (i) the indebtedness owed to any Originator by any Obligor (without giving effect to any purchase under the Purchase and Sale Agreement by the Seller at any time) under a Contract and sold by any such Originator to the Seller pursuant to the Purchase and Sale Agreement and sold by the Seller to the Transferor pursuant to the Receivables Purchase Agreement, and (ii) the indebtedness owed to the Seller by any Obligor (without giving effect A-12 105 to any purchase under the Receivables Purchase Agreement by the Transferor at any time) under a Contract and sold by the Seller to the Transferor pursuant to the Receivables Purchase Agreement, in each case whether constituting an account, chattel paper, instrument, investment property or general intangible, arising in connection with the sale or lease of merchandise or the rendering of Services by any Originator or the Seller, and includes the right to payment of any interest or Finance Charges and other obligations of such Obligor with respect thereto. "Receivable Purchase Termination Date" has the meaning set forth in Section 1.4 of the Receivable Purchase Agreement. "Receivable Purchase Termination Events" has the meaning set forth in Section 8.1 of the Receivable Purchase Agreement. "Receivables Pool" means at any time all then outstanding Receivables which (a) arose from or relate to a Contract, and (b) as to which the Obligors thereunder are Designated Obligors. If a Receivable is a Pool Receivable on the day immediately preceding the Commitment Termination Date, such Receivable shall continue to be considered a Pool Receivable at all times thereafter. "Receivables Purchase Agreement" means that certain Purchase Agreement dated as of December 30, 1997, between the Seller and the Transferor, with respect to the purchase of the Pool Receivables by the Transferor, as the same may be altered or supplemented from time to time. "Regulation D" means Regulation D of the Federal Reserve Board, or any other regulation of the Federal Reserve Board that prescribes reserve requirements applicable to nonpersonal time deposits or "Eurocurrency Liabilities" as presently defined in Regulation D, as in effect from time to time. "Regulatory Change" means, relative to any Affected Party: (a) any change in (or the adoption, implementation, phase-in or commencement of effectiveness of) any: (i) United States federal or state law or foreign law applicable to such Affected Party; (ii) regulation, interpretation, directive, requirement or request (whether or not having the force of law) applicable to such Affected Party of (A) any court, government authority charged with the interpretation or administration of any law referred in clause (a)(i) or of A-13 106 (3) any fiscal, monetary or other authority having jurisdiction over such Affected Party; or (iii) generally accepted accounting principles or regulatory accounting principles applicable to such Affected Party and affecting the application to such Affected Party of any law, regulation, interpretation, clause (a)(i) or (a)(ii) above; or (b) any change in the application to such Affected Party of any existing law, regulation, interpretation, directive, requirement, request or accounting principles referred to in clause (a)(i), (a)(ii) or (a)(iii) above. "Reinvestment" has the meaning set forth in Section 1.01(b). "Reinvestment Termination Date" means the second Business Day after the delivery by the Purchaser to the Transferor of written notice that the Purchaser elects to commence the amortization of its Purchaser's Investment or otherwise liquidate its interest in the Receivables Pool. "Related Commercial Paper" shall mean Commercial Paper issued by the Purchaser the proceeds of which were used to acquire, or refinance the acquisition of, an interest in Receivables with respect to the Transferor. "Related Security" means, with respect to any Receivable, Seller Receivable, or Originator Receivable, as the case may be: (a) all of the Transferor's right, title and interest in and to all Contracts or other agreements that relate to such Receivable; (b) all of the Transferor's interest in the merchandise (including returned merchandise), if any, relating to the sale which gave rise to such Receivable; (c) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise; (d) the assignment to any Agent, for the benefit of Purchaser and any assignee, of all UCC financing statements covering any collateral securing payment of such Receivable (but such assignment is made only to the extent of the interest of the Purchaser in the respective Receivable); and (e) all guarantees and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise. The interest of the Purchaser in any Related Security is only to the extent of the Purchaser's Undivided interest, as more fully described in the definition of an Undivided Interest. A-14 107 "Remaining Collections" has the meaning set forth in Section 3.1(a)(ii). "Required Allocations" has the meaning set forth in Section 2.1. "Required Allocations Limit" has the meaning set forth in Section 1.2(b). "Reserve Percentage" has the meaning set forth in Appendix B. "Revolving Credit Agreement" shall mean that certain Credit Agreement, dated as of November 13, 2000, as amended by Amendment No. 1 thereto, dated as of December 12, 2000 (without giving effect to any further amendments thereto), by and among the Servicer, Bank of America, Scotiabanc Inc., First Union National Bank and certain other lenders. "Run Off Day" for any Undivided Interest means any of (a) each day which occurs on or after the date designated by any Agent to the Transferor to be the "Run Off Commencement Date", provided such date is designated on at least one Business Day's notice during a time when any of the conditions set forth in Section 5.2 are not satisfied, and on or before the date, if any, designated by the Agent in its sole discretion on at least one Business Day's notice to the Transferor as the "Run Off Termination Date", and (b) each day which occurs on or after the Termination Date for such Undivided Interest. "Run Off Discount" has the meaning set forth in Appendix B. "Run Off Period" means one or more successive Run Off Days. "Run Off Servicer's Fee" has the meaning set forth in Appendix B. "Scheduled Commitment Termination Date" has the meaning set forth in Section 1.2(a). "Security" shall have the same meaning as in Section 2(l) of the Securities Act of 1933, as amended. "Seller Receivables" means (i) the indebtedness owed to any Originator by any Obligor (without giving effect to any purchase under the Purchase and Sale Agreement by The Wackenhut Corporation and any purchase under the Receivables Purchase Agreement by Wackenhut Funding Corporation, in each case, at any time) under a Contract and sold by any such Originator to The Wackenhut Corporation pursuant to the Purchase and Sale Agreement, and (ii) the indebtedness owed to The Wackenhut Corporation by any Obligor (without giving effect to any A-15 108 purchase under the Receivables Purchase Agreement by Wackenhut Funding Corporation, at any time) under a Contract, in each case, and sold by The Wackenhut Corporation to Wackenhut Funding Corporation pursuant to the Receivables Purchase Agreement, in each case whether constituting an account, chattel paper, instrument, investment property or general intangible, arising in connection with the sale or lease of merchandise or the rendering of Services by any Originator or the Wackenhut Corporation, and includes the right to payment of any interest or Finance Charges and other obligations of such Obligor with respect thereto. "Servicer" initially means The Wackenhut Corporation, and thereafter the Person determined pursuant to Section 8.1(a). "Servicer Transfer Event" has the meaning set forth in Section 8.01(b). "Servicer's Fee", has the meaning set forth in Appendix B. "Servicer's Fee Reserve" has the meaning set forth in Appendix B. "Services" means (i) security related services (including, without limitation, physical security, investigations, transit security, nuclear site security, emergency protection and similar services) and (ii) corrections related services (including, without limitation, correctional facility guard, food and similar services). "Settlement Date" means the last day of each Settlement Period. "Settlement Period" for any Undivided Interest means (a) each period commencing on the first day of each Yield Period for such Undivided Interest and ending on the last day of such Yield Period; and (b) on and after the Termination Date for such Undivided Interest, such period (including, without limitation, a daily period) as shall be selected from time to time by the Agent or, in absence of any such selection, each period of thirty days from the next preceding Settlement Date; provided, however, that (i) with respect to any Yield Period of one day (as described in clause (ii) of the proviso of the definition of "Yield Period"), the related Settlement Period shall be the first day following such Yield Period; A-16 109 (ii) any Settlement Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day; and (iii) the last Settlement Period shall end on the date on which all Undivided Interests have been reduced to zero. "Solvent" shall mean, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and present fair saleable value) is in excess of the total amount of its liabilities, including, without limitation, contingent liabilities; (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "Special Concentration Limit" has the meaning set forth in Section 2.3(c). "Step-Up Fee" has the meaning set forth in the definition of "Program Fee." "Successor Notice" has the meaning set forth in Section 8.1(b). "Termination Date" for any Undivided Interest means the Commitment Termination Date. "Termination Event" has the meaning set forth in Section 10.1. "Three-Month Default Ratio" means the ratio (expressed as a percentage) computed as of any Month End Date by dividing (x) the aggregate Unpaid Balance of all Defaulted Receivables calculated as at each of the three most recent Month End Dates less Losses (without giving effect to clause (z) of the definition thereof) at the three preceding fiscal Month End Dates by (y) the aggregate Unpaid Balance of all Pool Receivables calculated as at each of the three most recent Month End Dates less Losses (without giving effect to clause (z) of the definition thereof) at the three most recent fiscal Month End Dates. "Three-Month Dilution Ratio" means the ratio (expressed as a percentage) computed as of each Month End Date by dividing (x) the aggregate reduction in the Unpaid Balance of all Pool Receivables arising from dilutive credits during the three immediately preceding fiscal months by (y) Collections of Pool Receivables received during such period. "Total Capitalization" means the sum of (i) Consolidated Funded Debt plus (ii) Consolidated Net Worth. A-17 110 "Transferor" has the meaning set forth in the preamble. "Transferor Information" has the meaning set forth in Section 15.8. "Transferor Information Provider" has the meaning set forth in Section 15.8. "UCC" means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction or jurisdictions. "Undivided Interest" has the meaning set forth in Section 2.1. "Unmatured Termination Event" means any event which, with the giving of notice or lapse of time, or both, would become a Termination Event. "Unpaid Balance" of any Receivable means at any time the sum of (x) the unpaid principal amount thereof, plus (y) the unpaid amount of all finance charges, interest payments and other amounts actually accrued thereon at such time, but excluding, in the case of clause (y) next above, all late payment charges, delinquency charges, and extension or collection fees. "Wackenhut" has the meaning set forth in the preamble. "Wackenhut Family" means (i) George R. Wackenhut, Ruth J. Wackenhut, Richard R. Wackenhut and other lineal descendants of George R. Wackenhut, the founder of Wackenhut; (ii) the spouses and lineal descendants of the persons named in clause (i); and (iii) the estates or legal representatives of the persons named in clause (i). "WCC" means Wackenhut Corrections Corporation, a Florida corporation. "Yield Period" means with respect to any Undivided Interest (or portion thereof): (a) the period commencing on the date of the initial Purchase of such Undivided Interest (or such portion) and ending such number of days thereafter (not to exceed 100 days) as the Agent shall select, after consultation with the Transferor, pursuant to Sections 1.3 or 2.1(b); and (b) thereafter, each period commencing on the last day of the immediately preceding Yield Period for such Undivided Interest (or such portion) and ending such number of days A-18 111 thereafter (not to exceed 100 days) as the Agent shall select, after consultation with the Transferor; provided, however, that (i) any such Yield Period (other than a Yield Period consisting of one day) which would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day (unless the related Undivided Interest shall be accruing Earned Discount at a rate determined by reference to the Eurodollar Rate (Reserve Adjusted), in which case if such succeeding Business Day is in a different fiscal month, such Yield Period shall instead be shortened to the next preceding Business Day); (ii) in the case of Yield periods of one day for any Undivided Interest, (A) the Initial Yield Period shall be the day of the related Purchase; and (B) any subsequently occurring Yield Period which is one day shall, if the immediately preceding Yield Period is more than one day, be the last day of such immediately preceding Yield Period, and if the immediately preceding Yield Period is one day, shall be the next day following such immediately preceding Yield Period. The "related" Yield Period for any Undivided Interest at any time means the Yield Period pursuant to which Earned Discount is then accruing for such Undivided Interest. B. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. C. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". A-19 112 APPENDIX B CALCULATION OF DISCOUNT AND RESERVE This is Appendix B to the Amended and Restated Transfer and Administration Agreement dated as of January 26, 2001 among Wackenhut Funding Corporation, The Wackenhut Corporation, Enterprise Funding Corporation and Bank of America, N.A., as Agent and the Bank Investors (as amended, supplemented or otherwise modified from time to time, the "Agreement"). Capitalized terms used in this Appendix B without definition have the meanings assigned to such terms in Appendix A to the Agreement or in the Revolving Credit Agreement. Each reference in this Appendix B to any Section refers to such Section of the Agreement. Each reference in this Appendix B to any Part refers to the part of this Appendix B so designated. PART I DISCOUNT FACTOR
Sub- Part Term Page No. - ---- ---- -------- A. Discount Factor.............................. B-2 B. Earned Discount.............................. B-3 C. Negative Spread Fee.......................... B-3 D. Run Off Discount............................. B-3 E. Rate Definitions............................. B-4 Alternate Reference Rate................. B-4 Applicable Eurodollar Spread............. B-5 Bank Rate................................ B-5 Commercial Paper Rate.................... B-5 Domestic CD Rate......................... B-6 Assessment Rate.......................... B-6 Reserve Requirement...................... B-7 Eurodollar Rate (Reserve Adjusted)....... B-6 Purchaser Rate........................... B-6 F. Rate Variance Factor......................... B-7
B-1 113 PART II LOSS RESERVE; DILUTION RESERVE
Sub- Part Term Page No. - ---- ---- -------- A. Loss Reserve B-10.............................................. B-7 B. Reserve Percentage............................................. B-8 C. Dilution Reserve............................................... B-8 PART III SERVICER'S FEE RESERVE A. Servicer's Fee Reserve......................................... B-8 B. Servicer's Fee................................................. B-9 C. Run Off Servicer's Fee......................................... B-9 PART IV ADJUSTED AVERAGE MATURITY A. Adjusted Average Maturity...................................... B-9 B. Average Maturity............................................... B-10
PART I DISCOUNT FACTOR A. Discount Factor. The "Discount Factor" for a related Undivided Interest at any time in a Yield Period means an amount determined as follows: DF = ED + ROD where: DF = the Discount Factor of such Undivided Interest at such time; ED = Earned Discount of such Undivided Interest accrued and unpaid at such time, as determined pursuant to Part I.B; ROD = Run Off Discount of such Undivided Interest at such time, as determined pursuant to Part I.D. B-2 114 B. Earned Discount. The "Earned Discount" for any Undivided Interest for each day in a related Yield Period means an amount determined as follows: ED = [PI x (PR + PF) x 1/360] + NSF (if any); ED = Earned Discount of such Undivided Interest (or such portion) accrued on such day; PI = the Purchaser's Investment of such Undivided Interest (or such portion) on such day, as determined pursuant to Section 2.2; PR = the Purchaser Rate for such Undivided Interest (or such portion) on such day, as defined in Part I.E.; PF = the Program Fee consisting of the fee as calculated pursuant to the Fee Letters; and NSF = the Negative Spread Fee for such Undivided Interest or such portion thereof) on such day, as defined in Part C. No provision of the Agreement shall require the payment or permit the collection of Earned Discount in excess of the maximum permitted by applicable law. Earned Discount for any Undivided Interest shall not be considered paid by any distribution if at any time such distribution is rescinded or must otherwise be returned for any reason. C. Negative Spread Fee. The "Negative Spread Fee" means, for each Undivided Interest (or portion thereof) for each day in any Yield Period during which any Run Off Day or Termination Date for such Undivided Interest occurs, the amount, if any, by which; (i) the additional Earned Discount (calculated without taking into account any Negative Spread Fee) which would have accrued on the reductions of the related Purchaser's Investment of such Undivided Interest (or such portion) during such Yield Period (as so computed) if such reductions had remained as Purchaser's Investment exceeds, (ii) the income, if any, received by the owner of such Undivided Interest (or such portion) from such owner's investing the proceeds of such reductions of Purchaser's Investment. D. Run Off Discount. The "Run Off Discount" for the related Undivided Interest at any time means an amount determined as follows: B-3 115 ROD = PI x (PR + RVF) x AAM --------------------- 360 where: ROD = the Run Off Discount for such Undivided Interest at such time; PI = the Purchaser's Investment of such Undivided Interest at such time; PR = the Purchaser Rate for such Undivided Interest for a Yield Period deemed to commence at such time pursuant to Part I.E; AAM = the Adjusted Average Maturity of the Receivables Pool related to such Undivided Interest, as determined pursuant to Part V; and RVF = the Rate Variance Factor deemed to be in effect at such time, as determined pursuant to Part I.F. E. Rate Definitions. The "Alternate Reference Rate" means, on any date, a fluctuating rate of interest per annum equal to the higher of (a) the rate of interest most recently announced by Bank of America at its office in Charlotte, North Carolina as its reference rates from time to time, changing when and as said reference rates change (such reference rates are not necessarily the lowest or best rate charged by Bank of America) and (b) the Federal Funds Rate (as defined below) most recently determined by Bank of America plus .5% per annum. For purposes of this definition, "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal (for each day during such period) to (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (ii) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on B-4 116 such transactions received by Bank of America from three federal funds brokers of recognized standing selected by it. The Alternate Reference Rate is not necessarily intended to be the lowest rate of interest determined by BofA or Bank of America in connection with extensions of credit. "Applicable Eurodollar Spread" The sum of (i) the Applicable Facility Fee and (ii) the Applicable Margin on Eurodollar Rate Loans, in each case as defined in the Revolving Credit Agreement. "Bank Rate" for any Yield Period for the related Undivided Interest of any Purchaser or Bank Investor, as the case may be, means an interest rate per annum equal to the sum of (a) .25% per annum, plus (b) the amount of the Applicable Eurodollar Spread, plus (c) the Eurodollar Rate (Reserve Adjusted) of such Purchaser for such Yield Period, that if (i) it shall become unlawful for the Agent, any Enterprise Liquidity Provider or Enterprise Credit Support Provider to obtain funds in the London interbank eurodollar market in order to fund any Purchase or to maintain any Undivided Interest, or if such funds shall not be reasonably available to the Agent, Enterprise Liquidity Provider or Enterprise Credit Support Provider or (ii) there shall not be time prior to the commencement of an applicable Yield Period to determine a Eurodollar Rate in accordance with its terms, then the "Bank Rate" for any Yield Period for such Undivided Interest shall be a rate equal to the Alternate Reference Rate. "Commercial Paper Rate" for any Yield Period for the related Undivided Interest means a rate per annum equal to the sum of (i) the rate or, if more than one rate, the weighted average of the rates, determined by converting to an interest-bearing equivalent rate per annum the discount rate (or rates) at which Commercial Paper Notes having a term equal to such Yield Period and to be issued to fund the Purchase of or to maintain such Undivided Interest by the Purchaser purchasing such Undivided Interest (including, without limitation, Purchaser's Investment and accrued and unpaid Earned Discount) may be sold by any placement agent or commercial paper dealer selected by the Agent, as agreed between each such dealer and the Agent, plus (ii) the greater of (A) the commissions and charges charged by such placement agent or commercial paper dealer with respect to such Commercial Paper Notes and (B) the Dealer Fee as described in the Fee Letter. "Eurodollar Rate (Reserve Adjusted)" means, with respect to Undivided Interests owned or otherwise funded by Bank of America, Enterprise, any Enterprise Liquidity Provider or any Enterprise Credit Support Provider and with respect to any Yield Period for any related Undivided Interest (or portion thereof), a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of it) of (A) the rate B-5 117 obtained by dividing (i) the applicable LIBO Rate by (ii) a percentage equal to 100% minus the reserve percentage used for determining the maximum reserve requirement as specified in Regulation D (including without limitation any marginal, emergency, supplemental, special or other reserves) that is applicable to the Enterprise Liquidity Provider during such Yield Period in respect of eurocurrency or eurodollar funding, lending or liabilities (or, if more than one percentage shall be so applicable, the daily average of such percentage for those days in such Yield Period during which any such percentage shall be applicable) plus (B) the then daily net annual assessment rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) as estimated by the Enterprise Liquidity Provider for determining the current annual assessment payable by the Liquidity Provider to the FDIC in respect of eurocurrency or eurodollar funding, lending or liabilities; where: "LIBO Rate" means, with respect to any Yield Period, the rate at which deposits in dollars are offered to Bank of America, the Enterprise Liquidity Provider or the Enterprise Credit Support Provider in the London interbank market at approximately 11:00 a.m. (London time) two Enterprise Eurodollar Business Days before the first day of such Yield Period in an amount approximately equal to the Purchaser's Investment for a related Undivided Interest to which the Eurodollar Rate (Reserve Adjusted) is to apply and for a period of time approximately equal to the applicable Yield Period. "Purchaser Rate" for any Yield Period for any related Undivided Interest (or portion thereof) of any Purchaser means: (a) in the case of an Undivided Interest (or portion thereof) of any Purchaser other than one referred to in clause (b) of this definition, the Commercial Paper Rate of such Purchaser for such Undivided Interest (or such portion) for such Yield Period; and (b) in the case of an Undivided Interest (or portion thereof) owned or funded by a Bank Investor, an Enterprise Liquidity Provider or an Enterprise Credit Support Provider, the Bank Rate of such Purchaser for such Undivided Interest (or such portion) for such Yield Period; provided, however, that on any day when any Termination Event or Unmatured Termination Event shall have occurred and be continuing, the B-6 118 Purchaser Rate shall mean a rate per annum equal to the Alternate Reference Rate in effect on such day plus 2% per annum. "Reserve Requirement" means, for purposes of this definition and with respect to any Yield Period, a percentage (expressed as a decimal) equal to the daily average during such Yield Period of the aggregate reserve requirement (including all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other Scheduled changes in reserve requirements during such period) specified under Regulation D, as applicable to the class of banks of which Bank of America is a member, on deposits of the types used as a reference in determining the Domestic CD Rate and having a maturity approximately equal to such Yield Period. F. Rate Variance Factor. The "Rate Variance Factor" means, during any Yield Period, such percentage per annum not exceeding 2% as the Agent may designate from time to time in its sole discretion. PART II LOSS RESERVE A. Loss Reserve. The "Loss Reserve" of any Undivided Interest on any day means the greater of (x) $3,750,000 and (y) an amount determined as follows: LR = RP x (PI + DF) where: LR = the Loss Reserve of such Undivided Interest on such day; RP = the Reserve Percentage at the close of business of Purchaser on such day, as determined pursuant to Part II.B; PI = the related Purchaser's Investment of such Undivided Interest at the opening of business of Purchaser on such day, as determined pursuant to Section 1.3; and DF = the Discount Factor of such Undivided Interest at the close of business of Purchaser on such day, as determined pursuant to Part I.A. B. Reserve Percentage. The "Reserve Percentage" means, for the related Undivided Interest on any day, the greatest of (i) three times B-7 119 the most recent Three-Month Default Ratio, (ii) 1.5 times the percentage that the largest Special Concentration Limit set forth on Schedule 2.3(b) bears to the then Aggregate Unpaid Balance of Eligible Receivables and (iii) 10%. C. Dilution Reserve. The "Dilution Reserve" for the related Undivided Interest on any day means an amount equal to the product of (x) the related Purchaser's Investment of such Undivided Interest at the close of business of Purchaser on such day, as determined pursuant to Section 1.3 and (y) the greater of (i) 2% and (ii) 1.5 times the highest Three-Month Dilutions Ratio calculated on the Month End Date for each of the six fiscal months preceding or ending on such day. PART III SERVICER'S FEE RESERVE A. Servicer's Fee Reserve. The "Servicer's Fee Reserve" for the related Undivided Interest at any time means an amount determined as follows: SFR = SF + ROSF where: SFR = the Servicer's Fee Reserve for such Undivided Interest at any time; SF = the unpaid Servicer's Fee relating to such Undivided Interest accrued to such time and unpaid as determined pursuant to Part III B; and ROSF = the Run Off Servicer's Fee for such Undivided interest at such time, as determined pursuant to Part III.C. B. Servicer's Fee. The "Servicer's Fee" relating to any Undivided Interest accrued for any day means (i) an amount equal to (x) .50% per annum, times (y) the amount of the related Purchaser's Investment at the close of business on such day, times (z) 1/360; or (ii) on and after Servicer's reasonable request made at any time when the Transferor shall no longer be Servicer, an alternative amount specified by Servicer not exceeding (x) 110% of Servicer's cost and expenses of B-8 120 performing its obligations under the Agreement during the Yield Period when such day occurs, divided by (y) the number of days in such Yield Period. C. Run Off Servicer's Fee. The "Run Off Servicer's Fee" for any Undivided Interest at any time means an amount equal to (x) the related Purchaser's Investment at such time, times (y) (A) the percentage per annum set forth in clause (i) (x) of the definition of "Servicer's Fee", or (B) if Servicer's Fee is calculated pursuant to clause (ii) of such definition, the percentage per annum determined for each day by dividing the amount of the Servicer's Fee accrued for such day by the related Purchaser's Investment at the close of business on such day, multiplying the quotient by 360 and expressing the product as a percentage, times (z) a fraction, the numerator of which is the number of days equal to the then Adjusted Average Maturity, and the denominator of which is 360 days. PART IV ADJUSTED AVERAGE MATURITY "Adjusted Average Maturity" means, on any day, the product of (i) 2 times (ii) the Average Maturity for such day. "Average Maturity" means, on any day, that time period (expressed in days) equal to the weighted average maturity of the Pool Receivables as shall be calculated by Servicer, as set forth in the most recent Periodic Report in accordance with the provisions thereof. If the Agent shall disagree with any such calculation, the Agent may recalculate the Average Maturity for such day, which calculation shall, absent manifest error, be binding upon Servicer, the Transferor and Purchaser. B-9 121 AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT Dated as of January 26, 2001 Among WACKENHUT FUNDING CORPORATION, as Transferor and THE WACKENHUT CORPORATION, individually and as Servicer and ENTERPRISE FUNDING CORPORATION, as Purchaser and BANK OF AMERICA, N.A., as Agent 122 TABLE OF CONTENTS
Page ---- ARTICLE I THE COMMITMENT ............................................................ 2 SECTION 1.1. Commitment ................................................ 2 SECTION 1.2. Purchase and Reinvestment Limits .......................... 3 SECTION 1.3. Making Purchases from the Transferor ...................... 4 SECTION 1.5. Commitment Termination Date ............................... 4 SECTION 1.6. Purchase Termination Date ................................. 5 SECTION 1.7. Voluntary Termination of Commitment or Reduction of Maximum Purchase Limit ............................... 5 SECTION 1.8. Limitation of Ownership Interest .......................... 6 SECTION 1.9. Special Undivided Interests ............................... 6 SECTION 1.10. Benefits of Agreement ..................................... 6 ARTICLE II UNDIVIDED INTEREST AND PURCHASER'S SHARE .................................. 7 SECTION 2.1. Undivided Interest ........................................ 7 SECTION 2.2. Purchaser's Investment .................................... 8 SECTION 2.3. Net Pool-Balance .......................................... 10 SECTION 2.4. Shares .................................................... 11 ARTICLE III SETTLEMENTS ............................................................... 12 SECTION 3.1. Non-Run Off Settlement Procedures for Collections (a) Daily Procedure ................................................. 12 SECTION 3.2. Run Off-Settlement Procedures for Collections ............. 13 SECTION 3.3. Special Settlement Procedures: Reduction of Purchaser's Investment, Etc .......................................... 15 SECTION 3.4. Reporting ................................................. 18 SECTION 3.5. Payments and Computations, Etc ............................ 18 SECTION 3.6. Dividing or Combining Undivided Interests ................. 19 SECTION 3.7. Treatment of Collections and Deemed Collections ........... 20 ARTICLE IV FEES AND YIELD PROTECTION ................................................. 20 SECTION 4.1. Fees ...................................................... 20 SECTION 4.2. Yield Protection .......................................... 21
123 ARTICLE V CONDITIONS OF PURCHASES ................................................... 23 SECTION 5.1. Conditions Precedent to Initial Purchase .................. 23 SECTION 5.2. Conditions Precedent to All Purchases and Reinvestments ... 27 SECTION 5.3. Additional Condition Precedent to Purchases ............... 28 ARTICLE VI REPRESENTATIONS AND WARRANTIES ............................................ 28 SECTION 6.1. Representations and Warranties of the Transferor .......... 28 SECTION 6.2. Representations and Warranties of the Servicer ............ 33 ARTICLE VII GENERAL COVENANTS OF THE TRANSFEROR AND SERVICER .......................... 38 SECTION 7.1. Affirmative Covenants of the Transferor ................... 38 SECTION 7.2. Reporting Requirements of the Transferor .................. 42 SECTION 7.3. Negative Covenants of the Transferor ...................... 44 SECTION 7.4. Affirmative Covenants of Servicer ......................... 45 SECTION 7.5. Reporting Requirements of Servicer ........................ 48 SECTION 7.6. Negative Covenants of the Servicer ........................ 50 SECTION 7.7. Financial Covenants of the Servicer ....................... 52 ARTICLE VIII ADMINISTRATION AND COLLECTION ............................................. 53 SECTION 8.1. Designation of Servicer ................................... 53 SECTION 8.2. Successor Notice: Servicer Transfer Event ................. 54 SECTION 8.3. Subcontracts .............................................. 54 SECTION 8.4. Duties of Servicer ........................................ 54 SECTION 8.5. Allocation of Collections; Segregation .................... 55 SECTION 8.6. Modification of Receivables ............................... 55 SECTION 8.7. Documents and Records ..................................... 55 SECTION 8.8. Certain Duties to the Transferor .......................... 56 SECTION 8.9. Lock-Box Accounts ......................................... 56 SECTION 8.10. Rights of the Agent ....................................... 56 SECTION 8.11. Rights on Servicer Transfer Event ......................... 57 SECTION 8.12. Responsibilities of the Transferor ........................ 57 SECTION 8.13. Further Action Evidencing Purchases ....................... 58 SECTION 8.14. Application of Collections ................................ 59
iii 124 ARTICLE IX SECURITY INTEREST ......................................................... 59 SECTION 9.1. Grant of Security Interest ................................ 59 SECTION 9.2. Further Assurances ........................................ 60 SECTION 9.3. Remedies .................................................. 60 ARTICLE X [RESERVED] ................................................................ 60 ARTICLE XI TERMINATION ............................................................... 60 SECTION 11.1. Termination Events ........................................ 60 SECTION 11.2. Remedies .................................................. 63 ARTICLE XII THE AGENT ................................................................. 64 SECTION 12.1. Authorization and Action .................................. 64 SECTION 12.2. Agents' Reliance, Etc ..................................... 65 SECTION 12.3. Agents and Affiliates ..................................... 65 ARTICLE XIII BANK COMMITMENT; ASSIGNMENT OF PURCHASER'S INTEREST ....................... 66 SECTION 13.1. Rights as Bank Investor ................................... 66 SECTION 13.2. Indemnification of the Agent .............................. 67 SECTION 13.3. Non-Reliance .............................................. 67 SECTION 13.4. Payments by the Agent ..................................... 68 SECTION 13.5. Bank Commitment; Assignment to Bank Investors ............. 68 SECTION 13.6. Restrictions on Assignments ............................... 72 SECTION 13.7. Rights of Assignee ........................................ 75 SECTION 13.8. Authorization of Agent .................................... 75 SECTION 13.9. Notice of Assignment ...................................... 75 SECTION 13.10. Evidence of Assignment; Endorsement of Certificate ........ 75 SECTION 13.11. Rights of Support Providers ............................... 75 ARTICLE XIV INDEMNIFICATION ........................................................... 76 SECTION 14.1. Indemnities by the Transferor ............................. 76 SECTION 14.2. Contest of Tax Claim; After-Tax Basis ..................... 79 SECTION 14.3. Contribution .............................................. 79
iv 125 ARTICLE XV MISCELLANEOUS ............................................................. 79 SECTION 15.1. Amendments, Etc ........................................... 79 SECTION 15.2. Notices, Etc .............................................. 80 SECTION 15.3. No Waiver; Remedies ....................................... 80 SECTION 15.4. Binding Effect; Survival .................................. 81 SECTION 15.5. Costs, Expenses and Taxes ................................. 81 SECTION 15.6. No Proceedings ............................................ 82 SECTION 15.7. Bank of America Program Confidentiality ................... 82 SECTION 15.8. Confidentiality of the Transferor Information 85 SECTION 15.9. Captions and Cross References ............................. 88 SECTION 15.10. Integration ............................................... 88 SECTION 15.11. Governing Law ............................................. 88 SECTION 15.12. Waiver Of Jury Trial ...................................... 88 SECTION 15.13. Consent To Jurisdictions Waiver Of Immunities 88 SECTION 15.14. Execution in Counterparts ................................. 89 SECTION 15.15. Purchaser's Liabilities ................................... 89 SECTION 15.16. Agent's Liabilities ....................................... 89 SECTION 15.17. Delegation of Servicer's Duties ........................... 89 SECTION 15.18. Characterization of the Transactions Contemplated by this Agreement ....................................... 90 Schedule 2.3(b) Form of Concentration Limit Certificate Schedule 3.4(a) Periodic Report Schedule 5.1(a) Form of Certificate of Assignments Schedule 5.1(h) Form of Lock Box Agreement Schedule 5.1(i) Form of opinion of Akerman, Senterfitt & Eidson, P.A. Schedule 13.5(b) Form of Assignment and Assumption Agreement Schedule 5.1(p)(i) Amended and Restated Purchase and Sale Agreement Schedule 5.1(p)(ii) Receivables Purchase Agreement Schedule 6.1(j) Litigation Schedule 6.1(n) Location of Transferor's books, records and documents Schedule 6.1(w) List of Subsidiaries, Divisions and Tradenames Schedule 6.2(h) Changes in Financial Condition Schedule 6.2(n) Location of Servicer's, books, records and documents Schedule 6.2(o) Lock Box Accounts
v 126 Schedule 2.3(b) FORM OF SPECIAL CONCENTRATION LIMIT CERTIFICATE Reference is made to that certain Amended and Restated Transfer and Administration Agreement dated as of January 26, 2001 (as at any time amended or otherwise modified, the "Purchase Agreement") among Wackenhut Funding Corporation, a Florida corporation, The Wackenhut Corporation, Enterprise Funding Corporation, and Bank of America N.A., as Agent and the Bank Investors. Capitalized terms used herein have the meaning assigned thereto in the Purchase Agreement. For purposes of Section 2.3(b) of the Purchase Agreement, the following Special Concentration Limits shall be in effect for the period from January 26, 2001 until such time as the Administrative Agent delivers to the Transferor and the Servicer written notice of a change in the Special Concentration Limits: (a) Any one Obligor rated BBB or Baa2 or better by Standard & Poor's Corporation and Moody's Investors Service, Inc., respectively, may have a Special Concentration Limit of 5% of the Aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at any time, plus (b) Any three Obligors rated BBB or Baa2 or better by Standard & Poor's Corporation and Moody's Investors Service, Inc., respectively, may each have Special Concentration Limits of 4% of the Aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at any time, plus (c) Any five Obligors, regardless of rating, may each have Special Concentration Limits of 3% of the Aggregate Unpaid Balance of the Eligible Receivable in the Receivable Pool at any time. Transferor shall identify the specific Obligors to whom the Special Concentration Limits described above should be applied by such form of notice as the Agent may from time to time require. Date: BANK OF AMERICA, N.A., ----------------------- as Agent By: -------------------------------- Its: ------------------------------- 127 SCHEDULE 5.1(a) FORM OF CERTIFICATE OF ASSIGNMENTS Reference is made to the Amended and Restated Transfer and Administration Agreement, dated as of January 26, 2001 (the "Transfer Agreement"), among the undersigned (as "Seller"), Enterprise Funding Corporation (as the "Purchaser" or "Enterprise"), Bank of America, N.A., as agent for Enterprise and the Bank Investors (in such capacity, the "Agent") and The Wackenhut Corporation (as "Servicer"). Terms defined in the Transfer Agreement are used herein as therein defined. The undersigned hereby sells, assigns and transfers unto Enterprise each Undivided Interest purchased from the undersigned in one or more Purchases pursuant to the Transfer Agreement. Each Purchase by Enterprise from the undersigned of an Undivided Interest shall be endorsed by Enterprise on a grid with respect to each such Undivided Interest which has been or shall be attached hereto (and, upon such attachment, made a part hereof) or, at Enterprise's option, in the records of the Administrative Agent, and such endorsement shall evidence the ownership by Enterprise of the Undivided Interest; provided, that the failure of Enterprise (or the Administrative Agent on behalf of Enterprise) to make any such endorsement shall not void or otherwise impair any Purchase or limit the undersigned's obligations under the Transfer Agreement with respect to the Undivided Interests purchased. This Certificate of Assignments is made without recourse except as provided in the Transfer Agreement. This Certificate of Assignments is made pursuant to and upon all the representations, warranties, covenants and agreements on the part of the undersigned contained in the Transfer Agreement. This Certificate of Assignments is governed by and is to be construed and interpreted in accordance with the Transfer Agreement and the internal laws of the State of New York without regard to principles of conflicts of laws. Assignment by Enterprise of one or more Undivided Interests, or any portion thereof, is subject to the terms of the Transfer Agreement, including, without limitation, Article XIII thereof. Any such assignment shall be endorsed by Enterprise on the grid with respect to each such Undivided Interest attached hereto or, at Enterprise's option, in the records of the Agent, and such endorsement shall evidence the ownership by the assignee named 128 therein of each Undivided Interest (or portion thereof) so assigned; provided, that the failure of Enterprise (or the Agent on behalf of Enterprise) to make any such endorsement shall not void or otherwise impair any such assignment or limit the undersigned's obligations under the Agreement to the assignee with respect to any such Undivided Interest (or portion thereof) so assigned. Each reduction in Enterprise's Investment of each Undivided Interest as a result of the occurrence of a Run Off Day or day of partial liquidation as provided in Section 3.3(b) or (c) of the Transfer Agreement with respect to such Undivided Interest and each combination or division of one or more Undivided Interests shall also be endorsed by Enterprise on the grid with respect to each such Undivided Interest and each combination or division of one or more Undivided Interests attached hereto or, at Enterprise's option, in the records of the Administrative Agent, but the failure of Enterprise (or the Agent on behalf of Enterprise) to make any such endorsement shall not modify such reduction in Enterprise's Investment or such combination or division of one or more Undivided Interests. The undersigned hereby certifies on and as of the date of each Purchase that the conditions set forth in Sections 5.2 and 5.3 of the Transfer Agreement are fulfilled on such date. This letter agreement may be executed in counterparts each of which shall be deemed to be an original and all of which together shall constitute but one and the same letter agreement. IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly executed this ______________ ____, 20__. WACKENHUT FUNDING CORPORATION By -------------------------------- Title ------------------------------ 2 129 Grid with Respect to Undivided Interest No. _______(1) Attached to and Made a Part of Certificate of Assignments dated _________ __, 20__ from Wackenhut Funding Corporation to Enterprise Funding Corporation
Amount of Amount of Amount of Reduction Increase of Date of Enter- of Enter- Enter- Endorsed prise's Amount of prise's prise's Transaction Investment Assignment Investment Investment - ----------- ---------- ---------- ---------- -----------
- -------------------------- (1) A separate grid should be attached reflecting each Undivided Interest as sold. 3 130 Schedule 5.1(h) January __, 2001 Bank of America, N.A. P.O. Box 277469 Atlanta, GA 30384-7469 Ladies and Gentlemen: Reference is made to our lock-box account No. 3750156489 maintained with you (the "Account"). Pursuant to an Amended and Restated Transfer and Administration Agreement (the "Transfer Agreement") dated as of January 26, 2001, as the same may be amended or otherwise modified from time to time, among us, as Transferor, The Wackenhut Corporation, as Servicer (the "Servicer"), Enterprise Funding Corporation, as a Purchaser ("Purchaser") and Bank of America, N.A., as a Bank Investor and as the agent for the Purchaser and the Bank Investors (in such capacity, the "Agent") and the other Bank Investors. We have assigned and/or may hereafter assign to the Agent, on behalf of the Purchaser and the Bank Investors, one or more undivided percentage interests in certain of the accounts, chattel paper, instruments or general intangibles (collectively, "Receivables") with respect to which payments are or may hereafter be made to the Account, and have granted to the Agent, on behalf of the Purchaser and the Bank Investors, a security interest in the undersigned's retained interest in such Receivables. Your execution of this letter agreement is a condition precedent to the continued maintenance by us of the Account with you. In accordance with the Transfer Agreement, we are hereby transferring to the Agent exclusive ownership and control of the Account. The Agent has agreed to permit us to access the Account until such time as the Agent gives you notice that we shall no longer be permitted access to such Account, which notice shall be substantially in the form attached hereto as Annex 1. 131 January __, 2001 Page 2 We hereby irrevocably instruct you, at all times from and after the date of your receipt of notice from the Agent as described above, to make all payments to be made by you out of or in connection with the Account directly to the Agent, at its address set forth below its signature hereto or otherwise in accordance with the instructions of the Agent. We also hereby notify you that, at all times from and after the date of your receipt of notice from the Agent as described above, the Agent shall be irrevocably entitled to exercise in our place and stead any and all rights in respect of or in connection with the Account, including, without limitations, (a) the right to specify when payments are to be made out of or in connection with the Account and (b) the right to require preparation of duplicate monthly bank statements on the Account for the Agent's audit purposes and mailing of such statements directly to an address specified by the Agent. Notice from the Agent may be personally served or sent by Telex, facsimile or U.S. mail, certified return receipt requested, to the address, Telex or facsimile number set forth under your signature to this letter of agreement, or to such other address, Telex or facsimile number which you provide the Agent in writing. If notice is given by Telex or facsimile, it will be deemed to have been received when the notice is sent and the answerback is received (in the case of Telex) or receipt is confirmed by telephone or other electronic means (in the case of facsimile). All other notices will be deemed to have been received when actually received or, in the case of personal delivery, delivered. By executing this letter of agreement, you acknowledge the Agent's ownership and control of the Account and its ownership of (in each case, on behalf of the Purchaser and the Bank Investors) and security interest in the amounts from time to time on deposit therein and agree that from the date hereof the Account shall be maintained by you for the benefit of, and amounts from time to time therein held by you as agent for, the Agent on the terms provided herein. The Account is to be entitled "Bank of 132 January __, 2001 Page 3 America, N.A." as the Agent for Enterprise Funding Corporation and the Bank Investors". Except as otherwise provided in this letter agreement, payments to the Account are to be processed in accordance with the standard procedures currently in effect. All service charges and fees with respect to the Account shall continue to be payable by us under the arrangements currently in effect. By executing this letter agreement, you irrevocably waive and agree not to assert, claim or endeavor to exercise, irrevocably bar and estop yourself from asserting, claiming or exercising, and acknowledge that you have not heretofore received a notice, writ, order or any form of legal process from any other party asserting, claiming or exercising, any right of set-off, banker's lien or other purported form of claim with respect to the Account or any funds from time to time therein. Except for your right to payment of your customary service charges and fees for the routine maintenance and operation of the Account and to make deductions for returned items, you shall have no rights in the Account or funds therein. To the extent you may ever have such rights, you hereby expressly subordinate all such rights to all rights of the Agent. You may terminate this letter agreement by canceling the Account maintained with you, which cancellation and termination shall become effective only upon thirty days' prior written notice thereof from you to the Agent. Incoming mail addressed to the Account received after such cancellation shall be forwarded in accordance with the Agent's instructions. This letter agreement may also be terminated upon written notice to you by the Agent stating that the Transfer Agreement pursuant to which this letter agreement was obtained is no longer in effect. Except as otherwise provided in this paragraph, this letter agreement may not be terminated or amended without the prior written consent of the Agent. Please acknowledge your agreement to the terms set forth in this letter agreement by signing the two copies of this letter agreement enclosed herewith in the space provided below, sending 133 January __, 2001 Page 4 one such signed copy to the Agent at its address provided above and returning the other signed copy to us. Very truly yours, THE WACKENHUT CORPORATION By: , Ann Svoboda Title: Accepted and confirmed as of the date first written above: ENTERPRISE FUNDING CORPORATION Purchaser By: Title: Acknowledged and agreed to as of the date first written above: BANK OF AMERICA, N.A. By: Title: Address for notice: IL1-231-16-05 231 South LaSalle Street Chicago, Illinois 60697-1407 Attention: Willem van Beek - Vice President Telephone: 312/828-3119 Facsimile No.: 312/923-0273 134 ANNEX 1 TO LOCK-BOX AGREEMENT NOTICE OF EFFECTIVENESS DATED: ______________, 20__ TO: Bank of America, N.A. P.O. Box 277469 Atlanta, GA 30384-7469 ATTN:_________________________ Re: Lock Box Account 3750156489 Ladies and Gentlemen: We hereby give you notice that the transfer of control of the above-referenced Lock-Box Account, as described in our letter agreement with you dated as of December 23, 1997 is effective as of the date hereof. You are hereby instructed to comply immediately with the instructions set forth in that letter. Very truly yours, WACKENHUT FUNDING CORPORATION By: ________________________________________ Title: _____________________________________ ACKNOWLEDGED AND AGREED: BANK OF AMERICA, N.A. By: ___________________________ Title: ________________________ Date: _________________________ P.O. Box 277469 Atlanta, GA 30384-7469 Attention:_____________________ Facsimile No.:_________________ 135 Schedule 5.1(i) Form of opinion of Akerman, Senterfitt & Eidson, P.A. See Tab D-2. 136 Schedule 13.5(b) Form of Assignment and Assumption Agreement Reference is made to the Amended and Restated Transfer and Administration Agreement dated as of January __, 2001 as it may be amended or otherwise modified from time to time (as so amended or modified, the "Transfer Agreement") among Wackenhut Funding Corporation, as transferor (in such capacity, the "Transferor"), The Wackenhut Corporation, individually and as servicer (in such capacity, the "Servicer"), Enterprise Funding Corporation, as purchaser (in such capacity, the "Purchaser") and Bank of America, N.A., as agent for Enterprise and certain financial institutions from time to time a party thereto as Bank Investors (in such capacity, the "Agent"). Terms defined in the Transfer Agreement are used herein with the same meaning. __________________(the "Assignor") and ____________________(the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, without recourse and without representation and warranty, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to all of the Assignor's rights and obligations under the Transfer Agreement and the other Agreement Documents. Such interest expressed as a percentage of all rights and obligations of the Bank Investors being equal to the percentage equivalent of a fraction the numerator of which is $______________ and the denominator of which is the Facility Limit. After giving effect to such sale and assignment, the Assignee's Commitment will be as set forth on the signature page hereto. 2. [In consideration of the payment of $_____________, being ___% of the existing Aggregate Purchaser's Investment, and of $_____________, being ___% of the aggregate unpaid accrued Earned Discount, receipt of which payment is hereby acknowledged, the Assignor hereby assigns to the Agent for the account of the Assignee, and the Assignee hereby purchases from the Assignor, a _____% interest in and to all of the Assignor's right, title and interest in and to the Aggregate Purchaser's Investment purchased by the undersigned on ________________, 20__ under the Transfer Agreement.] [include if an existing Aggregate Purchaser's Investment is being assigned.] 137 3. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Transfer Agreement, any other Agreement Document or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Transfer Agreement or the Receivables, any other Agreement Document or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any of the Transferor, the Servicer, the Seller or any Originator or the performance or observance by any of the Transferor, the Servicer, the Seller or any Originator of any of its obligations under the Transfer Agreement, any other Agreement Document, or any instrument or document furnished pursuant thereto. 4. The Assignee (i) confirms that it has received a copy of the Transfer Agreement, the Receivables Purchase Agreement and the Amended and Restated Purchase and Sale Agreement, together with copies of the financial statements referred to in Section 6.2 of the Transfer Agreement, to the extent delivered through the date of this Agreement, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (ii) agrees that it will, independently and without reliance upon the Agent, any of its Affiliates, the Assignor or any other Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Transfer Agreement and any other Agreement Document; (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Transfer Agreement and the other Agreement Documents as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Transfer Agreement are required to be performed by it as a Bank Investor; and (vi) specifies as its address for notices and its account for payments the office and account set forth beneath its name on the signature pages hereof[; and (vii) attaches the forms prescribed by the Internal Revenue Service of the United States of America certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Transfer Agreement or such other documents 2 138 as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty].(2) 5. The effective date for this Assignment shall be the later of (i) the date on which the Agent receives this Assignment executed by the parties hereto and receives the consent of the Transferor and the Agent, on behalf of the Purchaser, and (ii) the date of this Assignment (the "Effective Date"). Following the execution of this Assignment and Assumption Agreement and the consent of the Transferor and the Agent, on behalf of the Purchaser, this Assignment and Assumption Agreement will be delivered to the Agent for acceptance and, with respect to the Assignment and Assumption Agreement, recording by the Agent. 6. Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall be a party to the Transfer Agreement and, to the extent provided in this Assignment, have the rights and obligations of a Bank Investor thereunder and (ii) the Assignor shall, to the extent provided in this Assignment, relinquish its rights and be released from its obligations under the Transfer Agreement. 7. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Transfer Agreement in respect of the interest assigned hereby (including, without limitation, all payments in respect of such interest in Aggregate Purchaser's Investment, Earned Discount and fees) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Transfer Agreement for periods prior to the Effective Date directly between themselves. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] - ------------------ (2) If the Assignee is organized under the laws of a jurisdiction outside the United States. 3 139 8. This Assignment shall be governed by, and construed in accordance with, the laws of the State of New York. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of the signature page to this Assignment by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption to be executed by their respective officers thereunto duly authorized as of the ____________ day of ________, 20__. Remaining [NAME OF ASSIGNOR] Commitment By: ---------------------------- Name: Title: Commitment [NAME OF ASSIGNEE] $___________ By: ---------------------------- Name: Title: Address for notices and Account for payments: [Address] [Account] 4 140 Consented to this __ day of __________, 20__ BANK OF AMERICA, N.A., as Administrative Agent By: ------------------------------ Name: Title: [TRANSFEROR] By: ------------------------------ Name: Title: Accepted this ____ day of ___________, 20__ BANK OF AMERICA, N.A. as Agent By: ------------------------------ Name: Title: 5 141 Schedule 5.1(p)(i) Amended and Restated Purchase and Sale Agreement See Tab A-3. 6 142 Schedule 5.1(p)(ii) Receivables Purchase Agreement See Tab A-2. 7 143 Schedule 6.1(j) Litigation None. 8 144 Schedule 6.1(n) List of Location of Records 4200 Wackenhut Drive #100 Palm Beach Gardens, Florida 33410 9 145 Schedule 6.2(h) Changes in Financial Condition None. 10 146 Schedule 6.2(n) List of Location of Records 4200 Wackenhut Drive #100 Palm Beach Gardens, Florida 33410 11 147 Schedule 6.2(o) List of Lockbox Banks and Accounts
Bank Name ABA Account Number - --------- --------- -------------- Bank of America Customer Connection 111000012 3750156489
12 EX-4.5 6 g67411kex4-5.txt AMENDMENT NO.1 TO RECEIVABLE PURCHASE AGREEMENT 1 Exhibit 4.5 AMENDMENT NUMBER 1 TO RECEIVABLE PURCHASE AGREEMENT AMENDMENT NUMBER 1 TO RECEIVABLE PURCHASE AGREEMENT (this "Amendment"), dated as of January 26, 2001, between WACKENHUT FUNDING CORPORATION, a Delaware corporation (the "Transferor") and its successors and assigns and THE WACKENHUT CORPORATION, a Florida corporation, (the "Seller") and its successors assigns, amending that certain Receivable Purchase Agreement dated as of December 30, 1997 between the Transferor and the Seller (collectively, the "Parties"), (the "Original Agreement," and said agreement as amended by this Amendment, the "Agreement"). WHEREAS, the Parties have agreed to adjust the calculation of the Purchase Price as set forth in the Original Agreement and to permit the Seller to contribute capital to the Transferor in exchange for equity interests in the Transferor, as well as certain other changes; WHEREAS, the Original Agreement requires that the consent of the Transferor and the Seller be obtained in order to effect the amendments contemplated herein; WHEREAS, on the terms and conditions set forth herein, the Parties consent to such amendments; WHEREAS, capitalized terms used herein shall have the meanings assigned to such terms in the Original Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows: SECTION 1. Amendment to Section 1.3. The first sentence of Section 1.3 of the Original Agreement is hereby amended to read in its entirety as follows (solely for convenience, changed text is italicized): "Consideration for Purchases; IP Note; Equity Contribution. On the terms and subject to the conditions set forth in this Agreement, the Transferor agrees to make all Purchase Price 2 payments (as determined in accordance with Section 2.1) in immediately available funds received from the Purchaser or the Bank Investors, as applicable, pursuant to the Transfer Agreement and, to the extent such funds are insufficient, by either (a) issuing, or increasing the principal amount outstanding under, a promissory note in the form of Exhibit A hereto to be issued by the Transferor to the Seller (such promissory note, as it may be amended, supplemented, endorsed or otherwise modified from time to time, together with all promissory notes issued from time to time in substitution therefor or renewal thereof, being herein called the "IP Note"), (b) treating the extent of such insufficient funds as a capital contribution by Seller to Transferor or (c) utilizing a combination of (a) and (b) above, which such determination shall be at the sole discretion of the Seller." SECTION 2. Amendment to Section 2.1. Section 2.1 of the Original Agreement is hereby amended to read in its entirety as follows: "Calculation of Purchase Price. With regard to each Month End Date, the "Purchase Price" for the Receivables sold by the Seller during the fiscal month ending on such Month End Date shall be determined in accordance with the following formula: PP = (AUB - ADA) x (1 - (DR/360(*)Days)) Where: PP = the aggregate Purchase Price for such sold Receivables AUB = "Aggregate Unpaid Balance" of such sold Receivables on such Month End Date, which shall mean the sum of the Unpaid Balances of each of such sold Receivables, as calculated as at the time of such sold Receivables' sale to the Transferor. ADA = "Allowance for Doubtful Accounts" which means the allowance for doubtful accounts established in respect to the AUB of such sold Receivables on the books of the Seller. DR = "Discount Rate" means the (i) the sum of interest accrued at the Cost of Funds Rate for the Month End Date plus (ii) 0.50% 2 3 (which represents the servicing fee rate) plus (iii) a risk-adjusted spread, not to be less than .50%, as mutually agreed upon from time to time by the Transferor and the Seller. "Costs of Funds Rate" means, for a Month End Date, the percentage equivalent of a fraction the numerator of which is (i) the product of 12 and (ii) the sum of (A) all interest accrued under the Transfer Agreement at the Purchaser Rate (including all applicable margins with respect thereto) for the preceding fiscal month, plus (B) all amounts accrued as Program Fees, Administrative Fees, Dealer Fees, and Facility Fees under the Transfer Agreement and/or the Fee Letter for the preceding fiscal month, and (C) all interest accrued under the IP Note for the preceding fiscal month, and the denominator of which is the sum of the average aggregate Purchaser's Investment under the Transfer Agreement and the average aggregate outstanding principal amount of the IP Note, in each case for the preceding fiscal month. Days = means the estimated number of days outstanding for such Receivables as mutually agreed upon from time to time by the Transferor and the Seller." SECTION 3. Amendment to Section 3.2(a). The first sentence of Section 3.2(a) of the Original Agreement is hereby amended to read in its entirety as follows (solely for convenience, changed text is italicized): "(a) On each Month End Date falling after the Initial Closing Date, the Transferor shall pay to the Seller the Purchase Price for the Receivables purchased from the Seller during the immediately preceding month by paying to the Seller all funds received by the Transferor from the Purchaser or the Bank Investors, as applicable, for Purchases or Reinvestments under the Transfer Agreement, and if insufficient, by automatically increasing the principal amount outstanding under the related IP Note by the amount of such insufficiency, less the amount, of any capital contribution made by the Seller to the Transferor under Section 1.3." SECTION 4. Replacement of Note. The Non-Negotiable Term Note dated December 30, 1997, between the Transferor, as promisor, and the 3 4 Seller, as promisee, shall be destroyed and replaced by a note substantially in the form of Exhibit A hereto. SECTION 5. Representations and Warranties. Each of the Transferor and the Seller hereby makes to the other on and as of the date hereof, the following representations and warranties: (a) Authority. Each of the Transferor and the Seller has the requisite corporate power and authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Original Agreement (as modified hereby). The execution, delivery and performance by the Transferor and the Seller of this Amendment and the performance of the Original Agreement (as modified hereby) have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions; (b) Enforceability. This Amendment has been duly executed and delivered by each of the Transferor and the Seller. The Original Agreement (as modified hereby) is the legal, valid and binding obligation of the Transferor and the Seller enforceable against the Transferor and the Seller in accordance with its terms, and is in full force and effect; and (c) Representations and Warranties. The representations and warranties of the Transferor and the Seller contained in the Original Agreement (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. SECTION 6. Reference to and Effect on the Original Agreement. (a) Except as specifically amended and modified above, the Original Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. (b) The execution, delivery and effectiveness of this Amendment shall not operate as waiver of any right, power or remedy of the 4 5 Parties under the Agreement, nor constitute a waiver of any provision of the Original Agreement. SECTION 7. No Purchase and Sale Termination Event. No event has occurred and is continuing that constitutes a Purchase and Sale Termination Event. SECTION 8. Amendment and Waiver. No provision hereof may be amended, waived, supplemented, restated, discharged or terminated without the written consent of the Transferor and the Seller. SECTION 9. Successors and Assigns. This Amendment shall bind, and the benefits hereof shall inure to the parties hereof and their respective successors and permitted assigns. SECTION 10. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE TRANSFEROR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 11. Severability; Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. Any provisions of this Amendment which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 12. Captions. The captions in this Amendment are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. 5 6 [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 6 7 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first written above. WACKENHUT FUNDING CORPORATION as Transferor By: ------------------------------------- Name: Title: THE WACKENHUT CORPORATION, as Seller By: ------------------------------------ Name: Title: Pursuant to Section 7.3(e) of the Amended and Restated Transfer and Administration Agreement (the "TAA") dated as of January 26, 2001 among the Transferor, the Seller, Enterprise Funding Corporation and Bank of America, N.A., as Bank Investor and as Agent, Bank of America and The Bank of Nova Scotia, each in their capacities as Bank Investors, hereby consent to this Amendment. BANK OF AMERICA, N.A., as Bank Investor By: -------------------------- Name: Title: 7 8 THE BANK OF NOVA SCOTIA as Bank Investor By: -------------------------- Name: Title: 8 EX-4.6 7 g67411kex4-6.txt LC ACCOUNT AGREEMENT 1 Exhibit 4.6 LC ACCOUNT AGREEMENT THIS LC ACCOUNT AGREEMENT (this "Agreement") is dated as of November 13, 2000, and made by and among THE WACKENHUT CORPORATION, a Florida corporation, (the "Pledgor"), and BANK OF AMERICA, N.A., as the agent for the Lenders party to that certain Credit Agreement (as defined below) (in such capacity herein and together with any successors in such capacity, the "Agent"). RECITALS WHEREAS, the Pledgor, the Lenders party thereto from time to time (the "Lenders") and the Agent have entered into a Credit Agreement dated as of the date hereof (said Credit Agreement as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and in effect, hereinafter referred to as the "Credit Agreement"); WHEREAS, as a condition precedent to the Lenders' obligations to make the Loans or of the Issuing Banks to issue Letters of Credit, the Pledgor is required to execute and deliver to the Agent a copy of this Agreement on or before the Closing Date; NOW, THEREFORE, in consideration of the foregoing and the agreements, provisions and covenants contained herein, the Pledgor and the Agent hereby agree as follows: Section 1. Capitalized terms used in this Agreement shall have the following meanings: "COLLATERAL" means (a) all funds from time to time on deposit in the LC Account; (b) all Investments and all certificates and instruments from time to time representing or evidencing such Investments; (c) all notes, certificates of deposit, checks and other instruments from time to time hereafter delivered to or otherwise possessed by the Agent for or on behalf of the Pledgor in substitution for or in addition to any or all of the Collateral described in clause (a) or (b) above; (d) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Collateral described in clause (a), (b) or (c) above; and (e) to the extent not covered by clauses (a) through (d) above, all proceeds of any or all of the foregoing Collateral. "INVESTMENTS" means those investments, if any, made by the Agent pursuant to Section 5 hereof. "LC ACCOUNT" means the cash collateral account established and maintained pursuant to Section 2 hereof. "SECURED OBLIGATIONS" means (i) all obligations of the Pledgor now existing or hereafter arising under or in respect of the Credit Agreement or the Notes (including, without limitation, the Pledgor's obligations to pay principal and interest and all other charges, fees, expenses, commissions, reimbursements, indemnities and other payments related to or in respect of the 1 2 obligations contained in the Credit Agreement or the Notes) or any documents or agreement related to the Credit Agreement or the Notes; and (ii) without duplication, all obligations of the Pledgor now or hereafter existing under or in respect of this Agreement, including, without limitation, all charges, fees, expenses, commissions, reimbursements, indemnities and other payments related to or in respect of the obligations contained in this Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement. Section 2. LC ACCOUNT; CASH COLLATERALIZATION OF LETTERS OF CREDIT. (i) At the time of delivery of any amounts hereunder, the Agent shall establish and maintain at its offices at 101 North Tryon Street, NCI-001-15-04, Charlotte, North Carolina 28255, in the name of the Agent and under the sole dominion, discretion and control of the Agent, a cash collateral account designated as Bank of America/The Wackenhut Corporation Cash LC Account (the "LC Account"). (ii) In accordance with Article X of the Credit Agreement, in the event that an Event of Default has occurred and is continuing and the Pledgor is required to pay to the Agent an amount equal to the maximum amount remaining drawn or unpaid under the Letters of Credit, the Agent shall, upon receipt of any such amounts, exercise the remedies set forth in Section 12 hereof and shall apply the proceeds as provided in Article X of the Credit Agreement. Any such amounts received by the Agent pursuant to Section 10.1(B) of the Credit Agreement shall be deposited in the LC Account. Upon a drawing under the Letters of Credit in respect of which any amounts described above have been deposited in the LC Account, the Agent shall apply such amounts to reimburse the Issuing Banks, ratably for the amount of such drawing. In the event the Letters of Credit are canceled or expire or in the event of any reduction in the maximum amount available at any time for drawing under such Letters of Credit (the "Maximum Available Amount"), the Agent shall apply the amount then in the LC Account designated to reimburse the applicable Issuing Banks for any drawings under the Letters of Credit less the Maximum Available Amount immediately after such cancellation, expiration or reduction, if any, FIRST, to the cash collateralization of the Letters of Credit if the Pledgor failed to pay all or a portion of the maximum amounts described above and, SECOND, to the payment in full of the outstanding Secured Obligations. (iii) Interest received in respect of Investments made by the Pledgor of any amounts deposited in the LC Account pursuant to clause (ii) of this Section 2 shall be delivered by the Agent to the Pledgor on the last Business Day of each calendar month or, if earlier, upon cancellation or expiration of or drawing of the Maximum Available Amount for drawing under the Letters of Credit, as the case may be, in respect of which such amounts were so deposited; PROVIDED, HOWEVER, that the Agent shall not deliver to the Pledgor any such interest received in respect of Investments of any amounts deposited in the LC Account pursuant to this Section 2 if an Event of Default has occurred and is continuing or unless all outstanding Secured Obligations have been indefeasibly paid in full in cash. 2 3 The Pledgor shall have no obligation to deposit funds into the LC Account except upon the occurrence of an Event of Default as provided in this Section 2. Section 3. PLEDGE; SECURITY FOR SECURED OBLIGATIONS. The Pledgor hereby absolutely and unconditionally pledges to the Agent (for itself and on behalf of the Lenders and Issuing Banks) a first priority lien and security interest in, the Collateral, as collateral security for the prompt payment in full when due, whether at stated maturity, by acceleration or otherwise (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), of all Secured Obligations. Section 4. DELIVERY OF COLLATERAL. All certificates or instruments, if any, representing or evidencing the Collateral shall be delivered to and held by the Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Agent. In the event any Collateral is not evidenced by a certificate reflecting title in the name of the Agent or a filing evidencing the security interest of the Agent, a notation shall be made in the records of the issuer of such Collateral or in such other appropriate records as the Agent may require, all in form and substance reasonably satisfactory to the Agent. The Agent shall have the right, at any time and without notice to the Pledgor, to transfer to or to register in the name of the Agent or any of its nominees any or all of the Collateral. In addition, the Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. Section 5. INVESTING OF AMOUNTS IN THE LC ACCOUNT; AMOUNTS HELD BY THE AGENT. Cash held by the Agent in the LC Account shall not be invested or reinvested except as provided in this Section 5. (i) Except as otherwise provided in Section 12 hereof, any funds on deposit in the LC Account shall be invested by the Agent so long as no Default or Event of Default shall have occurred and be continuing, in cash equivalents. (ii) The Agent is hereby authorized to sell, and shall sell, all or any designated part of the Collateral (A) so long as no Default or Event of Default shall have occurred and be continuing, upon the receipt of appropriate written instructions from the Pledgor or (B) in any event if such sale is necessary to permit the Agent to perform its duties hereunder or under the Credit Agreement. The Agent shall have no responsibility for any loss in the value of the Collateral resulting from a fluctuation in interest rates or otherwise. Any interest on securities constituting part of the Collateral and the net proceeds of the sale or payment of any such securities shall be held in the LC Account by the Agent. Section 6. REPRESENTATIONS AND WARRANTIES. In addition to its representations and warranties made pursuant to Article VIII of the Credit Agreement, the Pledgor represents and warrants to the Agent (for itself and as agent on behalf of the Lenders and Issuing Banks), that the following statements are true, correct and complete: 3 4 (i) The Pledgor will be the legal and beneficial owner of the Collateral free and clear of any Lien except for the lien and security interest created by this Agreement; (ii) The pledge and assignment of the Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations. Section 7. FURTHER ASSURANCES. The Pledgor agrees that at any time and from time to time, at its expense, it will promptly execute and deliver to the Agent any further instruments and documents, and take any further actions, that may be necessary or that the Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Section 8. TRANSFERS AND OTHER LIENS. The Pledgor agrees that it will not (a) sell or otherwise dispose of any of the Collateral, or (b) create or permit to exist any Lien upon or with respect to any of the Collateral, except for the lien and security interest created by this Agreement. Section 9. THE AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints the Agent as its attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Agent's reasonable discretion to take any action and to execute any instrument which the Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to the Pledgor representing any payment, dividend, or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. In performing its functions and duties under this Agreement, the Agent shall act solely for itself and as the agent of the Lenders and Issuing Banks, and the Agent has not assumed nor shall be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Pledgor. Section 10. THE AGENT MAY PERFORM. If the Pledgor fails to perform any agreement contained herein, after notice to the Pledgor, the Agent may itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by the Pledgor under Section 13 hereof. Section 11. STANDARD OF CARE; NO RESPONSIBILITY FOR CERTAIN MATTERS. In dealing with the Collateral in its possession, the Agent shall exercise the same care which it would exercise in dealing with its own property of a similar nature, but it shall not be responsible for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, (b) taking any steps to preserve rights against any parties with respect to any Collateral (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Collateral), (c) the collection of any proceeds, (d) any loss resulting from Investments made pursuant to Section 5 hereof, or (e) determining (x) the correctness of any statement or calculation made by the Pledgor in any written or telex (tested or otherwise) instructions, or (y) whether any deposit in the LC Account is proper. 4 5 Section 12. REMEDIES UPON DEFAULT; APPLICATION OF PROCEEDS. If any Event of Default shall have occurred and be continuing: (i) The Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the "Code") as in effect at that time in the State of Florida or in any other State where any portion of the Collateral may be located, and the Agent may, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker's board or at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices, and upon such other terms as the Agent may deem commercially reasonable. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' written notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (ii) Subject to the provisions of Section 2.(ii) hereof, any cash held by the Agent as Collateral and all cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or part of the Collateral shall be applied (after payment of any amounts payable to the Agent pursuant to Section 13 hereof) by the Agent to pay the Secured Obligations. Any surplus of such cash or cash proceeds held by the Agent and remaining after payment in full of all Secured Obligations shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus. Section 13. EXPENSES. In addition to any payments of expenses of Agent pursuant to the Credit Agreement, the Pledgor agrees to pay promptly to the Agent all the reasonable costs and expenses which the Agent may incur in connection with (a) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (b) the exercise or enforcement of any of the rights of the Agent hereunder, or (c) the failure by the Pledgor to perform or observe any of the provisions hereof. Section 14. NO DELAYS; WAIVER, ETC. No delay or failure on the part of the Agent in exercising, and no course of dealing with respect to, any power or right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Agent of any power or right hereunder preclude other or further exercise thereof or the exercise of any other power or right. The remedies herein provided are to the fullest extent permitted by law cumulative and are not exclusive of any remedies provided by law. Section 15. AMENDMENTS, ETC. No amendment, modification, termination or waiver of any provision of this Agreement, or consent to any departure by the Pledgor therefrom, shall in any event be effective without the written concurrence of the Agent. 5 6 Section 16. NOTICES. Except as otherwise specifically provided herein, all notices which are to be sent to the Pledgor or Agent shall be given in accordance with the Credit Agreement. Section 17. CONTINUING SECURITY INTEREST; TERMINATION. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until all Secured Obligations (other than Secured Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable) shall have been indefeasibly paid in full in cash, the Revolving Credit Commitments, the Letter of Credit Commitments or any other obligations of the Agent or any Lender to make any Loans or of the Issuing Banks to issue any Letters of Credit under the Credit Agreement shall have expired and the Letters of Credit shall have expired, (b) be binding upon the Pledgor, its respective successors and assigns, and (c) inure to the benefit of the Agent, the Lenders, the Issuing Banks and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c) and subject to the provisions of the Credit Agreement, any Lender or Issuing Bank may assign or otherwise transfer any Note held by it to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Lender or Issuing Bank herein or otherwise. Upon the indefeasible payment in full in cash of the Secured Obligations (other than Secured Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable) and the cancellation or expiration of the Letters of Credit and termination or expiration of all Revolving Credit Commitments, all Letter of Credit Commitments and any other obligations of the Agent and any Lender to make any Loan or of the Issuing Banks to issue any Letter of Credit, the Pledgor shall be entitled to the return, upon its request and at its expense, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. Section 18. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS AND JUDICIAL DECISIONS OF THE STATE OF FLORIDA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF FLORIDA. THE PLEDGOR HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE PURPOSES OF RESOLVING DISPUTES HEREUNDER OR FOR THE PURPOSES OF COLLECTION. UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT, TERMS DEFINED IN ARTICLE 9 OF THE CODE ARE USED HEREIN AS THEREIN DEFINED. Section 19. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party and all covenants, promises, and agreements by or on behalf of the Pledgor or by and on behalf of the Agent shall bind and inure to the benefit of the successors and assigns of the Pledgor, the Agent, the Lenders and the Issuing Banks. Section 20. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart 6 7 shall for all purposes be deemed an original, but all such counterparts shall together constitute but one and the same Agreement. The Pledgor and the Agent hereby acknowledge receipt of a true, correct, and complete counterpart of this Agreement. Section 21. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments and other communications between or among the parties, both oral and written, with respect thereto. Section 23. HEADINGS. This section headings in this Agreement are inserted for convenience of reference and shall not be considered a part of this Agreement or used in its interpretation. [Remainder of Page Intentionally Left Blank) 7 8 IN WITNESS WHEREOF, the Pledgor and the Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. THE WACKENHUT CORPORATION By: /s/ Ann Svoboda ----------------------------------------- Name: Ann Svoboda Title: Assistant Treasurer BANK OF AMERICA, N.A., as Agent By: /s/ Robert Mauriello ----------------------------------------- Name: Robert Mauriello Title: Vice President 8 EX-10.3 8 g67411kex10-3.txt EXECUTIVE OFFICER RETIREMENT PLAN 1 EXHIBIT 10.3 ================================================================================ [LOGO] THE WACKENHUT CORPORATION EXECUTIVE RETIREMENT PLAN (EFFECTIVE MARCH 1, 1989) As Amended and Revised December 27, 1989 and As Further Amended and Revised April 24, 1993 ================================================================================ 2 TABLE OF CONTENTS PAGE ---- INTRODUCTION ii ARTICLE I DEFINITIONS 1 ARTICLE II PARTICIPANT ELIGIBILITY 2 ARTICLE III BENEFITS 3 ARTICLE IV WHEN BENEFITS ARE PAYABLE 4 ARTICLE V ADMINISTRATION 6 ARTICLE VI AMENDMENT, TERMINATION AND EXCEPTIONS 7 ARTICLE VII MISCELLANEOUS 8 i 3 ARTICLE I DEFINITIONS 1.0 DEFINITIONS. The following terms when used in this Plan shall have the following meanings unless a different meaning is clearly required by the context. 1.1 TWC. The Wackenhut Corporation. 1.2 EMPLOYER. TWC and any of its subsidiary corporations. 1.3 BENEFICIARY. The beneficiary or beneficiaries of a Participant in accordance with Section 4.7. If more than one beneficiary survives the Participant, payments shall be made equally to the surviving beneficiaries, unless otherwise provided. Nothing herein shall prevent the Participant from designating primary and contingent beneficiaries. 1.4 COMMITTEE. The Administrative Committee appointed to administer the Plan pursuant to Article V. 1.5 DISABILITY. A Participant's inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or be of long continued and indefinite duration. Disability is determined and approved by the Committee based on medical evidence submitted by the Participant's physician or a physician approved by the Committee. A determination by the United States Social Security Administration that a Participant is disabled for Social Security purposes shall be conclusive and binding upon the Committee. 1.6 EMPLOYEE. An Employee of an Employer. 1.7 PARTICIPANT. Any Employee who participates in this Plan in accordance with Article II. 1.8 PERIOD OF SERVICE. The period of time during which an Employee is employed by an Employer. 1.9 PLAN. The Wackenhut Corporation Executive Retirement Plan as it may from time to time be amended. 1.10 RETIREMENT. The first date upon which the Participant shall separate from service and attain Normal Retirement Age. 1 4 1.11 SEPARATION FROM SERVICE. Severance of the Participant's employment with the Employer. A Participant shall be deemed to have severed his employment with the Employer for purposes of this Plan when, in accordance with the established practices of the Employer, the employment relationship is considered to have actually terminated. 1.12 NORMAL RETIREMENT AGE. Age 65. 1.13 FAS. The average salary of a Participant earned during his or her last five (5) years of employment with an Employer. Such salary does not include any bonuses, but does include any deferred salary which is included in the year in which it is earned, not in the year of payment. 1.14 LONG TERM DISABILITY (LTD) BENEFITS. LTD benefits are those payable by The Wackenhut Corporation Long Term Disability plan in effect from time to time and normally offered to Employees under the TWC "005" plan. ARTICLE II PARTICIPANT ELIGIBLITY 2.1 INITIAL ELIGIBLE EMPLOYEES. The attached list of individuals are those Employees who have been approved for participation at the inception of the Plan. See Exhibit A. Participants shown on Exhibit A who are age 55 or over at inception of the Plan shall not be eligible for Early Retirement pursuant to Section 4.2 of the Plan. 2.2 OTHER ELIGIBLE EMPLOYEES. (as amended April 24, 1993). In addition to those initially eligible, employees holding the following positions with applicable time periods may be selected to participate in the Plan. POSITION TIME PERIOD -------- ----------- Any Officer of TWC After having been an Officer of TWC for two years President of a major After two years of service Business Unit of Employer (excluding WATCI, WMSI and WASI) Sr. Vice President at After having been in position for two Group Level years Sr. Vice President at After ten years of service and having Division Level been in position for two years Vice President at Division After ten years of service and having Level been in position for two years 2 5 Such key executives shall be suggested by the Corporate Retirement Committee, and be finally approved for participation in the Plan by the Nominating and Compensation Committee of the Board of Directors of TWC. 2.3 EXCLUDED EMPLOYEES. No Senior Vice President, Executive Vice President, President, or Chairman of the Board of TWC shall be selected for participation in the Plan if such officer has elected coverage under an individual Deferred Compensation Agreement (the Senior Plan) between himself and TWC. Any such officer may elect to be included under this Plan and not the Senior Plan at the time he or she becomes eligible for the Senior Plan. ARTICLE III BENEFITS 3.1 BENEFIT COMPUTATION. The basic Benefit Formula is a product of forty-five percent (45%) of the FAS of a Participant at Normal Retirement Age after twenty-five (25) years of service, reduced by one hundred percent (100%) of any social security benefits for which the Participant is eligible at the time of his or her retirement. 3.2 YEARS OF SERVICE COUNTED. All years of service with the Employer, including years of service prior to participation in the Plan, are includible for purposes of the Benefit Computation in Section 3.1 above. Years of service in excess of twenty-five (25) years are not considered for purposes of the Benefit Computation. No benefits will be payable to any participant with less than ten (10) years of service with TWC or its subsidiaries. Years of service after a Participant reaches age 65 will be counted to allow a Participant to reach the maximum of 25 years of service. 3.3 BENEFITS WITH LESS THAN 25 YEARS OF SERVICE. For years of service with TWC and its subsidiaries in excess of ten (10) years, but less than twenty-five (25) years, the Benefit Computation in Section 3.1 above shall be 1.8% times the number of years of service to arrive at the Benefit Formula to be applied. Thus, a Participant who had twenty (20) years of service at the time of his or her entitlement to Benefits under this Plan would have a Benefit Formula of thirty-six percent (36%) of FAS reduced by one hundred percent (100%) of any social security benefits for which the Participant is eligible at the time of his or her retirement. 3 6 ARTICLE IV WHEN BENEFITS ARE PAYABLE 4.1 RETIREMENT. Upon retiring at Normal Retirement Age, a Participant shall be paid monthly 1/12th of the annual amount determined under the applicable Benefit Formula provided in either Section 3.1 or 3.3 either for the rest of his or her life or under the two optional forms of payment indicated in 4.1.1 and 4.1.2 below. Such payments shall begin the first day of the month following such retirement. The following is an example of the Benefit Computation. An Executive retires at age 65 with twenty-five (25) years of service. The FAS is $80,000 and the social security entitlement is $10,700 annually at the time of his or her retirement. 45% x $80,000 = $36,000 Less Annual Social Security -10,700 ------- Plan pays annually for life $25,300 ------- Monthly payment for life $ 2,109 ------- 4.1.1 LIFE WITH TEN YEARS CERTAIN. A Participant may elect the actuarially determined equivalent of the payments for life to be paid for his or her life with ten (10) years of such determined payment to be made in any event either to the retired Participant or to his designated Beneficiary. 4.1.2 JOINT AND SURVIVOR OPTIONS. A Participant may elect the actuarially determined equivalent of the payments for life to be paid for the lives of the Participant and another person. 4.2 EARLY RETIREMENT. If a Participant is at least age 55 and has at least twenty (20) years of service with the Employer, he or she may elect to retire at any time before age 65, but the amount of the Benefits otherwise payable to the Participant shall be reduced by a factor of 4% for each year (or fraction thereof) that the Participant is under Normal Retirement Age. The Benefit Calculation provided in Sections 3.1 or 3.3 would be made using an estimated amount of social security which would be payable to the Participant at age 65. The following is an example of the Benefit Computation. An Executive retires early at age 62 with twenty-two (22) years of service. His FAS is $80,000 and his estimated social security entitlement at age 65 is $10,700 annually. 1.8% x 22 x $80,000 = $31,680 Less estimated Social Security -10,700 ------- Benefit that is payable at age 65 $20,980 Early retirement factor 100%-3(4%) = x 88% Annual Benefit payable at age 62 $18,462 ------- Monthly payment for life $ 1,538 ------- 4 7 4.3 PRE-RETIREMENT DEATH BENEFIT. In the event of the death of a Participant prior to his or her retirement, a benefit shall be payable to his or her designated Beneficiary for a period of ten (10) years. This death benefit shall be computed by using the applicable Benefit Formula in either Section 3.1 or 3.3 as if the Participant had attained Normal Retirement Age, reduced by fifty percent (50%), but without any reduction for social security benefits. 4.3.1 TIME OF DISTRIBUTION. Distribution shall commence to be made as soon as administratively practicable following the date on which the Committee receives written notification of the Participant's death in the manner prescribed by the Committee. 4.4 DISABILITY BENEFIT. In the event of the Disability of a Participant prior to his or her retirement, a benefit shall be payable to such Participant commencing at the time LTD benefits as defined in Section 1.14 cease. This disability benefit shall be computed by using the applicable Benefit Formula in either Section 3.1 or 3.3 based upon the years of service and compensation of the Participant prior to his or her Disability. The benefit is computed as if the Participant had attained Normal Retirement Age, and is payable as selected by the Participant under Section 4.1 of this Plan. Any benefit payable under this Section shall be computed as if the Participant were eligible to receive LTD benefits for the period described in the LTD plan defined in Section 1.14, whether the Participant is actually covered by such LTD plan or not. 4.5 DELAY IN PAYMENT. Notwithstanding any other provision of the Plan, if the amount of a payment otherwise required to be made on any date under the Plan cannot be ascertained by such date, or if the Participant (or Beneficiary, if applicable) fails to provide proper written notification of his claim for a benefit to the Committee, or if it is not possible to make such payment on such date because the Committee cannot locate the Participant (or Beneficiary) after making reasonable efforts to do so, such payment may be made no later than 60 days after the earliest date on which such payment can be ascertained or proper notification is received or the Participant is located (whichever is applicable). 4.6 PROOF OF DEATH. The Committee may require such proof of death and such evidence of the right of any person to receive all or part of the death benefit of a deceased Participant as the Committee may deem desirable. 4.7 DESIGNATION OF BENEFICIARY. Every Participant shall be furnished with a form on which he may designate a Beneficiary to receive the benefits due him under the Plan in the event of his death during employment, or before all payments due are made. 4.7.1 A Participant may change any such designation by signing and filing with the Committee a new Designation of Beneficiary. 5 8 4.7.2 If no Beneficiary is designated, or if the designated Beneficiary has not survived the Participant, and if no alternative designation of Beneficiary shall be effective, the Participant's Beneficiary shall be his surviving spouse, or if no spouse survives the Participant, the estate of the deceased Participant. 4.7.3 If the Beneficiary cannot be located for a period of one year following the Participant's death despite mailing to the Beneficiary's last known address and if the Beneficiary has not made a written claim within such period to the Committee, such Beneficiary shall be treated as having predeceased the Participant. 4.8 PARTICIPANT'S RIGHTS UNSECURED. The right of the Participant or his Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Employer, and neither the Participant nor his Beneficiary shall have any rights in or against any specific assets of the Employer. Benefits may not be encumbered or assigned by a Participant or any Beneficiary. 4.9 FORFEITURE OF BENEFITS. Notwithstanding any other provision of this Plan, all benefits otherwise payable to a Participant may be forfeited if the Committee determines that such Participant has become employed by a competitor of the Employer either as an employee or a consultant. ARTICLE V ADMINSTRATION 5.1 THE COMMITTEE. The Plan will be administered by the Corporate Retirement Committee (the Committee) comprised of the President, the Chief Financial Officer, the Chief Legal Officer, and the Vice President, Human Resources of TWC. 5.2 POWERS AND AUTHORITY OF COMMITTEE. Except as otherwise expressly provided in the Plan, the Committee will have all powers necessary or helpful for the carrying out of its duties and responsibilities under the Plan, and its decisions or actions in good faith in respect of any matter hereunder will be final, conclusive and binding upon all parties concerned. 5.3 LIABILITY LIMITED. Except as otherwise provided by law, no person who is a member of the Committee or who is an employee, officer and/or director of the Employer will incur any liability whatsoever on account of any matter connected with or related to the Plan, unless such person has acted in bad faith, or has willfully neglected his duties, in respect of the Plan. 5.4 RELIANCE ON INFORMATION. The members of the Committee, the Employer, and its respective officers, directors and employees will be entitled to rely upon all 6 9 tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, insurance company, counsel, physician or other expert who is engaged by the Committee. The members of the Committee, the Employer, and its respective officers, directors, and employees will be fully protected in respect of any action taken or suffered by them in good faith in reliance thereon, and all action so taken or suffered shall be conclusive upon all persons affected thereby. 5.5 GENUINENESS OF DOCUMENTS. The Committee, the Employer, and its respective officers, directors and employees, will be entitled to rely upon any notice, request, consent letter, telegram or other paper or document believed by them or any of them, in good faith, to be genuine and to have been signed or sent by the proper person. 5.6 PROPER PROOF. In any case in which the Committee or the Employer is required under the Plan to take action upon the occurrence of any event, they will be under no obligation to take such action unless and until proper and satisfactory evidence of such occurrence has been received by them. ARTICLE VI AMENDMENT, TERMINATION AND EXCEPTIONS 6.1 MODIFICATION OR AMENDMENT. The Board of Directors of TWC may at any time amend this Plan; provided, however, that such amendment shall not affect the rights of the participants or their Beneficiaries with respect to any benefits accrued or payable before the date of any such amendment. 6.2 TERMINATION OF PLAN. The Board of Directors of TWC may, in its sole discretion, terminate the Plan at any time; provided, however, such termination shall not affect the rights of Participants or their Beneficiaries with respect to any benefits accrued or payable before the date of such termination of this Plan. 6.3 EXCEPTIONS. The Nominating and Compensation Committee of the Board of Director of TWC may make individual exceptions to the Plan from time to time to broaden the provisions of the Plan to be more favorable to a Participant than the provisions of the Plan. No exceptions may be made by such Committee to narrow the coverage of the Plan or to make exceptions which are less favorable to a Participant. 7 10 ARTICLE VII MISCELLANEOUS 7.1 NO IMPLIED RIGHTS. Neither the establishment of the Plan nor any modification thereof, shall be construed as giving any Participant, Employee, Beneficiary or other person any legal or equitable right unless such right shall be specifically provided in the Plan or conferred by affirmative action of the Committee or the Nominating and Compensation Committee of the Board of Directors of TWC in accordance with the terms and provisions of the Plan. 7.2 STATUS OF EMPLOYMENT RELATIONS. Nothing in this Plan shall be deemed to: 7.2.1 Give to any employee the right to be retained in the employ of TWC; 7.2.2 Affect the right of TWC to discipline or discharge any employee at any time; 7.2.3 Give TWC the right to require any employee to remain in its employ; or 7.2.4 Affect any employee's right to terminate his employment at any time. 7.3 BINDING EFFECT. The provisions of the Plan shall be binding on the Employer, the Committee and their successors and on all persons entitled to benefits under the Plan and their respective heirs, legal representatives and successors in interest. 7.4 GOVERNING LAWS. The Plan shall be construed and administered according to the laws of the State of Florida to the extent that such laws are not preempted by the laws of the United States of America. 7.5 USAGE. Whenever applicable, the masculine gender, when used in the Plan, shall include the feminine and neuter genders, and the singular shall include the plural. 7.6 CAPTIONS. The captions contained herein are inserted as a matter of convenience and for reference only, and in no way define, limit, enlarge or describe the scope or intent of the Plan nor in any way shall affect the Plan or the construction of any provisions thereof. 7.7 RABBI TRUST. This plan shall be complemented by a "Rabbi" or "Springing Trust" which shall make reference to this Plan and which shall provide some measure of security for the otherwise unfunded benefits contemplated by this Plan. 8 EX-10.4 9 g67411kex10-4.txt AMENDED & RESTATED SPLIT DOLLAR 1 Exhibit 10.4 AMENDED AND RESTATED SPLIT DOLLAR LIFE INSURANCE AGREEMENT I PARTIES A. The Wackenhut Corporation ("Employer"), 1500 San Remo Avenue, Coral Gables, Florida 33146; B. The George Wackenhut Irrevocable Trust dated January 25, 1982 ("GW Trust"), c/o Northern Trust Bank, 700 Brickell Avenue, Miami, Florida 33131; C. The Ruth Wackenhut Irrevocable Trust dated January 3, 1983 ( "RW Trust"), c/o Northern Trust Bank, 700 Brickell Avenue, Miami, Florida 33131; D. George Wackenhut ("Employee"), 1500 San Remo Avenue, Coral Gables, Florida 33146. II DEFINITIONS A. The "Parties" are the persons listed in paragraphs IA, IB, IC, and ID above; B. The "Owners" (sometimes also referred to as "Owner"), are the GW Trust and the RW Trust; C. The "Agreements" are the two agreements identified in paragraphs IIIA and IIIB below; D. This Amended and Restated Split Dollar Life Insurance Agreement is referred to as the "Restated Agreement"; 2 E. The "Insurer" is the Manufacturers Life Insurance Company ("Manufacturers"). F. The "Policy" is the policy issued by Manufacturers and listed on Schedule A; G. The "Employer's Policy Interest" is the total amount to be paid to Employer as specified in paragraph IVD. III RECITALS A. On January 25, 1982 certain of the Parties hereto entered into an Agreement Relating to Advancements for Life Insurance on the Life of George R. Wackenhut and Other Provisions Relating Thereto. That Agreement is to expire after the eighth anniversary date, unless extended by the Parties. B. On January 3, 1983, certain of the Parties hereto entered into an Agreement Relating to Advancements for Life Insurance on the Life of Ruth J. Wackenhut and Other Provisions Relating Thereto. That Agreement is to expire after the eighth anniversary date, unless extended by the Parties. C. The respective Parties now desire to amend and entirely restate the Agreements described in paragraphs IIIA and IIIB above to extend the terms thereof and to reflect that new coverage has been purchased in furtherance of those Agreements. 2 3 D. Employer is a corporation duly organized and validly existing under the laws of Florida. E. Employee is the Chairman and Chief Executive Officer of Employer and is a valued and trusted employee. F. In consideration of the faithful performance of services by Employee for Employer, Employer wishes to continue assisting Owner in paying the premiums on a life insurance policy by contributing from time to time, to the payment of premiums due on the policy on the life of Employee and Ruth Wackenhut and to provide a means for payment to Employer of all amounts it is entitled to receive under the Agreements and this Restated Agreement, all in accordance with the terms and conditions of this Restated Agreement. G. Employer and Employee have agreed that the Policy insuring the lives of Employee and Ruth Wackenhut, his wife, issued by Manufacturers, which was purchased by and is owned by the Owners, is subject to the terms and conditions of this Restated Agreement. H. Each Owner is an irrevocable trust under the laws of Florida. NOW, THEREFORE, in consideration of $10.00 and other good and valuable consideration, the parties mutually agree as follows: 3 4 IV TERMS A. ACQUISITION OF POLICY. The Parties shall cooperate in paying the annual premiums on the Policy as long as the Policy remains in force. The Policy was issued to the Owner as owner and the Owner shall be the sole and exclusive owner of the Policy. B. PAYMENT OF PREMIUMS. Employer has paid the Policy premiums through March 1, 1990. All premium payments thereafter shall be paid by the Employer and the Owner in accordance with the formula set forth in this paragraph IVB(1), IVB(2), IVB(3) and IVB(4) below. Unless otherwise agreed to by the Employer and the Owner, all premium payments on the Policy are to be made in accordance with and subject to the following terms and conditions: (1) On or before thirty days prior to the due date of each required premium on the Policy (not including any grace period), the Employer shall pay to Owner the amount specified in Schedule B for the applicable policy year for each year that this Restated Agreement is in force. (2) Owner shall pay to the Insurer the amount received by it under paragraph IVB(1) above and the amount specified in Schedule C for the applicable policy year for each year that this Restated 4 5 Agreement is in force. Owner's share of the premium has been calculated using the Insurer's current published premium rate for annual renewal term insurance for standard risks for joint lives; if this is adjusted by Insurer in the future, Owner's share of the premium will be adjusted accordingly. (3) Owner shall pay its portion of each premium on a date no later than a date within the grace period allowed by the Policy. Upon request by Employer, Owner shall provide Employer with proof of payment. (4) To the extent the Employer fails to pay a portion of any premium due on the Policy, as required by paragraph IVB(1) above, the Owner may, at its option, pay all or any portion of the premium and deduct that amount from the total amount of the Employer's Policy Interest, notwithstanding any other provision of this Agreement. Notwithstanding anything herein to the contrary, to the extent the Employer fails to pay a portion of any premium due on the Policy or pay the additional compensation payable under the following paragraph IVC, neither the Owner, Employee or any other person shall have the obligation to pay such premium due on the Policy. C. ADDITIONAL COMPENSATION. As additional compensation to Employee, the Employer also shall pay to Employee, if 5 6 living, or to his wife if he is then deceased, an amount equal to the Owner's portion of the annual premium, as specified in Schedule C. Employee and Ruth Wackenhut agree to contribute to Owner all amounts received by either of them under the prior sentence of this paragraph IVC. D. DISBURSEMENT OF POLICY PROCEEDS BY OWNER. In consideration of the Employer's agreement to continue to contribute to the payment of the premiums in the manner set forth in this Restated Agreement, Owner agrees to repay to Employer, at the time and in the manner provided in this Restated Agreement, the sum of $760,000 in full settlement of all amounts due or to become due under this Restated Agreement. E. POLICY OWNERSHIP. Owner is the owner of the Policy and may exercise all rights of ownership with respect to the Policy. Such rights include the privilege to exercise all the rights of an owner under the terms of the Policy, including the right to borrow on the security of the Policy, but only to the extent that the cash value exceeds the Employer's Policy Interest; to pledge or assign the interest in the Policy for such loans or advances; the right, in the event of a termination of this Restated Agreement, to realize against the cash value of the Policy and to retain the cash received after satisfying the Owner's obligation to pay to Employer the Employer's Policy Interest; the right of Owner pursuant to paragraph IVG, to collect the Policy proceeds and to retain the balance of the proceeds remaining after satisfying the Owner's 6 7 obligations to pay to Employer the Employer's Policy Interest; and the right, subject to the right of Employer to be paid its Policy Interest, to surrender the Policy. Employer agrees to sign any documents necessary to assist owner in exercising its rights under this Restated Agreement. Owner also has the right to assign its ownership rights to any person or entity it, in its absolute discretion chooses. F. APPLICATION OF POLICY DIVIDENDS. Any annual dividend attributable to the Policy will be applied to the reduction of the Employer's portion of premiums due on the Policy pursuant to paragraph IVB(1). G. DEATH. In the event of the death of the survivor of Employee and Ruth Wackenhut while this Restated Agreement is in force: (1) Employer shall be entitled to that portion of the proceeds of the Policy equal to the amount of Employer's Policy Interest. (2) Owner shall be entitled to the proceeds of the Policy in excess of the amount of the Employer's Policy Interest. H. OWNERSHIP. Notwithstanding anything herein contained to the contrary, in no event shall Employer have any ownership or security interest in any assets of Owner, including but not limited to, the Policy. 7 8 I. Termination of Restated Agreement. (1) Subject to fulfillment of the obligations arising upon termination hereinafter set forth, this Restated Agreement shall terminate on the first to occur of the following events (each referred to herein as a "Termination Event"): (i) Delivery of written notice of termination by Employer to Owner. (ii) Surrender of the Policy by Owner with the written consent of the Employer. (iii) At the option of Employer, termination of Employee's employment with Employer for any reason, by either Employer or Employee, with or without cause. (iv) Bankruptcy or receivership of the Employer. (2) Within fifteen (15) work days following a Termination Event, Owner, in Owner's sole discretion, shall take one of the following actions: (i) Surrender the Policy and pay to Employer the Employer's Policy Interest to the extent of the cash surrender value. (ii) Retain all or a portion of the Policy and pay to Employer the Employer's Policy Interest to the extent of the cash surrender value. 8 9 J. PROVISIONS REGARDING THE INSURANCE. The parties acknowledge and agree as follows: (1) Manufacturers shall be bound only by the provisions of the Policy and any endorsement thereto. (2) Any payment made or actions taken by Manufacturers in accordance with the provisions of the Policy and any endorsement thereto shall fully discharge Manufacturers from all claims, suits and demands of all persons whatsoever. (3) Manufacturers shall not be deemed a party to, or to have notice of, this Restated Agreement or the provisions hereof and shall have no obligation to see to the performance of the obligations of the parties hereunder. K. SPECIAL PROVISIONS. In compliance with the requirements of the Employee Retirement Income Security Act of 1974, as amended, the parties hereby confirm: (1) Employer is the named fiduciary of the split dollar life insurance plan of which this Amended and Restated Agreement is the written instrument. (2) The funding policy of the split dollar life insurance plan is that the Employer will pay the premiums under the Policy as required under paragraph IVB above. (3) The following claims procedure shall be utilized: 9 10 (i) The claimant shall file a claim for benefits by notifying Employer orally or in writing. If the claim is wholly or partially denied, Employer shall provide a written notice within ninety (90) days specifying the reason for the denial, the provisions of this Amended and Restated Agreement on which the denial is based, and additional material or information, if any, necessary for the claimant to receive benefits. Such written notice shall also indicate the steps to be taken by the claimant if a review of the denial is desired. (ii) If a claim is denied and a review is desired, the claimant shall notify the Employer in writing within sixty (60) days after receipt of written notice of a denial of a claim. In requesting a review, the claimant may review plan documents and submit any written issues and comments the claimant feels are appropriate. Employer shall then review the claim and provide a written decision within sixty (60) days of receipt of a request for a review. This decision shall state the specific reasons for the decision and shall include references to specific provisions of this Restated Agreement, if any, upon which the decision is based. 10 11 (iii) In no event shall Employer's liability under this Restated Agreement exceed the amount of proceeds from the Policy. L. AMENDMENT. This Restated Agreement may be altered, amended or modified, including the addition of any extra policy provisions, but only by a written instrument signed by all of the Parties. M. ASSIGNMENT. One or more of the parties may assign such party's interests and obligations under this Restated Agreement at any time subject to the terms and conditions of this Restated Agreement. N. GOVERNING LAW. This Restated Agreement shall be governed by the laws of the State of Florida. O. ENTIRE AGREEMENT. This Restated Agreement sets forth the entire agreement of the parties with respect to the subject matter hereof. Any and all prior agreements or understandings with respect to such matters are hereby superseded. IN WITNESS WHEREOF, the parties have signed this Restated Agreement as of the 17th day of October, 1989. EMPLOYER: THE WACKENHUT CORPORATION Attest: /s/ J.P. Rowan By: /s/ J. Calvin Harris -------------------------- -------------------------------- 11 12 OWNER: GEORGE WACKENHUT IRREVOCABLE TRUST Northern Trust Bank, N.A. Co-Trustee By: /s/ Illegible --------------------------------- /s/ Donald B. Paul --------------------------------- Donald B. Paul, CPA Co-Trustee OWNER: RUTH WACKENHUT IRREVOCABLE TRUST Northern Trust Bank, N.A. Co-Trustee By: /s/ Illegible --------------------------------- /s/ Donald B. Paul --------------------------------- Donald B. Paul, CPA Co-Trustee EMPLOYEE: /s/ G. R. Wackenhut --------------------------------- George Wackenhut EMPLOYEE'S WIFE: /s/ Ruth J. Wackenhut --------------------------------- Ruth J. Wackenhut 12 13 SCHEDULE A Company Policy # Face Amount - ------- -------- ----------- Manufacturers Life Insurance Company 5,130,509-2 $800,000 14 Schedule B Employer Premium Payments Per Paragraph IVB(1) Year Employer's Premium ---- ------------------ 1 $16,481 2 16,470 3 16,456 4 16,440 5 16,421 6 16,399 7 16,372 8 16,341 9 16,304 10 16,261 11 16,209 12 16,149 13 16,078 14 15,994 15 15,897 16 15,782 17 15,648 18 15,491 19 15,311 20 15,097 If there are premium payments due after year 20, the annual premium payments will continue to be $16,543 annually with the Employer's portion reduced by the amounts paid by Owner as determined under Schedule C. 15 Schedule C Owner Premium Payments Per Paragraph IVB(2) Year Owner's Premium ---- --------------- 1 $ 62 2 74 3 87 4 103 5 122 6 144 7 171 8 202 9 239 10 282 11 334 12 394 13 465 14 549 15 646 16 761 17 895 18 1,052 19 1,232 20 1,446 If there are premium payments due after year 20, the annual premium payments to be paid by the Owner will be the lower of the P.S. 58 amount or the current premium rate for annual renewal term insurance for standard risks published by Manufacturers. EX-10.7 10 g67411kex10-7.txt OFFICE LEASE DATED 04/08/95 1 Exhibit 10.7 REFERENCED DATA Any reference in this lease to the following subjects shall incorporate therein the data stated for the subject(s) in this Section: DATE OF LEASE April 18, 1995 LANDLORD: Daniel S. Catalfumo, as Trustee under F.S. 689.071 LANDLORD'S ADDRESS: 1540 Latham Road, WPB, FL 33409 TENANT: The Wackenhut Corporation TENANT'S ADDRESS: 1500 San Remo Avenue Coral Gables, FL 33416-3036 DEMISED PREMISES: Ninety Thousand Five Hundred (90,500) square feet on the second through fourth (2nd - 4th) floors and a portion of the first floor of the Building. For all purposes hereof the Building shall be deemed to contain Ninety-four Thousand Nine Hundred Fifty-six (94,956) square feet (the "Building Area"). LEASE TERM: Fifteen (15) Years. ESTIMATED DATE OF SUBSTANTIAL COMPLETION: January 16, 1996 RENTAL COMMENCEMENT DATE: February 15, 1996 EXPIRATION DATE OF LEASE TERM: February 28, 2001 ANNUAL RENTAL: One Million Seven Hundred Sixty-Four Thousand Seven Hundred Fifty Dollars and 00/100 ($1,764,750.00) calculated at the rate of $19.50 per square foot. TENANT'S PROPORTIONATE SHARE: 94.98% PERMITTED USES: General Business and Office Use SECURITY DEPOSIT: N/A OPTIONS TO RENEW: Three (3) Five (5) year options WITNESSES: LANDLORD: - ------------------------------- -------------------------------- DANIEL S. CATALFUMO, as Trustee - ------------------------------- under F.S. 689.071 TENANT: - ------------------------------- THE WACKENHUT CORPORATION By: ----------------------------- Senior Vice-President 2 OFFICE LEASE THIS LEASE made and entered into as of the 18th day of April, 1995 by and between DANIEL S. CATALFUMO, AS TRUSTEE UNDER F.S. 689.071, (hereinafter referred to as "Landlord") and THE WACKENHUT CORPORATION (hereinafter referred to as "Tenant"). W I T N E S S E T H: 1. DEMISED PREMISES. A. Landlord is or will become the owner of a 7.7 acre tract of land (the "Land") situated adjacent to I-95 at the corner of RCA Boulevard and Northcorp Parkway, in Palm Beach Gardens, Florida, more particularly described in Exhibit "A" attached hereto. Landlord shall construct upon said Land a four (4) story building to be known as "The Wackenhut Center" (hereinafter referred to as the "Building"), together with two (2) other office buildings (the "Adjacent Buildings") surrounding parking areas and driveways (collectively called the "Parking Facilities") and curbs and sidewalks all as located on the Site Plan attached hereto as Exhibit "B". The Land, along with the Building, Adjacent Buildings, Parking Facilities and all other improvements presently or hereafter located upon the Land, are hereinafter collectively referred to as the "Property". Landlord agrees that the aggregate square footage of the Building and Adjacent Buildings shall not exceed One Hundred Twenty-Five (125,000) square feet subject to the expansion provision contained in Paragraph 47. B. Landlord, for the term and subject to the provisions and conditions hereof, shall lease to Tenant, and Tenant shall accept from Landlord, certain space more particularly described by the cross-hatched area on the floor plans annexed hereto as Exhibit "C", which for all purposes hereof shall be deemed to contain Ninety Thousand Five Hundred (90,500) square feet consisting of all of the second through fourth (2nd - 4th) floors and a portion of the first floor of the Building, (the "Demised Premises"), together with an exclusive license for the duration of the term of the Lease to use the parking spaces (the "Parking Spaces") described in the Parking Space Schedule attached hereto as Exhibit "D", for parking of the passenger vehicles and service vans of Tenant and Tenant's invitees and employees and for no other purpose. Upon the Leasehold Improvements Completion Date as hereinafter defined, Landlord and Tenant shall promptly execute a revision to the Referenced Data containing the actual square footage (which square footage of the Demised Premises shall be the Building Area less 1,500 square feet for which Tenant shall not be obligated to pay Rent and less the portion of the Building not leased by Tenant pursuant to its Expansion and Contraction Rights as defined below, which calculation shall be subject to the reasonable verification of Tenant's architect) the actual Rent to be paid hereunder and the actual Tenant Improvement Allowance (as hereafter defined). The revised Referenced Data shall be incorporated into this Lease automatically upon execution by the Parties. Tenant shall have the right to increase the square footage of the Demised Premises by any amount up to the entire Building Area, or decrease the square footage of the Demised Premises on the first floor of the south portion of the Building by any amount up to 8,677 square feet (the "Expansion and Contraction Rights"). Tenant shall be entitled to exercise its Expansion and Contraction Rights up until such time as Tenant has provided Landlord with its Preliminary Interior Plans (as defined in Paragraph 3.A.) pursuant to Paragraph 3.A. If Tenant elects to change the square footage of the Demised Premises, then in such event, the Annual Rent, Tenant's Proportionate Share, the amount of the Tenant Improvement Allowance (as hereafter defined), and the actual square footage of the Demised Premises shall be modified upon the Leasehold Improvements Completion Date. Any space in the Building which is not leased by Tenant ("Remaining 2 3 Space") shall be on the first floor of the south portion of the Building in a reasonably leasable configuration. Tenant agrees that landlord may access any such Remaining Space through Tenant's lobby at no expense to Landlord, or its other tenants, except for the cost of any hallway required to be constructed by Landlord to access the Remaining Space. Tenant shall have the right to approve the location, size and appearance of any such hallway, which approval shall not be unreasonably withheld. No portion of any hallway required to access the Remaining Space shall be included in the Demised Premises. If the area of the Remaining Space is more than 3,500 square feet, then the area of the lobby for which Tenant is paying Rent shall be reduced in proportion to the relative square footages of the Remaining Space and the Demised Premises to account for the shared use of the lobby. For example, if the area of the Remaining Space is 4,000 square feet, the area of the Demised Premises is 90,956 square feet, the Building Area is 94,956 square feet and the area of the lobby is 1,728 square feet, then the portion of the lobby for which Tenant shall not pay Rent will be 72.79 square feet (4,000/94,956 x 1,728 = 72.79). C. The Demised Premises shall be used for general business and office purposes, including, but not limited to conference and computer facilities, employee kitchen and lounge facilities, and any other legally permitted uses under applicable laws, regulations and restrictions recorded among the Public Records of Palm Beach County as of the date hereof, or as hereafter consented to or created by Tenant and for no other purposes. D. The use and occupation by Tenant of the Demised Premises shall include the non-exclusive use (except for the exclusive parking spaces assigned to Tenant pursuant to the Parking Space schedule), in common with other tenants of the Building of the common facilities, employees' parking areas, service roads, loading facilities, sidewalks and customer car parking areas (collectively the "Common Areas") as such Common Areas now exist or as such Common Areas may hereafter be constructed, and other facilities as may be designated from time to time by Landlord, subject however to the terms and conditions of this agreement and to the Rules and Regulations (as hereafter defined) for the use thereof as prescribed from time to time by Landlord. 2. TERM. A. This Lease shall be effective upon execution by Landlord and Tenant and the term of this Lease shall commence on the Rental Commencement Date and end at 12:00 midnight on the last day of the month in which the fifteenth (15th) anniversary of the Rental Commencement Date occurs, unless sooner terminated as herein provided. The "Rental Commencement Date", shall be February 15, 1996, provided that Landlord has "delivered" the Demised Premises over to Tenant for the installation of Tenant's furniture and systems on or before January 16, 1996 (the "Leasehold Improvements Completion Date"). For the purposes of this Paragraph 2, the term "delivered" or "delivery of the Demised Premises", shall mean that possession of the Demised Premises has been turned over to Tenant ready for the installation of Tenant's furniture and systems with (1) at least one elevator servicing the Demised Premises available for use by Tenant; (2) reasonable access and reasonable facilities necessary for the conduct of Tenant's business in the Demised Premises, including, corridors, elevators, stairways, toilets, heating, ventilating, air conditioning, water, plumbing, public area lighting and electrical power facilities, all properly installed in accordance with all applicable building codes and in good working order; (3) all facilities serving the Building and passing through the Demised Premises shall have been completed; (4) the exterior of the Building shall be substantially completed and enclosed, including all windows with the remaining work to be done in the Building to be of such a nature so as to not materially interfere with Tenant's installation of its furniture and systems, 3 4 and, upon completion thereof, its normal use and occupancy of the Demised Premises for the conduct of its business. Landlord and Tenant acknowledge that, subject to Landlord meeting the foregoing conditions with respect to delivery of the Demised Premises, Landlord may be working on completing the Demises Premises, Building and Parking Facilities between January 16, 1996 and February 15, 1996, provided that by February 15, 1996, in addition to all of the foregoing conditions with respect to delivery of the Demised Premises, Landlord shall have obtained all required governmental approvals and inspections which are necessary, when taken together with the work to be performed by Tenant, to allow Tenant to lawfully occupy the Demised Premises and Landlord shall have complied with all legal requirements which are necessary for Tenant to use the Demised Premises for the conduct of its business (provided Tenant applies for and obtains its occupational licenses from the appropriate authorities) The determination as to whether or not the Demised Premises have been "delivered" as defined above shall be made jointly by Tenant's architect and the architect of record who prepared and sealed the Interior Plans and Specifications after consultation and a joint inspection of the Building using their reasonable judgment. If Landlord delivers the Demised Premises to Tenant for the installation of Tenant's furniture and systems after January 16, 1996, or if Landlord fails to complete before February 15, 1996, any work being performed after January 15, 1996, as described above the Rental commencement Date shall be that day which is thirty (30) days after landlord has delivered the Demised Premises to Tenant ready for the installation of Tenant's furniture and systems or completed any of Landlord's remaining work as applicable. If Tenant occupies any portion of the Demised Premises for purposes of conducting its business prior to the date which would otherwise be calculated to be the Rental Commencement Date pursuant to this paragraph, Tenant shall immediately commence paying Rent on the portion of the Demised Premises so occupied. If Catalfumo Construction, Inc. performs the Leasehold Improvements and Landlord fails to deliver the Building and Demised Premises in the condition required above by January 16, 1996, Landlord shall provide Tenant with two (2) days of Rent abatement for every day of delay, said Rent abatement to commence on the Rental Commencement Date. B. If Tenant elects to have a contractor other than Catalfumo Construction, Inc. construct the Leasehold Improvements, Rent shall be payable commencing on February 15, 1996, regardless of whether or not the Leasehold Improvements are completed or whether or not Tenant has occupied the Demised Premises, provided that Landlord has turned over the first and second floors of the Building to Tenant ready for the Tenant's selected contractor to immediately commence construction of Tenant's Leasehold Improvements on or before October 15, 1995 and the balance of the Demised Premises by November 15, 1995 (respectively, the "Core Building Completion Dates"). If Tenant elects to have a contractor other than Catalfumo Construction, Inc. construct the Leasehold Improvements and Landlord fails to deliver the Completed Core Building (as hereinafter defined) to Tenant ready for Tenant's selected contractor to commence work by November 15, 1995, the Rental Commencement Date shall be that date which is ninety (90) days after Landlord has delivered the Completed Core Building and Tenant shall be provided with two (2) days of Rent abatement for every day of delay with said abatement to commence on the Rental Commencement Date. The term "Completed Core Building" shall mean that Landlord has completed the core and shell and the remainder of the Building to the extent necessary such that Tenant can, based upon reasonable joint determination of Landlord's and Tenant's architects, arrived at after consultation and a joint inspection of the Building, commence and carry on the Leasehold Improvements (as defined in Paragraph 3.A.), using all necessary trades, including non-union laborers and contractors; provided, however, that in no event shall the Core Building Completion Date be deemed to have occurred until: (1) temporary power is available to each floor; (2) the portion of the Demised Premises to be turned over is water 4 5 tight; (3) Tenant and its agents have safe access to the applicable portion of the Demised Premises for themselves, their employees and invitees and, given consideration to ongoing construction activities, such access is reasonably clear, convenient and sufficient to permit Tenant to commence and carry on the work on the Leasehold Improvements in accordance with good construction practices. within 11 days of the Core Building Completion Date, Tenant shall walk through the Building and prepare a "punch list" of items which are incomplete or do not comply with the Building Plans and Specifications. C. In no event shall Rent commence to be due unless there is available to the Demised Premises: (1) required utility services, (2) elevator service servicing the Demised Premises and (3) the completion of the parking spaces serving the Demised Premises. D. Anything in Paragraph 2.A. and B. to the contrary notwithstanding, if Landlord fails to perform by the core Building or Leasehold Improvements Completion Dates as applicable and such failure was in fact caused by any of the following, Rent shall commence as if the delay had not occurred and the deadline dates for the delivery of the Completed Core Building or Leasehold Improvements, as applicable shall be extended by the number of days of delay, provided Landlord shall have given Tenant prompt written notice of any delays which may be caused by Tenant as provided in Paragraph 3.A.: (1) material changes in the work to be performed by Landlord in readying the Demised Premises for Tenant's occupancy, which are requested by Tenant after approval of the Interior Plans and Specifications for the Leasehold Improvements (as those terms are defined in Paragraph 3 hereof); or (2) any failure by Tenant, to furnish any required plan, information (including, without limitation, any material, furnishings, equipment, color or other selection) approval or consent within the required period of time; or (3) the performance or non-performance of any work or activity in the Demised Premises by Tenant or any of its employees, agents or contractors. E. If Landlord has not delivered the Demised Premises to Tenant by April 15, 1996, if Catalfumo Construction, Inc. is performing the Leasehold Improvements, or if Catalfumo Construction, Inc. is not performing the Leasehold Improvements and Landlord has not delivered the Completed Core Building to Tenant ready for Tenant's selected contractor to commence the Leasehold Improvements as described in Paragraph 2. by February 15, 1996, then, and only then, Tenant shall be entitled to terminate this Lease by providing written notice of its election within fifteen (15) days thereafter, failing which, Tenant shall be deemed to have elected not to terminate this Lease, provided however, any election by Tenant not to terminate this Lease pursuant to this Paragraph 2.E., shall not be deemed a waiver or modification of Tenant's right to receive the Rent Abatement provided above or any other right or remedy available to Tenant by reason of such failure by Landlord. F. Upon delivery of the Demised Premises to Tenant for the installation of Tenant's furniture and systems it shall be presumed that all work theretofore performed by or on behalf of Landlord was satisfactorily performed in accordance with and meeting the requirements of this Lease, excepting any items covered by Landlord's construction warranty, punch list items or latent defects in work performed by Catalfumo Construction, Inc. Tenant shall provide Landlord with a "Punch List" of items, which are incomplete or do not comply with the Interior Plans and Specifications (as hereinafter defined) as soon as practicable 5 6 after Tenant takes possession of the Demised Premises, but in any event, prior to sixty (60) days from the date of possession. G. When the Rental Commencement Date has been established, if the Rental Commencement Date is different from that presently set forth in the Referenced Data, Landlord and Tenant shall execute a revision to the Referenced Data setting forth the actual Rental Commencement Date and the actual Expiration Date. H. Landlord shall obtain a building permit from the City of Palm Beach Gardens for the construction of the Building by April 30, 1995. on or before July 15, 1995, Landlord will send Tenant a notice confirming that the Core Building Completion Dates are October 15, 1995, for the first two floors and November 15, 1995 for the remainder of the Building, or specifying that the Core Building Completion Dates will be delayed beyond such dates. In the latter event, Landlord will notify Tenant at least sixty (60) days prior to the new dates anticipated as the Core Building Completion Date. In the event Landlord fails to send the required notice on or before July 15, 1995, then Landlord shall be deemed to have confirmed the Core Building Completion Dates set forth herein. Landlord agrees to update previous notices to Tenant as changing circumstances may require. These notices shall be given to facilitate Tenant's scheduling only and Landlord shall have no liability for the failure to give said notices or for the inaccuracy of said notices beyond the specific rights and remedies set forth in this Paragraph 2. From and after the date hereof until the second of the Core Building Completion Dates (at which time Tenant shall have complete access to the Demised Premises), Tenant and its agents shall be permitted to inspect the progress of Landlord's work on the Building at reasonable times on reasonable notice to Landlord's designee (until further notice Landlord's designee shall be Daniel S. Catalfumo). Any such inspection shall be made at Tenant's sole risk and expense. Upon request of Tenant, Landlord shall provide Tenant with oral reports on the progress of Landlord's work and copies of Landlord's construction schedule and the updates thereof. I. For purposes of Tenant's entitlement to the Rent abatement in the event the Completed Core Building or the Demised Premises (as applicable) are not delivered on the dates specified in Sub-Paragraphs 2(A) and 2(B) above, Landlord hereby waives any right to assert Force Majeure (pursuant to Paragraph 37), impossibility of performance or any other similar basis, in law or equity, to relieve Landlord of its obligation to grant Tenant the Rent abatement as aforesaid. 3. CONSTRUCTION OF BUILDING AND LEASEHOLD IMPROVEMENTS. A. Upon execution of the Lease, Landlord shall construct the Building in accordance with architectural and engineering drawings and specifications (the "Building Plans and Specifications") prepared by Landlord's architect and attached hereto as Exhibit "E". No material alterations or substitutions of materials from the Buildings Plans and Specifications shall be made by Landlord without the prior written consent of Tenant which shall not be unreasonably withheld or delayed. In addition, Landlord has provided Tenant with copies of the elevations and Site Plan for the Adjacent Buildings, prepared by Oliver-Glidden & Partners dated March 14, 1995, which have been reviewed and approved by Tenant. If Tenant requests any changes to the Building Plans and Specifications or the Site Plan for the Property which require Landlord to seek amendments or reapproval by the City of Palm Beach Gardens, or would delay the development of the Property or construction of the Building and Demised Premises, Landlord shall be granted a day for day extension of the dates to deliver the Demised Premises or the Completed Core Building as applicable as set forth in paragraph 2 above. Upon receipt of a request from Tenant for any such changes causing a delay, Landlord shall provide Tenant with a written notice of the delay which will be caused by the change and Tenant shall then elect within three (3) business days whether or not to proceed with the change. If Tenant requests any change which would cause an increase in the cost of 6 7 construction of the Building or development of the Property, Tenant shall be required to pay the actual cost of said change without mark-up for profit (but with a mark-up for overhead) upon receipt of Landlord's invoice therefor. Landlord shall provide Tenant with written notice of the increase in cost and Tenant shall have three (3) business days to elect whether or not to proceed with the change. Tenant shall have a space plan, interior design plan, finish schedules and architectural sketches (the "Preliminary Interior Plans") of the proposed Leasehold Improvements to the demised premises prepared and submitted to landlord on or before July 1, 1995, said preliminary interior plans to include the items set forth on exhibit "F", be complete and ready for Landlord's, architect and engineer to prepare the Interior Plans and Specifications (as defined below). Landlord shall provide Tenant with an allowance of $.83 per square foot of the Demised Premises to be used by Tenant to defray a portion of the costs for preparation of the Preliminary Interior Plans. This allowance shall be payable to Tenant as and when Tenant incurs architectural and engineering costs in the preparation of the Preliminary Interior Plans. Within forty-five (45) days of receipt of the Preliminary Interior Plans, Landlord shall have permit sets of working architectural and engineering drawings in sufficient detail for processing permits and bidding purposes prepared in accordance with the Preliminary Interior Plans (the "Interior Plans and Specifications"). The Interior Plans and Specifications shall be subject to Tenant's architect's reasonable review and approval. Tenant's architect shall review and approve or disapprove the Interior Plans and Specifications within Ten (10) days of receipt of same from Landlord and any revisions to the Interior Plans and Specifications within three (3) days of receipt of same from Landlord. The improvements to be made to the Demised Premises pursuant to the Interior Plans and Specifications shall be referred to herein as the "Leasehold Improvements." Upon completion of the Interior Plans and Specifications, Landlord and Tenant shall mutually select three (3) general contractors, including Catalfumo Construction, Inc., to bid on the construction of the Leasehold Improvements. Tenant shall have the right to select the general contractor to complete the construction of the Leasehold Improvements. If Tenant selects Catalfumo Construction, Inc., Tenant shall notify Landlord within thirty (30) days of receipt of the Interior Plans and Specifications. If Tenant selects a contractor other than Catalfumo Construction, Inc., Landlord will provide, at no additional cost to Tenant, all reasonable building services during construction of the Leasehold Improvements on an as available basis, including use of elevators, delivery docks and parking to aid in the construction of the Leasehold Improvements. Landlord shall not charge any administration or management fees with respect to the construction of the Leasehold Improvements. if Landlord has previously purchased and stored building materials to be used for the Leasehold Improvements, which are in excess of Landlord's requirements for construction of the Building, Tenant shall be permitted to purchase said materials at Landlord's original out-of-pocket cost with no additional mark-up by Landlord or Landlord's contractor for profit, overhead or supervision with respect to said excess building materials. B. Landlord shall provide Tenant with an improvement allowance (the "Improvement Allowance"), which shall be applied first to the cost of obtaining required permits for, and completing the construction of, the Leasehold Improvements, with any remaining portions of the Improvement Allowance to be applied to Tenant's costs of relocation into the Demised Premises, including, but not limited to, telephone and computer cabling, furniture, security systems, moving costs, or any other costs and expenses as Tenant may elect. The Improvement Allowance shall be in an amount equal to Thirty-Five and 58/100 Dollars ($35.58) multiplied times the square footage (as determined in accordance with Paragraph 1.B.) shown in the Interior Plans and Specifications approved by Tenant and Landlord. Landlord shall disburse the Improvement Allowance toward the Leasehold Improvements in accordance with the following conditions: (i) prior to commencement of any work, Landlord and Tenant shall have approved the Interior Plans and Specificiations for such work as provided in Paragraph 3.A. above; (ii) the 7 8 Interior Plans. and Specifications shall meet all requirements of Palm Beach County, Florida and other local governmental authorities having jurisdiction over the work; (iii) disbursements shall be made at least once in each month by Landlord in an amount which, when added to all previous amounts paid hereunder, shall not exceed 90% of the cost of the work performed with respect to "hard" costs (95% once not less than 50% of a particular contract has been completed and 100% once all of the work under a particular contract has been completed, provided Landlord's construction lender approves this disbursement procedure) and 100% of the cost of the work performed with respect to all other costs and materials purchased no later than the 10th day of the month, provided Landlord shall have received on or before the 20th day of the preceding month an AIA Form G702/3 from Tenant's architect (subject to verification of same by Landlord and Landlord's construction lender), containing a certification of (a) the stage of completion, (b) the estimated cost of completion, (c) the cost of the work and materials incorporated in the Demised Premises to date, and (d) an estimate of the cost of all remaining work and materials and of the performance of the work in accordance with the Interior Plans and Specifications for the Leasehold Improvements. In the event the above certification is received after the 20th day of the month, the disbursement with respect thereto shall be made concurrently with Landlord's next draw request to its lender but in any event, on or before the 30th day of the following month; (iv) each request for disbursement shall be accompanied by waivers of lien with respect to work on the Building paid for out of prior disbursements signed by, as appropriate, all architects, engineers, contractors, mechanics and designers to be paid out of the proceeds thereof, or with respect to which a reimbursement of payment is being submitted, provided that if any such waiver(s) cannot be obtained, Landlord and Landlord's construction lender will accept Tenant's indemnification with respect thereto; and to the extent that the Improvement Allowance is not exhausted upon completion of the work in accordance with the Interior Plans and Specifications, Landlord shall, at Tenant's request, disburse the balance of the Improvement Allowance to Tenant, and Tenant shall not thereafter be required to account to Landlord for the balance of the Improvement Allowance so disbursed to Tenant. Tenant shall be responsible for the cost of the Leasehold Improvements and Tenant's costs of relocation, to the extent that they exceed the Thirty-Five Dollars ($35.00) per square foot Improvement Allowance. C. Intentionally Omitted. 4. RENT. A. Tenant shall pay as minimum rent for the Demised Premises the sum of one Million Seven Hundred Sixty-Four Thousand Seven Hundred Fifty and 00/100 ($1,764,750.00) annually which is Nineteen and 50/100 Dollars ($19.50) per square foot of area as determined in accordance with Paragraph l.B. (the "Annual Rental"). Such Annual Rental shall be payable during the term hereof, in advance, in equal monthly installments, together with all sales, use or other Taxes based thereon (including, but not limited to the tax imposed by Florida Statutes 212.031), and any other state, federal or other governmental or quasi governmental tax, service tax, license fee or other imposition levied on the Rents received by Landlord, all of which shall collectively be referred to hereafter as "Sales Tax". The first monthly installment of Annual Rental shall be payable on the Rental Commencement Date and payment of monthly installments of Annual Rental shall continue to be payable on the first (1st) day of each successive month thereafter during the Term hereof. The monthly installments shall be One Hundred Forty-seven Thousand Sixty-two and 50/100 ($147,062.50) plus Sales Tax. B. In addition to the Annual Rental, Tenant shall, upon written notice from Landlord in accordance with Paragraph 5, pay any sums required to be paid by Tenant for any calendar year pursuant to Paragraph 5 together with applicable Sales Tax on all of the above and all other sums which are due to landlord under the terms of this Lease (all such sums being hereinafter collectively referred to as "Additional Rent"). The Annual Rental and 8 9 Additional Rent are hereinafter sometimes collectively referred to as "Rent". C. If the Rental Commencement Date occurs on a day other than the first (1st) day of the month, Rent from the Rental Commencement Date until the first (1st) day of the following month shall be prorated (calculated on the basis of a thirty (30) day month) and shall be payable upon the Rental Commencement Date. D. All sums payable by Tenant under this Lease, whether or not stated to be Annual Rental or Additional Rent, shall be collectible by Landlord as Rent, and in the event of a default in payment thereof, Landlord shall have the same rights and remedies as for a failure to pay Annual Rental (without prejudice to any other right or remedy available therefor). E. If Landlord, at any time or times, shall accept said Rent after same shall become due and payable, such acceptance shall not excuse delay upon subsequent occasions, or constitute, or be construed as, a waiver of any of Landlord's rights hereunder. F. All Rent and other sums due to Landlord hereunder shall be payable without demand, deduction, set-off, or counterclaim (except for any right of set-off which may be expressly set forth in this Lease) at the office address of Landlord first above given, or at such other address as Landlord may designate, from time to time, by written notice to Tenant. 5. TENANT'S RESPONSIBILITY FOR OPERATING EXPENSES A. For and with respect to each calendar year (and any portion thereof) during the term of this Lease (and any renewals or extensions thereof), after calendar year 1996, Tenant shall pay to Landlord, as Additional Rent, an amount equal to Tenant's Proportionate Share of the amount by which the amounts paid by Landlord for Taxes (as defined below), electric and insurance exceed $1.35, $1.50 and $.15 per square foot respectively (the "Excess Operating Expenses"). If at any time during the term of this Lease the amounts paid by Landlord for Taxes, electric or insurance for any calendar year are less than the base amounts set forth in the preceding sentence, then the Rent shall be reduced by the amount by which the actual cost for said expense item is less than the applicable base figure. In addition, Tenant shall not be required to pay any Excess Operating Expenses for Taxes which is are a direct result of a sale or transfer of Landlord's interest in the Building or Property, or the placement of a mortgage on the Building in excess of the then current market value of the Building. In such event, the base amount for Taxes set forth in this paragraph shall be increased by the amount of the increase in the Taxes caused by the sale, transfer or mortgage. Tenant's Proportionate Share of such Excess Operating Expenses shall be paid in accordance with the following procedure: Within 120 days after the end of each calendar year, Landlord shall furnish to Tenant a written statement (the "Expense Statement") setting forth the amount, if any, due from Tenant as a result of Excess Operating Expenses in the amounts paid by Landlord for Taxes, electric and insurance calculated pursuant to this Paragraph. Tenant's Proportionate Share of any such Excess Operating Expenses shall be paid by Tenant with thirty (30) days of receipt of the Expense Statement. For the purposes of this Paragraph, the term "Taxes" shall be defined as all real estate taxes and assessments, ad valorem or otherwise, transit Taxes, and any other federal, state, city, county or other local governmental or quasi-governmental charges or charges by any school, drainage, waste management, or other special improvement or service district, or other public entity granted the power to assess the Property whether directly on the ad valorem tax bill or otherwise, (but not including income taxes or any other Taxes imposed upon or measured by Landlord's income or profits, unless the same shall be imposed in lieu of real estate taxes or limited solely to income from real property), general or special, ordinary or extraordinary, foreseen or unforeseen, which may now or hereafter be levied, assessed or 9 10 imposed upon the Property or with respect to the ownership thereof, excluding the Taxes assessed against the Adjacent Buildings and excluding a prorated portion of the Taxes assessed against the land which shall be determined by multiplying the total Taxes assessed against the Land by a fraction, the numerator of which shall be the number of gross square feet contained in the Adjacent Buildings only and the denominator of which shall be the number of gross square feet contained in all of the buildings located on the Land or if the Adjacent Buildings are not constructed, then the denominator shall be one hundred twenty-five thousand (125,000) square feet plus the area of any square footage, if any, contained in the Proposed Building Expansion as defined in Paragraph 47. Taxes shall also include any personal property taxes imposed upon the furniture, fixtures, machinery, equipment, apparatus, systems and appurtenances in proportion to the extent used in connection with the Building for the operation thereof. If, due to a future change in the method of taxation, any franchise, income, profit or other tax, however designated, shall be levied, assessed or imposed in substitution, in whole or in part, for (or in lieu of) any tax which would otherwise be included within the definition of Taxes, such other tax shall be deemed to be included within Taxes as defined herein, Taxes shall also include all of Landlord's expenses, including, but not limited to, attorney's fees incurred by Landlord in any effort to minimize Taxes; provided, however, that Landlord shall have no obligation to undertake any contest, appeal or other procedure to minimize Taxes. Taxes shall be calculated taking advantage, of the maximum possible discount. Tenant shall have the right (but not the obligation) to contest the amount or validity of the Taxes which the Tenant is required to pay hereunder, and for that purpose, the Tenant shall have the right to file in the name of the Landlord all such protests or petitions and to institute and prosecute such proceedings as the Tenant may deem necessary for the purpose of such contest. Except as hereinafter provided, in the event a refund of Taxes previously paid is obtained as a result of such contest by Tenant, Tenant shall pay the cost of prosecuting such contest. If payment of some or all of the Taxes is necessary in order to avoid penalties or interest accruing thereon, Tenant shall pay its proportionate share of such Taxes, and Landlord shall pay the balance thereof prior to such protest or proceeding. Any refund of any Taxes relating to periods during the Term of the Lease shall be applied first to reimburse or pay actual expenses incurred in connection with the tax contest or appeal and next to Landlord and Tenant in proportion to the amount of Taxes each has previously paid for the tax periods on which the refund is based. Tenant shall be entitled to audit the items included in the Additional Rent for a period of two (2) years after the end of each calendar year. Landlord shall maintain and make available to Tenant upon reasonable notice, the supporting information used to calculate the Additional Rent. Landlord shall either credit any overpayments discovered by Tenant's audit to the next payments of Rent coming due under the Lease, or if no further payments of Rent are due under the Lease, Landlord shall promptly repay the overpayment to Tenant. Notwithstanding anything to the contrary contained hereinabove, Taxes shall not include any maintenance fees or regular or special assessments imposed by the RCA Boulevard Drainage Association, Inc. or otherwise pursuant to that certain Declaration of Protective Covenants, Restrictions, Reservations and Servitude recorded in ORB 7105 at Page 1765 of the Public Records of Palm Beach County as the same may be hereafter amended. 6. SECURITY DEPOSIT. Intentionally Omitted. 7. TENANT'S COVENANTS. Tenant agrees, on behalf of itself, its employees and agents, that it shall: A. Comply at all times with any and all Federal, state, and local statutes, regulations, ordinances and other requirements of any applicable public authorities relating to its use and occupancy of the Demised Premises and as provided in Paragraph 52 hereof. 10 11 B. Provide Landlord access to the Demised Premises at all reasonable times during normal business hours, without charge or diminution of rent, to enable Landlord: (1) to examine the same and to make such repairs, additions and alterations as Landlord may be permitted to make hereunder to the Demised Premises or any other portion of the Property or any part thereof; and (2) upon reasonable notice, to show the Demised Premises to any prospective mortgagees and purchasers, and, during the twelve (12) months prior to expiration of the term of this Lease or any renewal term, to prospective tenants. Landlord shall give Tenant reasonable prior notice of its need for access to the Demised Premises, except in cases of emergency, and shall be accompanied at all times by Tenant's representatives. Landlord shall use its best efforts to minimize any disruption of Tenant's operations. Notwithstanding anything to the contrary contained herein, Landlord shall not enter any of the Demised Premises in such a fashion that Landlord's entry would jeopardize Tenant's governmental security clearance status required to conduct its operations. C. Tenant shall commit no waste in or upon the Demised Premises. D. Upon the termination of this Lease for any reason whatsoever, remove Tenant's goods, trade fixtures and effects and those of any other person claiming under Tenant, and quit and deliver up the Demised Premises to Landlord peaceably and quietly in as good order and condition as at the inception of the term of this Lease or as the same hereafter may be improved by Landlord or Tenant, reasonable use and wear thereof, damage from fire and other insured casualty and repairs which are Landlord's obligation excepted. Goods and effects not removed by Tenant at the termination of this Lease, however terminated, upon five (5) days written notice from Landlord shall be considered abandoned and Landlord may dispose of and/or store the same as it deems expedient, the reasonable cost thereof to be charged to Tenant. E. Not place signs on the Demised Premises except in accordance with sign criteria approved by Landlord and the City of Palm Beach Gardens, and in accordance with the provisions of Paragraph 42 of this Lease. F. Not overload, damage or deface the Demised Premises or do any act which might make void or voidable any insurance on the Demised Premises of the Building and/or the Property or which may render an increased or extra premium payable for insurance (and without prejudice to any right or remedy of Landlord regarding this Subparagraph, Landlord shall have the right to collect from Tenant, upon demand, any such increased or extra premium). G. Not make any alteration of or addition to the Demised Premises without the prior written approval of Landlord, which shall not be unreasonably withheld or delayed. No consent shall be required from Landlord for alterations, the aggregate cost of which do not exceed $10,000, provided that such alterations are not structural or do not result in material modifications to the Buildings main systems (i.e. HVAC, electrical or plumbing) as certified by Landlord's architect. All alterations and additions to the Demised Premises shall be performed in accordance with plans and specifications therefore submitted to Landlord whether or not Landlord's consent is required and approved by Landlord if Landlord's consent is required, in a good and workmanlike manner and in conformity with all building codes, laws, regulations, rules, ordinances and other requirements of all governmental or quasi-governmental authorities having jurisdiction. H. Notwithstanding anything to the contrary contained herein, on the termination of the Lease, Tenant shall not be required to restore the Demised Premises to their condition existing immediately prior to the making of the Leasehold Improvements, nor shall Tenant be required to restore the Demised Premises to their condition prior to the making of any future alterations and additions to the Demised Premises in accordance with the terms of the Lease, unless Landlord advises Tenant in 11 12 writing of such required restoration at the time of Landlord's approval of the plans submitted in connection with such future alterations and additions. All counters, railings, movable partitions, lighting fixtures, special cabinet and other wood work, doors machines and equipment which are installed in the Demised Premises by or for the account of Tenant, and not paid for by Landlord, and which can be removed without permanent structural damage to the Building, and all furniture, furnishings and other articles of personal property owned by Tenant and located in the Demised Premises (all of which are herein called "Tenant's Property") shall be and remain the property of Tenant, and may be removed by it at any time during the term of this Lease. However, if any of Tenant's Property is removed, Tenant shall repair or pay the cost of repairing any damage to the Demised Premises or the Building resulting from such removal. During the term of the Lease, Tenant may finance or refinance the purchase price of all or any part of its furnishings and equipment and in connection therewith may grant security interests in and liens upon such items, provided that no liens may be granted or placed upon Landlord's fee interest in the Building or Property. The Landlord agrees to execute and deliver such disclaimers of interest or waivers of lien as the Tenant or its respective lenders (including finance lessors), may reasonably request with respect to such furnishings and equipment in connection with such financing or refinancing. I. Not bring any flammable, explosive or dangerous material or article onto the Property in violation of any applicable law, regulation, ordinance or to the extent that a common law nuisance would result. Landlord acknowledges that Tenant shall be permitted to keep firearms in the Building. J. Intentionally Omitted. K. Not bring safes, heavy files, or other heavy into the Property in excess of the floor loads provided for in the Building Plans and Specifications. Tenant shall indemnify, defend and save Landlord harmless from any and all expenses and other damages, including attorney's fees, and costs, resulting from the use or installation by Tenant of heavy equipment in excess of the provided floor loads. L. Not use, create, store, or permit any toxic or hazardous material anywhere on the Property in violation of applicable laws and regulations. Tenant shall not dispose of any toxic or other hazardous waste through the plumbing system or drainage system of the Building or the Property, and Tenant shall not violate any requirement of any governmental agency, with respect to waste disposal. Tenant shall indemnify, defend and hold Landlord harmless from any and all expenses and other damages, including attorney's fees and costs incurred by Landlord, as a result of the storage, handling or disposal of any hazardous materials or waste by Tenant in violation of applicable laws and regulations, which indemnification shall survive the expiration or earlier termination of this Lease. M. Immediately and at its expense, Tenant shall repair and restore any and all damages caused to the Demised Premises or the Building due to Tenant's improvements, installations, alterations, additions or other work conducted by Tenant within the Demised Premises, and Tenant shall restore the Building to the condition existing prior to improvement, installations, alterations, additions or other work conducted by Tenant within the Demised Premises. N. Comply with the Rules and Regulations (as hereinafter defined) as initially set forth on Exhibit "G" which is attached hereto and incorporated herein, and comply with such other reasonable rules and regulations as Landlord may establish, and from time to time amend, for the general safety, comfort and convenience of Landlord, occupants and tenants of the Building. 12 13 O. Not install or operate in the Demised Premises any electrically operated equipment or other machinery, including computers, which would overload the Buildings electrical system capacities or any plumbing fixtures, which would exceed the Buildings plumbing system capacity, both as set forth in the building plans and specifications without first obtaining the prior written consent of Landlord. Tenant shall not install any equipment of any kind or nature whatsoever which would or might necessitate any changes, replacements or additions to the structural system, water system, plumbing system, heating system, air conditioning system or the electrical system servicing the Demised Premises or any other portion of the Building without the prior written consent of Landlord, and in the event such consent is granted, such replacements, changes or additions shall be paid for by Tenant. 8. SERVICES. Landlord agrees that, throughout the term of the Lease and any extensions, it shall maintain and manage the Building and Property in a first class manner consistent with other Class A office buildings in Palm Beach County. In that regard, Landlord shall: A. Provide self service passenger elevator service to all floors in the Building above the ground floor. B. Provide Tenant with access to the Demised Premises 24 hours per day, 7 days a week, 365 days per year, except in case of an emergency, which causes Landlord to limit access to Tenant. C. Provide janitorial service after normal business hours to the Demised Premises and Common Areas in the Building and Parking Facilities Monday through Friday, as are customarily provided in first class office buildings in Palm Beach County, Florida. Janitorial services are to be provided as detailed in Cleaning Specifications schedule attached as Exhibit "G". D. subject to the provisions of Paragraphs 12 and 15 hereof, maintain, operate, repair and replace as necessary, the Building's plumbing, electrical and HVAC systems, the elevators and public portions of the Building, both exterior and interior, structural and non-structural, foreseen and unforeseen, including, without limitation, the base Building structure and roof. Landlord shall make any repairs to the Demised Premises covered by its construction warranties or caused or resulting from carelessness, omission, neglect or improper conduct of Landlord, its servants, agents, contractors, employees, invitees or licensees or a breach of Landlord's obligations under this Lease. Landlord shall be responsible for all repairs to the core areas within the Demised Premises and for all repairs and replacements to the Building and the Building systems which are not specifically set forth as the obligation of Tenant. In the event that any repair is required by reason of the negligent or willful acts of Tenant or its agents, employees or invitees, or of any other person entering the Building with Tenant's consent, express or implied, Landlord may upon fifteen (15) days written notice to Tenant, make such repair and add the cost thereof to the first installment of Rent which will thereafter become due. E. Furnish the Demised Premises and Common Areas of the Property with electric service for lighting and normal office use in accordance with the Building Plans and Specifications. Furnish the Demised Premises and Common Areas with heating or air conditioning during such hours as may be determined by Tenant so that the average temperature in the Demised Premises is 72(degrees) F+/- 2(degrees). F. Maintain and repair, at its cost and expense, in good working order and condition, the Demised Premises, including the plumbing, electrical, HVAC and other systems within the Demised Premises, with the exception of such items which are damaged by Tenant's negligence or the negligence of Tenant's agents, employees contractors or invitees. 13 14 G. Tenant acknowledges that Landlord does not warrant that any of the services referred to in this Paragraph 8 will be free from interruption from causes beyond the reasonable control of Landlord. If Landlord fails to provide any essential services or facilities for three (3) consecutive business days to the extent that all or a portion of the Demised Premises is rendered untenantable and Tenant cannot conduct its normal business in the Demised Premises or a portion thereof, then Rent shall be abated for the portion of the Demised Premises rendered untenantable retroactive to the first day that the service or facility was unavailable, provided that there shall be no abatement if the failure to provide service is as a result of an event of force majeure as defined in Paragraph 36. In such event, Tenant shall be entitled to expend any reasonable sums required to correct Landlord's failure and deduct the same from the next Rent coming due. H. Landlord shall manage and maintain the Building and Property in a first class fashion. If at any time during the term of the Lease, Tenant is dissatisfied with the management and/or maintenance of the Building and Property, and Tenant provides written notice of such dissatisfaction to Landlord, Landlord shall have fifteen (15) days to reasonably remedy the cause of Tenant's dissatisfaction. If Landlord fails to satisfy Tenant's reasonable concerns, Tenant shall so notify Landlord and Landlord shall be required to replace the management and/or service providers. Further, Tenant shall have the right at any time during the term of the Lease to contract separately to provide its own janitorial service. If Tenant elects this option, the applicable cost of the janitorial service for the Demised Premises, as then being paid by Landlord per the existing vendor contract or at the then prevailing market rate for similar janitorial services, whichever is greater, shall be deducted from the Rent being paid by Tenant. I. Provide tempered water and municipally provided cold water to the Demised Premises. 9. SUBLETTING AND ASSIGNING. Tenant shall not assign, mortgage or otherwise transfer or encumber this Lease or any portion of Tenant's interest herein, or sublet all or any portion of the Demised Premises without first obtaining Landlord's prior written consent thereto, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Tenant, without Landlord's consent, shall be entitled to sublet the Demised Premises or assign in whole or in part, its rights under the Lease to any affiliate or subsidiary of Tenant or any parent of Tenant or any successor of Tenant resulting from a merger or consolidation of Tenant into any entity under the "Common Control" of Tenant. Should Tenant sublet or assign all or a portion of the Demised Premises for an amount greater than the Rent Tenant is paying, whether or not such assignee or subtenant is under the Common Control of Tenant, the excess shall be retained in full by Tenant. If Landlord consents to any assignment or subletting, such consent will not be deemed a consent to any further subletting or assignment. Duly attempted assignments, mortgages, subleases or other encumbrances of the Demised Premises in violation of this paragraph shall be null and void. If Landlord consents to any subletting or assignment, or if Landlord's consent is not required it shall nevertheless be a condition to the effectiveness thereof that a fully executed copy of the sublease or assignment be furnished to Landlord and that any assignee assume in writing all obligations of Tenant hereunder, including, without limitation, the obligation to only use the Demised Premises for the uses permitted hereunder. In the event of any subletting or assignment of the Demised Premises, whether or not Landlord's consent is required, Tenant shall remain liable for all of the obligations of Tenant set forth herein. For the purposes of this paragraph, "Common Control" shall be defined as the percentage of shares, or the voting rights to said shares, which control the making of major corporate decisions. 10. IDEMNIFICATION. Tenant shall indemnify, defend and hold Landlord, its agents and employees, harmless from and against any 14 15 and all liability, claims, suits, demands, judgments, costs, damages, fines, interest and expenses (including reasonable attorneys' fees and disbursements) incurred or suffered by Landlord, its agents and employees, by reason of any breach, violation or nonperformance by Tenant, or its agents, employees, licensees, invitees or contractors of any covenant or provision of this Lease, or by reason of any damage to persons or property caused by moving property of or for Tenant in or out of the Building, or by the installation or removal of furniture or other property of or for Tenant or by reason of or arising out of the acts, omissions, negligence or improper conduct of Tenant, or its agents, employees, licensees, invitees or contractors in the preparation, alteration, use or occupancy of the Demised Premises. Landlord shall indemnify, defend and hold Tenant harmless from and against any and all liability, claims, suits, demands, judgments, costs, damages, fines, interest and expenses (including reasonable attorneys' fees and disbursements) incurred or suffered by Tenant by reason of any breach, violation or non-performance by Landlord, or its agents, employees or contractors, of any covenant or provision of this Lease, or by reason of or arising out of the acts, omissions, negligence, or improper conduct of Landlord, or its agents, employees, licensees, invitees or contractors in the preparation, alteration, repair or maintenance of the Building; provided, however, that such indemnification by Landlord shall not be enforceable against any mortgagee in possession of the Building prior to a foreclosure or other proceeding or process, whereby any such mortgagee may obtain fee title to the Building. Where applicable, the indemnifying party shall have the right, at the indemnifying party's own cost and expense, to resist or defend such action or proceeding in the indemnified party's name, if necessary, and by such attorneys as the indemnified party shall approve, which approval shall not be unreasonably withheld or delayed. 11. INSURANCE A. Tenant, at its own cost and expense, shall obtain and maintain in full force and effect during the original term hereof, and any extensions or renewals, single limit public liability and property damage insurance in an amount at least equal to Five Million Dollars ($5,000,000.00) or such other amounts as Landlord's lender may reasonably require from time to time upon thirty (30) days prior written notice. B. Landlord shall at all times during the term of the Lease and extensions, maintain in effect a policy or policies of insurance covering the Building and Property and providing protection against all perils included within the classification "fire and extended coverage", business interruption/rent loss insurance for a period not to exceed eighteen (18) months and any other commercially reasonable coverages for similar buildings in the amounts as reasonably required by Landlord's lender. In any event, Landlord agrees to carry with companies reasonably acceptable to Tenant, during the Term hereof, all risk property insurance ("Landlord's Property Insurance") covering fire and extended coverage, vandalism and malicious mischief, sprinkler leakage and all other perils of direct physical loss or damage insuring the improvements and betterments located in the Building, including the Demised Premises and all appurtenances thereto (excluding Tenant's Property) for the full replacement value thereof. If the Building is within a federally designated flood plain, Landlord shall also carry flood insurance in the maximum amount available, not to exceed the full insurable value of the Building, including the Demised Premises. During construction of the Building, Landlord shall carry, at its own expense, Builder's Risk Insurance in appropriate amounts. Landlord, upon request, shall furnish Tenant certificates of the insurance required of Landlord pursuant to this Paragraph. In addition, Landlord shall maintain on the Building and Property, public liability and property damage insurance in amounts equal to those required to be maintained by Tenant as set forth in Paragraph 11.A. C. Tenant agrees to carry all risk insurance covering Tenant's fixtures, furnishings, wall covering, carpeting, drapes, 15 16 equipment and all other items of personal property of Tenant located on or within the Demised Premises in amounts as may be determined by Tenant ("Tenant's Property Insurance"). Landlord agrees it shall not have any right, title or interest in and to Tenant's Property Insurance or any proceeds therefrom. D. Except for Tenant's Property Insurance, all policies of insurance described above shall name Landlord and any mortgagee of Landlord as named insureds, and shall include an endorsement providing that the policies will not be cancelled or amended until after thirty (30) days, prior notice to Landlord. All such policies of insurance shall be issued by a financially responsible company or companies satisfactory to Landlord and authorized to issue such policy or policies, and licensed to do business in the State of Florida. Tenant shall deposit with Landlord duplicate originals of such insurance on or prior to the Rental Commencement Date, together with evidence of paid-up premiums, and shall deposit with Landlord renewals thereof at least fifteen (15) days prior to expiration of any such policies. 12. FIRE OR OTHER CASUALTY. 12.01 If the Building or the Demised Premises shall be partially or totally damaged or destroyed by fire or other cause (and if this Lease shall not have been terminated as in this Paragraph 12 hereinafter provided), Landlord shall promptly repair the damage and restore and rebuild the Building and the Demised Premises to substantially the same condition as existed prior to the fire or other casualty, at its expense (without limiting the rights of Landlord under any other provisions of this Lease), after notice to it of the damage or destruction; provided, however, that Landlord shall not be required to repair or replace any of Tenant's Property. 12.02 (a) if the Building or the Demised Premises shall be partially damaged or partially destroyed by fire or other cause, then the rents payable hereunder shall be abated to the extent that the Demised Premises shall have been rendered untenantable or rendered inaccessible for the period from the date of such damage or destruction to the date the damage shall be repaired or restored. In the event that so much of the Demised Premises shall be damaged, destroyed or rendered inaccessible that Tenant is unable to conduct its business in a reasonable manner in the undamaged or non-destroyed portion of the Demised Premises, then, if Tenant moves out of the entire Demised Premises until the restoration work has been completed, the rent therefor shall be fully abated. (b) if the Demised Premises or a major part thereof shall be totally (which shall be deemed to include substantially totally) damaged or destroyed or rendered completely (which shall be deemed to include substantially completely) untenantable or inaccessible on account of fire or other cause, then the rents shall abate as of the date of the damage or destruction and until Landlord shall repair, restore and rebuild the Demised Premises including access thereto, provided, however, that should Tenant reoccupy a portion of the Demised Premises for the conduct of business during the period the restoration work is taking place and prior to the date that the same are made completely tenantable, rents allocable to such portion shall be payable by Tenant from the date of such occupancy. (c) if the Demised Premises or a major part thereof shall be totally (which shall be deemed to include substantially totally) damaged or destroyed or rendered completely (which shall be deemed to include substantially completely) untenantable on account of fire or other cause, then within ninety (90) days after such damage or destruction to the Demised Premises, Landlord shall deliver to Tenant a statement prepared by a reputable contractor setting forth such contractor's estimate as to the time required to repair such damage. If the estimated time period exceeds 180 days from the date of such statement, Tenant may elect to terminate this Lease by notice to Landlord not later than thirty (30) days following receipt of such statement. If Tenant 16 17 makes such election, the term of this Lease shall expire upon the thirtieth (30th) day after notice of such election is given by Tenant, and Tenant shall vacate the Demised Premises and surrender same to Landlord in accordance with the provisions of Paragraph 7 hereof. If Tenant shall not have elected to terminate this Lease pursuant to this Section 12.02(c) (or is not entitled to terminate this Lease pursuant to this Paragraph 12) and such repairs are not made by Landlord within two (2) months after the expiration of the period estimated for effecting such repairs, then Tenant may elect to terminate this Lease by giving notice to Landlord not later than sixty (60) days following expiration of the aforesaid restoration period. If tenant makes such election, the term of this Lease shall expire on the thirtieth (30th) day after notice of such election is given by Tenant, and Tenant shall vacate the Demised Premises and surrender the same to Landlord in accordance with the provisions of Paragraph 7 hereof. 12.03 If the Building shall be so damaged or destroyed by fire or other cause (whether or not the Demised Premises are damaged or destroyed) as to require a reasonably estimated expenditure to restore of more than 25% of the full insurable value of the Building immediately prior to the casualty, then Landlord may terminate this Lease by giving Tenant notice to such effect within ninety (90) days after the date of the casualty. Notwithstanding the foregoing, Landlord may not exercise such option unless it terminates, at the same time, all leases of space in the Building. In such event, this Lease shall terminate on the thirtieth (30th) day after the giving of such notice of termination and the rents payable hereunder shall be apportioned as of the date of such termination with respect to the undamaged portion of the Demised Premises and as of the date of damage with respect to the damaged portion of the Demised Premises (except as to those portions which were reoccupied by Tenant). Within ninety (90) days after such damage or destruction to the Demised Premises, Landlord shall deliver to Tenant a statement prepared by a reputable contractor setting forth such contractor's estimate as to the time required to repair such damage. If the estimated time period exceeds 180 days from the date of such statement or if the remaining unexpired term of the Lease is less than two (2) years, Tenant may elect to terminate this Lease by notice to Landlord not later than sixty (60) days following receipt of such statement. If Tenant makes such election, the term of this Lease shall expire upon the thirtieth (30th) day after notice of such election is given by Tenant, and Tenant shall vacate the Demised Premises and surrender same to Landlord in accordance with the provisions of Paragraph 7 hereof. If Tenant shall not have elected to terminate this Lease pursuant to this Section 12.03 (or is not entitled to terminate this Lease pursuant to this Paragraph 12) and such repairs are not made by Landlord within two (2) months after the expiration of the period estimated for effecting such repairs, then Tenant may elect to terminate this Lease by giving notice to Landlord not later than sixty (60) days following expiration of the aforesaid restoration period. If Tenant makes such election, the term of this Lease shall expire on the thirtieth (30th) day after notice of such election is given by Tenant, and Tenant shall vacate the Demised Premises and surrender the same to Landlord in accordance with the provisions of Paragraph 7 hereof. 12.04 No damages, compensation or claim shall be payable by Landlord for inconvenience, loss of business or annoyance arising from any repair or restoration of any portion of the Demised Premises or of the Building pursuant to this Paragraph, and the time periods provided to Landlord to complete repairs or restoration shall be extended by the period of any delay beyond the control of Landlord which arises by reason of adjustment of insurance. Notwithstanding the foregoing, Landlord shall be obligated to use all reasonable efforts in order to effectuate an expeditious adjustment with its insurance carrier and to proceed with due diligence in connection with such repair or restoration. Such obligation on Landlord's part shall include the requirement, subject to its lender's consent that Landlord seek a loan in order to finance such repair or restoration based upon its anticipated 17 18 insurance settlement, if in Landlord's reasonable judgment same would be commercially reasonable. 13. INCREASE IN PREMIUMS. Tenant shall not do, permit or suffer to be done any act, matter, thing or failure to act in respect to the Property or the Demised Premises or use or occupy the Property or the Demised Premises or conduct or operate Tenant's business in any manner objectionable to insurance companies whereby the fire insurance or any other insurance now in force or hereafter to be placed on the Demised Premises or any part thereof shall become void or suspended or whereby any premiums in respect of insurance maintained by Landlord shall be higher than those which would normally have been in effect for the occupancy contemplated under the permitted uses. In case of a breach of this covenant, in addition to all other rights and remedies of Landlord hereunder, Tenant shall (a) indemnify Landlord and hold Landlord harmless from and against any loss which would have been covered by insurance which shall become void or suspended because of such breach by Tenant, and (b) pay to Landlord any and all increase of premiums on any insurance, including, without limitation, rent insurance, resulting from any such breach. 14. WAIVER OF SUBROGATION. Landlord and Tenant waive, unless said waiver should invalidate any insurance required or permitted hereunder, their right to recover damages against each other for any reason whatsoever to the extent the damaged party recovers indemnity from its insurance carrier. Any insurance policy procured by either Tenant or Landlord which does not name the other as a named insured shall, if obtainable at no extra cost, contain an express waiver of any right of subrogation by the insurance company, including but not limited to Tenant's worker's compensation carrier, against Landlord or Tenant, whichever the case may be. 15. EMINENT DOMAIN. A. If the whole of the Property, Parking Facilities, or the whole of the Demised Premises shall be taken or condemned for a public or quasi-public use under any law, ordinance or regulation, or by right of eminent domain or private purchase in lieu thereof by any competent authority, this Lease shall terminate and Rent shall abate for the unexpired portion of the term of this Lease as of the date the right to possession shall vest in the condemning authority. B. If part of the Demised Premises or a part of the Parking Facilities shall be acquired or condemned as aforesaid, and such acquisition or condemnation shall render the remaining portion unsuitable for the business of Tenant the term of this Lease shall cease and terminate as provided in Paragraph 15(A) hereof, provided however, that diminution of area shall not in and of itself be conclusive as to whether the portion of the Demised Premises remaining after such acquisition is unsuitable for Tenant's business. If such partial taking is not extensive enough to render the Demised Premises unsuitable for the business of Tenant, this Lease shall continue in full force and effect except that the Annual Rental shall be reduced in the same proportion that the area of the Demised Premises taken bears to the area demised. Subject to the rights of any mortgagee of Landlord's estate, Landlord shall, upon receipt of the net condemnation award, make all necessary repairs or alterations to the Building, Property and Parking Facilities so as to render the portion of the Property not taken a complete architectural unit, but Landlord shall in no event be required to spend for such work an amount in excess of the net amount received by Landlord as damages for the part of the Building, Property and Parking Facilities so taken. "Net amount received by Landlord" shall mean that portion of the condemnation award in excess of any sums required to be paid by Landlord to the holder of any mortgage on the property so condemned, and all expenses and legal fees incurred by Landlord in connection with the condemnation proceeding. 18 19 C. If part of the Building or Parking Facilities, but no part of the Demised Premises, is taken or condemned as aforesaid, and, such partial acquisition or condemnation shall render Landlord unable to comply with its obligations under this Lease, or shall render the Demised Premises unsuitable for the business of Tenant, the term of the Lease shall cease and terminate as provided in Paragraph 15.A. hereof, by Landlord sending notice to such effect to Tenant, whereupon Tenant shall immediately vacate the Demised Premises. D. In the event of any condemnation or taking as hereinbefore provided, whether whole or partial, Tenant shall not be entitled to any part of the award, as damages or otherwise, for such condemnation and Landlord is to receive the full amount of such award, and Tenant hereby expressly waives any right or claim to any part thereof. Although all damages in the event of any condemnation are to belong to the Landlord whether such damages are awarded as compensation for diminution in value of the leasehold or the fee of the Demised Premises, Tenant shall have the right to claim and recover from the condemning authority, but not from Landlord, such compensation as may be separately awarded or recoverable by Tenant in Tenant's own right on account of any damage to Tenant's Property, Tenant's business by reason of the condemnation and for or on account of any cost or loss to which Tenant might be put in removing Tenant's merchandise, furniture, fixtures, and equipment, or the loss of Tenant's business or decrease in value thereof. 16. EVENTS OF TENANT'S DEFAULT. Each of the following events shall constitute an Event of Default under this Lease: A. If Tenant shall fail to pay Rent within five (5) days of the date of written notice from Landlord that said Rent is past due (provided that Landlord shall not be required to provide said written notice more than two (2) times in any calendar year); or B. If Tenant shall fail to perform or observe any of the other covenants, terms or conditions contained in this Lease within thirty (30) days after written notice thereof by Landlord (provided that Tenant shall not be deemed to be in default if the default is of such a nature that it cannot be cured within thirty (30) days and Tenant commences to cure its default within said thirty (30) day period and diligently pursues the cure to completion; or C. If a receiver or trustee is appointed to take possession of all or a substantial portion of the assets of Tenant and such receiver or trustee is not dismissed within thirty (30) days; or D. If Tenant makes an assignment for the benefit of creditors; or E. If any bankruptcy, reorganization, insolvency, creditor adjustment or debt rehabilitation proceedings are instituted by or against Tenant under any state or federal law and the same are not dismissed within thirty (30) days; or F. If levy, execution, or attachment proceedings or other process of law are commenced upon, on or against Tenant or a substantial portion of Tenant's assets and the same are not dismissed within thirty (30) days; or G. If a liquidator, receiver, custodian, sequester, conservator, trustee, or other similar judicial officer is applied for by Tenant; or H. If Tenant becomes insolvent in the bankruptcy or equity sense; or I. Intentionally Omitted. 19 20 17. LANDLORD'S REMEDIES. A. If Tenant fails to pay Annual Rental, Additional Rent, or any other sum payable to Landlord hereunder within five (5) days of the date when due, Tenant shall pay a late charge in the amount of five percent (5%) of the amount of the delinquent payment plus interest accruing on the unpaid sums from the date such sums are due at a rate equal to the rate of interest paid by Landlord on sums borrowed by Landlord (the "Late Charge"). The Late Charge shall be Additional Rent under the terms of this Lease. In no event however shall any interest or other charge on any delinquent payments exceed the amount allowed to be charged under the usury laws of the State of Florida, it being acknowledged and agreed that any amount in excess of such limitation shall be refunded to Tenant by Landlord by means of a credit against the next installment(s) of Rent coming due hereunder, or if no such Rent payments remain to be paid, then the excess shall be refunded in cash. The Late Charge shall be in addition to, and shall not in any way limit any other rights or remedies available to Landlord under the terms of this Lease or at law and in equity. B. Upon the occurrence of an Event of Default, Landlord may, at any time thereafter, and in addition to any other available rights or remedies at law and/or in equity, elect any one or more of the following remedies: (1) Intentionally Omitted. (2) To immediately re-enter the Demised Premises, including Tenant's exclusive Parking Facilities, without accepting surrender of the leasehold estate and remove all persons and all or any property therefrom, with or without summary dispossession proceedings or by any suitable action or proceeding at law, without being liable to indictment, prosecution or damages therefor, and repossess and enjoy the Demised Premises; together with all additions, alterations and improvements. Upon recovering possession of the Demised Premises by reason of or based upon or arising out of a default on the part of Tenant, Landlord may, at Landlord's option, either terminate this Lease or make such alterations and repairs as may be necessary in order to relet the Demised Premises or any part or parts thereof, either in Landlord's name or otherwise, for a term or terms which may at Landlord's option be less than or exceed the period which would otherwise have constituted the balance of the Term of this Lease and at such rent or rents and upon such other terms and conditions as in Landlord's sole discretion may seem advisable and to such person or persons as may in Landlord's discretion seem best. Upon each such reletting all rents received by Landlord from such reletting shall be applied: first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including brokerage fees and attorney's fees and all costs of such alterations and repairs; third, to the payment of Rent due and unpaid hereunder; and the residue if any, shall be held by Landlord and applied in payment of future rent as it may become due and payable hereunder. If such rentals received from such reletting during any month shall be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of the Demised Premises or the making of alterations and/or improvements thereto or the reletting thereof shall be construed as an election on the part of Landlord to terminate this Lease unless written notice of such intention be given to Tenant. Landlord shall in no event be liable in any way whatsoever for failure to relet the Demised Premises or, in the event that the Demised Premises or any part or parts thereof are relet, for failure to collect the rent thereof under such reletting. Tenant, for Tenant and Tenant's successors and assigns, hereby irrevocably constitutes and appoints Landlord as Tenant's agent to collect the rents due and to become due under all subleases of the Demised Premises or any part thereof without in any way affecting Tenant's obligation to pay any unpaid balance of Rent due or to become due hereunder. Notwithstanding any such reletting without termination, 20 21 Landlord may at any time thereafter elect to terminate this Lease for such previous breach. (3) To terminate this Lease and the term hereby created without any right on the part of Tenant to waive the forfeiture by payment of any sum due or by other performance of any condition, term or covenant broken, whereupon Landlord shall be entitled to recover, any and all sums and damages for violation of Tenant's obligations hereunder accrued and unpaid or which have arisen at the time of such termination. C. No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy herein or by law provided but each shall be cumulative and in addition to every other right or remedy given herein or now or hereafter existing at law or in equity or by statute. D. In the event of a breach by Tenant of any of the covenants or provisions hereof, Landlord, in its sole and absolute discretion, shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for in law or in equity. E. No waiver by Landlord of any breach by Tenant of any of Tenant's obligations, agreements or covenants herein shall be a waiver of any subsequent breach or of any obligation, agreement or covenant, nor shall any forbearance by Landlord to seek a remedy for any breach by Tenant be a waiver by Landlord of any rights and remedies with respect to such or any subsequent breach. F. If Tenant defaults under any of the covenants or provisions of this Lease, Landlord, in its sole and absolute discretion and in addition to any other available rights or remedies, may elect to cure Tenant's default in which event any sums advanced and any costs incurred by Landlord in curing such default shall be due and payable by Tenant to Landlord upon demand together with interest thereon from the date the sums are advanced or the costs are incurred until paid to Landlord. G. Landlord shall use reasonable efforts to mitigate its damages in the event of any default by Tenant hereunder. 18. LANDLORD'S DEFAULT/TENANT'S REMEDIES. If Landlord shall fail to perform any provision of this Lease or breach any covenant contained on the part of Landlord, Tenant shall give Landlord written notice thereof, and Landlord shall have thirty (30) days after receipt of Tenant's notice to remedy the failure or breach, unless the failure or breach is of such a nature that it may not be cured within thirty (30) days in which event, Landlord shall commence to cure the failure or breach within said thirty (30) day period and diligently pursue the cure to completion. If Landlord fails to cure its default within said thirty (30) day period, or commence the cure and diligently complete same as applicable, Tenant shall be entitled to remedy Landlord's default and deduct the reasonable cost of doing so from the next payment of Rents then coming due under the Lease. If the default is of such a nature that it may not be remedied by Tenant, Tenant shall be entitled to seek equitable relief in order to compel Landlord's cure of the default. In such event, Tenant shall be entitled to recover its reasonable attorneys' fees and costs in seeking such equitable remedy. 19. QUIET ENJOYMENT. Upon paying the Rent, and upon Tenant's observance and keeping of all the covenants, agreements and conditions of this Lease, Tenant shall quietly have and enjoy the Demised Premises during the term of this Lease without hindrance or molestation by anyone claiming by or through Landlord; subject, however, to the terms, exceptions, reservations and conditions of this Lease. Landlord and Tenant agree that this provision shall be deemed a covenant remaining with the Land, which shall bind Landlord's successors and/or assigns. 21 22 20. NO WAIVER. The failure of either party to insist in any one or more instances upon the strict performance of any one or more agreements, terms, covenants, conditions, or obligations of this Lease, or to exercise any right, remedy or election therein contained, shall not be construed as a waiver or relinquishment for the future of the performance of such one or more obligations of this Lease or of the right to exercise such right, remedy or election, with respect to any subsequent breach, act, or omission. The manner of enforcement or the failure of Landlord to enforce any of the covenants, conditions, rules and regulations set forth herein or hereafter adopted, against any tenant in the Building shall not be deemed a waiver of any such covenants, conditions, rules and regulations. 21. SUBORDINATION NON-DISTURBANCE AND ATTORNMENT/ESTOPPEL. A. upon written request of Landlord, or any mortgagee or beneficiary of Landlord, Tenant will in writing, subordinate its right hereunder to the interest of any ground lessor of the Land upon which the Demised Premises is situated and to the lien of any mortgage or deed of trust, now or hereafter in force against the Land and Building of which the Demised Premises is a part, and upon any building hereafter placed upon the land of which the Demised Premises is a part and to all advances made or hereafter to be made upon the security thereof; provided, however, that the ground lessor, or the mortgagee or trustee named in said mortgage or trust deed shall agree that Tenant's peaceable possession of the Demised Premises or its rights under this Lease will not be diminished on account thereof. B. In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage or deeds of trust, upon any such foreclosure or sale Tenant agrees to recognize such beneficiary or purchaser as the Landlord under this Lease, provided Tenant's right to possession continues unabated and Tenant's rights under this Lease continue undiminished. C. Landlord agrees to obtain a Non-Disturbance and Attornment Agreement from its current lender(s) and the ground lessor, if any, and delivery same to Tenant within thirty (30) days from the date hereof and from any future lender within thirty (30) days from obtaining financing from such lender, substantially in accordance with the form attached hereto as Exhibit "H". D. Intentionally Omitted. E. Within ten business (10) days after written request from Landlord from time to time, Tenant shall execute and deliver to Landlord, or Landlord's designee, a written statement certifying, (i) that this Lease is unmodified and in full force and effect, or is in full force and effect as modified and stating the modifications; (ii) the amount of Annual Rent and the date to which Annual Rent and Additional Rent have been paid in advance; and (iii) that Landlord is not in default hereunder or, if Landlord is claimed to be in default, stating the nature of any claimed default; (iv) the amount of security deposit Landlord is holding, if any, and (v) any options to renew or purchase that Tenant may have. 22. NOTICES. All bills, statements, notices or communications which either party hereto may desire or be required to give to the other shall be given or rendered in writing and either hand delivered to Landlord or Tenant or sent by registered or certified mail or overnight courier, postage prepaid, addressed to Landlord or Tenant at the address set forth on the first page hereof or any other address pursuant to notice given as herein set forth. In addition, if the notice is given to Landlord, copies shall be provided to Tambone Real Estate Development Corporation, 4500 PGA Blvd., Suite 304, Palm Beach Gardens, FL 33418, and John F. Flanigan, Esquire, Moyle, Flanigan, Katz, et al, 625 N. Flagler Drive, Barnett Centre, 9th Floor, West Palm Beach, FL 33401. Any notices given in accordance with the Lease shall be deemed to be 22 23 given when the same is hand delivered to the other party, delivered by the overnight courier or upon acceptance or refusal of the certified or registered mail, as the case may be. 23. HOLDING OVER. Should Tenant continue to occupy the Demised Premises after expiration of the term of this Lease or any renewals thereof, such tenancy shall (without limitation on any of Landlord's rights or remedies therefor) be one at sufferance from month to month at a minimum monthly rent equal to 150% of the Rent payable for the last month of the term of this Lease. 24. BROKERS. Tenant represents and warrants that it has not employed any broker or agent as its representative in the negotiation for or the obtaining of this Lease other than PREVE LIBERATORE & BARTON ("Broker") whose commission shall be paid by Landlord pursuant to a separate written agreement, and agrees to indemnify and hold Landlord harmless from and against any and all cost or liability for compensation (including, without limitation, reasonable attorneys' fees and costs) claimed by any other broker or agent other than Broker with whom it has dealt or claimed to have been engaged by Tenant. 25. DEFINITIONS OF LANDLORD AND TENANT. A. The word "Tenant" as used in this Lease shall be construed to mean tenants in all cases where there is more than one tenant, and the necessary grammatical changes required to make the provisions hereof apply to corporations, partnerships, or individuals, men or women, shall in all cases be assumed as through in each case fully expressed. Each provision hereof shall extend to and shall, as the case may require, bind and inure to the benefit of Tenant and its heirs, legal representatives, successors and assigns, provided that this Lease shall not inure to the benefit of any assignee, heir, legal representative, transferee or successor of Tenant except upon the express written consent or election of Landlord, except as herein otherwise provided. B. The term "Landlord" as used in this Lease shall mean the fee owner of the Building or, if different, the party holding and exercising the right, as against all others (except space tenants of Building) to possession of the Building. In the event of voluntary or involuntary transfer of such Ownership or right to a successor in interest of Landlord, Landlord shall be freed and relieved of all liability and obligation hereunder which shall thereafter accrue (and, as to any unapplied portion of Tenant's security deposit, Landlord shall be relieved of all liability therefore upon transfer of such portion to its successor in interest) and Tenant shall look solely to such successor in interest for the performance of the covenants and obligations of Landlord hereunder which shall thereafter accrue, provided that such successor in interest agrees to assume and be bound by the terms of this Lease. Subject to the foregoing, the provisions hereof shall be binding upon and inure to the benefit of the heirs, personal representatives, successors and assigns of Landlord. In no event shall the liability of Landlord to Tenant hereunder exceed Landlord's interest in the Building. Tenant agrees that no judgment arising from any default of Tenant's agreements under the terms of this Lease or by reason of any willful or negligent act of Landlord and its building manager, and their employees, officers, agents and independent contractors, shall attach against any property of Landlord other than the Building, and in no event shall any such judgment constitute a lien upon any other lands or properties owned by Landlord wheresoever located. Neither shall any such judgment attach or constitute a lien against any property of any principal or partner of the Landlord, or of their heirs, executors, administrators, successors or assigns. 26. PRIOR AGREEMENTS; AMENDMENTS. Neither party hereto has made any representations or promises except as contained herein. No agreement hereinafter made shall be effective to change, modify, discharge or effect an abandonment of this Lease, in whole or in part, unless such agreement is in writing and signed by the party 23 24 against whom enforcement of the change, modification, discharge or abandonment is sought. 27. CAPTIONS. The captions of the Paragraphs in this Lease are inserted and included solely for convenience and shall not be considered or given any effect in construing the provisions hereof. 28. CONSTRUCTION OF LEASE. If any term of this Lease, or the application thereof to any person or circumstances, shall to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Lease shall be valid and enforceable to the fullest extent permitted by law. 29. CONSTRUCTION LIENS, ETC. A. Tenant shall comply with the Construction Lien Law of the State of Florida as set forth in Florida Statutes, Chapter 713. Tenant will not create or permit to be created or remain as a result of any action or work done or contracted for by Tenant, and will discharge, any lien, encumbrance or charge (levied on account of any imposition or any mechanic's, laborer's or materialman's lien) which might be or become a lien, encumbrance or charge upon the Property, the Demised Premises or any part thereof or the income therefrom, whether or not the same shall have any priority or preference over or ranking on a parity with the estate, rights and interest of Landlord in the Property, the Demised Premises or any part thereof, or the income therefrom, and tenant will not suffer any other matter or thing whereby the estate, rights and interest of Landlord in the Property, the Demised Premises or any part thereof might be impaired; provided that any mechanic's, laborer's or materialman's lien may be discharged in accordance with Subparagraph B of this Paragraph 29. B. If any construction, laborer's or materialman's lien shall at any time be filed against the Building, the Demised Premises or any part thereof as a result of any action or work done on behalf of or contracted for by Tenant, Tenant, within fifteen (15) days after notice of the filing thereof, will cause it to be discharged of record by payment, deposit, bond, order of the court of competent jurisdiction or otherwise. If Tenant shall fail to cause such lien to be discharged within the period aforesaid, then in addition to any other right or remedy, Landlord may, but shall not be obligated to, discharge it either by paying the amount claimed to be due or by transferring same to security, and in any such event, Landlord shall be entitled, if Landlord so elects, to compel prosecution of any action for the foreclosure of such lien by the lienor and to pay the amount of the judgment in favor of the lienor with interest costs and allowances. Any amount so paid by Landlord and all costs, expenses, and fees including without limitation attorneys' fees, incurred by Landlord in connection with any mechanic's, laborer's or materialman's lien, whether or to the same has been discharged of record by payment, deposit, bond, order of the court of competent jurisdiction or otherwise, together with interest thereon, at the maximum rate permitted by law, from the respective dates of Landlord's making of the payments and incurring of the costs and expenses, shall constitute Additional Rent payable by Tenant to Landlord upon demand. C. Nothing contained in this Lease shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any materials for any alteration, addition, improvement or repair to the Property, the Demised Premises or any part thereof, nor as giving Tenant any right, power or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to the filing of any lien against the Property, the Demised Premises or any part thereof, nor to subject Landlord's estate in the Property to liability under the Construction Lien Law of the 24 25 State of Florida in any way, it being expressly understood that Landlord's estate shall not be subject to any such liability. D. Notwithstanding any provision to the contrary set forth in this Lease, it is expressly understood and agreed that the interest of the Landlord shall not be subject to liens for improvements made by Tenant in and to the Demised Premises, including the Leasehold Improvements, Tenant shall notify each and every contractor making any such improvements of the provision set forth in the preceding sentence of this Paragraph, and shall require each such contractor to execute an agreement providing that it will look solely to Tenant for payment in connection with improvements and will not file any liens or notices to owner in connection with the improvements. The parties agree to execute, acknowledge and deliver to Landlord without charge a Construction Lien Notice, in recordable form, containing a confirmation that the interest of the Landlord shall not be subject to liens for improvements made by Tenant to the Property or the Demised Premises. 30. CERTAIN RIGHTS RESERVED TO LANDLORD. Landlord reserves the following rights: A. ADJOINING AREAS. The use and reasonable access thereto through the Demised Premises for the purposes of operation, maintenance, decoration and repair of all walls, windows and doors bounding the Demised Premises (including exterior walls of the Building, core corridor walls and doors and any core corridor entrance) except the inside surface thereof, any terraces or roofs adjacent to the Demised Premises and any space in or adjacent to the Demised Premises used for shafts, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other facilities are reserved to Landlord. Landlord shall use reasonable efforts to minimize any disruption of Tenant's operations caused by the exercise of Landlord's rights hereunder. B. COMMON AREAS AND PARKING FACILITIES. Subject to Tenant's parking rights as set forth in the attached Parking Space Schedule, Landlord shall have the exclusive right to manage the Common Areas and the Parking Facilities. 31. INTENTIONALLY OMITTED. 32. RULES AND REGULATIONS. Tenant covenants and agrees that it shall comply with and observe all nondiscriminatory, uniformly applied reasonable rules and regulations ("Rules and Regulations") which Landlord shall from time to time promulgate for the management and use of the Demised Premises, the Building and the Parking Facilities. Landlord's initial Rules and Regulations are set forth on Exhibit "I" attached hereto and made a part hereof Landlord shall have the right from time to time to reasonably amend or supplement the Rules and Regulations theretofore promulgated. 33. WAIVER OF JURY TRIAL. LANDLORD AND TENANT HEREBY WAIVE ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM, OR SUBSEQUENT PROCEEDING, BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT'S USE OR OCCUPANCY OF THE DEMISED PREMISES, THE BUILDING OR THE PARKING FACILITIES AND/OR ANY CLAIM OF INJURY OR DAMAGE. 34. RADON GAS. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of Radon that exceed Federal and State guide lines have been found in buildings in Florida. Additional information regarding Radon and Radon testing may be obtained from your county public health unit. 35. NO OPTION. The submission of this Lease to Tenant for examination does not constitute a reservation of or option for the Demised Premises and this Lease becomes effective as a lease only upon execution and delivery thereof by the Landlord and Tenant. 25 26 36. FORCE MAJEURE. Notwithstanding anything to the contrary contained herein, neither Landlord nor Tenant shall be deemed in default with respect to any obligation hereunder, if their inability to perform is due to any event of Force Majeure. "Force Majeure" shall mean any and all causes beyond the reasonable control of a party, including, without limitation, governmental restrictions, labor disputes (including strikes, slowdowns and similar labor problems), accident, mechanical breakdown, shortages or inability to obtain labor, fuel, steam, water, electricity or materials (for which no substitute is readily available at an economically reasonable price), acts of God, enemy action, civil commotion, fire or other casualty. Force Majeure shall not include the financial condition of a party or its inability to make payments. No party shall be entitled to claim Force Majeure unless it shall have given the other party notice of the cause of such Force Majeure with reasonable promptness after it shall make a good faith determination that it will seek the benefit of Force Majeure. 37. RECORDING. Landlord and Tenant acknowledge and agree that a Memorandum of Lease in form and substance as attached hereto as Exhibit "J" shall be recorded in the Public Records of Palm Beach County, Florida. The Memorandum will be recorded by Landlord within three (3) business days of the closing of the purchase of the Land by Landlord. 38. EXPANSION OPTION. Tenant shall have the right on the fifth (5th) anniversary of the Rental Commencement Date to lease up to an additional Three Thousand Two Hundred Eighty (3,280) square feet, on the first floor of the Building, or such greater amount of square footage which has not been leased by Tenant if Tenant elects to reduce the size of the Demised Premises as set forth in Paragraph 1.B. or if Landlord increases the size of the Building pursuant to Paragraph 47. (The portions of the adjacent square footage on which Tenant shall hold options hereunder and any space leased by Tenant pursuant to Paragraph 39 below, shall be defined herein as the "Additional Space"). Tenant shall only be entitled to lease the Additional Space in increments to be determined by the size of the existing office suites developed in the Additional Space. The per square foot rental rate for the Additional Space will be the rate then being paid by Tenant under this Lease for the Demised Premises with the exception that Landlord shall provide Tenant with an improvement allowance for the Additional Space equal to the then "Fair Market" (as defined in the attached Exhibit "K") for such improvement allowances. If Landlord and Tenant cannot agree on a "Fair market" improvement allowance, the improvement allowance matter will be resolved via arbitration pursuant to the procedure set forth in Exhibit "K". Tenant shall provide Landlord with nine (9) months prior written notice of its election to expand into the Additional Space in accordance with the option granted in this Paragraph 38, failing which, the option shall be deemed waived and of no further force and effect. Upon delivery of possession of the Additional Space to Tenant, Tenant shall have ninety (90) days to construct its leasehold improvements to the Additional Space with Rent to commence for the Additional Space on the earlier of occupancy for the purpose of conducting its business of the Additional Space by Tenant or ninety (90) days from the delivery of possession of the Additional Space to Tenant for its leasehold improvements. 39. PREFERENTIAL RIGHT TO LEASE. Tenant shall have the first right to lease any Additional Space which becomes vacant in the Building (after first being occupied) during the term of the Lease. The per square foot rental rate for any Additional Space under this Paragraph shall be the then prevailing "Fair market" per square foot rental rate, including a "Fair Market" tenant improvement allowance determined in accordance with Exhibit "J". Tenant shall have ten (10) days from receipt of written notice from Landlord that Additional Space is or will become vacant in the Building to exercise its right under this paragraph. Landlord shall give Tenant ninety (90) days prior notice with respect to Additional Space which is to become vacant as a result of the expiration of the stated term of another tenant's lease and use its best efforts to give Tenant as much notice as possible with respect to any unscheduled vacancies. If Tenant exercises its right to lease 26 27 Additional Space pursuant to this Paragraph, Tenant shall have sixty (60) days from receipt of "as built" plans for the Additional Space to design any leasehold improvements Tenant desires to make to the Additional Space and ninety (90) days to construct the leasehold improvements. Rent shall commence for any Additional Space leased under this Paragraph on the earlier of (a) the date of occupancy of all or a portion of the Additional Space by Tenant, (b) completion of construction of the leasehold improvements to the Additional Space as evidenced by a Certificate of occupancy thereof, or (c) ninety (90) days from the delivery of the Additional Space to Tenant for construction of Tenant's leasehold improvements. If Tenant leases any space under this Paragraph the term of the Lease for the Additional Space shall run concurrently and end coterminously with the balance of the term of the Lease for the Demised Premises. 40. RENEWAL OPTIONS. Provided Tenant is not in default in payment of Rent at the time of exercise or at the time of commencement of any of the renewal options referred to herein, Tenant shall have three (3) five (5) year options to extend the Term of the Lease after the expiration of the original Term. To exercise each of the options, Tenant must give Landlord written notice of its intention to exercise the option not less than twelve (12) months prior to the expiration of the original Term of the Lease or the applicable renewal Term. If Tenant fails to give twelve (12) months notice of its intention to exercise the option, and if Landlord has not committed the space to another prospect as evidenced by a signed Letter of Intent for the Demised Premises or a portion thereof, Tenant shall be entitled to elect to exercise the option on or before that day which is nine (9) months prior to the expiration of the original Term of the Lease or the then applicable renewal Term. If Tenant elects to exercise any of its renewal options pursuant to the terms of this Paragraph, the per square foot rental for each renewal Term for the Demised Premises and any Additional Space during each renewal Term shall be the Fair Market per square foot rental rate (including any Fair Market improvement allowance) at the time of the applicable renewal determined in accordance with the provisions of Exhibit III", provided, however, that in no event shall the Rent for the first renewal Term be higher than $25.00 per square foot, plus any Excess Operating Expenses to be paid by Tenant as Additional Rent pursuant to Paragraph 5. If Tenant fails to give notice as required herein of its exercise of any renewal option, then such option and all subsequent options shall terminate and be of no further force and effect. 41. STORAGE SPACE. Tenant shall be granted the use of three thousand (3,000) square feet of storage space in the Building at no additional Rent, if, through collaboration with Tenant's architect, Landlord is able to design such space into the Building at no additional construction cost. 42. SIGNAGE. Tenant shall have the exclusive right to display its sign and logoon the Building in the following locations: A. On two (2) sides of the Building on the top of the Building attached to the stucco parapet wall as shown on the Building Plans and Specifications; B. Above the entry of Tenant's exclusive lobby on the first floor of the Building; C. On the ground mounted monument signage to be located at the entrance to the Property. 43. SATELLITE DISH. Tenant shall have the right, at its own expense, but at no additional charge from Landlord, to install a satellite dish and/or antenna on the roof subject to Tenant obtaining any and all required governmental approvals of the installation. The cost of any required screening of the roof mounted equipment shall be included in the cost to be paid by Tenant for the roof mounted equipment. Tenant shall not install 27 28 any equipment on the roof which will overburden the building structure or require any additional structural expense in construction of the Building. Landlord shall cooperate fully with Tenant in obtaining all required approvals of the satellite dish and/or antenna. Landlord shall not install any other satellite dish or antenna on the roof which would interfere with Tenant's signals or reception. 44. OPTION TO PURCHASE. Tenant shall have the option to purchase the Building at any time from the date of execution of the Lease, through that date which is one (1) year from the issuance of the Certificate of occupancy for the Building. If Tenant exercises its option to purchase, the purchase price shall be Thirteen million one Hundred Fifteen Thousand Ten and 00/100 ($13,115,010) (based on the gross square footage of the Building of 95,280 square feet at $137.65/gross square foot. If the gross square footage of the Building is increased as set forth in Paragraph 47, the purchase price shall be increased accordingly). If Landlord has applied for or closed permanent financing prior to Tenant exercising its option to purchase the Building, Tenant shall pay, in addition to the purchase price, any and all costs and expenses incurred by Landlord in connection with the permanent financing (but not the construction loan financing the costs of which shall be borne solely by Landlord) including, without limitation, documentary stamps, intangible taxes, title insurance costs, recording costs, prepayment penalties, assumption fees, loan application fees, and commitment fees. If Tenant elects to exercise its option, it shall execute and deliver to Landlord a Contract containing the terms set forth herein and those customarily contained in contracts for the sale of similar commercial real estate in Palm Beach County Florida which are not inconsistent with the terms hereof including the obligation of Landlord to pay for the cost of the documentary stamps on the deed and the title insurance premium. Tenant shall deliver a cash deposit of $100,000.00 along with such Contract. Closing shall occur not less than thirty (30) days and no more than one hundred twenty (120) days from the date of full execution of the Contract, but in no event prior to issuance of a Certificate of occupancy for the Demised Premises. Any sale contemplated hereby, shall be all cash to Landlord. Landlord agrees to notify Tenant of any and all potential costs to be incurred by Tenant as a result of Landlord obtaining permanent financing prior to Landlord attempting to obtain permanent financing on the Building and shall provide Tenant with copies of the executed loan documents within a reasonable period of time after closing such permanent financing. 45. RIGHT OF FIRST REFUSAL TO PURCHASE THE BUILDING. If the Landlord shall determine at any time during the term of the Lease to sell the Building and if Landlord receives a bonafide offer to purchase from a third party, which Landlord desires to accept, Landlord shall give Tenant ten (10) business days to exercise its right of the first refusal to purchase the Building on the same terms and conditions as set forth in the bonafide third party offer. If Tenant elects to exercise the right of first refusal to purchase the Building, the purchase shall be closed in accordance with the provisions of the bonafide third party offer. A sale of the Building shall include any transfer (whether in a single or a series of transactions) of a majority of the interests in Landlord. 46. NON-COMPETE. Landlord shall not lease, or allow any assignment or sublease to, or sell any premises within the Building or the Property to any competitor of Tenant, provided Tenant has not exercised its right to assign or sublet the Demised Premises to an unaffiliated third party or vacated the Building. 47. EXPANSION OF BUILDING. Landlord and Tenant agree that Landlord and Tenant shall use their best good faith efforts to design Tenants Leasehold Improvements to allow for the expansion of the two (2) story portion of the Building up to a maximum of 1,390 additional square feet on the first and second floors in the area marked as the "Proposed Building Expansion on Exhibit "C". If Landlord is successful in completing the Proposed Building Expansion, any square footage located in the Proposed Building 28 29 Expansion shall be added to (a) in the Additional Space as defined in paragraph 38, (b) the total square footage of the Building and (c) the total square footage permitted to be contained in the Building and Adjacent Buildings. 48. DIVISION OF PROPERTY. Landlord and Tenant acknowledge and agree that the Building and the Land upon which the Building is located, cannot be replatted to subdivide the Building and the portion of the Land on which the Building is located from the entire tract which comprises the Land. Accordingly, Landlord and Tenant agree that should Tenant elect to exercise its option to purchase the Building under Paragraph 44 or its right of first refusal under Paragraph 45, then Landlord and Tenant shall cooperate with one another using their best efforts to obtain an exemption from the platting requirement to enable the subdivision of the Land. Landlord and Tenant agree to execute such cross easement agreements and other agreements as may be reasonably necessary to accomplish the subdivision of the Land. If an exemption cannot be obtained, then the Building, Adjacent Buildings and Land shall be submitted to a commercial condominium form of ownership and the Building shall be designated as a separate unit from the Adjacent Buildings. The Land and Parking Facilities, landscaping, access roads and signage shall be designated as Common Areas to be maintained by the owners of the Building and Adjacent Buildings sharing the cost on a prorata basis. Prior to closing any purchase contemplated in Paragraph 44 and 45, Landlord and Tenant agree to execute any and all documentation necessary in order to complete the subdivision of the Land or conversion to the commercial condominium form of ownership in the event such conversion is necessitated by Tenant's election of any of the options set forth herein. 49. LANDLORD'S REPRESENTATIONS. Landlord represents and warrants to Tenant (a) Landlord has entered into a contact to acquire the Land from its present owner; (b) Landlord shall close on the purchase of the Land on or before May 1, 1995; (c) Landlord will provide Tenant with copies of any notice of default which Landlord may receive from the seller and with a copy of the executed deed of conveyance within three (3) business days of the closing of the purchase of the Land; (d) Landlord shall cause the Land, Buildings, Adjacent Buildings and Parking Facilities to be developed substantially as set forth on the Site Plan and shall complete the development of the Adjacent Buildings in such a fashion so as to not interfere with the use by Tenant of the Building and Parking Facilities. Landlord shall not make any material changes to the Site Plan without the prior written consent of Tenant, which shall not be unreasonably withheld or delayed. Landlord further covenants, represents and warrants that prior to the Rental Commencement Date (i) title to the Land, including any beneficial interest therein or any interest in this Lease, shall not be sold, transferred or conveyed by Landlord without Tenant's prior written consent, which consent may be withheld in Tenant's sole discretion and (ii) Landlord's obligations to construct the Building pursuant to the terms of this Lease shall not be delegated to or undertaken by any third party other than Catalfumo Construction, Inc. Notwithstanding the foregoing, Landlord shall be permitted to convey the Land to an entity in which Daniel S. Catalfumo and Richard Tambone collectively own directly or indirectly a majority or controlling interest provided that reasonably acceptable evidence of such ownership is furnished to Tenant together with properly executed copies of the recorded deed of conveyance and written agreement whereby this Lease is assigned to and assumed by such entity. 50. SECURITY. If Landlord elects to provide security guard service for the Building or Property or any other property owned by Landlord and located within the Northcorp project, Landlord shall employ The Wackenhut Corporation Security Guard Services for such services. Regardless of whether or not Landlord elects to provide security guard services to the Property, Tenant shall, at its own cost and expense, be entitled to do so using its own forces, provided that Tenant's security guard services shall not 29 30 unreasonably interfere with the use of the Adjacent Buildings and Parking Facilities by the Tenants of the Adjacent Buildings. 51. ENVIRONMENTAL MATTERS. A. STATUS OF PROPERTY. Landlord represents and warrants that any handling, transportation, storage, treatment or usage of hazardous or toxic substances (as defined by any applicable government authority and hereinafter being referred to as "Hazardous Materials") that has occurred or will occur on the Property (except for any of such activities which may be undertaken by Tenant or its agents or invitees) shall be in compliance with all applicable federal, state and local laws, regulations and ordinances. Landlord further represents and warrants that no leak, spill, discharge, emission or disposal of Hazardous materials has occurred on the Property and that the soil, groundwater, soil vapor on or under the Property are free of Hazardous materials as of the date hereof. B. INDEMNIFICATION BY LANDLORD. Landlord agrees to indemnify, defend and hold Tenant and its officers, partners, directors, shareholders, employees and agents harmless from any claims, judgments, damages, fines, penalties, costs, liabilities (including sums paid in settlement of claims) or loss including fees and expenses of any attorneys, consultants and experts which arise during or after the Term or any renewal term, or in connection with the presence or suspected presence of Hazardous materials in the soil, groundwater, or soil vapor on or under the Property, unless such Hazardous materials are present solely as the result of the acts of Tenant, its officers, employees, invitees, or agents. Without limiting the generality of the foregoing, this indemnification shall survive the expiration of this Lease and does specifically cover costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence of suspected presence of Hazardous Materials in the soil, groundwater, or soil vapor on or under the Property, unless the Hazardous materials are present solely as the result of the acts of Tenant, its officers, agents, invitees, or employees. Without limiting the generality of the foregoing, this indemnification shall also specifically cover costs in connection with: (a) soil, ground water or soil vapor on or under the Property before the date hereof; or (b) Hazardous Materials that migrate, flow percolate, diffuse or in any way move onto or under the Property after the date hereof; or (c) Hazardous Materials present on or under the Property as a result of any discharge, dumping, spilling (accidental or otherwise) onto the Property during or after the Term or any renewal term by any person or entity other than Tenant, its officers, employees, invitees and agents. 52. COMPLIANCE WITH LAWS AND PROCEDURES A. COMPLIANCE. Tenant at its sole cost, will promptly comply with all applicable governmental or quasi governmental laws, guidelines, rules, regulations and requirements, whether of federal, state, or local origin, applicable to the Premises, including, but not limited to, the Americans with Disabilities Act, 42 U.S.C. Section 12101 et seq. (the "Legal Requirements") arising from or pertaining to the use or occupancy of the Premises. Notwithstanding the foregoing, the following are applicable: (i) Landlord as opposed to Tenant shall be responsible for insuring that the following elements of the Building comply with the Legal Requirements; structural elements; Common Areas; and mechanical, electrical and plumbing elements common to the entire Building (not including, for example, plumbing and electrical fixtures and fittings located in the Premises); (ii) Landlord's obligations with respect to Hazardous Materials is set forth in Paragraph 51 above. Tenant at its sole cost and expense shall be solely responsible for taking any and all measures which are required to comply with the requirements of the ADA within the Premises. Any 30 31 Alterations to the Premises made by or on behalf of Tenant for the purpose of complying with the ADA or which otherwise require compliance with the ADA shall be done in accordance with this Lease; provided, that Landlord's consent to such Alterations shall not constitute either Landlord's assumption, in whole or in part, of Tenant's responsibility for compliance with the ADA, or representation or confirmation by Landlord that such Alterations comply with the provisions of the ADA. Notwithstanding the foregoing, Landlord as opposed to Tenant shall be responsible for non-compliance with Legal Requirements of any work performed by Tenant's contractor to the extent the Building and Demised Premises are deficient in terms of the Legal Requirements as the same exists on the date the Building and Demised Premises are delivered to Tenant's contractor. 53. NO RIGHT TO USE THE NAME "WACKENHUT". Notwithstanding anything to the contrary contained herein, the right to use the name, "Wackenhut" alone, or in combination with any other words, such as, for example, "The Wackenhut Center" or "The Wackenhut Headquarters" or any similar combinations, together with the right to any trademarks, service marks, or logos of Tenant, its affiliates or subsidiaries, whether now or hereafter created or existing shall belong solely and exclusively to Tenant and Landlord hereby expressly disclaims any right, title or interest therein or thereto. No permission, express or implied, is granted to Landlord by Tenant to use the same in any print or media advertisements or notices without the express prior written consent of Tenant, which consent Tenant may withhold in its sole and absolute discretion. Upon the termination of this Lease for any reason or in the event of any assignment or sublease by Tenant, Tenant shall have the right to remove its signage from the exterior and interior of the Building and the Property at its expense. This provision shall expressly survive the termination or cancellation of this Lease and may be enforced by injunctive relief in addition to any other remedies available at law or in equity to Tenant. IN WITNESS WHEREOF, the parties hereto have executed this Lease on the day and year first aforesaid. Signed, sealed and delivered LANDLORD: in the presence of: - ------------------------------------- ------------------------------------ DANIEL S. CATALFUMO, as - ------------------------------------- Trustee under F.S. 689.071 TENANT: THE WACKENHUT CORPORATION - ------------------------------------- By: - ------------------------------------- -------------------------------- Senior Vice-President 31 EX-10.8 11 g67411kex10-8.txt 1ST AMENDMENT TO OFFICE LEASE 1 Exhibit 10.8 FIRST AMENDMENT TO LEASE This First Amendment to Lease is executed this 3rd day of November 1995, by PGA PROFESSIONAL CENTER, LTD. ("Landlord") and THE WACKENHUT CORPORATION ("Tenant"). BACKGROUND: A. Daniel S. Catalfumo, as Trustee under F.S. 689.071 and The Wackenhut Corporation entered into that certain Lease dated April 18, 1995, for the lease of certain space in the building to be known as The Wackenhut Center in Palm Beach Gardens, Florida. B. Daniel S. Catalfumo, as Trustee under F.S. 689.071 assigned his interest as Landlord to PGA Professional Center, Ltd. pursuant to Assignment of Lease dated June 8, 1995. C. Landlord and Tenant desire to modify the Lease as set forth below. NOW THEREFORE, in consideration of the sum of Ten and 00/100 ($10.00) Dollars and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties agree as follows: 1. Recitals. The foregoing recitals are true and correct and incorporated herein by reference. 2. Landlord and Tenant hereby amend the Lease to delete in its entirety Paragraph 44 titled Option To Purchase. 3. Except as modified herein, the Lease remains in full force and effect and unmodified. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date set forth above. WITNESSES: PGA PROFESSIONAL CENTER, LTD. BY: PGA PROFESSIONAL CENTER, INC. General Partner - ------------------------------------- By: /s/ Daniel S. Catalfumo - ------------------------------------- ------------------------------------ Daniel S. Catalfumo, President TENANT: THE WACKENHUT CORPORATION - ------------------------------------- By: /s/ Robert C. Kneip - ------------------------------------- ----------------------------------- Robert C. Kneip, Senior Vice-President EX-10.9 12 g67411kex10-9.txt KEY EMPLOYEE INCENTIVE SOCK PLAN AMENMENTS 1 Exhibit 10.9 KEY EMPLOYEE LONG-TERM INCENTIVE STOCK PLAN THE WACKENHUT CORPORATION AMENDMENTS THROUGH MAY 5, 2000 2 THE WACKENHUT CORPORATION KEY EMPLOYEE LONG-TERM INCENTIVE STOCK PLAN TABLE OF CONTENTS ARTICLE SECTION PAGE 1 ESTABLISHMENT, PURPOSE AND DURATION 1.1 Establishment of the Plan 1 1.2 Purpose of the Plan 1 1.3 Duration of the Plan 1 2 DEFINITIONS AND CONSTRUCTION 2.1 Definitions 1 2.2 Gender and Number 5 2.3 Severability 5 3 ADMINISTRATION 3.1 The Committee 5 3.2 Authority of the Committee 5 3.3 Decisions Binding 6 3.4 Procedures of the Committee 6 3.5 Award Agreements 6 4 SHARES SUBJECT TO THE PLAN 4.1 Number of Shares 6 4.2 Lapsed Awards 7 4.3 Adjustments in Authorized Shares 7 5 ELIGIBILITY AND PARTICIPATION 5.1 Eligibility 7 5.2 Actual Participation 7 ii 3 ARTICLE SECTION PAGE 6 STOCK OPTIONS 6.1 Grant of Options 7 6.2 Option Agreement 7 6.3 Option Price 8 6.4 Duration of Options 8 6.5 Exercise of Options 8 6.6 Payment 8 6.7 Restrictions on Share Transferability 8 6.8 Termination of Employment Due to Death, Disability or Retirement 8 6.9 Termination of Employment for Other Reasons 9 6.10 Nontransferability of Options 9 7 RESTRICTED STOCK UNITS 7.1 Grant of Restricted Stock Units 9 7.2 Restricted Stock Unit Agreement 9 7.3 Vesting 10 7.4 Other Restrictions 10 7.5 Payment 10 7.6 Dividend Equivalents 10 7.7 Termination of Employment Due to Death, Disability or Retirement 10 7.8 Termination of Employment for Other Reasons 10 8 PERFORMANCE UNITS AND PERFORMANCE SHARES 8.1 Grant of Performance Units and Performance Shares 11 8.2 Value of Performance Units and Performance Shares 11 8.3 Payment of Performance Units and Performance Shares 11 8.4 Form and Timing of Payment 11 8.5 Termination of Employment Due to Death, Disability or Retirement 11 8.6 Termination of Employment for Other Reasons 11 8.7 Nontransferability 12 8.8 Performance Measures 12 9 RIGHTS OF EMPLOYEES 9.1 Employment 12 9.2 Participation 13 iii 4 ARTICLE SECTION PAGE 10 CHANGE IN CONTROL 10.1 Stock Based Awards 13 10.2 Performance Based Awards 13 10.3 Pooling of Interests Accounting 13 11 AMENDMENT, MODIFICATION AND TERMINATION 11.1 Amendment, Modification and Termination 13 11.2 Awards Previously Granted 14 11.3 Compliance with Code Section 162(m) 14 12 WITHHOLDING 12.1 Tax Withholding 14 12.2 Share Withholding 14 13 REDEMPTION OF COMMON STOCK ON 14 OF EMPLOYMENT 14 INDEMNIFICATION 15 15 SUCCESSORS 15 16 REQUIREMENTS OF LAW 16.1 Requirements of Law 15 16.2 Governing Law 15 iv 5 THE WACKENHUT CORPORATION KEY EXECUTIVE LONG-TERM INCENTIVE STOCK PLAN ARTICLE 1. ESTABLISHMENT, PURPOSE AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. The Wackenhut Corporation (hereinafter referred to as the "Company"), a Florida corporation, hereby establishes an incentive compensation plan to be known as the "Key Executive Long-Term Incentive Stock Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock Units, Performance Units, and Performance Shares. Upon approval by the Board of Directors of the Company, subject to ratification within twelve (12) months by an affirmative vote of a majority of Shares of the Common Stock present and entitled to vote at the Annual Meeting at which a quorum is present, the Plan shall become effective as of August 1, 1991 (the "Effective Date"), and shall remain in effect as provided in Section 1.3 herein. 1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success, and enhance the value of the Company by providing incentives to Key Employees that will link their personal interests to those of Company shareholders, and provide an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Key Employees upon whose judgement, interest and special effort the successful conduct of its operations largely is dependent. 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 12 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after the tenth (10th) anniversary of the Plan's Effective Date. ARTICLE 2. DEFINITIONS AND CONSTRUCTION 2.1 Definitions. Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) "Award" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock Units, Performance Units or Performance Shares. 1 6 (b) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (c) "Board or "Board of Directors" means the Board of Directors of The Wackenhut Corporation. (d) "Cause" means (i) willful and gross misconduct on the part of a Participant that is materially and demonstrably detrimental to the Company; or (ii) the commission by a Participant of one or more acts which constitute an indictable crime under United States Federal, state or local law. "Cause" under either (i) or (ii) shall be determined in good faith by a written resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of all the Directors at a meeting duly called and held for that purpose after reasonable notice to the Participant and opportunity for the Participant and his or her legal counsel to be heard. (e) "Change in Control" of the Company shall be deemed to have occurred if the conditions set forth in any one or more of the following paragraphs shall have been satisfied: (i) Any person (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of Shares of the Company), is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; or (ii) During any period of two (2) consecutive years (not including any period prior to the execution of this Plan), individuals who at the beginning of such period constitute the Board (and any new Director, whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority thereof; or (iii) The stockholders of the Company approve (a) a plan of complete liquidation of the Company; or (b) an agreement for the sale or disposition of all or substantially all the Company's assets; or (c) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by 2 7 remaining outstanding or by being converted into voting securities of the surviving entity), at least 50% of the combined voting securities of the Company (or such surviving entity) outstanding immediately after such merger or consolidation. However, in no event shall a Change in Control be deemed to have occurred, with respect to the Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction. A Participant shall be deemed "part of a purchasing group..." for purposes of the preceding sentence if the Participant is an equity participant or has agreed to become an equity participant in the purchasing company or group (except for (i) passive ownership of less than 5% of the Shares of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not deemed to be significant, as determined prior to the Change in Control by a majority of the disinterested Directors). (f) "Code means the Internal Revenue Code of 1986, as amended from time to time. (g) "Committee" means the Nominating and Compensation Committee of the Board, or any other committee appointed by the Board to administer the Plan pursuant to Article 3 herein. (h) "Company" means The Wackenhut Corporation, a Florida corporation (including any and all subsidiaries), or any successor thereto as provided in Article 15 herein. (i) "Director" means any individual who is a member of the Board of Directors of the Company. (j) "Disability" means a permanent and total disability, within the meaning of the Code Section 22 (e) (3), as determined by the Committee in good faith, upon receipt of sufficient competent medical advice from one or more individuals, selected by the Committee, who are qualified to give professional medical advice. (k) "Employee" means any full-time, nonunion employee of the Company. Directors who are not otherwise employed by the Company shall not be considered employees under this Plan. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto. (m) "Fair Market Value" means the average of the highest and lowest price at which the Stock was traded on the five business days preceding the date of 3 8 an awarded, as reported on the consolidated tape of the New York Stock Exchange. (n) "Incentive Stock Option" or "ISO" means an option to purchase Shares, granted under Article 6 herein, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422A of the code. (o) "Key Employee" means an employee of the Company, including an employee who is an officer of the Company, who, in the opinion of members of the Committee, can contribute significantly to the growth and profitability of the Company. "Key Employee" also may include those employees, identified by the Committee, in situations concerning extraordinary performance, promotion, retention, or recruitment. The granting of an Award under this Plan shall be deemed a determination by the Committee that such employee is a Key Employee. (p) "Nonqualified Stock Option" or "NQSO" means an option to purchase shares, granted under Article 6 herein, which is not intended to be an Incentive Stock Option. (q) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (r) "Option Price" means the price at which a share may be purchased by a Participant pursuant to an Option, as determined by the Committee. (s) "Participant" means a Key Employee of the Company who has an outstanding Award granted under the Plan. (t) "Performance Share" means an Award, designated as a performance share, granted to a Participant pursuant to Article 8 herein. (u) "Performance Unit" means an Award, designated as a performance unit, granted to a Participant pursuant to Article 8 herein. (v) "Period of Restriction" means the period during which the transfer of Shares covered by each grant of Restricted Stock Units is restricted in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and is subject to a substantial risk of forfeiture, as provided in Article 7 herein. (w) "Person" shall have the meaning ascribed to such term in Section 3 (a) (9) of the Exchange Act and used in Sections 13 (d) and 14 (d) thereof, including a "group" as defined in Section 13 (d). 4 9 (x) "Restricted Stock Unit" means an Award granted to a Participant pursuant to Article 7 herein. (y) "Stock" or "Shares" means the $.10 par value Series B common stock of The Wackenhut Corporation. (z) "Covered Employee" means a Participant who, as of the date of vesting and/or payout of an Award, as applicable, is one of the group of "covered employees", as defined in the regulations promulgated under Code Section 162(m), or any successor thereto. (aa) "Performance-Base Exception" means the performance-based exception from the tax deductibility limitations of Code Section 162(m). 2.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 2.3 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. ARTICLE 3. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Nominating and Compensation Committee of the Board, or by any other Committee appointed by the Board consisting of not less than two (2) Directors who are not Employees. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. No member of the Committee shall be eligible to participate in the Plan or any similar Plan of the Company or any of its Subsidiaries while serving on the Committee or shall have been so eligible at any time within one (1) year prior to his or her service on the Committee. 3.2 AUTHORITY OF THE COMMITTEE. Subject to the provisions herein and subject to ratification by the Board, the Committee shall have full power to select Key Employees to whom Awards are granted; to determine the size and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 11 herein) to amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall have the full power to make all other determinations which may be necessary or advisable for the administration of the Plan. 5 10 3.3 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board of Directors shall be final, conclusive and binding on all Persons, including the Company, its stockholders, employees, Participants, and their estates and beneficiaries. 3.4 PROCEDURES OF THE COMMITTEE. All determinations of the Committee shall be made by not less than a majority of its members present at the meeting (in person or otherwise) at which a quorum is present. A majority of the entire Committee shall constitute a quorum for the transaction of business. Any action required or permitted to be taken at a meeting of the Committee may be taken without a meeting if a unanimous written consent, which sets forth the action, is signed by each member of the Committee and filed with the minutes for proceedings of the Committee. No member of the Committee shall be liable, in the absence of bad faith, for any act or omission with respect to his or her services on the Committee. Service on the Committee shall constitute service as a Director of the Company so that members of the Committee shall be entitled to indemnification (as provided in Article 14 herein), and limitation of liability and reimbursement with respect to their services as members of the Committee to the same extent as for services as Directors of the Company. 3.5 AWARD AGREEMENTS. Each Award under the Plan shall be evidenced by an award agreement which shall be signed by an officer of the Company and by the Participant, and shall contain such terms and conditions as may be approved by the Committee, which need not be the same in all cases. Any award agreement may be supplemented or amended in writing from time to time as approved by the Committee, provided that the terms of such agreements as amended or supplemented, as well as the terms of the original award agreement, are not inconsistent with the provisions of the Plan. ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS 4.1 NUMBER OF SHARES AVAILABLE FOR GRANT. Subject to adjustment as provided in Section 4.2 herein, the number of Shares hereby reserved for issuance to Participants under the Plan shall be two million seven hundred and thirty five thousand eight hundred and forty four (2,735,844). The Board shall determine the appropriate methodology for calculating the number of Shares issued pursuant to the Plan. Unless and until the Board determines that an Award to a Covered Employee shall not be designed to comply with the Performance-Based Exception, the following rules shall apply to grants of such Awards under the Plan: (a) Stock Options. The maximum aggregate number of Shares that may be granted in the form of Stock Options, pursuant to any Award granted in any one fiscal year to any one single Participant, shall be one hundred thousand (100,000). (b) Performance Shares/Performance Units. The maximum aggregate payout (determined as of the end of the applicable performance period) with respect to Awards of Performance Shares or Performance Units granted in any one fiscal year to any one Participant shall be equal to the value of fifty thousand (50,000) Shares. 6 11 4.2 LAPSED AWARDS. If any Award granted under this Plan terminates, expires, or lapses for any reason, any Shares subject to such Award again shall be available for the grant of an Award under the Plan. 4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, Stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares which may be delivered under Section 4.1 (including such single Participant limits), and in the number and class of and/or price of Shares subject to outstanding Options, Restricted Stock Units, Performance Units, and Performance Shares granted under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargements of rights; and provided that the number of Shares subject to any Award shall always be a whole number. Any adjustment of an ISO under this paragraph shall be made in such a manner so as not to constitute a "modification" within the meaning of Section 425(h)(3) of the Code. ARTICLE 5. ELIGIBILITY AND PARTICIPATION 5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all Employees of the Company, who, in the opinion of members of the Committee, are Key Employees. "Key Employees" may include Employees who are members of the Board, but may not include Directors who are not Employees. 5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from Key Employees those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Employee shall have any right to be granted an Award under this Plan. ARTICLE 6. STOCK OPTIONS 6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options may be granted to Key Employees at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number o Shares subject to Options granted to each Participant. The Committee may grant ISOs, NQSOs, or a combination thereof. However, no Employee may receive an Award of ISOs that are first exercisable during any calendar year to the extent that the aggregate Fair Market Value of the shares (determined at the time the options are granted) exceeds $100,000. Nothing in this Article 6 shall be deemed to prevent the grant of NQSOs in excess of the maximum established by Section 422A of the Code. 6.2 OPTION AGREEMENT. Each Option grant shall be evidenced by an Option Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Option Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Section 422A of the Code, or a NQSO whose grant is intended not to fall under the Code provisions of Section 422A. 7 12 6.3 OPTION PRICE. The purchase price per Share covered by an Option shall be determined BY THE COMMITTEE, but, in the case of an ISO, shall not be less than 100% of the Fair Market Value of such Share on the date the Option is granted. An ISO granted to an employee who, at the time of grant, owns (Within the meaning of Section 425 (d) of the Code) Shares possessing more than 10% of the total combined voting power of all classes of stock of the Company, shall have an exercise price which is at least 110% of the Fair Market Value of the Shares subject to the Option. 6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the Committee shall determine at the time of grant provided, however, that no ISO shall be exercisable later than the tenth (10th) anniversary date of its grant. 6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. 6.6 PAYMENT. Options shall be exercised by the delivery of a written notice of exercise to the Secretary of the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price upon exercise of any Option shall be payable to the Company in full either (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having a Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) or (b). The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. The proceeds from such a payment shall be added to the general funds of the Company and shall be used for general corporate purposes. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Options exercised. 6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee shall impose such restrictions on any Shares acquired pursuant to the exercise of an Option under the Plan, as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any Stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 6.8 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT. In the event the employment of a Participant is terminated by reason of death or disability, any outstanding 8 13 Options shall become immediately exercisable at any time prior to the expiration date of the Options or within one year after such date of termination of employment, whichever period is shorter, by such person or persons as shall have acquired the Participant's rights under the Option by will or by the laws of descent and distribution. In the event the employment of a Participant is terminated by reason of retirement (as defined under the then established rules of the Company's nonqualified retirement plan), any outstanding Options shall become immediately exercisable at any time prior to the expiration date of the options. Notwithstanding the provisions of this Section 6.8, the Committee may provide, in its sole and absolute discretion, that following a termination of employment with the Company by reason of death or disability a Participant may exercise an Option, in whole or in part, for a period of time, as determined by the Committee, subsequent to such termination of employment and prior to the termination of the Option pursuant to Section 6.4 above, either subject to or without regard to any vesting or other limitation on exercise imposed pursuant to Section 6.5 above. In the case of ISOs, the tax treatment prescribed under Section 422A of the Internal Revenue Code of 1986, as amended, may not be available if the Options are not exercised within the Section 422A prescribed time period after termination of employment. 6.9 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of the Participant shall terminate for any reason other than death, disability, retirement or for Cause, the Participant shall have the right to exercise Options that were vested in the Participant at the date of termination within the 90 days after the date of termination, but in no event beyond the expiration of the term of the Option and only to the extent that the Participant was entitled to exercise the Option at the date of termination of employment. Notwithstanding the provisions of the Section 6.9, the Committee may provide, in its sole and absolute discretion, that following the termination of employment with the Company by reason other than death, disability or Cause, a Participant may exercise an Option, in whole or in part, for a period of time, as determined by the Committee, subsequent to such termination of employment and prior to the termination of the Option pursuant to Section 6.4 above, either subject to or without regard to any vesting or other limitation on exercise imposed pursuant to Section. 5 above. If the employment of the participant shall terminate for Cause, all outstanding Options immediately shall be forfeited to the Company and no additional exercise period shall be allowed, regardless of the vested status of the Options. 6.10 NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant. 9 14 ARTICLE 7. RESTRICTED STOCK UNITS 7.1 GRANT OF RESTRICTED STOCK UNITS. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Restricted Stock Units to Key Employees in such amounts as the Committee shall determine. 7.2 RESTRICTED STOCK UNIT AGREEMENT. Each Restricted Stock Unit grant shall be evidenced by a Restricted Stock Unit Agreement that shall specify the Period of Restriction, or Periods, the number of Restricted Stock Units covered by the grant, and such other provisions as the Committee shall determine. Each Restricted Stock Unit shall be equivalent in value to a Share of Common Stock. 7.3 VESTING. Each grant of Restricted Stock Units shall require the Participant to remain in the employment of the Corporation or a Subsidiary for a prescribed period ("Restriction Period"). The Committee shall determine the Restriction Period or Periods which shall apply to the share of Common Stock covered by each grant of Restricted Stock Units. 7.4 OTHER RESTRICTIONS. The Committee shall impose such other restrictions on any Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, restrictions based upon the achievement of specific (Company-wide, divisional, and/or individual) performance goals, and/or restrictions under applicable Federal or state securities laws. 7.5 PAYMENT. Upon expiration of the Restriction Period or Periods applicable to each grant of Restricted Stock Units, the Participant shall, without payment on his part, be entitled to receive payment in an amount equal to the aggregate fair market value of the shares of Common Stock covered by such grant on the date of expiration. Such payment may be made only in shares of Common Stock equal to the number of Restricted Stock Units with respect to which such payment is made. 7.6 DIVIDEND EQUIVALENTS. A Participant whose Restricted Stock Units have not previously terminated shall be entitled to receive payment in an amount equal to each cash dividend the Company would have paid to such Participant during the term of those Restricted Stock Units as if the Participant has been the owner of record of the shares of Common Stock covered by such Restricted Stock Units on the record date for the payment of such dividend. Payment of each such dividend equivalent shall be made on payment date of the cash dividend with respect to which it is made, or as soon as practicable thereafter. 7.7 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT. In the event that a Participant's employment is terminated with the Company because of death, disability or normal retirement (as defined under the then established rules of the Company), any remaining Period of Restriction applicable to the Restricted Stock Units pursuant to Section 7.3 hereof shall automatically terminate and, except as otherwise provided in Section 7.4, the Shares issued in payment of the Restricted Stock Units shall be free of restrictions and freely transferable. In the event that a Participant terminates his employment with the Company because of early retirement (as defined under the then established rules of the Company), the Committee, in its sole discretion, may waive the restrictions remaining on any or all grants of Restricted Stock 10 15 Units pursuant to Section 7.3 herein and add such new restrictions to Shares issued in payment of Restricted Stock Units as it deems appropriate. 7.8 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant terminates his employment with the Company for any reason other than for death, disability or retirement, as set forth in Section 7.7 herein, during the Period of Restriction, then any Restricted Stock Units granted still subject to restrictions as of the date of such termination shall automatically be forfeited. In such event, the Participant shall not be entitled to receive any payment with respect to those Restricted Stock Units, except as provided in Section 7.6 herein, provided, however, that, in the event of any involuntary termination of the employment of a participant by the Company other than for Cause, the Committee, in its sole discretion, may waive the automatic forfeiture of any or all such Restricted Stock Unit grants. ARTICLE 8. PERFORMANCE UNITS AND PERFORMANCE SHARES 8.1 GRANT OF PERFORMANCE UNITS AND PERFORMANCE SHARES. Subject to the terms and provisions of the Plan, Performance Units or Performance Shares may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Performance Units or Performance Shares granted to each Participant. 8.2 VALUE OF PERFORMANCE UNITS AND PERFORMANCE SHARES. Each Performance Unit shall have an initial value of one dollar ($1.00) and each Performance Share initially shall represent one share of Stock. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the ultimate value of the Performance Unit or Performance Share to the Participant. The time period during which the performance goals must be met shall be called a "Performance Period". 8.3 PAYMENT OF PERFORMANCE UNITS AND PERFORMANCE SHARES. After a Performance Period has ended, the holder of a Performance Unit or Performance Share shall be entitled to receive the value thereof as determined by the extent to which performance goals discussed in Section 8.2 have been met. 8.4 FORM AND TIMING OF PAYMENT. Payment in Section 8.3 above shall be made in cash, stock or a combination thereof as determined by the Committee. Payment may be made in a lump sum or installments as prescribed by the Committee. If any payment is to be made on a deferred basis, the Committee may provide for the payment of dividend equivalents or interest during the deferral period. 8.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT. In the case of death, disability, or retirement, the holder of a Performance Unit or Performance Share shall receive pro rata payment based on the number of months service during the Performance Period but based on the achievement of performance goals during the entire Performance Period; provided, however, that the Committee, in its sole and absolute discretion, shall have the right to make such payment on a non-pro rata basis. Payment shall be made at the time payments are made to Participants who did not terminate service during the Performance Period. 11 16 8.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant terminates employment with the Company for any reason other than death, disability or retirement, all Performance Units or Performance Shares shall be forfeited. The Committee, in its sole and absolute discretion, may waive the automatic forfeiture provisions of this Section 8.6 and pay to a Participant a pro rated amount of the value of the Performance Unit or Performance Share based on the achievement of performance goals during the entire time the Participant was still employed with the Company; provided, however, that the Committee, in its sole and absolute discretion, shall have the right to make such payment on a non-pro rata basis. 8.7 NONTRANSFERABILITY. No Performance Units or Performance Shares granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution until the termination of the applicable Performance Period. All rights with respect to Performance Units or Performance Shares granted to a Participant under the Plan shall be exercisable during his lifetime only by the Participant or the Participant's legal representative. 8.8 PERFORMANCE MEASURES. Unless and until the Committee proposes for shareholder vote and shareholders approve a change in the general performance measures set forth in this Section 8.8, the attainment of which may determine the degree of payout and / or vesting with respect to Awards to Covered Employees which are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such grants shall be chosen from among: (a) Return on Equity; (b) Earnings Per Share; (c) Operating Cash Flow; (d) Gross Revenue; (e) Income Before Taxes; (f) Net Income; (g) Return on Revenue; and (h) Stock Price Appreciation. The Board shall have the discretion to adjust the determinations of the degree of attainment of the pre-established performance goals; provided, however, that Awards which are designed to qualify for the Performance-Based Exception, and which are held by Covered Employees, may not be adjusted upward (the Board shall retain the discretion to adjust such Awards downward). In the event that applicable tax and / or securities laws change to permit Board discretion to alter the governing performance measures without obtaining shareholder approval of such changes, the Board shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Board determines that it is advisable to grant Awards which shall not qualify for the Performance-Based Exception, the Board may make such grants without satisfying the requirements of Code Section 162(m). 12 17 ARTICLE 9. RIGHTS OF EMPLOYEES 9.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. 9.2 PARTICIPATION. No employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. ARTICLE 10. CHANGE IN CONTROL 10.1 STOCK BASED AWARDS. Notwithstanding the remaining provisions of the Plan, in the event of a Change in Control of the Company, all Stock based awards granted under this Plan, including NQSOs, ISOs, and Restricted Stock Units, that are still outstanding and not yet vested, shall become immediately 100% vested in each Participant, as of the first date that the definition of Change in Control has been fulfilled, and shall remain as such for the remaining life of the Award, as such life is provided herein and within the provisions of the related individual Award Agreements. Within ten (10) business days after the occurrence of a Change in Control, the stock certificates representing payment of Restricted Stock Unit grants, without any restrictions or legend thereon, shall be delivered to the applicable Participants. 10.2 PERFORMANCE BASED AWARDS. Notwithstanding the remaining provisions of the Plan, in the event of a Change in Control of the Company, all performance based awards granted under this Plan shall be immediately paid out in cash, including Performance Units or Performance shares. The amount of the payout shall be based on the extent to which performance goals, established for the Performance Period then in progress, have been met up to the date of the Change in Control, or at target, whichever is higher. 10.3 POOLING OF INTERESTS ACCOUNTING. Notwithstanding any other provision of the Plan to the contrary, in the event that the consummation of a Change in Control is contingent on using the pooling of interests accounting methodology, the Board may take any action necessary to preserve the use of pooling of interests accounting. ARTICLE 11. AMENDMENT, MODIFICATION AND TERMINATION 11.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend, or modify the Plan. However, without the approval of the stockholders of the company (as may be required by the Code, by the insider trading rules of Section 16 of the Exchange Act, by any national securities exchange or system on which the Shares are then listed or reported, or by a regulatory body having jurisdiction with respect hereto), no such termination, amendment, or modification may: (a) Increase the total amount of Shares which may be issued under this Plan, except as provided in Section 4.3 herein; or 13 18 (b) Change the class of employees eligible to participate in the Plan; or (c) Materially increase the cost of the Plan or materially increase the benefits to Participants; or (d) Extend the maximum period after the date of grant during which Options may be exercised; or (e) Change the provisions of the Plan regarding Option Price. 11.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment or modification of the Plan shall in any manner adversely affect any Award previously granted under the Plan, without the written consent of the Participant. 11.3 COMPLIANCE WITH CODE SECTION 162(m). At all times when Code Section 162(m) is applicable, all Awards granted under this Plan shall comply with the requirements of Code Section 162(m); provided, however, that in the event the Board determines that such compliance is not desired with respect to any Award or Awards available for grant under the Plan, then compliance with Code Section 162(m) will not be required. In addition, in the event that changes are made to Code Section 162(m) to permit greater flexibility with respect to any Award or Awards available under the Plan, the Board may, subject to this Article 11, make any adjustments it deems appropriate. ARTICLE 12. WITHHOLDING 12.1 TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any grant, exercise or payment made under or as a result of this Plan. 12.2 SHARE WITHHOLDING. With respect to withholding required upon the exercise of NQSOs, or upon the payment of Restricted Stock Units, or upon the payment of Performance Units or Performance shares (if paid in full or part in Shares), participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair market Value, on the date the tax is to be determined, equal to the amount required to be withheld. All elections shall be irrevocable, and be made in writing, signed by the Participant in advance of the day that the transaction becomes taxable. Share withholding elections made by Participants who are subject to the short-swing profit restrictions of Section 16 of the Exchange Act must comply with such additional restrictions in making their election. 14 19 ARTICLE 13. REDEMPTION OF COMMON STOCK ON TERMINATION OF EMPLOYMENT As of the time of voluntary or involuntary termination of employment of a Participant and at the discretion of the Committee, Participant shall sell to the Corporation, and the Corporation shall redeem from the Participant, all of Participant's Shares, that are owned or have vested due to Participant's participation in the Plan. The redemption price for each Share redeemed shall be the average of the highest and lowest price at which the Stock was traded during the five business days preceding the date of the Committee's decision to redeem the Shares of a participant. The redeemed shares shall be transferred to the Corporation properly endorsed by the Participant free and clear of all claims, liens and encumbrances whatsoever. As used herein, the term "termination of employment" means the complete termination of employment. ARTICLE 14. INDEMNIFICATION Each Person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company's approval, or paid by him in satisfaction of any judgment in any such action, suit or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Persons may be entitled under the Company's Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. ARTICLE 15. SUCCESSORS All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all substantially all of the business and/or assets of the Company. ARTICLE 16. REQUIREMENTS OF LAW 16.1 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 16.2 GOVERNING LAW. To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Florida. 15 EX-10.15 13 g67411kex10-15.txt 4TH AMENDMENT TO OFFICE LEASE 1 Exhibit 10.15 FOURTH AMENDMENT TO OFFICE LEASE THIS FOURTH AMENDMENT TO OFFICE LEASE is made as of the 1st day of April, 1999 by and between LEPERCQ CORPORATE INCOME FUND L.P., as successor-in-interest to PGA PROFESSIONAL CENTER, LTD. ("Landlord") and THE WACKENHUT CORPORATION ("Tenant"). W I T N E S S E T H : WHEREAS, Landlord and Tenant are parties to a certain Office Lease dated April 18, 1995, as amended by a First Amendment to Office Lease dated November 3, 1995, a Second Amendment to Office Lease dated August 1, 1996 and a Third Amendment to Office Lease dated December 10, 1997 (the Office Lease as amended is hereinafter collectively referred to as the "Lease"); WHEREAS, Landlord and Tenant desire to further modify the Lease as hereinafter set forth. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. The foregoing recitals are true and correct and are incorporated herein by reference. 2. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Lease. 3. The Lease is in full force and effect. Neither Landlord nor Tenant is in default thereunder, and to the knowledge of Landlord and Tenant, no events have occurred which would, with the giving of notice or the passage of time, or both, constitute an event of default under the Lease. 4. As of April 1, 1999 (the "Expansion Date"), Tenant hereby leases from Landlord approximately 2,859 square feet located in the Building (the "Expansion Space") which was previously occupied by Tambone Real Estate Development Corporation ("Tambone"). The parties acknowledge that Tenant has dealt directly with Tambone as to the takeover of the Expansion Space. Landlord shall have no liability to 2 Tenant for any failure or refusal by Tambone to surrender the Expansion Space to Tenant on the Expansion Date or for any holding over related to the Expansion Space or any consequential or other damages that Tenant may suffer as a result of any delay in obtaining possession of the Expansion Space. 5. Tenant's occupancy of the Expansion Space shall be subject to all of the terms and conditions of the Lease, as modified by this Amendment, except that from and after the Expansion Date (a) the Annual Rental payable under the Lease shall be increased by $54,778.44 and (b) Tenant's proportionate share shall be increased to one hundred (100%) percent. 6. Anything in Paragraph 5(a) above to the contrary notwithstanding, if and so long as Tenant is not in default under this Lease beyond any grace period, Tenant shall be entitled to a monthly rent credit equal to $4,564.87, commencing on the Expansion Date and continuing for a total of four (4) months for a total rent credit of $18,259.48. 7. Sections 38 and 39 of the Lease are hereby deleted. 8. Except as thereby modified, the Lease remains in full force and effect. In the event of any conflict between the terms of the Lease and the terms of this Amendment, the terms of this Amendment shall govern. -2- 3 IN WITNESS WHEREOF, this Fourth Amendment to Office Lease has been executed as of the day and year first above written. LANDLORD: LEPERCQ CORPORATE INCOME FUND L.P. By: Lex GP-1, Inc. By: /s/ ----------------------------------------- Name: Title: TENANT: THE WACKENHUT CORPORATION By: /s/ Francis E. Finizia ----------------------------------------- Name: Francis E. Finizia Title: Corporate Counsel and Assistant Secretary -3- EX-10.16 14 g67411kex10-16.txt DESIGNATED EXECUTIVE OFFICER BONUS PLAN 1 EXHIBIT 10.16 DESIGNATED EXECUTIVE OFFICER BONUS PLAN FOR FISCAL 2000 ELIGIBILITY AND PARTICIPATION Eligibility in this plan is limited to the Designated Senior Executive Officers, which presently includes the following: o Chairman of the Board and Chief Executive Officer o President and Chief Operating Officer TARGET INCENTIVE AWARDS For fiscal year 2000, the percentages defined for each participant are shown below: TARGET INCENTIVE AWARD POSITION AS A PERCENT OF BASE SALARY - -------- --------------------------- COB/CEO 50% Pres/COO 50% PERFORMANCE MEASURES CORPORATE PERFORMANCE MEASURES PARTICIPANTS - -------------------- ------------ Corporate Revenues 30% Corporate Income Before Tax 70% ---- Total 100% DEFINITION OF CORPORATE INCOME This definition excludes extraordinary items and changes in accounting principles, as defined by GAAP. Extraordinary items, as defined by GAAP, include items of a very unusual and infrequent nature, a good example of which is a loss incurred in the early extinguishment of debt. Changes in accounting principles as a result of new pronouncements or requirements issued by accounting authorities such as SEC, FASB, etc. Non-recurring and unusual items not included or planned for in the budgeted bonus targets may be excluded from the corporate income before income taxes, as defined, at the recommendation of management and at the discretion and agreement of the Nominating and Compensation Committee. EX-10.17 15 g67411kex10-17.txt SENIOR MANAGEMENT BONUS PLAN 1 EXHIBIT 10.17 THE WACKENHUT CORPORATION SENIOR MANAGEMENT BONUS PLAN FOR FISCAL 2000 ELIGIBILITY AND PARTICIPATION Eligibility in this plan is limited to the Senior Officers, which presently includes the following: o Chairman of the Board and Chief Executive Officer o President and Chief Operating Officer o EVP & President -- North American Operations Group o SVP -- Chief Financial Officer o SVP & President -- Wackenhut International, Inc. o SVP -- Corporate Planning & Development and President & CEO, Wackenhut Resources, Inc. o SVP -- General Counsel & Assistant Secretary o SVP -- Human Resources TARGET INCENTIVE AWARDS For fiscal year 2000, the percentages defined for each participant are shown below. TARGET INCENTIVE AWARD POSITION AS A PERCENTAGE OF BASE - -------- ------------------------ COB/CEO 35% Pres/COO 35% EVPs 35% SVPs 35% PERFORMANCE MEASURES CORPORATE BUSINESS UNIT PERFORMANCE MEASURES PARTICIPANTS PARTICIPANTS - -------------------- ------------ ------------- Corporate Revenues 30% 30% Corporate Income Before Taxes 70% 30% Business Unit Service Profit 0% 40% ---- ---- Total 100% 100% DEFINITION OF CORPORATE INCOME This definition excludes extraordinary items and changes in accounting principles, as defined by GAAP. Extraordinary items, as defined by GAAP, include items of a very unusual and infrequent nature, a good example of which is a loss incurred in the early extinguishment of debt. Changes in accounting principles as a result of new pronouncements or requirements issued by accounting authorities such as SEC, FASB, etc. Non-recurring and unusual items not included or planned for in the budgeted bonus targets may be excluded from the Page 1 of 2 2 corporate income before income taxes, as defined, at the recommendation of management and at the discretion and agreement of the Nominating and Compensation Committee. AWARD DETERMINATION Based on performance achieved during the year, a participant's award payout will be a function of performance against pre-established goals for each performance measure, as shown in the following chart: PERFORMANCE PAYOUT AS PERCENT ACHIEVED OF TARGET INCENTIVE AWARD - ----------- ------------------------- Outstanding 150% Target 100% Threshold 50% Below threshold 0% Threshold, Target, and Outstanding performance levels will be defined at the beginning of each year for each performance measure. DISCRETIONARY JUDGMENT For other plan participants, the CEO and COO may recommend an adjustment to an individual's incentive award to reflect individual performance. For the CEO and COO themselves, recommended adjustments, if any, will be made by the Nominating and Compensation Committee. All recommended adjustments will be subject to review and approval by the Committee. Adjustments will be based on the following guidelines: EVALUATION OF MULTIPLY INDIVIDUAL PERFORMANCE AWARD BY: - ---------------------- ----------- Outstanding 150% Normal Performance 100% Clearly below desired 0-80% GOVERNANCE The Nominating and Compensation Committee of the Board of Directors of The Wackenhut Corporation is responsible for the administration and governance of the plan. Actions requiring Committee approval include final determination of plan eligibility and participation, Identification of performance goals, and final award determination. The decision of the Committee shall be conclusive and binding on all participants. Page 2 of 2 EX-21.1 16 g67411kex21-1.txt SUBSIDIARIES 1 EXHIBIT 21.1 SUBSIDIARIES OF THE CORPORATION SUBSIDIARIES OF THE WACKENHUT CORPORATION American Guard and Alert, Inc. (Alaska) Save a Friend, Inc. (Florida) Titania Advertising, Incorporated (Florida) Titania Insurance Company of America (Vermont) Tuhnekcaw, Inc. (Delaware) Wackenhut Airline Services, Inc. (Florida) Wackenhut Australia, Pty., Ltd. (Australia) Wackenhut of Canada, Ltd. (Canada) Wackenhut Corrections Corporation (Florida) Wackenhut Educational Services, Inc. (Florida) Wackenhut Financial, Inc. (Delaware) Wackenhut Funding Corp. (Delaware) Wackenhut International, Incorporated (Florida) Wackenhut of Nevada, Inc. (Nevada) Wackenhut Resources, Inc. (Florida) Wackenhut Services, Incorporated (Florida) Wackenhut.com Online Store, Inc. (Florida) SUBSIDIARIES OF WACKENHUT INTERNATIONAL, INCORPORATED Ecma, S.A. de C.V. (El Salvador) Instituto Wackenhut, S.A. (Ecuador) Peruana de Seguridad y Vigilancia, S.A. (PESEVISA) (Peru) Seguridad Wackenhut, S.A. de CV (Mexico) Setecsa de Venezuela, C.A. (Venezuela) Wackenhut A/O (Russia) Wackenhut Belize, Ltd. (Belize) Wackenhut Bolivia, S.A. (Bolivia) Wackenhut Cameroon, S.A. (Cameroon) Wackenhut Central Europe GMBH (Germany) Wackenhut Czech, SPOL, S.R.O. (Czech Republic) Wackenhut de El Salvador, S.A. (El Salvador) Wackenhut de Guatemala, S.A. (Guatemala) Wackenhut de Honduras, S.A. (Honduras) Wackenhut de Nicaragua, S.A. (Nicaragua) Wackenhut de Valores, S.A. (Guatemala) Wackenhut de Venezuela, S.A. (Venezuela) Wackenhut del Ecuador, S.A. (Ecuador) Wackenhut Dominicana, S.A. (Dominican Republic) Wackenhut France, S.A.R.L. (France) Wackenhut Gambia, Ltd. (Gambia) Wackenhut Jamaica, Ltd. (Jamaica) Wackenhut Kuban (Russia) Wackenhut Pakistan (PVT) Limited (Pakistan) Wackenhut Morocco, Inc. (Morocco) Wackenhut Maghreb, S.A. (Morocco) Wackenhut Mozambique Lda (Mozambique) Wackenhut Neva (Russia) Wackenhut Paraguay, S.A. (Paraguay) Wackenhut Peru, S.A. (Peru) 2 SUBSIDIARIES OF WACKENHUT INTERNATIONAL, INCORPORATED (CONTINUED) Wackenhut Puerto Rico, Inc. (Puerto Rico) Wackenhut S.A. (Costa Rica) Wackenhut Sakhalin (Russia) Wackenhut Santa Cruz, S.A. (Bolivia) Wackenhut Seges (Ivory Coast) Wackenhut Services S.A. de C.V. (El Salvador) Wackenhut Sierra Leone (Sierra Leone) Wackenhut Transportation de Valores, S.A. (Ecuador) Wackenhut Venzolana, SA (Venezuela) Wackenhut U.K. Limited (United Kingdom) Wackenhut Uruguay, S.A. (Uruguay) WII/Sound and Security Engineering Co. (Jordan) SUBSIDIARY OF AMERICAN GUARD AND ALERT Ahtna AGA Security, Inc. (Alaska) SUBSIDIARIES OF WACKENHUT CORRECTIONS CORPORATION Atlantic Shores Healthcare, Inc. Miramichi Youth Centre Management, Inc. Wackenhut Corrections (U.K.), Limited (United Kingdom) Wackenhut Corrections Corporation Australia Pty Ltd. (Australia) Canadian Correctional Management Inc. Wackenhut Corrections Design Services, Inc. Wackenhut Corrections Netherlands Antilles, N.V. Wackenhut Corrections Puerto Rico, Inc. WCC Development, Inc. (Florida) WCC/FL/01, Inc. (Florida) WCC/FL/02, Inc. (Florida) WCC Financial, Inc. (Delaware) WCC Real Estate Holdings, LLC (Florida) SUBSIDIARY OF WACKENHUT CORRECTIONS CORPORATION AUSTRALIA Wackenhut Correctional Services Pty Ltd. (Australia) Australasian Correctional Management Pty Ltd. (Australia) Australasian Correctional Investment Pty Ltd. (Australia) SUBSIDIARY OF WACKENHUT SERVICES, INCORPORATED Wackenhut Services, LLC. (Colorado) SUBSIDIARIES OF WACKENHUT RESOURCES, INC. WRI Employers Insurance, Inc. (Florida) WRI Staffing, Inc. (Florida) WRI II, Inc. (Florida) Oasis Outsourcing, Inc. (Florida) Oasis Outsourcing II, Inc. (Florida) Oasis Outsourcing III, Inc. (Florida) Oasis Outsourcing IV, Inc. (Florida) Oasis Outsourcing V, Inc. (Florida) Oasis Outsourcing VI, Inc. (Florida) Oasis Outsourcing VII, Inc. (Florida) Oasis Outsourcing VIII, Inc. (Florida) 3 SUBSIDIARIES OF WACKENHUT RESOURCES, INC. (CONTINUED) Oasis Outsourcing Benefits, Inc. (Florida) Oasis Outsourcing Benefits II, Inc. (Florida) Oasis Outsourcing Benefits III, Inc. (Florida) Oasis Payroll Services, Inc. (Florida) Oasis Staffing, Inc. (Florida) Oasis Staffing II, Inc. (Florida) Oasis Staffing III, Inc. (Florida) Workforce Alternative, Inc. (Florida) King Employee Services, Inc. (Florida) EX-23.1 17 g67411kex23-1.txt CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (Registration Statement File Nos. 33-59159, 333-11833, 333-11837, 333-46399, 333-80607 and 333-38344). ARTHUR ANDERSEN LLP West Palm Beach, Florida, March 23, 2001. EX-24.1 18 g67411kex24-1.txt POWER OF ATTORNEY 1 EXHIBIT 24.01 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Julius W. Becton Date: 2/16/01 - -------------------------------- ----------------------- Julius W. Becton, Jr., Director 2 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Carroll A. Cambell Date: 3/8/01 - -------------------------------- ----------------------- Carroll A. Campbell, Director 3 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Anne N. Foreman Date: 2/19/01 - -------------------------------- ----------------------- Anne N. Foreman, Director 4 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Edward L. Hennessy, Jr. Date: 2/14/01 - ---------------------------------- ----------------------- Edward L. Hennessy, Jr., Director 5 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Paul X. Kelley Date: 2/14/01 - -------------------------------- ----------------------- Paul X. Kelley, Director 6 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Nancy Reynolds Date: 2/18/01 - -------------------------------- ----------------------- Nancy Reynolds, Director 7 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Richard R. Wackenhut Date: 2/13/01 - -------------------------------- ----------------------- Richard R. Wackenhut, Director 8 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ George R. Wackenhut Date: 2/14/01 - -------------------------------- ----------------------- George R. Wackenhut, Director 9 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Alan B. Bernstein Date: 2/14/01 - -------------------------------- ----------------------- Alan B. Bernstein, Director 10 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ John F. Ruffle Date: 2/15/01 - -------------------------------- ----------------------- John F. Ruffle, Director 11 POWER OF ATTORNEY The undersigned member of the Board of Directors of The Wackenhut Corporation hereby constitute and appoint Philip L Maslowe, Juan D. Miyar, Timothy L. McCormick, James P. Rowan and Francis E. Finizia and each of them severally, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities to sign any and all reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Benjamin R. Civiletti Date: 2/21/01 - -------------------------------- ----------------------- Benjamin R. Civiletti, Director -----END PRIVACY-ENHANCED MESSAGE-----