<PAGE> 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, 1995
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: (407) 622-5656
--------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
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
- -------------------------------------- -----------------------
</TABLE>
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, 1996, the aggregate market value of the 3,858,885 shares of
Common Stock, Series A, the registrant's sole class of voting stock, held by
non-affiliates of the registrant was $38,261,641. At March 28, 1996,
3,858,885 shares of Series A and 8,309,762 shares of Series B of the
registrant's Common Stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the registrant's Proxy Statement for its 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Report.
EXHIBIT INDEX IS ON PAGE 46
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
The Wackenhut Corporation (the "Company") is a leading international
provider of security-related and other support services and a leading
developer and manager of privatized correctional and detention facilities.
The Company provides security services, food services and other related
services to commercial and governmental customers through its services
business (the "Services Business"). Through its correctional business (the
"Correctional Business"), the Company also provides correctional and detention
facility design, development and management services to governmental agencies.
The Company has approximately 45,000 full and part-time employees serving over
14,000 commercial and governmental customers through an extensive network of
offices and operations in 48 states and 50 countries.
The Company was incorporated in 1958 to continue the businesses that were
originally established in 1954 by its Chairman and Chief Executive Officer,
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 core 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 third largest security services organization in the
United States and is the leading United States-based provider of security
services abroad. In addition to its core security-related services, which
include guard and investigative 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 ("CPO") program to provide highly specialized and trained security
professionals to a broad range of customers such as national retailers, banks
and other financial institutions and gated communities. CPOs are also used as
supplemental law enforcement forces by public transportation authorities and
other governmental entities. Moreover, in seeking to respond to the specialized
needs of its larger clients, the Company developed its national accounts
("National Accounts") program to provide customized security services on a
national or regional level to large customers with multiple locations. The
National Accounts program provides customers with a high level of service by
providing a dedicated contact person with the Company who is responsible for
coordinating their accounts on a nationwide basis. 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 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 55% owned Wackenhut
Corrections Corporation subsidiary ("WCC"). WCC presently has
contracts to manage 25 correctional and detention facilities, with a design
capacity of 16,653 beds. From December 29, 1991 to December 31, 1995, WCC's
revenues increased from $37.9 million to $99.4 million and operating income
increased from $1.7 million to $7.2 million, representing compound annual growth
rates of 27.3% and 43.5%, respectively. In addition, from December 29, 1991 to
December 31, 1995, the Company increased its design capacity of contracts at a
compound annual growth rate of 37.4%. As of March 27, 1996, WCC's total equity
market capitalization was approximately $394 million.
In addition to its expansion into the Correctional Business through WCC,
the Company has leveraged its management skills to expand into other support
services. In 1992, the Company entered into the foodservice business for
correctional institutions and, in January 1996, expanded its presence in this
market through the acquisition of contracts and certain assets of the
Correctional Food Services Division of Service America Corporation. In 1995, the
Company's Food Services Division had revenues of $34.7 million and the
Correctional Food Service Division of Service America Corporation, which the
Company acquired, had revenues of $41.1 million. Presently, only 10% of the
correctional foodservice market has been privatized. Consequently, the Company
believes that as privatization of correctional food services continues to gain
<PAGE> 3
acceptance at state and local levels, the Food Services Division will have
opportunities for expansion. In addition to the services which the Company has
specifically targeted for expansion, the Company continues to explore and
selectively invest in other service businesses, including temporary services,
commercial and governmental support services, supplemental police services,
crash-fire-rescue services, fire protection services, and airport services.
BUSINESS STRATEGY
The Company's business strategy is focused on two primary objectives: (i)
enhancing its position as a leading international provider of security and
security-related services by distinguishing the type and quality of security
services it provides; and (ii) using its security service expertise and contacts
to offer other support services to its clients. Key elements of the Company's
business strategy are described below:
- ENHANCE LEADERSHIP POSITION OF CORE SECURITY-RELATED SERVICE
BUSINESS. 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; and (iii) well-organized supervisory
and feedback procedures. The Company's customer turnover ratio, the
industry benchmark for client satisfaction, has been significantly lower
than the industry average. Domestically, the Company experienced 9.1%
client turnover during 1995, a period in which the industry, the Company
believes, experienced an approximate 20% client turnover rate.
Furthermore, the Company's employee turnover ratio for security guards
has averaged approximately half of what the Company believes to be the
industry average.
- DEVELOP SPECIALIZED SECURITY SERVICES. The Company has identified and
targeted National Accounts and CPOs as its primary growth areas in the
security services business and seeks to expand its market position.
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 its
clients.
- 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 business
and the foodservice business has provided it with the experience it
believes will allow it to develop other specialized programs and support
services such as temporary services, building maintenance, supplemental
police services, crash-fire-rescue services, fire protection services,
and airport services.
- GEOGRAPHIC EXPANSION. The Company seeks to increase revenues and enhance
earnings stability by continuing to expand its international presence.
Historical revenue growth has been centered in Central and South America
and, more recently, Western Europe. The Company has also been expanding
into Central and Eastern Europe, the former Soviet Union, the People's
Republic of China and other countries in the Far East in an attempt to
capitalize on recent economic developments and political reforms in these
areas. The Company believes this geographic diversity helps to protect
its revenues and earnings from adverse regional economic and business
cycles. In addition, the Company believes that its far reaching
geographic presence, which includes 50 countries worldwide, provides it
with an advantage when pursuing contracts with multi-national
corporations.
- CORRECTIONAL BUSINESS. WCC's objective is to enhance its position as one
of the leading providers of privatized correctional and detention
services. Key elements of WCC's business strategy include: (i) effective
management of projects; (ii) selective development of new business
opportunities; (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.
- PURSUE SELECTED ACQUISITIONS. In addition to internal growth in the
security-related services business, the Company's growth strategy
includes the selected acquisition of other support service businesses.
<PAGE> 4
For example, through its January 1996 acquisition of the Correctional
Food Services Division of Service America Corporation, the Company has
established a leading position in the growing correctional foodservice
industry.
MARKETS
SERVICES BUSINESS. The private security-related services industry includes
guard and investigative services, alarm monitoring services, security consulting
services, armored car transport and other security services. According to an
industry study by The Freedonia Group, Inc., dated June 1995 (the "Freedonia
Report"), the total private security-related services industry had revenues of
approximately $16.6 billion in 1994, which are projected to increase to $26.1
billion by the year 2000, a compound annual growth rate of 7.9%. The largest and
most visible component of the industry is the guard and investigative services
component which also accounts for the largest portion of the Company's revenues.
According to the Freedonia Report, the guard and investigative services market,
including security consulting services, had revenues of approximately $11.6
billion in 1994, which are projected to increase to $17.9 billion by the year
2000, a compound annual growth rate of 7.6%.
Guard and investigative services are 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 and detectives. In contrast,
contract services are provided to end users pursuant to contracts with
independent security-related service firms such as the Company. The Company
believes that the advantages to clients of using contract security service
providers rather than providing services internally on a proprietary basis are
three-fold: (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. According to the Freedonia Report, the total
market for contract guard and investigative services was $10.9 billion in 1994,
representing approximately 66% of the total contract security-related services
market.
In addition to its presence in guard and investigative services, the
Company has identified opportunities in related services markets, such as
correctional food services. Only 10% of prisons and jails in the United States
have privatized their food services, of which the Company's market share is
approximately one-third. The Company believes that trends in privatization will
result in growth opportunities in this market component.
CORRECTIONAL BUSINESS. The trend in the United States and other countries
toward privatization of government services and functions has increased as
governments have faced continuing pressure to control costs and improve the
quality of services. Governmental agencies responsible for correctional and
detention facilities have privatized facilities in an attempt to address these
pressures. During the period from 1984 to 1994, the worldwide number of beds
under management at privatized correctional and detention facilities increased
from 885 to 49,154, with the majority of this growth occurring since 1989.
During 1994, the worldwide number of beds under management or construction at
privatized correctional and detention facilities increased 51.0% to 49,154 from
32,555 in 1993.
WCC markets its services in the United States to federal, state and local
governmental agencies. According to reports on privatization from the Private
Corrections Project Center for Studies in Criminology and Law, University of
Florida (the "Privatization Reports"), 18 states and Puerto Rico had awarded
management contracts to private companies at December 31, 1994. At December 31,
1994, there were a total of 80 facilities with a design capacity of 45,386 beds
privatized in the United States, of which the Company was awarded 19 facilities
with a design capacity of 11,838 beds. Federal agencies have privatized
Immigration and Naturalization Service detention facilities and United States
Marshal detention facilities. State agencies have privatized state prisons,
community corrections facilities, chemical dependency treatment centers,
intermediate sanction facilities, juvenile offender facilities, pre-release
centers, work program facilities and state jail facilities. Local agencies have
privatized city jail facilities and transfer facilities.
In the United Kingdom, the Home Office, the chief British governmental body
responsible for law enforcement, awarded its first contract for a
privately-managed prison in 1991. At December 1, 1995, there
<PAGE> 5
were a total of six facilities with a design capacity of 3,505 beds privatized
in the United Kingdom, including one managed by a WCC joint venture, with a
design capacity of 850 beds. The Home Office has stated that new correctional
and detention facilities in England and Wales will be privatized. Therefore, WCC
believes that significant growth opportunities exist in the United Kingdom. The
Home Office is also privatizing court escort services. In December 1995, the
Company's joint venture, PPS, was awarded contracts to perform court escort
services in two regions of the United Kingdom.
In Australia, Queensland privatized its first facility in 1989. At December
8, 1995, there were a total of five privatized facilities with a design capacity
of 2,233 beds privatized in Australia, of which WCC currently manages three
facilities with a design capacity of 1,778 beds (which includes the design
capacity of the Sale, Australia facility which is presently under construction).
COMPANY ORGANIZATION
The Company's business can be divided into the Services Business and
Correctional Business. The Services Business, which encompasses all business of
the Domestic Operations Group and the International Group, and all business of
the Government Services Group except for the operations of WCC, provides
security-related and other support services for commercial and governmental
clients. The Correctional Business, which consists exclusively of the business
conducted through WCC, provides correctional and detention facility design,
development and management services to government agencies. Provided below is
financial information for each business segment for Fiscal 1993, Fiscal 1994 and
Fiscal 1995. The following table sets forth the contribution to consolidated
revenues and operating income by each of the Company's business segments. See
Note 14 of Notes to Consolidated Financial Statements (which also includes a
summary of domestic and international operations) included elsewhere in
this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
FISCAL 1993 FISCAL 1994 FISCAL 1995
---------------- ----------------- ----------------
BUSINESS SEGMENT AMOUNT % AMOUNT % AMOUNT %
- -------------------------------------------------------- -------- --- -------- ---- -------- ---
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Services.............................................. $600,472 91% $642,727 88% $697,301 88%
Correctional.......................................... 58,784 9 84,026 12 99,431 12
-------- --- -------- ---- -------- ---
Total Revenues...................................... $659,256 100% $726,753 100% $796,732 100%
Operating Income:
Services.............................................. $ 3,050 68% $ 10,846 71% $ 8,545 54%
Correctional.......................................... 1,446 32 4,446 29 7,229 46
-------- --- -------- ---- -------- ---
Operating Income before write-down of
headquarters building............................... 4,496 100% 15,292 100% 15,774 100%
Write-down of headquarters building................... -- (8,700) --
-------- -------- --------
Total Operating Income.............................. $ 4,496 $ 6,592 $ 15,774
</TABLE>
SERVICES BUSINESS
The Services Business is conducted through three separate operating groups:
the Domestic Operations Group, the Government Services Group (excluding WCC) and
the International Group. The following table sets forth the contribution of each
operating group to the total revenues and total operating income of the Services
Business during Fiscal 1993, Fiscal 1994 and Fiscal 1995.
<TABLE>
<CAPTION>
REVENUES
--------------------------------------------------------------
FISCAL 1993 FISCAL 1994 FISCAL 1995
---------------- ---------------- ----------------
OPERATING GROUP AMOUNT % AMOUNT % AMOUNT %
- --------------------------------------------------------- -------- --- -------- --- -------- ---
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Domestic Operations...................................... $336,048 56% $380,941 59% $423,743 61%
Government Services (excluding WCC)...................... 184,915 31 177,613 28 166,035 24
International............................................ 82,759 14 89,900 14 113,205 16
Other.................................................... 1,019 -- 1,222 -- 1,141 --
Inter-Group Revenues..................................... (4,269) (1) (6,949) (1) (6,823) (1)
-------- --- -------- --- -------- ---
Total Services Business Revenues......................... $600,472 100% $642,727 100% $697,301 100%
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
OPERATING INCOME
--------------------------------------------------------------
FISCAL 1993 FISCAL 1994 FISCAL 1995
---------------- ---------------- ----------------
OPERATING GROUP AMOUNT % AMOUNT % AMOUNT %
- --------------------------------------------------------- -------- --- -------- --- -------- ---
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Domestic Operations...................................... $ 10,434 65% $ 12,977 61% 13,501 70%
Government Services (excluding WCC)...................... 3,499 22 5,162 25 2,871 15
International............................................ 2,164 13 2,992 14 2,783 15
-------- --- -------- --- -------- ---
Operating Income Before Corporate Expenses and
Underwriting Losses................................ 16,097 100% 21,131 100% 19,155 100%
Corporate Expenses and Underwriting Losses............... (13,047) (10,285) (10,610)
-------- -------- --------
Total Services Business Operating Income................. $ 3,050 $ 10,846 $ 8,545
</TABLE>
DOMESTIC OPERATIONS GROUP. The Domestic Operations Group has historically
provided over half of the Company's consolidated revenues. This group provides
security-related and other support services throughout the United States. The
Domestic Operations Group is subdivided into the following divisions: the
Security Services Division, the Nuclear Division and the Food Services Division.
In conducting its Services Business, the Company has adopted a quality
management approach. General management responsibilities for each operating
group are vested in a small group of managers located at Company headquarters.
Day-to-day management responsibility for each group is vested in 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 sites and carefully monitor operating
results.
Security Services Division. Through its Security Services Division, the
Company furnishes security officers (armed and unarmed) to protect its clients'
property against fire, theft, intrusion, vandalism and other physical harm.
Specialized security services offered by the Company include executive
protection, 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 investigative services for
attorneys, financial institutions and retail and industrial businesses.
The Company will attempt to 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 require security-related services on a national or regional level at
multiple locations. Such clients include retail chains, banks, manufacturers and
restaurant chains. Management believes that such clients value the flexibility
and service provided by a dedicated single point of contact with the Company
through the National Accounts program.
For its CPO program, the Company recruits law enforcement academy
graduates, former military police, 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. Only
about 6% of initial applicants for the Company's CPO program are eventually
hired by the Company. CPOs perform such functions as prisoner transportation in
Maryland and Colorado, neighborhood and downtown security in Florida, transit
security in Wisconsin and California, rest-stop security in Florida and other
supplemental law enforcement-related services. Management believes that services
provided by CPOs 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.
The contracts of the Security Services Division with private industry
usually are for a one year term. Most of these contracts are subject to
termination by either party on 30 days prior notice. Billing rates are based on
a specified rate per hour and generally are subject to renegotiation or
escalation if related costs increase because of changes in minimum wage laws or
certain other events beyond the control of the Company.
<PAGE> 7
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.
Nuclear Division. The Company provides specialized security-related
services for nuclear power generating facilities owned by public and private
utility companies. The Company provides 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.
Food Services Division. The Company's correctional foodservice business,
the second largest in the industry, provides over 31 million meals annually to
over 115 jail and prison facilities in 27 states throughout the United States.
Food for regular, therapeutic and religious diets is prepared using conventional
or cook-chill methods. The Company provides a quality assurance program that
encompasses all aspects of the foodservice business. Specifically, the Company
provides product testing and menu development through its staff of nutritional
experts, which includes professional dietitians. Also, to ensure high quality of
service and product, facility audits are conducted on an on-going basis. The
Company bids for foodservice contracts and provides food services on a cost per
meal basis. Complete foodservice management, commissary, laundry and janitorial
programs are available to correctional clients.
On January 5, 1996, the Company acquired the contracts and certain assets
of the Correctional Food Services Division of Service America Corporation, which
had revenues of approximately $41.1 million in 1995. The Company paid a cash
purchase price of approximately $12.4 million.
Only 10% of the correctional foodservice business was privatized as of
December 31, 1995. Consequently, the Company sees substantial opportunity to
expand its operations in the Food Services Division, especially in light of the
recent trend toward privatization of certain governmental services.
Additionally, the correctional foodservice business has high barriers to entry,
including the need for substantial expertise to comply with strict governmental
dietary requirements and the capital resources necessary to finance start-up
costs and maintain inventory levels. The Company believes that its in-house
staff of highly-trained professional dietitians and managers provides it with a
competitive advantage. The Company intends to concentrate on expanding its Food
Services Division through internally-generated growth and selected acquisitions.
GOVERNMENT SERVICES GROUP. The Government Services Group generates
approximately 21% of the Company's consolidated revenues. The Government
Services Group business is conducted primarily through WCC and Wackenhut
Services Inc. ("WSI"). For a discussion of WCC, see "Business -- Correctional
Business." Through WSI, the Government Services Group provides security services
primarily to United States federal government entities and has established a
commercial client base in Australia. Services provided by WSI range from basic
security and administrative support to specialized emergency response teams.
These response teams are staffed with highly trained personnel, many with prior
governmental intelligence experience. These response teams are equipped with
sophisticated weaponry and engage in such specialized activities as aerial
assault and rapelling operations.
In the United States, WSI provides security-related services at 11
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. Since 1990, the
<PAGE> 8
Company has managed the Rocky Flats Environmental Technology Site near Denver
and since 1964, has managed the Nevada Test Site near Las Vegas. Since 1986, WSI
also has provided security as a sub-contractor at the U.S. Strategic Petroleum
Reserves in Texas and Louisiana. Since 1984, WSI has overseen training and
resource development for the United States Department of Energy at the Central
Training Academy 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.
Through the Government Services Group the Company also operates its
accelerated access authorization program. This program provides background
investigation and research services in support of individual clearances required
for employment at United States Department of Energy sites. Currently, this
program provides services at two facilities.
INTERNATIONAL GROUP. International Group accounts for approximately 14% of
the Company's consolidated revenues. The International Group's business is
conducted primarily through Wackenhut International, Inc. ("WII").
Since its organization in 1967, WII has grown to include a network of
subsidiaries, partnerships and affiliates in over 50 countries. Management
believes the Company's international presence, through the operations of WII, is
larger than any of its domestic competitors. The Company believes that its risk
exposure in international operations conducted through WII is reduced
substantially by the fact that the vast majority of its international operations
are structured through 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, central station monitoring, armored cars
and janitorial services. The Company believes that this experience will be
valuable in assisting the Company's domestic expansion into new support service
areas.
The Company's goal is to increase its international presence by further
developing existing markets and by expanding into new markets. Most recently,
WII has expanded into Central and Eastern Europe, the former Soviet Union, the
People's Republic of China and other countries in the Far East in an attempt to
capitalize on recent economic developments and political reforms in these areas.
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 23 locations. WII also provides protective services at
NASA space shuttle support sites in Africa. Major competitors of WII include
large United States-based companies with operations overseas, sizable foreign
concerns such as Group 4 and Securitas, and local and regional companies.
CORRECTIONAL BUSINESS
The Company's Correctional Business is conducted through the operations of
WCC. WCC is a leading developer and manager of privatized correctional and
detention facilities in the United States, the United Kingdom and Australia. WCC
was founded in 1984 as a division of the Company to capitalize on emerging
opportunities in the private correctional services market. WCC presently has
contracts to manage 25 correctional and detention facilities with an aggregate
design capacity of 16,653 beds, 17 of which are currently in operations, seven
of which are under development by WCC and one of which is being developed by a
third party. WCC offers governmental agencies a comprehensive range of prison
management services from individual consulting projects to the integrated
design, construction and management of correctional and detention facilities. In
addition to providing the fundamental services relating to the security of
facilities and the detention and care of inmates, WCC 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. The Company believes that
WCC's experience in delivering a full
<PAGE> 9
range of quality privatization services on a cost-effective basis to
governmental agencies provides such agencies strong incentives to choose WCC
when awarding new contracts or renewing existing contracts.
In the United States, there is a growing trend toward privatization of
correctional and detention services as governments have faced continuing
pressure to control costs and improve the quality of services. According to the
Privatization Reports, the design capacity of privately-managed correctional and
detention facilities in the United States has increased significantly over the
last ten years. The majority of this growth has occurred since 1989, as the
number of correctional and detention facilities under contract for private
management increased from 26 facilities with a design capacity of 10,973 beds in
1989 to 88 facilities with a design capacity of 49,154 beds in 1994. Even after
such growth, according to the Privatization Reports, only 3.0% of inmates in
United States correctional and detention facilities were housed in
privately-managed facilities at December 31, 1994. The Company believes that
many factors have contributed to industry growth, the most important of which
are increasing inmate populations and the demonstrated ability of private
entities to design, construct and manage facilities on a cost-effective basis.
International recognition of the benefits of private sector management of
correctional and detention facilities also continues. WCC has contracts to
manage four of the 11 facilities that have been privatized in the United Kingdom
and Australia. In particular, WCC believes that significant growth opportunities
exist in the United Kingdom since the Home Office, the chief British
governmental body responsible for law enforcement, adopted a policy in 1993 to
privatize all new prisons in England and Wales, as well as some existing prisons
and court escort services. In December 1995, WCC entered into two contracts to
provide court escort services in the West Midlands and Southeast Areas of
England, commencing in May 1996. Under court escort contracts, a private
company on behalf of a governmental agency, transports prisoners between
prisons, police stations and courts and is responsible for the custody of such
prisoners during transportation and court appearances.
WCC's objective is to enhance its position as one of the leading developers
and managers of privatized correctional and detention facilities. Key elements
of WCC's business strategy include: (i) effective management of projects; (ii)
selective development of new business opportunities; (iii) aggressive pursuit of
acquisitions; (iv) expanded scope of services; (v) expansion into international
markets by establishing alliances with strategic local partners; and (vi)
limiting capital risk.
In September 1994, WCC completed an initial public offering ("IPO") in
which it sold 2,185,000 shares of common stock at an offering price of $9 per
share. Following the completion of the IPO, the Company owned approximately
73.3% of the issued and outstanding shares of common stock of WCC. In January
1996, WCC completed a subsequent public offering of 2,300,000 shares of common
stock at an offering price of $24 per share, which resulted in the Company
owning approximately 55% of the issued and outstanding shares of common stock of
WCC.
CUSTOMERS
During Fiscal 1995, the Company provided services to more than 14,000
customers. The Company's largest customer was the United States Department of
Energy, which accounted for approximately 17% of the Company's consolidated
revenue in Fiscal 1995. The service contracts at the Savannah River site (8%)
and the Rocky Flats Plant (5%) are the largest of the Company's contracts with
the United States Department of Energy. Contracts with governmental agencies of
the State of Texas accounted for 37% and 41% of WCC's revenues in Fiscal 1995
and Fiscal 1994, respectively. Contracts with the New South Wales Department of
Corrective Services accounted for 13% of WCC's revenues in Fiscal 1995.
Contracts with the Queensland Corrective Services Commission accounted for 13%
of WCC's revenues in Fiscal 1995. Contracts with the Louisiana Department of
Public Safety and Corrections accounted for 11% and 13% of WCC's revenues in
Fiscal 1995 and Fiscal 1994, respectively.
COMPETITION
The Company is the third largest security and protective services
organization in the United States and a leading provider of such services
worldwide. The Company competes domestically and internationally with
<PAGE> 10
Borg-Warner Security Company and Pinkerton's, Inc. The Company also competes
with numerous local and regional security services companies. The top five
providers of services similar to those provided by the Company account for less
than 25% 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.
WCC 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. WCC competes with a
number of companies domestically and internationally, such as Corrections
Corporation of America, Esmor Correctional Services, Inc., Group 4 International
Corrections Service, Securicor Group, U.K. Detention Services, Ltd., and United
States Corrections Corp. Some of the competitors are larger and have greater
resources than WCC. WCC 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 addition, in some markets WCC competes with governmental agencies
that are responsible for the development and management of correctional
facilities.
EMPLOYEES
The Company's principal business is labor intensive, and is affected
substantially by the availability of qualified personnel and the cost of labor.
As of March 28, 1996, the Company had over 45,000 full and part-time employees,
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 Company are covered by collective bargaining
agreements. Relations with employees have been generally satisfactory. At March
28, 1996, WCC had 3,038 full-time employees and 78 part-time employees.
Employees at four of WCC's facilities are unionized.
BUSINESS REGULATIONS AND LEGAL CONSIDERATIONS
The Company 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.
The industry in which WCC operates is subject to national, federal, state
and local regulations in the United States, United Kingdom 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. WCC's contracts
frequently include extensive reporting requirements and require supervision and
on-site monitoring by representatives of contracting governmental agencies.
WCC'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 WCC personnel to be licensed and may make them subject to
background investigation. State law also typically requires corrections officers
to meet certain training standards.
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.
<PAGE> 11
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.
<PAGE> 12
ITEM 2. PROPERTIES
The Company relocated its executive offices to The Wackenhut Center, a
newly constructed building located at 4200 Wackenhut Drive #100, Palm Beach
Gardens, Florida, in March 1996. The Wackenhut Center contains approximately
90,500 square feet and is leased from P.G.A. Professional Center, Ltd., for an
initial term of 15 years, with consecutive options to extend the term of the
lease for three additional five year periods. This lease requires annual rental
payments in the amount of $1,764,750 with no escalation during the initial 15
year term.
WCC owns a 66,000 square foot building in Aurora, Colorado, which is
operated by WCC as a detention center under a contract with the United States
Government. The Company owns a 15,000 square foot warehouse building in Miami,
Florida. In addition, the Company owns two buildings in Ecuador and one each in
the Dominican Republic, Costa Rica and Puerto Rico that are used for the
operations of its foreign subsidiaries in those countries. All other offices of
the Company are leased. The aggregate annual rent for all non-cancelable
operating leases of office space, automobiles, data processing and other
equipment is approximately $6,994,000. The Company owns substantially all
uniforms, firearms, and accessories used by its security officers.
ITEM 3. LEGAL PROCEEDINGS
On March 29, 1996, the Company settled a lawsuit alleging tortious
interference with contract and other related torts by the Company ("Essex
Company vs. Wackenhut Services, Inc.," Case No. 94-908 JC/DJS United States
District Court for the District of New Mexico). The reserves previously provided
by the Company are adequate to cover the exposure in this matter.
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, the various asserted claims and
litigation in which the Company is currently involved will not materially affect
its financial position or future operating results, although no assurance can be
given with respect to the ultimate outcome for any such claim or litigation. The
foregoing opinion is based in part upon the fact that the Company believes it
has established adequate reserves for litigation contingencies in its financial
statements in accordance with generally accepted accounting principles.
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.
EXECUTIVE OFFICERS OF THE REGISTRANT
GEORGE R. WACKENHUT has been Chairman of the Board and Chief Executive
Officer of the Company since its inception. 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 also a director
of WCC. Mr. Wackenhut 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 and 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.
Mr. Wackenhut received his B.S. degree from the University of Hawaii and his
M.Ed. degree from Johns Hopkins University. Mr. Wackenhut is married to
Ruth J. Wackenhut, Secretary of the Company. His son, Richard R. Wackenhut,
is President and Chief Operating Officer of the Company and also a Director.
RICHARD R. WACKENHUT has been President and Chief Operating Officer of the
Company and a member of the Board of Directors since April 26, 1986, and was
formerly Senior Vice President of Operations from 1983 to 1986. He was Manager
of Physical Security from 1973 to 1974. He 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 Director of
Wackenhut del Ecuador, S.A.; Wackenhut UK Limited; Wackenhut Dominicana, S.A.;
and several domestic subsidiaries of the Company, including WCC. He is a member
of the St. Thomas University Advisory Board. He 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 completed the Advanced Management
Program of the Harvard University School of
<PAGE> 13
Business Administration in 1987. Mr. Wackenhut is the son of George R.
Wackenhut, Chairman of the Board and Chief Executive Officer of the Company, and
Ruth J. Wackenhut, Secretary of the Company.
ALAN B. BERNSTEIN has been Executive Vice President of the Company and
President, Domestic Operations Group since April 27, 1991. 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; Acting President, Wackenhut Systems
Corporation, 1983; Director of Integrated Guard Security, 1981; and Manager of
Wackenhut Electronic Systems Corporation (Miami) from 1976 to 1981. He received
his B.S.E.E. degree from the University of Rochester, and an M.B.A. degree from
Cornell University.
FERNANDO CARRIZOSA has been Senior Vice President, International Operations
since January 28, 1989. Mr. Carrizosa was Vice President of International
Operations from January 31, 1988 to 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 an M.B.A. with honors from Florida
International University in 1976.
TIMOTHY P. COLE has been Executive Vice President and President, Government
Services Group since April 27, 1991. Mr. Cole was Senior Vice President
Government Services from 1989 to 1991. He joined the Company as President of
Wackenhut Services, Inc. in 1988. Mr. Cole was associated with the Martin
Marietta Corporation from 1982 to 1988 and served in various capacities,
including Program Director and Director of Subcontracts. He received his B.B.A.
degree from the University of Oklahoma and his M.B.A. from Pepperdine
University. Mr. Cole completed the Advanced Management Program of the Harvard
University Graduate School of Business Administration in 1987. Mr. Cole is also
the Chairman of the Board of Directors of WCC.
ROBERT C. KNEIP has been the Senior Vice President, Corporate Planning and
Development of the Company since 1988. He joined the Company in 1982. Mr. Kneip
has held various positions in the Company including Director, Power Generating
Services; Director, Contracts Management; Vice President, Contracts Management;
and Vice President, Planning and Development. Prior to joining the Company, Mr.
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.
JAMES P. ROWAN is Vice President and General Counsel, and Assistant
Secretary of the Company. He joined the Company in 1979 as Assistant General
Counsel, became Associate General Counsel in 1982 and a Vice President in 1986.
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.
DANIEL E. MASON has been Vice President and Chief Financial Officer,
Domestic Operations Group since June 1992. Prior to that he was Controller,
Domestic Operations, since joining the Company in June 1990. Mr. Mason came to
the Company from Coastal Corporation, where he was Corporate Controller of its
Miami-based, refined products marketing subsidiary, Coastal Fuels Marketing,
Inc. During his eleven years at Coastal, he held various positions including
Manager of Accounting Services, Director of Planning and Analysis, and Division
Controller, Retail Operations. Mr. Mason received his B.S. in Accounting from
Florida International University and an M.B.A. from the University of Miami.
RUTH J. WACKENHUT has been Secretary of the Company since 1958. She is
married to George R. Wackenhut, Chairman of the Board and Chief Executive
Officer of the Company and her son, Richard R. Wackenhut, is President and
Chief Operating Officer of the Company and also a director.
<PAGE> 14
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
On October 31, 1995, the Company declared a 25% stock dividend, effected in
the form of a stock split (the 25% stock dividend), paid on January 9, 1996 to
stockholders of record at the close of business on December 22, 1995. The 25%
stock dividend was paid in Series B Common Stock to holders of the
Company's Series A Common Stock and Series B Common Stock. The accompanying
Consolidated Financial Statements have been retroactively restated to reflect
the 25% stock dividend.
Regular quarterly dividends of $.0575 and $.0600 per share (adjusted for the
25% stock dividend) on both outstanding Series A Common Stock and Series B
Common Stock were declared and paid by the Company for each of the four
quarters of fiscal years ended January 1, 1995 and December 31, 1995,
respectively. The Company intends to declare future quarterly dividends on
Series A Common Stock and Series B Common Stock, depending on its earnings,
financial condition, capital requirements and other relevant factors.
The ensuing table shows the high and low prices for the Company's Series A
Common Stock and Series B Common Stock, as reported on the New York Stock
Exchange, for each quarterly period during fiscal years ended January 1, 1995
and December 31, 1995, respectively. The prices shown in the table have been
rounded to the nearest 1/8th and reflect the 25% stock dividend. The
approximate number of record holders of Series A Common Stock and Series B
Common Stock, as of February 22, 1996 was 876 and 943, respectively.
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Series A Series B Series A Series B
- ------------------------------------------------------------------------------------------------------------------------------------
Quarter High Low High Low High Low High Low
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 9-1/4 $ 7-7/8 $ 7-3/8 $6-3/8 $ 14 $ 8-3/8 $12-3/4 $ 8-1/2
Second 9-3/4 8-1/8 7-1/2 6 15-1/4 10-7/8 12-3/8 9
Third 10-3/8 8-3/4 9 6-5/8 12-3/4 11-1/8 11-1/4 9-7/8
Fourth 10-1/4 7-1/4 8-7/8 6-7/8 14-1/2 12 12-3/4 10-3/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the Company set forth below with respect to
the Statement of Income Data and Balance Sheet Data for and at the end of the
Company's fiscal years ended December 29, 1991 ("Fiscal 1991"), January 3, 1993
("Fiscal 1992"), January 2, 1994 ("Fiscal 1993"), January 1, 1995 ("Fiscal
1994") and December 31, 1995 ("Fiscal 1995") are derived from the
Consolidated Financial Statements of the Company. The Selected Financial
Data should be read in conjunction with the Company's Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Annual Report on Form 10-K.
<TABLE>
<CAPTION>
FISCAL(1)
--------------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA(2):
Revenues................................................. $570,411 $615,378 $659,256 $726,753 $796,732
Non-recurring charges.................................... -- -- (1,726) -- --
Write-down of headquarters building...................... -- -- -- (8,700)(3) --
Operating income......................................... 13,859 3,367 4,496 6,592 15,774
Income before income taxes............................... 11,867 1,588 3,371 3,002 13,733
Provision for income taxes............................... 4,378 834 485 17 4,742
Income before extraordinary charge and
cumulative effect of accounting change................. 7,721 1,137 3,609 2,272 7,260
Extraordinary charge -- early extinguishment of debt,
net of income taxes.................................... -- -- (1,444) (887) --
Cumulative effect of accounting change for income
taxes.................................................. -- 7,370 -- -- --
Net income............................................... 7,721 8,507 2,165 1,385 7,260
======== ======== ======== ======== ========
Income per share before extraordinary charge and
cumulative effect of accounting change................. $ .64 $ .09 $ .30 $ .19 $ .60
Extraordinary charge per share -- early extinguishment of
debt,
net of income taxes.................................... -- -- (.12) (.08) --
Cumulative effect per share of accounting change for
income taxes........................................... -- .61 -- -- --
-------- -------- -------- -------- --------
Net income per share..................................... $ .64 $ .70 $ .18 $ .11 $ .60
Total dividends per share................................ $ .19 $ .20 $ .23 $ .23 $ .24
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
------------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................ $ 48,599 $ 56,932 $ 56,163 $ 75,589 $ 49,638
Total assets............................................... 172,093 192,236 211,297 212,757 197,927
Current portion of long-term debt.......................... 730 730 10,456 -- 11
Long-term debt............................................. 46,920 63,260 57,484 38,991 5,376
Total debt................................................. 47,650 63,990 67,940 42,756 6,502
Shareholders' equity....................................... 42,847 47,587 47,362 57,459 62,904
</TABLE>
- ---------------
(1) The Company's fiscal year ends on the Sunday closest to the calendar year
end. Fiscal 1991, Fiscal 1993, Fiscal 1994 and Fiscal 1995 each included 52
weeks. Fiscal 1992 included 53 weeks.
(2) Per share amounts are restated to reflect a 100% stock dividend declared in
Fiscal 1992, a 25% stock dividend declared during Fiscal 1994 and a 25%
stock dividend declared during Fiscal 1995 (in each case, effected in the
form of a stock split).
(3) In Fiscal 1994, the Company recognized a one-time operating expense of
$8,700,000 in connection with the writedown of its former headquarters
building.
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Since its inception in 1954, the Company has become a leading international
provider of security-related and other support services and a leading developer
and manager of privatized correctional and detention facilities. The Company
provides security-related and other support services through the Services
Business and correctional services through the Correctional Business. Through
the Services Business, the Company provides physical security services, food
services and other related services to commercial and governmental customers.
Through the Correctional Business, the Company provides correctional and
detention facility design, development and management services to government
agencies. The Company is managed through three operating groups: the Domestic
Operations Group, the Government Services Group and the International Group. The
Services Business is operated through all three groups, while the Correctional
Business is operated by the Government Services Group exclusively through the
Company's 55%-owned WCC subsidiary. For presentation purposes, the financial
results of WCC are described separately from the results of the Government
Services Group's other operations.
From a well established base in its core security-related services
business, the Company has expanded into a range of other support services in
response to a trend toward privatization of governmental services and
outsourcing by commercial customers of non-core support functions. For example,
in 1984 the Company expanded into the Correctional Business which in Fiscal 1995
increased its revenues by 18.3% and operating income by 62.6% from Fiscal 1994.
Moreover, in Fiscal 1992 the Company entered the foodservice business for
correctional institutions, which in Fiscal 1995 generated $34.7 million in
revenues. The Company continues to expand its market presence in these areas
and, consistent with that strategy, acquired the contracts and certain assets of
the Correctional Food Service Division of Service America Corporation in early
1996. The Company continues to explore and may selectively invest in other
service businesses such as temporary services, building maintenance,
supplemental police services, crash-fire-rescue services, fire protection
services, and airport services.
During Fiscal 1995, the Company continued to achieve sustained growth.
Between Fiscal 1991 and Fiscal 1995, the Company's consolidated revenues
increased at a compound annual growth rate of 8.7%, including a 9.6% increase
from Fiscal 1994 to Fiscal 1995.
The Domestic Operations Group lead the growth in revenues of the Services
Business with an increase of 11.2% to $423.7 million in Fiscal 1995 from $380.9
million in Fiscal 1994, which was attributable to: (i) a significant increase in
revenues derived from the provision of core security-related services to
National Accounts; (ii) an increase in its CPO business; and (iii) expansion of
market share in the correctional foodservice business.
The International Group also achieved significant growth, with revenues
increasing 25.9% to $113.2 million in Fiscal 1995 from $89.9 million in Fiscal
1994. The increase in revenues was principally attributable to steady
geographical expansion, including expansion in the Central and South American
and European operations.
Government Services Group (excluding WCC) revenues decreased 6.5% to $166.0
million in Fiscal 1995 from $177.6 million in Fiscal 1994, primarily as a result
of reductions in government funding for security at United States Department of
Energy facilities. Contracts with the Department of Energy are typically cost
reimbursable contracts for which the Company can earn award fees based on
performance factors. Although award fee pools available to the Company have not
been reduced significantly, further reductions in revenues could impact profit
contribution from these contracts.
During Fiscal 1995, WCC continued to generate sustained growth. Between
Fiscal 1991 and Fiscal 1995, WCC generated compound annual revenue growth of
27.3%, which included an 18.3% increase in Fiscal 1995. Operating income
increased 62.6% in Fiscal 1995, and has grown from $1.7 million in Fiscal 1991
to $7.2 million in Fiscal 1995. Revenue and operating income increases reflect
an increase from eight facilities
<PAGE> 16
and 1.0 million compensated resident days in Fiscal 1991 to 16 facilities and
2.4 million compensated resident days in Fiscal 1995.
In December 1995, the Company sold its headquarters building in Coral
Gables, Florida, and subsequently relocated to a newly constructed, leased
building in Palm Beach Gardens, Florida. The move to a more efficient building
in a less expensive location should result in reduced annual operating costs.
However, a one-time $750,000 charge against first quarter 1996 earnings is
anticipated for the cost of the move.
RESULTS OF OPERATIONS
The table below summarizes results of operations for the Company's two
business segments by organizational group.
<TABLE>
<CAPTION>
% CHANGE % CHANGE
FISCAL VS. FISCAL FISCAL VS. FISCAL FISCAL
1993 1993 1994 1994 1995
-------- ---------- -------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Services Business
Domestic Operations Group................................... $336,048 13.4% $380,941 11.2% $423,743
Government Services Group (excluding WCC)................... 184,915 (3.9) 177,613 (6.5) 166,035
International Group......................................... 82,759 8.6 89,900 25.9 113,205
Other....................................................... 1,019 19.9 1,222 (6.6) 1,141
Inter-Group Revenues........................................ (4,269) -- (6,949) -- (6,823)
-------- ----- -------- ----- --------
600,472 7.0 642,727 8.5 697,301
Correctional Business -- WCC.................................. 58,784 42.9 84,026 18.3 99,431
-------- ----- -------- ----- --------
Consolidated Revenues......................................... $659,256 10.2% $726,753 9.6% $796,732
-------- ----- -------- ----- --------
OPERATING INCOME:
Services Business
Domestic Operations Group................................... $ 10,434 24.4% $ 12,977 4.0% $ 13,501
Government Services Group (excluding WCC)................... 3,499 47.5 5,162 (44.4) 2,871
International Group......................................... 2,164 38.3 2,992 (7.0) 2,783
Corporate Expenses and Underwriting Losses.................. (13,047) 21.2 (10,285) (3.2) (10,610)
-------- ----- -------- ----- --------
3,050 255.6 10,846 (21.2) 8,545
Correctional Business -- WCC.................................. 1,446 207.5 4,446 62.6 7,229
Write-down of Headquarters Building........................... -- -- (8,700) -- --
-------- ----- -------- ----- --------
Consolidated Operating Income................................. $ 4,496 46.6% $ 6,592 139.3% $ 15,774
-------- ----- -------- ----- --------
</TABLE>
COMPARISON OF FISCAL 1995 TO FISCAL 1994
REVENUES
Consolidated revenues increased 9.6% to $796.7 million in Fiscal 1995 from
$726.7 million in Fiscal 1994.
SERVICES BUSINESS
Services Business revenues increased 8.5% to $697.3 million in Fiscal 1995
from $642.7 million in Fiscal 1994.
Domestic Operations Group. Domestic Operations Group revenues increased
11.2% to $423.7 million in Fiscal 1995 from $380.9 million in Fiscal 1994.
Within the Domestic Operations Group, revenues from the Security Services
Division increased 11.2% to $336.2 million in Fiscal 1995 from $302.4 million in
Fiscal 1994 as a result of: (i) a significant increase in revenues derived from
the provision of security-related services to National Accounts; and (ii) an
increase in its CPO business reflecting the growing demand for the specialized
services offered in this area. Revenues from the Food Services Division
increased 39.6% to $34.7 million in Fiscal 1995 from $24.9 million in Fiscal
1994, reflecting the Company's increased presence in the growing correctional
foodservice market. Revenues from the Nuclear Division remained relatively
unchanged from
<PAGE> 17
Fiscal 1994 to Fiscal 1995, reflecting the maturation of the nuclear power
industry and limited opportunities for growth in this market.
Government Services Group. Government Services Group revenues (excluding
WCC) decreased 6.5% to $166.0 million in Fiscal 1995 from $177.6 million in
Fiscal 1994. Within the Government Services Group, revenues of Wackenhut
Services, Inc. decreased 5.6% to $146.7 million in Fiscal 1995 from $155.5
million in Fiscal 1994, principally due to reductions in government funding for
security at United States Department of Energy facilities. Management believes
this reduction in funding will continue to affect Government Services Group
revenues and operating income. Revenues of Wackenhut Educational Services, Inc.
decreased 40.3% to $13.1 million in Fiscal 1995 from $22.0 million in Fiscal
1994, principally due to the loss of two contracts. The decrease in Government
Services Group revenues in Fiscal 1995 was partially offset by revenues of $6.1
million generated by the Wackenhut of Australia subsidiary, which was acquired
in Fiscal 1995, and provides security-related services.
International Group. International Group revenues increased 25.9% to
$113.2 million in Fiscal 1995 from $89.9 million in Fiscal 1994, as this group
continued to experience steady geographical expansion. The increase in revenues
was principally attributable to: (i) increased revenues from Central and South
American operations, where revenues increased 21.2% to $83.4 million in Fiscal
1995 from $68.8 million in Fiscal 1994; and (ii) increased revenues from
European operations, which increased 40.0% to $15.0 million in Fiscal 1995 from
$10.7 million in Fiscal 1994. The increase in international revenues reflects
returns on past investment in new markets as well as continuing increased demand
for physical security services in those geographic regions serviced by the
Company.
CORRECTIONAL BUSINESS
The Correctional Business revenues increased 18.3% to $99.4 million in
Fiscal 1995 from $84.0 million in Fiscal 1994. Of the increase in Fiscal 1995
revenues, $11.9 million was generated by domestic operations and $3.5 million
was generated by operations in Australia.
The increase in domestic revenues of WCC in Fiscal 1995 was primarily
attributable to an increase in compensated resident days to 1.9 million in
Fiscal 1995 from 1.7 million in Fiscal 1994, reflecting: (i) increased occupancy
at two facilities opened in late 1994; (ii) the opening of two facilities in the
second half of 1995; and (iii) the expansion of one facility in 1995. The
increase in domestic revenues also reflected management fees generated from the
development of four facilities.
The increase in international revenues of WCC in Fiscal 1995 was primarily
attributable to an increase in compensated resident days to 420,000 in Fiscal
1995 from 371,000 in Fiscal 1994, reflecting the expansion of one facility in
Australia, and an increase in management fees generated from the development of
another facility in Australia.
In Fiscal 1995, "pass-through" revenues and expenses were reclassified to
exclude amounts related to construction and design activities, consistent with
industry practice. As a result, only management fees for development and design
services are included in revenues. All prior periods have been restated to
reflect this reclassification. See Note 1 of Notes to the Consolidated Financial
Statements.
OPERATING INCOME
Consolidated operating income increased to $15.8 million in Fiscal 1995
from $6.6 million in Fiscal 1994, which included an $8.7 million write-down of
the headquarters building in Fiscal 1994.
SERVICES BUSINESS
Operating income from the Services Business decreased 21.2% to $8.5 million
in Fiscal 1995 from $10.8 million in Fiscal 1994.
Domestic Operations Group. Domestic Operations Group operating income
increased 4.0% to $13.5 million in Fiscal 1995 from $13.0 million in Fiscal
1994. The growth in operating income within the
<PAGE> 18
Domestic Operations Group was a result of: (i) continued strong performance in
the core security-related services business, particularly in National Accounts;
(ii) increased demand for Custom Protection Officers; (iii) continued
development of the foodservice business.
Government Services Group. Government Services Group (excluding WCC)
operating income decreased 44.4% to $2.9 million in Fiscal 1995 from $5.2
million in Fiscal 1994, reflecting: (i) lower than expected ratings at one
facility, resulting in a decrease in award fees paid to the Company by the
United States Department of Energy for such facility; and (ii) the termination
of two contracts in Wackenhut Educational Services, Inc.
International Group. International Group operating income decreased 7.0%
to $2.8 million in Fiscal 1995 from $3.0 million in Fiscal 1994. The principal
contribution to operating income of the International Group was made by
subsidiaries in Central and South America and Europe. However, development costs
in the Far East and Africa substantially offset gains in Central and South
America and Europe.
CORRECTIONAL BUSINESS
WCC operating income increased 62.6% to $7.2 million in Fiscal 1995 from
$4.4 million in Fiscal 1994.
WCC domestic operating income increased 112.3% to $4.5 million in Fiscal
1995 from $2.1 million in Fiscal 1994, reflecting: (i) increased occupancy at
two facilities opened in late Fiscal 1994; (ii) the opening of two facilities in
the second half of Fiscal 1995; and (iii) the expansion of one facility in
Fiscal 1995. The increase in domestic operating income also reflected management
fees generated from the development of four facilities.
WCC international operating income increased 17.3% to $2.7 million in
Fiscal 1995 from $2.3 million in Fiscal 1994. The increase in operating income
reflects the expansion of one facility in Australia and management fees
generated from the development of another facility in Australia.
OTHER EXPENSE
Other expense decreased 43.2% to $2.0 million in 1995 from $3.6 million in
1994, principally due to a decrease of $1.7 million in interest expense
attributable to a reduction in funding requirements. In addition there was a
decrease of $199,000 in interest and investment income which was principally due
to a decrease in fixed income securities investment holdings of the Company's
captive reinsurance subsidiary. The proceeds from the Company's sales of these
securities were used primarily to reduce the Company's debt.
INCOME BEFORE INCOME TAXES
Income before income taxes increased to $13.7 million in Fiscal 1995 from
$3.0 million in Fiscal 1994, which included an $8.7 million write-down of the
headquarters building in Fiscal 1994.
The combined federal and state effective income tax rate was 34.5% for
Fiscal 1995 and 0.6% for Fiscal 1994, respectively. The lower effective rate in
Fiscal 1994 primarily reflected reductions in the statutory rate attributable to
tax exempt interest income, targeted job credits and the utilization of capital
loss carryforwards which was significantly higher in 1994.
MINORITY INTEREST EXPENSE
Minority interest expense (net of income taxes) increased to $2.4 million
in Fiscal 1995 from $1.0 million in Fiscal 1994, reflecting the increase in
earnings of WCC and other majority-owned international subsidiaries of the
Company.
<PAGE> 19
EQUITY INCOME OF FOREIGN AFFILIATES
Equity income of foreign affiliates (net of income taxes) increased 120.6%
to $631,000 in Fiscal 1995 from $286,000 in Fiscal 1994 primarily resulting from
increased earnings of security services affiliates in South America and Europe
and decreased losses from WCC's joint venture in the United Kingdom.
EXTRAORDINARY CHARGE
In Fiscal 1994, the Company prepaid a note to an insurance company and
recognized an extraordinary charge of $887,000 (net of income taxes) for the
early extinguishment of such debt.
NET INCOME
Net income increased to $7.3 million in Fiscal 1995, or $0.60 per share,
compared to $1.4 million, or $0.11 per share in Fiscal 1994, after the $887,000
extraordinary charge and the write-down of the headquarters building ($5.4
million net of income taxes).
COMPARISON OF FISCAL 1994 TO FISCAL 1993
REVENUES
Consolidated revenues increased 10.2% to $726.7 million in Fiscal 1994 from
$659.2 million in Fiscal 1993.
SERVICES BUSINESS
Revenues from the Services Business increased 7.0% to $642.7 million in
Fiscal 1994 from $600.5 million in Fiscal 1993.
Domestic Operations Group. Domestic Operations Group revenues increased
13.4% to $380.9 million in Fiscal 1994 from $336.0 million in Fiscal 1993.
Revenues from the Security Services Division of the Domestic Operations Group
contributed $37.4 million to this increase in Fiscal 1994 largely due to the
success in obtaining National Accounts with major corporations in the second
half of Fiscal 1993 and in Fiscal 1994. In Fiscal 1994 the Company was also
awarded a $34.7 million contract with the State of Hawaii to supply security
services at eight airports. CPO revenues increased $14.3 million (35.9%) over
Fiscal 1993. Revenues of the Nuclear Division remained essentially flat in
Fiscal 1994, reflecting the maturation of the nuclear power industry and limited
opportunities for growth in this market. Food Services Division revenues
increased 36.0% to $24.9 million in Fiscal 1994 from $18.3 million in Fiscal
1993.
Government Services Group. Government Services Group revenues (excluding
WCC) decreased 3.9% to $177.6 million in Fiscal 1994 from $184.9 million in
Fiscal 1993. Revenues of Wackenhut Services, Inc. decreased $8.1 million as a
result of reductions in manpower requirements by the Department of Energy. The
decrease in the Government Services Group revenues in Fiscal 1994 was partially
offset by an increase at Wackenhut Educational Services, Inc. of $3.4 million
(18.4%) over Fiscal 1993.
International Group. The International Group revenues increased 8.6% to
$89.9 million in Fiscal 1994 from $82.8 million in Fiscal 1993 primarily due to
growth in Central and South America.
CORRECTIONAL BUSINESS
Correctional Business revenues increased 42.9% to $84.0 million in Fiscal
1994 from $58.8 million in Fiscal 1993. This increase was primarily generated by
international operations due to the consolidation of Australasian Correctional
Management Pty Limited ("ACM") and the opening of two facilities in Fiscal 1994.
<PAGE> 20
OPERATING INCOME
Consolidated operating income, which included an $8.7 million write-down of
the headquarters building in Fiscal 1994, increased to $6.6 million in Fiscal
1994 from $4.5 million in Fiscal 1993.
SERVICES BUSINESS
Operating income from the Services Business increased to $10.8 million in
Fiscal 1994 from $3.0 million in Fiscal 1993.
Domestic Operations Group. Domestic Operations Group operating income
increased 24.4% to $13.0 million in Fiscal 1994 from $10.4 million in Fiscal
1993. This increase was principally due to improvements in the profit
contribution of the core security-related services business.
Government Services Group. Government Services Group operating income
(excluding WCC) increased 47.5% to $5.2 million in Fiscal 1994 from $3.5 million
in Fiscal 1993. The increase was principally due to higher award fees resulting
from excellent ratings at Department of Energy facilities. In addition, two
unprofitable divisions of the Government Services Group which had combined
losses of $2.0 million in Fiscal 1993 were sold in that year.
International Group. International Group operating income increased 38.3%
to $3.0 million in Fiscal 1994 from $2.2 million in Fiscal 1993. This increase
was principally due to growth in Central and South America.
CORPORATE EXPENSES AND UNDERWRITING LOSSES
The decrease in Corporate Expenses and Underwriting Losses in Fiscal 1994
resulted principally from a decrease in underwriting losses of the Company's
captive reinsurance subsidiary.
CORRECTIONAL BUSINESS
Operating income from the Correctional Business increased 207.5% to $4.4
million in Fiscal 1994 from $1.4 million in Fiscal 1993. This increase was
primarily attributable to the consolidation of ACM and the opening of two
facilities.
OTHER EXPENSE
Other expense was $3.6 million in Fiscal 1994 compared to $1.1 million in
Fiscal 1993, resulting from the following factors. First, interest expense
amounted to $5.1 million and exceeded the previous year by $874,000. Second,
the liquidation of investments of the captive reinsurance subsidiary to reduce
corporate debt resulted in lower interest and investment income ($1.6 million)
to the Company.
INCOME BEFORE INCOME TAXES
Income before income taxes, which included an $8.7 million write-down of
the headquarters building in Fiscal 1994, was $3.0 million in Fiscal 1994
compared to $3.4 million in Fiscal 1993.
The provision for income taxes in 1994 was $17,000, reflecting an effective
income tax rate of 0.6% due to partial utilization of capital loss
carryforwards, targeted job tax credits and tax exempt interest income of the
captive reinsurance subsidiary. The effective income tax rate was 14.4% in
Fiscal 1993 due to similar factors, and a favorable federal income tax
adjustment of $637,000 that resulted from a revenue agent's examination for the
years 1980 to 1986.
MINORITY INTEREST EXPENSE
Minority interest expense (net of income taxes) increased $637,000
reflecting the sale of a minority interest in WCC.
<PAGE> 21
EQUITY INCOME OF FOREIGN AFFILIATES
Equity income of foreign affiliates (net of income taxes) decreased
$799,000 to $286,000 in Fiscal 1994 from $1.1 million in Fiscal 1993, mainly
as a result of the consolidation of ACM in Fiscal 1994.
INCOME BEFORE EXTRAORDINARY CHARGE
Income before extraordinary charge was $2.3 million or $0.19 per share in
Fiscal 1994. In Fiscal 1993, net income before extraordinary charge was $3.6
million, or $0.30 per share, restated for the stock dividends declared in Fiscal
1995 and Fiscal 1994.
EXTRAORDINARY CHARGE
In Fiscal 1994, the Company prepaid a senior note to an insurance company
and recognized an extraordinary charge for the early extinguishment of debt in
the amount of $887,000 (net of income taxes). The Company also recognized a $1.4
million extraordinary charge (net of income taxes) for the early extinguishment
of another senior note in Fiscal 1993.
NET INCOME
Net income, which included an $8.7 million ($5.4 million net of income
taxes) write-down of the Company's headquarters building, was $1.4 million in
Fiscal 1994, or $0.11 per share, compared to $2.2 million, or $0.18 per share in
1993, both restated for stock dividends declared in Fiscal 1995 and Fiscal 1994.
INFLATION
Management believes that inflation has not had a material effect on the
Company's results of operations during the past three fiscal years. However,
many of the Company's service contracts provide for either fixed management fees
or for fees that increase by only small amounts during the terms of the
contracts. Since personnel costs represent the Company's largest expense,
inflation 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 rates received by the Company for its
services.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds have been, and are expected to
continue to be, cash flows from operations and borrowings under lines of credit
provided by banks in the United States and abroad. Cash and cash equivalents
amounted to $20.2 million at December 31, 1995 compared to $13.8 million at
January 1, 1995. Of this cash and cash equivalents, $9.3 million serves as
collateral for certain obligations of the Company's captive reinsurance
subsidiary.
The Company has additional sources of liquidity available in the form of a
$50 million revolving line of credit and a $50 million accounts receivable
securitization facility. Additionally, at December 31, 1995, WCC had in place a
$15 million revolving line of credit, and subsidiaries of the Company and WCC
had in place credit agreements with banks providing Australian $9.5 million
(approximately $7.1 million U.S. at December 31, 1995). WCC's $15 million
revolving line of credit contains certain covenants that restrict WCC's ability
to pay dividends to the Company.
At December 31, 1995, the Company had $1.4 million outstanding under its
$50 million revolving line of credit and $36 million outstanding in the form of
letters of credit securing reserves of the captive reinsurance subsidiary and
other corporate transactions. The unused portion of the revolving line of credit
was $12.6 million at December 31, 1995. In addition, at December 31, 1995, the
Company had sold $35 million of accounts receivable under its accounts
receivable securitization facility. Under the terms of the accounts receivable
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, 1995, WCC and the subsidiaries of the Company and
<PAGE> 22
WCC had $5.1 million outstanding under their credit agreements. At December 31,
1995 and January 1, 1995, the ratio of total debt to total capitalization was
9.4% and 42.7%, respectively. See Note 5 to the Consolidated Financial
Statements.
WCC anticipates making cash investments in connection with future
acquisitions. In addition, in line with a developing industry trend toward
requiring private operators to make capital investments in facilities and to
enter into direct financing arrangements in connection with the development of
such facilities, WCC plans to use part of the net proceeds of $51.8 million from
the January 1996 public offering of shares of its common stock to finance
start-up costs, leasehold improvements and equity investments in facilities, if
appropriate, in connection with undertaking new contracts. In connection with
the award of one project, WCC recently has agreed to make an approximate $4.0
million equity investment in the project and to assist in the financing of the
project by guaranteeing up to approximately $20.0 million of the permanent
pass-through financing. The governmental entity that has contracted for the
project is the ultimate pass-through source of payments and the recourse
obligations of WCC and the subsidiary through which it will hold its investment
in the project are substantially limited in type and likelihood. WCC and its
subsidiary have made application to restructure the pass-through financing to a
non-recourse basis. WCC has structured the transaction so that the financing for
the project will be repaid from funds generated by the project. In addition, to
the extent that WCC elects to receive dividends from its subsidiary, it will be
required to arrange for a letter of credit in favor of the subsidiary to provide
security for the payment of certain possible future tax obligations of the
subsidiary. The letter of credit will not be issued any earlier than the second
half of 1997 and, consequently, any financing arrangements with respect to such
letter of credit have not been determined. The Company does not believe that the
issuance of the letter of credit will have a material impact on its liquidity or
capital resources or the liquidity or capital resources of WCC.
Net cash generated by operating activities was $13.3 million in Fiscal 1995
compared to $13.0 million in Fiscal 1994.
Cash used in investing activities amounted to $9.3 million in Fiscal 1995.
Capital expenditures of $6.9 million reflect purchases of equipment related to
the provision of security-related services and investments in facilities by WCC.
In the second half of Fiscal 1995, the Company acquired the contracts and
certain assets of Protection Management International Pty., Ltd. and Checkmate
Security Group, two companies in Australia engaged in the Services Business for
$2.6 million. In December 1995, the Company sold its headquarters building in
exchange for a $9.0 million first mortgage note and $1.7 million in cash (after
payment of related expenses).
Cash provided by financing activities amounted to $2.4 million in Fiscal
1995. In Fiscal 1995, the Company sold certain receivables for $35 million in
cash to prepay amounts outstanding under the mortgage on the Company's
headquarters building and to reduce the amounts outstanding under the Company's
revolving loan.
Cash dividends paid in Fiscal 1995 amounted to $2.9 million.
Current cash requirements consist of amounts needed for capital
expenditures, increased working capital needs resulting from corporate growth,
payment of liabilities incurred in the operation of the Company's business, the
renovation or construction of correctional facilities by WCC, possible
acquisitions and the payment of dividends. 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.
Subsequent to year end, WCC sold 2.3 million shares of its common stock at
a price of $24.00 per share. Such proceeds are only available to WCC. The
offering resulted in net proceeds to WCC of approximately $51.8 million.
Management believes that cash on hand, internally generated cash flows 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, both on a near term and long term basis.
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
The Wackenhut Corporation:
We have audited the accompanying consolidated balance sheets of The
Wackenhut Corporation (a Florida corporation) and subsidiaries as of January 1,
1995 and December 31, 1995, and the related consolidated statements of income,
cash flows and shareholders' equity for each of the three fiscal years in the
period ended December 31, 1995. These financial statements are the
responsibility of the corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 January 1, 1995 and December 31, 1995, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects of financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 22, 1996.
<PAGE> 24
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 1995 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
END OF PERIOD
-------------------------
JANUARY 1, DECEMBER 31,
1995 1995
---------- ------------
(IN THOUSANDS EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................................................... $ 13,808 $ 20,185
Accounts receivable, less allowance for doubtful accounts of $1,056 in 1994
and
$1,268 in 1995.............................................................. 100,425 77,121
Inventories................................................................... 7,179 6,798
Other......................................................................... 16,233 18,058
---------- ------------
137,645 122,162
---------- ------------
NOTES RECEIVABLE................................................................ 1,646 10,540
---------- ------------
MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT -- CASUALTY REINSURANCE
SUBSIDIARY.................................................................... 11,495 5,774
---------- ------------
PROPERTY AND EQUIPMENT, AT COST................................................. 45,928 29,132
Accumulated depreciation...................................................... (15,102) (9,851)
---------- ------------
30,826 19,281
---------- ------------
DEFERRED TAX ASSET, NET......................................................... 11,021 6,170
---------- ------------
OTHER ASSETS
Investment in and advances to foreign affiliates, at cost, including equity in
undistributed earnings of $2,066 in 1994 and $4,098 in 1995................. 6,165 10,984
Other......................................................................... 13,959 23,016
---------- ------------
20,124 34,000
---------- ------------
$212,757 $197,927
========= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt............................................. $ -- $ 11
Notes payable................................................................. 3,765 1,115
Accounts payable.............................................................. 14,839 20,223
Accrued payroll and related taxes............................................. 25,761 29,602
Accrued expenses.............................................................. 17,095 21,456
Deferred tax liability, net................................................... 596 117
---------- ------------
62,056 72,524
---------- ------------
RESERVES FOR LOSSES -- CASUALTY REINSURANCE SUBSIDIARY.......................... 38,450 40,118
---------- ------------
LONG-TERM DEBT.................................................................. 38,991 5,376
---------- ------------
OTHER........................................................................... 7,543 8,027
---------- ------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 4, 11 and 13)...........................
MINORITY INTEREST............................................................... 8,258 8,978
---------- ------------
SHAREHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized................................. -- --
Common stock, $.10 par value, 20,000,000 shares authorized
Series A, 3,858,885 issued and outstanding in 1994 and 1995................. 386 386
Series B, 5,794,539 issued and outstanding in 1994 and 8,272,887 in 1995.... 579 827
Additional paid-in capital.................................................... 38,919 39,644
Retained earnings............................................................. 21,681 25,790
Cumulative translation adjustment............................................. (3,552) (3,702)
Unrealized loss on marketable securities...................................... (554) (41)
---------- ------------
57,459 62,904
---------- ------------
$212,757 $197,927
========= ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 25
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 1, 1995 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
1993 1994 1995
-------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
REVENUES....................................................... $659,256 $726,753 $796,732
-------- -------- --------
OPERATING EXPENSES
Payroll and related taxes.................................... 491,408 538,297 587,644
Other operating expenses..................................... 161,626 173,164 193,314
Write-down of headquarters building.......................... -- 8,700 --
Non-recurring charges........................................ 1,726 -- --
-------- -------- --------
654,760 720,161 780,958
-------- -------- --------
OPERATING INCOME............................................... 4,496 6,592 15,774
-------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense............................................. (4,230) (5,104) (3,356)
Interest and investment income............................... 3,105 1,514 1,315
-------- -------- --------
(1,125) (3,590) (2,041)
-------- -------- --------
INCOME BEFORE INCOME TAXES..................................... 3,371 3,002 13,733
PROVISION FOR INCOME TAXES..................................... 485 17 4,742
MINORITY INTEREST, NET OF INCOME TAXES......................... 362 999 2,362
EQUITY INCOME OF FOREIGN AFFILIATES, NET OF INCOME TAXES....... (1,085) (286) (631)
-------- -------- --------
INCOME BEFORE EXTRAORDINARY CHARGE............................. 3,609 2,272 7,260
EXTRAORDINARY CHARGE -- EARLY EXTINGUISHMENT OF DEBT, NET OF
INCOME TAXES................................................. (1,444) (887) --
-------- -------- --------
NET INCOME........................................... $ 2,165 $ 1,385 $ 7,260
======== ======== ========
EARNINGS PER SHARE:
Income before extraordinary charge........................... $ 0.30 $ 0.19 $ 0.60
Extraordinary charge -- early extinguishment of debt, net of
income taxes.............................................. (0.12) (0.08) --
-------- -------- --------
Net income........................................... $ 0.18 $ 0.11 $ 0.60
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE> 26
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 1, 1995 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS EXCEPT SHARE
DATA)
<S> <C> <C> <C>
COMMON STOCK
Series A
Balance, beginning and end of year....................... $ 386 $ 386 $ 386
Number of shares, all years, beginning and end,
3,858,885..............................................
------- ------- -------
Series B
Balance, beginning of year............................... 386 386 579
25% stock dividends effected in the form of stock splits
in
1994 and 1995.......................................... -- 193 242
Proceeds from the exercise of stock options.............. -- -- 6
------- ------- -------
Balance, end of year..................................... 386 579 827
Number of shares, end of year, 3,858,885 in 1993,
5,794,539 in 1994 and 8,272,887 in 1995................
------- ------- -------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year.................................. 26,234 26,234 38,919
Increase due to initial public offering of subsidiary's
common stock and exercise of stock options............... -- 12,685 327
Proceeds from the exercise of stock options................. -- -- 398
------- ------- -------
Balance, end of year........................................ 26,234 38,919 39,644
------- ------- -------
RETAINED EARNINGS
Balance, beginning of year.................................. 23,880 23,268 21,681
Net income.................................................. 2,165 1,385 7,260
Dividends................................................... (2,777) (2,779) (2,909)
25% stock dividend effected in the form of a stock split.... -- (193) (242)
------- ------- -------
Balance, end of year........................................ 23,268 21,681 25,790
------- ------- -------
CUMULATIVE TRANSLATION ADJUSTMENT
Balance, beginning of year.................................. (3,395) (3,058) (3,552)
Translation adjustment...................................... 337 (494) (150)
------- ------- -------
Balance, end of year........................................ (3,058) (3,552) (3,702)
------- ------- -------
UNREALIZED (LOSS) GAIN ON MARKETABLE SECURITIES
Balance, beginning of year.................................. 96 146 (554)
Net unrealized (losses) gains for the year.................. 50 (700) 513
------- ------- -------
Balance, end of year........................................ 146 (554) (41)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY.......................... $47,362 $57,459 $62,904
------- ------- -------
DIVIDENDS PER SHARE
Restated for the effects of the 25% stock dividends effected
in the form of stock splits declared in 1994 and 1995.... $ 0.23 $ 0.23 $ 0.24
======= ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE> 27
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 1, 1995 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
FISCAL YEARS
----------------------------
1993 1994 1995
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income..................................................... $ 2,165 $ 1,385 $ 7,260
Adjustments --
Depreciation expense........................................ 4,354 4,374 4,489
Amortization expense........................................ 6,787 7,544 7,682
Provision for bad debts..................................... 735 508 863
Equity income, net of dividends............................. (1,487) (202) (562)
Minority interests in net income............................ 548 1,514 3,579
Write-down of headquarters building......................... -- 8,700 --
Extraordinary loss on early extinguishment of debt.......... 2,348 1,344 --
Other....................................................... (75) (495) (424)
Changes in assets and liabilities, net of
acquisitions and divestiture --
(Increase) Decrease in assets:
Accounts receivable....................................... (9,607) (5,745) (14,200)
Inventories............................................... (4,985) (5,137) (5,497)
Other current assets...................................... (3,006) (1,154) (5,207)
Marketable securities and certificates of deposit......... (3,116) (1,352) 329
Other assets.............................................. (2,947) (3,567) (2,233)
Deferred tax asset, net................................... 624 (4,647) 4,529
Increase (Decrease) in liabilities:
Accounts payable and accrued expenses..................... 234 (2,981) 7,047
Accrued payroll and related taxes......................... 5,482 3,280 3,934
Deferred tax liability, net............................... (545) 596 (479)
Reserves for losses of casualty reinsurance subsidiary.... 7,573 4,950 1,668
Other..................................................... 534 4,122 484
------- ------- --------
Net Cash Provided By Operating Activities.............. $ 5,616 $13,037 $ 13,262
------- ------- --------
</TABLE>
(Continued)
<PAGE> 28
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 1, 1995 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
FISCAL YEARS
---------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
INVESTING ACTIVITIES
Net proceeds from initial public offering of
subsidiary's common stock.............................. $ -- $ 17,626 $ --
Net proceeds from exercise of stock options of
subsidiary............................................. -- -- 1,147
Payments on notes receivable.............................. 852 438
Payments for acquisitions, net of cash acquired........... -- (935) (2,606)
Investment in and advances to foreign affiliates.......... (1,310) (732) (1,410)
Capital expenditures...................................... (3,409) (5,091) (6,857)
Proceeds from sales of marketable securities of
casualty reinsurance subsidiary, net................... -- 14,000 6,227
Deferred charge expenditures.............................. -- (701) (7,430)
Sale of headquarters building............................. -- -- 1,675
--------- --------- ---------
Net Cash Provided By (Used In) Investing
Activities...................................... (3,867) 24,605 (9,254)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of debt............................ 113,270 196,411 314,365
Payments on debt.......................................... (109,320) (225,287) (344,491)
Dividends paid............................................ (2,777) (2,779) (2,909)
Proceeds from the exercise of stock options............... -- -- 404
Proceeds from sales of accounts receivable................ -- -- 35,000
--------- --------- ---------
Net Cash Provided By (Used In) Financing
Activities...................................... 1,173 (31,655) 2,369
--------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 2,922 5,987 6,377
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR...................................... 4,899 7,821 13,808
--------- --------- ---------
CASH AND CASH EQUIVALENTS, AT END OF YEAR................... $ 7,821 $ 13,808 $ 20,185
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest............................................... $ 4,172 $ 4,209 $ 3,366
Income taxes........................................... 1,545 1,119 1,531
Non-cash financing and investing activities:
Note received related to sale of headquarters
building............................................. -- -- 9,000
Note received related to sale of subsidiary............ 1,250 -- --
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE> 29
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 1, 1995 AND DECEMBER 31,
1995
(TABULAR INFORMATION: IN THOUSANDS EXCEPT PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal year
The corporation's fiscal year ends on the Sunday closest to the calendar
year end. Fiscal years 1993, 1994 and 1995 each included 52 weeks.
Basis of financial statement presentation
The consolidated financial statements include the accounts of the
corporation and its subsidiaries, including its casualty reinsurance subsidiary.
All significant intercompany transactions and balances have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform with
current year presentation.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Minority interest
The minority interest expense represents principally the separate public
ownership in Wackenhut Corrections Corporation (WCC) and the ownership by
foreign investors in several subsidiaries of Wackenhut International,
Incorporated.
Income taxes
The corporation accounts for its income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Earnings per share
Earnings per share are computed using the average number of common shares
outstanding, including common stock equivalents and reflects the declaration of
the 25% stock dividends effected in the form of stock splits in 1994 and 1995.
Prior years' earnings per share have been restated to give effect to the stock
splits. The average number of shares and common stock equivalents outstanding
was 12,058,340, 12,066,780, and 12,131,772 in 1993, 1994 and 1995, respectively.
Cash and cash equivalents
The corporation considers highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The effect on cash
flows of exchange rate changes in foreign currency has not been significant for
any of the fiscal years presented.
<PAGE> 30
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
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.
Revenues
Revenue is recognized as services are provided. During fiscal years 1993,
1994 and 1995, the largest client of the corporation was the U.S. Department of
Energy, accounting for approximately 24%, 20% and 17% respectively, of the
corporation's consolidated revenues.
Fair value of financial instruments
The carrying amount of cash and cash equivalents, accounts receivable,
other receivables, notes receivable, notes payable and accounts payable
approximates fair value. Marketable securities are classified as
available-for-sale in accordance with SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Marketable securities are recorded
at fair value and unrealized holding gains and losses are excluded from earnings
and reported as a net amount in a separate component of shareholders' equity.
Realized gains and losses from the sale of securities are based on specific
identification of the security. The fair value of marketable securities and
certificates of deposit is presented under "wholly-owned casualty reinsurance
subsidiary" in Note 4 of these financial statements. The carrying value of
long-term debt (including current portion) approximates fair value.
Interest rate swaps
The corporation has entered into two interest rate swap agreements in order
to manage interest rate costs. Under the terms of the interest rate swaps, the
corporation agrees with counterparties to exchange at specific intervals, the
difference between fixed rate (5.2% and 6.87%) and floating rate (5.66% for both
swaps) interest amounts calculated in reference to an agreed-upon notional
principal amount. Interest to be paid or received is accrued over the life of
the agreement as an adjustment to interest expense.
Newly Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 "Accounting for Stock-Based Compensation," which requires adoption in fiscal
1996. SFAS No. 123 requires that the corporation's financial statements include
certain disclosures about stock-based employee compensation arrangements and
permits the adoption of a change in accounting for such arrangements. Changes in
accounting for stock-based compensation are optional and the corporation plans
to adopt only the disclosure requirements in 1996.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," which requires adoption in fiscal 1996. SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The impact of adopting this statement is
not expected to have a material impact upon the corporation's results of
operations or financial position.
Foreign currency translation
Foreign currency transactions and financial statements (except for
countries with highly inflationary economies) are translated into U.S. dollars
at current exchange rates, except for revenues, costs and expenses
<PAGE> 31
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which are translated at average exchange rates during each reporting period.
Adjustments resulting from translation of financial statements are reflected as
a separate component of shareholders' equity. 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 their local
currencies into U.S. dollars creates translation adjustments which are included
in the statements of income.
(2) ACCOUNTS RECEIVABLE SECURITIZATION
In January 1995, the corporation entered into a three-year agreement with
two financial institutions to sell, on an on-going basis, an undivided interest
in a defined pool of eligible receivables up to a maximum of $40,000,000. In
December 1995, the accounts receivable securitization facility was increased to
$50,000,000. The costs associated with this program are based upon the
purchasers' level of investment and cost of issuing commercial paper plus
predetermined fees. Such costs are included in "Interest expense" in the
consolidated statements of income. At December 31, 1995, $35,000,000 of accounts
receivable had been sold under this agreement. The defined pool of accounts
receivable sold at December 31, 1995 approximates fair value. The corporation
retains substantially the same risk of credit loss as if the receivables had not
been sold.
(3) PROPERTY AND EQUIPMENT AND DEPRECIATION METHODS
Property and equipment are stated at cost, less accumulated depreciation.
The corporation uses principally the straight-line method of depreciation for
property and equipment. The components of property and equipment and their
estimated lives are as follows:
<TABLE>
<CAPTION>
YEARS 1994 1995
------------ ------- -------
<S> <C> <C> <C>
Land................................................ -- $ 4,444 $ 1,451
Buildings and improvements.......................... 20 to 33 1/3 24,722 10,121
Furniture and fixtures.............................. 5 to 20 3,608 3,910
Equipment........................................... 5 to 20 9,026 9,448
Automobiles and trucks.............................. 3 4,128 4,202
------- -------
$45,928 $29,132
======= =======
</TABLE>
In the fourth quarter of 1995, the corporation sold its headquarters
building located in Coral Gables, Florida. In 1994, the building was written
down by $8,700,000 to reflect the estimated realizable value based on a third
party valuation. The corporation sold its headquarters building in exchange for
a $9,000,000 note (bearing interest at 6.5% and maturing in December 1997) and
$1,675,000 in cash (after payment of related expenses) which resulted in no
additional gain or loss on the transaction.
(4) WHOLLY-OWNED CASUALTY REINSURANCE SUBSIDIARY
The corporation has a wholly-owned casualty insurance subsidiary which
reinsures a portion of the corporation's workers' compensation and 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. Future adjustments of the amounts recorded as of December 31, 1995,
resulting from a continuous review process as well as differences between
estimates and ultimate payments, will be reflected in the corporation's
consolidated statements of
<PAGE> 32
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income as such adjustments become determinable. A summary of operations for the
last three fiscal years is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Premiums recognized................................... $ 16,282 $ 17,900 $ 17,642
Loss expense.......................................... (20,863) (18,499) (18,239)
-------- -------- --------
Underwriting loss..................................... (4,581) (599) (597)
Investment income..................................... 2,033 1,486 2,245
-------- -------- --------
$ (2,548) $ 887 $ 1,648
======== ======== ========
</TABLE>
Premiums paid by the corporation to the reinsurance subsidiary of
$16,282,000, $17,900,000 and $17,642,000, for the fiscal years ended 1993, 1994
and 1995, respectively, have been eliminated in consolidation.
Marketable securities and certificates of deposit, carried at fair value,
consisted of the following at January 1, 1995 and December 31, 1995:
<TABLE>
<CAPTION>
1994 1995
FAIR 1994 FAIR 1995
VALUE COST VALUE COST
------- ------- ------ ------
<S> <C> <C> <C> <C>
Municipal Bonds..................................... $ 7,332 $ 7,899 $1,556 $1,559
Government Bonds.................................... 968 975 844 847
Preferred Stock..................................... 1,713 2,040 1,980 2,040
Other............................................... 1,482 1,482 1,394 1,394
------- ------- ------ ------
$11,495 $12,396 $5,774 $5,840
------- ------- ------ ------
</TABLE>
The unrealized loss on marketable securities of $901,000 and $66,000 at
January 1, 1995 and December 31, 1995, respectively, has been reflected in the
accompanying consolidated balance sheets net of applicable income taxes. The
corporation has placed in trust, in favor of certain insurance companies,
$1,345,000 in time deposits and $9,300,000 in cash and cash equivalents, and has
issued irrevocable standby letters of credit for $31,392,000. Municipal bonds
mature in 2018, government bonds mature in periods after 10 years and
certificates of deposit mature within one year. As of December 31, 1995,
marketable securities and certain other investments of the corporation's
reinsurance subsidiary have specific restrictions on future sales.
(5) NOTES PAYABLE AND LONG-TERM DEBT
At December 31, 1995 the corporation had an outstanding note payable of
$1,115,000 which represented short-term borrowings of an international
subsidiary incurred for working capital, bearing interest at 8.0%, with a
maturity in 1996.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1994 1995
------- ------
<S> <C> <C>
Revolving loan -- 7.0% in 1994 and 6.2% in 1995 .................... $20,450 $1,400
First mortgage note on headquarters building -- 7.1%................ 16,060 --
Other debt principally related to WCC and international
subsidiaries...................................................... 2,481 3,987
------- ------
38,991 5,387
Less -- current portion of long-term debt........................... -- 11
------- ------
$38,991 $5,376
======= ======
</TABLE>
<PAGE> 33
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In January 1994, the corporation used short-term borrowings to prepay the
first $12,500,000 of its senior notes. In August 1994, the corporation prepaid
the remaining $12,500,000 of senior notes to an insurance company with proceeds
from WCC's initial public offering (IPO) (see Note 10). The prepayments resulted
in extraordinary charges of $1,444,000 ($2,348,000 before tax) or $.12 per share
in 1993 and $887,000 ($1,344,000 before tax) or $.08 per share in 1994.
In January 1995, the corporation prepaid the outstanding balance on the
first mortgage note with proceeds from the sales of accounts receivable under
the securitization facility. The corporation also used proceeds from the
accounts receivable securitization to reduce the outstanding balance of the
revolving loan.
At year end, the corporation had in place a revolving credit agreement with
one bank under which the corporation may borrow up to $50,000,000. The unused
portion of the revolving line of credit was $12,640,000 at December 31, 1995
after deducting $35,960,000 in outstanding letters of credit. The interest
payable is, at the corporation's option, a function of the applicable LIBOR or
certificate of deposit rates. The agreement requires, among other things, that
the corporation maintain a minimum consolidated net worth, as defined, and
limits certain payments and distributions.
In December 1994, WCC entered into a revolving credit agreement with a bank
under which the subsidiary may borrow up to $15,000,000 until September 30,
2002. The corporation is not a guarantor of the revolving credit agreement which
requires, among other things, that WCC maintain a minimum tangible net worth, as
defined, and limits certain payments and distributions.
Aggregate annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ANNUAL MATURITY
---------------------------------------------------------------------- ---------------
<S> <C>
1996.................................................................. $ 11
1997.................................................................. 763
1998.................................................................. 4,399
1999.................................................................. 13
2000.................................................................. 15
Thereafter............................................................ 186
-------
$ 5,387
============
</TABLE>
The corporation is a party to two offsetting interest rate swaps with Union
Bank of Switzerland and Bank of America Illinois at year end. The notional
principal amount under both agreements was $81,200,000 and the agreements expire
in December 1998. Based on the interest rates in effect at December 31, 1995,
the corporation was not exposed to a material loss in the event that either
party failed completely to perform according to the terms of the contract.
(6) PREFERRED AND COMMON STOCK
The board of directors has authorized 10,000,000 shares of preferred stock.
In October 1994 and in 1995, the board of directors declared 25% stock
dividends, effected in the form of stock splits. The 1995 stock dividend was
payable on January 9, 1996 to stockholders of record at the close of business on
December 22, 1995. Prior periods' per share data have been restated. The stock
dividends were paid in series B common stock to holders of the corporation's
series A and B shares. Series B common stock has all the rights and privileges
of the series A common stock with the exception of voting privileges.
(7) STOCK INCENTIVE AND STOCK OPTION PLANS
Key employees of the corporation 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 corporation's common
stock are granted to participants as approved by the Nominating and Compensation
<PAGE> 34
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Committee of the corporation's board of directors (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.
At December 31, 1995, 1,707,185 shares of series B common stock were
reserved for issuance, including 1,149,997 shares available for future grants or
awards.
Changes in outstanding non-qualified stock options for series B common
stock, as adjusted for 25% stock dividends in 1994 and 1995, are as follows:
<TABLE>
<CAPTION>
STOCK OPTION PRICE
OPTIONS PER SHARE
------- --------------
<S> <C> <C>
Granted in 1994............................................ 390,938 $6.16
Granted in 1995............................................ 218,750 $10.80
Exercised in 1995.......................................... (52,500) $6.16
-------
Outstanding at December 31, 1995........................... 557,188 $6.16 - $10.80
=======
</TABLE>
At December 31, 1995, 338,438 options with an exercise price of $6.16 were
exercisable. The remaining 218,750 options with an exercise price of $10.80
become exercisable in January 1996.
At December 31, 1995, options were outstanding with expiration dates
ranging from April 2004 to January 2005.
On January 30, 1996, the corporation granted 202,000 non-qualified stock
options to purchase shares of the corporation's series B common stock at
$14.00 per share. The options become exercisable in January 1997 and expire in
January 2006.
(8) RETIREMENT AND DEFERRED COMPENSATION PLANS
The corporation 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. The plan currently is not funded. The corporation
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 1993, 1994 and 1995 was $236,000, $267,000 and
$329,000, respectively. The present value of accumulated pension benefits at
year end 1993, 1994 and 1995 was $1,161,000, $1,400,000 and $1,895,000,
respectively and is included in "Other liabilities" in the accompanying
consolidated balance sheets.
The corporation has established non-qualified deferred compensation
agreements with certain senior executives providing for fixed annual benefits
ranging from $100,000 to $175,000 payable upon retirement at approximately age
60 for a period of 20 years. In the event of death before retirement, annual
benefits are paid for a period of 10 years. Benefits are funded by life
insurance contracts purchased by the corporation. 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 1993, 1994 and
1995 was $403,000, $444,000 and $468,000, respectively. The liability for
deferred compensation was $2,629,000 and $3,274,000 at year-end 1994 and 1995,
respectively and is included in "Other liabilities" in the accompanying
consolidated balance sheets.
<PAGE> 35
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) INCOME TAXES
The provision (credit) for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------
1993 1994 1995
----- ------- ------
<S> <C> <C> <C>
Federal income taxes:
Current.................................................... $ 669 $ 3,014 $ 581
Deferred................................................... (385) (3,112) 3,578
----- ------- ------
284 (98) 4,159
State income taxes:
Current.................................................... 252 527 104
Deferred................................................... (51) (412) 479
----- ------- ------
201 115 583
----- ------- ------
Total.............................................. $ 485 $ 17 $4,742
===== ======= ======
</TABLE>
Deferred income taxes resulted from timing differences in the recognition
of revenues and expenses for tax and financial reporting purposes. The tax
effects of the principal timing differences are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------
1993 1994 1995
----- ------- -------
<S> <C> <C> <C>
Senior note prepayment premium.............................. $(904) $ 904 $ --
Income of foreign subsidiaries and affiliates............... 972 1,186 1,336
Reserve for losses of reinsurance subsidiary................ (462) (8) (1,222)
Reserve for claims of employee health trust................. (148) (1,191) (412)
Building write-down......................................... -- (3,350) 2,976
Deferred compensation....................................... (268) (398) (491)
Depreciation................................................ 106 (486) (824)
Amortization of deferred charges............................ 173 205 2,601
Other, net.................................................. 95 (386) 93
----- ------- -------
$(436) $(3,524) $ 4,057
===== ======= =======
</TABLE>
The reconciliation of income tax computed at the federal statutory tax rate
(34%) to income tax expense is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Provision using statutory federal tax rate................... $1,146 $1,021 $4,670
Capital loss carryforward utilization........................ (228) (814) (330)
Targeted jobs tax credits.................................... (109) (235) (117)
Tax exempt interest.......................................... (321) (295) (167)
Other, net................................................... (204) 225 103
------ ------ ------
284 (98) 4,159
State income taxes........................................... 201 115 583
------ ------ ------
$ 485 $ 17 $4,742
====== ====== ======
</TABLE>
The tax effect of the extraordinary charge for the early extinguishment of
debt during fiscal 1993 and 1994 amounted to $904,000 and $457,000, respectively
(see Note 5).
<PAGE> 36
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the net non-current deferred tax asset at January 1, 1995
and December 31, 1995 are shown below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
1994 1995
------- -------
<S> <C> <C>
Reserve for losses of reinsurance subsidiary....................... $ 5,270 $ 6,492
Income of foreign subsidiaries and affiliates...................... (5,614) (6,950)
Reserve for claims of employee health trust........................ 4,692 5,104
Reserve for legal and other expenses............................... 899 430
Capital loss carryforward.......................................... 150 162
Deferred compensation.............................................. 2,660 3,133
Depreciation....................................................... (363) 439
Building write-down................................................ 3,350 373
Deferred charges................................................... -- (3,238)
Other, net......................................................... 127 387
------- -------
11,171 6,332
Valuation allowance...................................... (150) (162)
------- -------
Deferred tax asset, net.................................. $11,021 $ 6,170
======= =======
</TABLE>
The components of the net current deferred tax liability at January 1, 1995
and December 31, 1995 are shown below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
1994 1995
------- -------
<S> <C> <C>
Amortization of uniforms and accessories........................... $ 1,818 $ 1,774
Accrued vacation pay............................................... (1,033) (1,242)
Other, net......................................................... (189) (415)
------- -------
Deferred tax liability, net.............................. $ 596 $ 117
======= =======
</TABLE>
At December 31, 1995, the corporation had available a capital loss
carryforward of $421,000 of which $391,000 expires in 1998 and $30,000 expires
in 2000. The deferred tax asset arising from the capital loss carryforward has
been fully reserved due to the uncertainty of the corporation's ability to
generate future capital gains.
(10) WACKENHUT CORRECTIONS CORPORATION PUBLIC OFFERINGS
WCC, formerly a wholly-owned subsidiary of the corporation, sold 2,185,000
shares of common stock at an offering price of $9.00 per share in connection
with its initial public offering in 1994. Net proceeds of approximately
$17,626,000 from the IPO were used to repay bank debt and indebtedness to the
corporation. Following the offering, WCC had 8,185,000 shares outstanding of
which the corporation owned approximately 73%.
During 1995, the exercise of 354,697 non-qualified stock options of WCC
reduced the corporation's ownership in WCC to approximately 70% at December 31,
1995.
In January 1996, WCC sold 2,300,000 shares of common stock at a price of
$24.00 per share. Net proceeds of approximately $51,764,000 from the offering
will be used for possible future acquisitions, capital investments in new
facilities, working capital requirements and general corporate purposes. After
the offering, the corporation's ownership in WCC was reduced to approximately
55%.
<PAGE> 37
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The board of directors of WCC has granted non-qualified stock options to
purchase common stock which, if fully exercised, would reduce the corporation's
ownership in WCC to approximately 52%.
(11) WACKENHUT MONITORING SYSTEMS BUSINESS
In 1993, the corporation sold its Wackenhut Monitoring Systems subsidiary
in exchange for a $1,250,000 note and $100,000 cash which resulted in a loss of
approximately $95,000. In connection with this transaction, the corporation has
guaranteed indebtedness related to certain operating leases which totaled
approximately $2,402,000 at December 31, 1995 and expire from 1996 to 1997.
(12) NON-RECURRING CHARGES
In the fourth quarter of 1993, the corporation recognized non-recurring
charges of $1,726,000. A significant portion of these charges was due to a
$791,000 decrease in the value of guard contracts acquired in 1991. The
remaining components of the non-recurring charges consist principally of
write-downs of various long-term assets, none of which are individually
significant to the consolidated financial statements.
(13) COMMITMENTS AND CONTINGENCIES
The nature of the corporation's business results in claims for damages
arising from the conduct of its employees or others. In the opinion of
management, there are no pending legal proceedings that would have a material
effect on the consolidated financial statements of the corporation.
The corporation leases office space, data processing equipment and
automobiles under non-cancelable operating leases expiring between 1996 and
2011. The corporation has entered into a lease for new corporate headquarters in
Palm Beach Gardens, Florida, commencing in early 1996. The lease requires annual
payments of $1,764,750 for an initial term of 15 years with 3 five-year options
to extend the term of the lease. Rent expense for the fiscal years ended January
2, 1994, January 1, 1995 and December 31, 1995 was $6,312,000, $4,993,000, and
$6,994,000, respectively. The minimum commitments under these leases and the 15
year lease for the new corporate headquarters are as follows:
<TABLE>
<CAPTION>
MINIMUM
YEAR COMMITMENT
------------------------------------------------------------------------- ----------
<S> <C>
1996..................................................................... $ 6,870
1997..................................................................... 5,224
1998..................................................................... 3,737
1999..................................................................... 2,969
2000..................................................................... 2,084
Thereafter............................................................... 18,437
----------
$ 39,321
=========
</TABLE>
<PAGE> 38
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) BUSINESS SEGMENTS
Security-Related and Other Support Services and Correctional Services
The corporation's principal business consists of security related and other
support services to commercial and governmental clients. A subsidiary of the
corporation, Wackenhut Corrections Corporation, provides facility management and
construction services to detention and correctional facilities. Provided below
is various financial information for each segment:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Security-related and other support services......... $600,472 $642,727 $697,301
Correctional services............................... 58,784 84,026 99,431
-------- -------- --------
Total revenues.............................. 659,256 726,753 796,732
-------- -------- --------
Operating Income:
Security-related and other support services......... 3,050 10,846 8,545
Correctional services............................... 1,446 4,446 7,229
Write-down of headquarters building................. -- (8,700) --
-------- -------- --------
Total operating income...................... 4,496 6,592 15,774
-------- -------- --------
Equity income (loss) of foreign affiliates, net of
taxes:
Security-related and other support services......... 824 617 744
Correctional services............................... 261 (331) (113)
-------- -------- --------
Total equity income......................... 1,085 286 631
-------- -------- --------
Capital expenditures:
Security-related and other support services......... 3,083 4,829 4,137
Correctional services............................... 326 262 2,720
-------- -------- --------
Total capital expenditures.................. 3,409 5,091 6,857
-------- -------- --------
Depreciation and amortization expense:
Security-related and other support services......... 9,040 9,631 9,868
Correctional services............................... 2,101 2,287 2,303
-------- -------- --------
Total expenses.............................. 11,141 11,918 12,171
-------- -------- --------
Identifiable assets:
Security-related and other support services......... 192,149 182,424 159,087
Correctional services............................... 19,148 30,333 38,840
-------- -------- --------
Total identifiable assets................... $211,297 $212,757 $197,927
======== ======== ========
</TABLE>
<PAGE> 39
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Domestic and International Operations
Non-U.S. operations of the corporation and its subsidiaries are conducted
primarily in South America and Australia. The corporation carries its investment
in affiliates (20% to 50% owned) under the equity method. U.S. income taxes
which would be payable upon remittance of affiliates' earnings to the
corporation are provided currently. Minority interest in consolidated foreign
subsidiaries have been reflected net of applicable income taxes in the
accompanying financial statements. A summary of domestic and international
operations is shown below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Domestic operations................................. $575,733 $615,727 $652,723
International operations............................ 83,523 111,026 144,009
-------- -------- --------
Total revenues.............................. $659,256 $726,753 $796,732
-------- -------- --------
Operating Income:
Domestic operations................................. $ 2,904 $ 10,630 $ 11,407
International operations............................ 1,592 4,662 4,367
Write-down of headquarters building................. -- (8,700) --
-------- -------- --------
Total operating income...................... $ 4,496 $ 6,592 $ 15,774
-------- -------- --------
Equity income of foreign affiliates, net of taxes:
Domestic operations................................. $ -- $ -- $ --
International operations............................ 1,085 286 631
-------- -------- --------
Total equity income......................... $ 1,085 $ 286 $ 631
-------- -------- --------
Capital expenditures:
Domestic operations................................. $ 1,932 $ 1,498 $ 2,911
International operations............................ 1,477 3,593 3,946
-------- -------- --------
Total capital expenditures.................. $ 3,409 $ 5,091 $ 6,857
-------- -------- --------
Depreciation and amortization expense:
Domestic operations................................. $ 9,240 $ 9,751 $ 9,512
International operations............................ 1,901 2,167 2,659
-------- -------- --------
Total expenses.............................. $ 11,141 $ 11,918 $ 12,171
-------- -------- --------
Identifiable assets:
Domestic operations................................. $179,565 $163,864 $141,431
International operations............................ 31,732 48,893 56,496
-------- -------- --------
Total identifiable assets................... $211,297 $212,757 $197,927
-------- -------- --------
</TABLE>
<PAGE> 40
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the corporation and its subsidiaries
for the fiscal years ended January 1, 1995 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Revenues...................................... $171,522 $175,016 $191,205 $189,010
Income (loss) from operations(1).............. 3,203 4,042 3,863 (4,516)
Income (loss) before extraordinary charge..... 1,820 1,953 1,982 (3,483)
Extraordinary charge -- early extinguishment
of debt, net of income taxes(1)............. -- -- (887) --
-------- -------- -------- --------
Net income (loss)............................. $ 1,820 $ 1,953 $ 1,095 $ (3,483)
-------- -------- -------- --------
Earnings (loss) per share:(2)
Income (loss) before extraordinary charge... $ 0.15 $ 0.16 $ 0.17 $ (0.29)
Extraordinary charge........................ -- -- (0.08) --
-------- -------- -------- --------
Net income (loss)................... $ 0.15 $ 0.16 $ 0.09 $ (0.29)
======== ======== ======== ========
1995
Revenues...................................... $189,792 $193,371 $203,637 $209,932
Income from operations........................ 3,055 3,967 4,394 4,358
Net income.................................... 1,599 1,726 1,956 1,979
Earnings per share(2)......................... $ 0.13 $ 0.15 $ 0.16 $ 0.16
======== ======== ======== ========
</TABLE>
- ---------------
(1) In the fourth quarter of 1994, the carrying value of the headquarters
building was written down to its estimated realizable value and a charge of
$8,700,000 was recognized (see Note 3). Additionally, an extraordinary
charge of $887,000 (after tax) or $.08 per share, was recognized in the
third quarter of 1994 for the early retirement of senior debt (see Note 5).
(2) Earnings per share have been restated to include the 25% stock dividend
effected in the form of a stock split, declared on October 29, 1994 and
paid on January 9, 1995 and the 25% stock dividend effected in the form of
a stock split, declared on October 31, 1995 and paid on January 9, 1996
(see Notes 1 and 6).
<PAGE> 41
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 1996 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
are included in Item 8:
Consolidated Balance Sheets - January 1, 1995 and December 31, 1995
Consolidated Statements of Income - Fiscal years ended January 2, 1994,
January 1, 1995 and December 31, 1995
Consolidated Statements of Cash Flows - Fiscal years ended January
2, 1994, January 1, 1995 and December 31, 1995
Consolidated Statements of Shareholders' Equity - Fiscal years ended
January 2, 1994, January 1, 1995 and December 31, 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
SCHEDULE II
THE WACKENHUT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 1, 1995
AND DECEMBER 31, 1995
(In thousands)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS, BALANCE AT
BEGINNING COSTS AND TO OTHER ACTUAL END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS CHARGE-OFFS PERIOD
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 2, 1994:
Allowance for doubtful accounts $1,580 $735 - ($1,628) $ 687
==================================================================================
Valuation allowance - deferred tax asset $2,932 - - ($ 300) $2,632
==================================================================================
YEAR ENDED JANUARY 1, 1995:
Allowance for doubtful accounts $ 687 $508 - ($ 139) $1,056
==================================================================================
Valuation allowance - deferred tax asset $2,632 - - ($2,482) $ 150
==================================================================================
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts $1,056 $863 ($162) ($ 489) $1,268
==================================================================================
Valuation allowance - deferred tax asset $ 150 $ 12 - - $ 162
==================================================================================
</TABLE>
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:
<PAGE> 42
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------
<C> <S> <C> <C>
3.1 -- Articles of Incorporation as amended
3.2 -- Bylaws currently in effect
4.1 -- Revolving Credit and Reimbursement Agreement dated January 5, 1995 by and
among The Wackenhut Corporation, NationsBank of Florida, N.A. and Bank of
America Illinois, as Lenders, and NationsBank of Florida, N.A., as Agent
(incorporated by reference to the Registrant's Form 10-K Annual Report for
the fiscal year ended January 1, 1995)
4.2 -- Letter dated June 8, 1995 concerning the Revolving Credit and
Reimbursement Agreement dated January 5, 1995 by and among The Wackenhut
Corporation, NationsBank of Florida, N.A., and Bank of America Illinois,
as Lenders, and NationsBank of Florida, N.A., as Agent
4.3 -- Letter dated August 24, 1995 concerning the Revolving Credit and
Reimbursement Agreement dated January 5, 1995 by and among The Wackenhut
Corporation, NationsBank of Florida, N.A., as Agent
4.4 -- Receivables Purchase Agreement dated as of January 5, 1995 among The
Wackenhut Corporation, as Seller, Receivables Capital Corporation and
Enterprise Funding Corporation, each as a Purchaser, Bank of America
National Trust and Savings Association and NationsBank of North Carolina,
N.A., each as a Managing Agent, and Bank of America National Trust and
Savings Association, as the Administrative Agent (incorporated by
reference to the Registrant's Form 10-K Annual Report for the fiscal year
ended January 1, 1995)
4.5 -- First Amendment dated December 15, 1995 to the Receivables Purchase
Agreement dated as of January 5, 1995 among The Wackenhut Corporation, as
Seller, Receivables Capital Corporation and Enterprise Funding
Corporation, each as a Purchaser, Bank of America National Trust and
Savings Association and NationsBank of North Carolina, N.A., each as a
Managing Agent, and Bank of America National Trust and Savings
Association, as the Administrative Agent
4.6 -- $15,000,000 Credit Agreement dated as of December 12, 1994 between
Wackenhut Corrections Corporation, as Borrower, and Barnett Bank of South
Florida, N.A., as Lender (incorporated by reference to the Registrant's
Form 10-K Annual Report for the fiscal year ended January 1, 1995)
4.7 -- Amended and Restated Revolving Credit and Reimbursement Agreement dated
July 1, 1993 between The Wackenhut Corporation and NationsBank of Florida,
National Association (incorporated by reference to the Registrant's Form
10-K Annual Report for the fiscal year ended January 2, 1994)
4.8 -- Amendment dated May 18, 1994 to the Amended and Restated Revolving Credit
and Reimbursement Agreement dated July 1, 1993 between The Wackenhut
Corporation and NationsBank of Florida, N.A.
4.9 -- Amendment dated March 7, 1995 to the Amended and Restated Revolving Credit
and Reimbursement Agreement dated July 1, 1993 between The Wackenhut
Corporation and NationsBank of Florida, N.A. (incorporated by reference to
the Registrant's Form 10-K Annual Report for the fiscal year ended January
1, 1995)
10.1 -- Form of Deferred Compensation Agreement for Executive Officers
(the "Senior Plan"): Alan B. Bernstein, Richard R. Wackenhut, Fernando
Carrizosa, Timothy P. Cole and Robert C. Kneip (incorporated by
reference to the Registrant's Form 10-K Annual Report for the fiscal year
ended January 2, 1994)
10.2 -- Amendments to the Deferred Compensation Agreements for Executive Officers
(the "Senior Plan"): Alan B. Bernstein, Richard R. Wackenhut, Fernando
Carrizosa, Timothy P. Cole and Robert C. Kneip (incorporated by reference
to the Registrant's Form 10-K Annual and Report for the fiscal year ended
December 29, 1991)
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------
<C> <S> <C> <C>
10.3 -- Executive Officer Retirement Plan
10.4 -- Amended and Restated Split Dollar arrangement with George R. and Ruth J. Wackenhut
10.5 -- Office Lease dated April 18, 1995 by and between The Wackenhut Corporation
and Daniel S. Catalfumo, as Trustee under F.S. 689.071
10.6 -- 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
10.7 -- $9,000,000 Promissory Note dated December 21, 1995 between The Wackenhut
Corporation and ACP-Atrium CG, L.P., a Florida limited partnership
10.8 -- Purchase Money Real Estate Mortgage, Assignment and Security Agreement
dated December 31, 1995 between The Wackenhut Corporation and ACP-Atrium
CG, L.P., a Florida limited partnership
10.9 -- Key Employee Long-Term Incentive Stock Plan dated July 1991
21.1 -- Subsidiaries of The Wackenhut Corporation
23.1 -- Consent of Arthur Andersen LLP
24.1 -- Powers of Attorney
27.1 -- Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 44
(b). Reports on Form 8-K.
On January 30, 1995, the Company filed a current report on Form 8-K to
report that it would take a special, one-time charge in the fourth quarter of
fiscal 1994 to provide for a loss resulting from the write-down in the carrying
value of its headquarters building in Coral Gables, Florida. The loss
resulting from the write-down of the headquarters building carrying value of
$8.7 million is due to management's decision to sell the Company's
headquarters building.
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
Date: March 29, 1996 By: /s/ Juan D. Miyar*
---------------------------------------
Juan D. Miyar, Vice President - Accounting
Services and Corporate Controller
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.
Date: March 29, 1996 /s/ George R. Wackenhut*
--------------------------------------
- -
<PAGE> 45
George R. Wackenhut, Chairman of the
Board and Chief Executive Officer
(principal executive officer)
Date: March 29, 1996 /s/ Daniel E. Mason*
----------------------------------
Daniel E. Mason, Vice President
and Chief Financial Officer,
Domestic Operations (principal
financial officer)
Date: March 29, 1996 /s/ Juan D. Miyar*
-----------------------------------
Juan D. Miyar, Vice President -
Accounting Services and Corporate
Controller (principal accounting
officer)
Date: March 29, 1996 /s/ Julius W. Becton, Jr.*
-----------------------------------
JULIUS W. BECTON, JR.
Director
-----------------------------------
RICHARD G. CAPEN, JR.
Director
-----------------------------------
ANNE N. FOREMAN
Director
-----------------------------------
EDWARD L. HENNESSY, JR.
Director
Date: March 29, 1996 /s/ Paul X. Kelley *
-----------------------------------
PAUL X. KELLEY
Director
-----------------------------------
NANCY CLARK REYNOLDS
Director
Date: March 29, 1996 /s/ Thomas P. Stafford *
-----------------------------------
THOMAS P. STAFFORD
Director
Date: March 29, 1996 /s/ George R. Wackenhut *
-----------------------------------
GEORGE R. WACKENHUT
Director
Date: March 29, 1996 /s/ Richard R. Wackenhut *
-----------------------------------
RICHARD R. WACKENHUT
Director
Date: March 29, 1996 *By /s/ Daniel E. Mason
-----------------------------------
DANIEL E. MASON, Attorney-in-fact
<PAGE> 46
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------
<C> <S> <C> <C>
3.1 -- Articles of Incorporation as amended
3.2 -- Bylaws currently in effect
4.1 -- Revolving Credit and Reimbursement Agreement dated January 5, 1995 by and
among The Wackenhut Corporation, NationsBank of Florida, N.A. and Bank of
America Illinois, as Lenders, and NationsBank of Florida, N.A., as Agent
(incorporated by reference to the Registrant's Form 10-K Annual Report for
the fiscal year ended January 1, 1995)
4.2 -- Letter dated June 8, 1995 concerning the Revolving Credit and
Reimbursement Agreement dated January 5, 1995 by and among The Wackenhut
Corporation, NationsBank of Florida, N.A., and Bank of America Illinois,
as Lenders, and NationsBank of Florida, N.A., as Agent
4.3 -- Letter dated August 24, 1995 concerning the Revolving Credit and
Reimbursement Agreement dated January 5, 1995 by and among The Wackenhut
Corporation, NationsBank of Florida, N.A., as Agent
4.4 -- Receivables Purchase Agreement dated as of January 5, 1995 among The
Wackenhut Corporation, as Seller, Receivables Capital Corporation and
Enterprise Funding Corporation, each as a Purchaser, Bank of America
National Trust and Savings Association and NationsBank of North Carolina,
N.A., each as a Managing Agent, and Bank of America National Trust and
Savings Association, as the Administrative Agent (incorporated by
reference to the Registrant's Form 10-K Annual Report for the fiscal year
ended January 1, 1995)
4.5 -- First Amendment dated December 15, 1995 to the Receivables Purchase
Agreement dated as of January 5, 1995 among The Wackenhut Corporation, as
Seller, Receivables Capital Corporation and Enterprise Funding
Corporation, each as a Purchaser, Bank of America National Trust and
Savings Association and NationsBank of North Carolina, N.A., each as a
Managing Agent, and Bank of America National Trust and Savings
Association, as the Administrative Agent
4.6 -- $15,000,000 Credit Agreement dated as of December 12, 1994 between
Wackenhut Corrections Corporation, as Borrower, and Barnett Bank of South
Florida, N.A., as Lender (incorporated by reference to the Registrant's
Form 10-K Annual Report for the fiscal year ended January 1, 1995)
4.7 -- Amended and Restated Revolving Credit and Reimbursement Agreement dated
July 1, 1993 between The Wackenhut Corporation and NationsBank of Florida,
National Association (incorporated by reference to the Registrant's Form
10-K Annual Report for the fiscal year ended January 2, 1994)
4.8 -- Amendment dated May 18, 1994 to the Amended and Restated Revolving Credit
and Reimbursement Agreement dated July 1, 1993 between The Wackenhut
Corporation and NationsBank of Florida, N.A.
4.9 -- Amendment dated March 7, 1995 to the Amended and Restated Revolving Credit
and Reimbursement Agreement dated July 1, 1993 between The Wackenhut
Corporation and NationsBank of Florida, N.A. (incorporated by reference to
the Registrant's Form 10-K Annual Report for the fiscal year ended January
1, 1995)
10.1 -- Form of Deferred Compensation Agreement for Executive Officers
(the "Senior Plan"): Alan B. Bernstein, Richard R. Wackenhut, Fernando
Carrizosa, Timothy P. Cole and Robert C. Kneip (incorporated by
reference to the Registrant's Form 10-K Annual Report for the fiscal year
ended January 2, 1994)
10.2 -- Amendments to the Deferred Compensation Agreements for Executive Officers
(the "Senior Plan"): Alan B. Bernstein, Richard R. Wackenhut, Fernando
Carrizosa, Timothy P. Cole and Robert C. Kneip (incorporated by reference
to the Registrant's Form 10-K Annual and Report for the fiscal year ended
December 29, 1991)
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------
<C> <S> <C> <C>
10.3 -- Executive Officer Retirement Plan
10.4 -- Amended and Restated Split Dollar arrangement with George R. and Ruth J. Wackenhut
10.5 -- Office Lease dated April 18, 1995 by and between The Wackenhut Corporation
and Daniel S. Catalfumo, as Trustee under F.S. 689.071
10.6 -- 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
10.7 -- $9,000,000 Promissory Note dated December 21, 1995 between The Wackenhut
Corporation and ACP-Atrium CG, L.P., a Florida limited partnership
10.8 -- Purchase Money Real Estate Mortgage, Assignment and Security Agreement
dated December 31, 1995 between The Wackenhut Corporation and ACP-Atrium
CG, L.P., a Florida limited partnership
10.9 -- Key Employee Long-Term Incentive Stock Plan dated July 1991
21.1 -- Subsidiaries of The Wackenhut Corporation
23.1 -- Consent of Arthur Andersen LLP
24.1 -- Powers of Attorney
27.1 -- Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE WACKENHUT CORPORATION
------------------------
The articles of incorporation of The Wackenhut Corporation, originally
filed with the Secretary of State of Florida on December 4, 1958, under the
corporate name of Security Services Corp., are hereby restated 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 ununiformed 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
or 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 Statutes.
ARTICLE III
The maximum amount of shares of stock that this corporation shall be
authorized to issue shall be 30,000,000 shares which are to be divided into two
classes as follows:
20,000,000 shares of Common Stock, par value $.10 per share, and
10,000,000 shares of Preferred Stock.
The Common Stock may be created and issued from time to time in one or more
series with voting rights for each series 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. The
Preferred Stock may be created and issued from time to time in one or more
series with such resignations, preferences, limitations, conversion rights,
cumulative, relative, participating, optional or other rights, including voting
rights,
<PAGE> 2
qualifications, limitations or restrictions thereof and 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.
ARTICLE IV
The principal place of business of this corporation shall be at 3280 Ponce
de Leon Blvd., Coral Gables, 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 amount of capital with which this corporation will begin business is
Five Hundred Dollars.
ARTICLE VII
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.
ARTICLE VIII
The names and post office addresses of the members of the first Board of
Directors, the President, and the Secretary and the Treasurer are:
<TABLE>
<S> <C> <C>
G. DAVID PARRISH................................. 220 Security Trust President and Director
Bldg., Miami, Florida
JOHN T. WOITESEK................................. 220 Security Trust Secretary and Director
Bldg., Miami, Florida
GENE ESSNER...................................... 220 Security Trust Treasurer and Director
Bldg., Miami, Florida
</TABLE>
ARTICLE IX
The name and post office address of each subscriber of these Articles of
Incorporation, the number of shares of stock each agrees to take and the value
of the consideration therefor (the sum of which values is not less than the
amount of capital specified in Article VI) are:
<TABLE>
<S> <C> <C> <C>
G. DAVID PARRISH.................................. 220 Security Trust 167 shares $167.00
Bldg., Miami, Florida
JOHN T. WOITESEK.................................. 220 Security Trust 167 shares $167.00
Bldg., Miami, Florida
GENE ESSNER....................................... 220 Security Trust 167 shares $167.00
Bldg., Miami, Florida
--------
$500.00
=======
</TABLE>
2
<PAGE> 3
ARTICLE X
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,
copyrights, 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 of 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 XI
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 XI 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 XII
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
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, including advances of his 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.
3
<PAGE> 4
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 January
25, 1992 and duly adopted by the shareholders of the Corporation on April 24,
1992.
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 5th day of May, 1992.
/s/ RICHARD R. WACKENHUT
--------------------------------------
Richard R. Wackenhut
President and Chief
Operation Officer
/s/ JAMES P. ROWAN
--------------------------------------
James P. Rowan
Assistant Secretary
4
<PAGE> 5
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
THE WACKENHUT CORPORATION,
A FLORIDA CORPORATION
Pursuant to provisions of Section 607.1006 of the Florida Business
Corporation Act, The Wackenhut Corporation, a Florida corporation (the
"Corporation"), hereby adopts the following Articles of Amendment:
(a) The name of this corporation is The Wackenhut Corporation.
(b) Article III of the Corporation's Articles of Incorporation is amended
to read as follows:
ARTICLE III
The maximum number of shares of stock that the Corporation shall be
authorized to issue shall be 30,000,000 shares which are to be divided into two
classes as follows:
20,000,000 shares of Common Stock, par value $0.10 per share, of which
3,858,885 shares are designated to be issuable as Series A Common Stock
and 16,141,115 shares are designated to be issuable as Series B Common
Stock; and
10,000,000 shares of Preferred Stock.
The Common Stock may be created and issued from time to time in one or more
series with voting rights for each series 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. 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.
The Corporation has authorized the issuance of a series of Common Stock
consisting of 3,858,885 shares of voting Common Stock, par value $.10 per share
which shall be designated as the Series A Common Stock. The Corporation has
authorized the issuance of a series of Common Stock consisting of 16,141,115
shares of non-voting Common Stock, par value $.10 per share which shall be
designated as the Series B Common Stock. 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.
(c) The foregoing amendment to the Articles of Incorporation of the
Corporation was duly authorized by the Corporation's Board of Directors on
October 31, 1995, without Shareholder action, pursuant to Section 607.0602 of
the Florida Business Corporation Act.
(d) In accordance with Section 607.0123 of the Florida Business Corporation
Act, this amendment shall be effective on October 31, 1995.
The undersigned director of the Corporation has executed these Articles of
Amendment this 15th day of March, 1995.
THE WACKENHUT CORPORATION,
a Florida corporation
By: /s/ G. R. WACKENHUT
--------------------------------------
Name: G. R. WACKENHUT
--------------------------------------
Title: Director
5
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
THE WACKENHUT CORPORATION
(INCORPORATED UNDER THE LAWS OF FLORIDA)
------------------------
ARTICLE I -- STOCK
1. Transfers of stock shall be made only upon the books of the Corporation,
and only by the person named in the certificate or by an attorney, lawfully
constituted, in writing, and only upon surrender of the certificate therefor.
2. Subject to the laws of the State of Florida, the Certificate of
Incorporation, and the By-Laws, the Board of Directors may make such rules and
regulations as they may deem expedient relative to the issue, transfer and
registration of certificates of the capital stock of the Corporation, and may
appoint a transfer agent or registrar of transfers, or both, and require all
certificates of stock to bear the signature of such transfer agent or registrar,
or the signature of both.
3. Registered stockholders only shall be entitled to be treated by the
Corporation as the holders in fact of the stock standing in their respective
names, and the Corporation shall not be bound to recognize any equitable or
other claim to or interest in any share on the part of any other person, whether
or not it shall have express or other notice thereof, except as expressly
provided by the laws of Florida.
4. In case of loss or destruction of any certificate of stock, another may
be issued in its place upon proof of such loss or destruction and upon the
giving of a satisfactory bond of indemnity to the Corporation in such sum as the
Directors may provide.
ARTICLE II -- STOCKHOLDERS' MEETING
1. All meetings of the stockholders shall be held at such place, within or
without the State of Florida, as shall be stated in the notice of the meeting.
2. The annual meeting of the stockholders of the Corporation for the
election of Directors to succeed those whose terms expire, and for the
transaction of such other business as may come before the meeting, shall be held
at such hour and on such day as the Board of Directors may determine and cause
to be stated in the notice of the meeting; provided, however, the date of such
meeting shall be within 120 days following the close of the fiscal year of the
Corporation. If the annual meeting of stockholders be not held as herein
prescribed, the election of Directors may be held at any meeting thereafter
called pursuant to these By-laws. Any stockholder, represented in person or by
proxy, may call for an election by ballot; otherwise the election shall be held
with or without ballot as the Chairman of the meeting prescribes.
3. Special meetings of the stockholders may be called by the Chairman of
the Board, the President, or one of the Vice Presidents or by the Board of
Directors, and shall be called at any time by the Chairman of the Board, the
President, one of the Vice Presidents, Secretary or Treasurer upon the request,
in writing, of stockholders owning twenty percent (20%) of the outstanding stock
of the Corporation entitled to vote. Such request must state in specific terms
the purpose of the meeting.
4. Notice of the time and place of the annual and of all special meetings
of the stockholders shall be given at least ten (10) days prior to the meeting
to each stockholder of record of the Corporation entitled to vote thereat.
Business transacted at all special meetings of the stockholders shall be
confined to the purposes stated in the notice thereof and matters incidental
thereto.
<PAGE> 2
5. A quorum at any annual or special meeting of the stockholders shall
consist of stockholders holding a majority of the capital stock of this
Corporation outstanding and entitled to vote thereat, represented either in
person or by proxy, except as otherwise specially provided by law or in the
Certificate of Incorporation. If a quorum be not present at a properly called
stockholders' meeting, the meeting may be adjourned by a majority of those
present and entitled to vote thereat.
ARTICLE III -- BOARD OF DIRECTORS
1. The management of all the affairs, property and interests of the
Corporation shall be vested in a Board of not less than three (3) and not more
than nineteen (19) Directors, consisting of persons who shall be elected to and
who shall, except as hereinafter provided, hold office until the next annual
meeting or until their successors are elected and qualify. Directors need not be
stockholders. In addition to the powers and authorities by the By-Laws and the
Certificate of Incorporation expressly conferred upon it, the Board may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
2. The exact number of Directors shall be determined from time to time by
resolution adopted by the affirmative vote of a majority of all the Directors
then holding office at any special or regular meeting, provided that in the case
of a special meeting notice of such proposed action has been included in the
notice thereof. Any such resolution, when so adopted, shall effect an amendment
of this section and constitute a determination of the exact number of persons
constituting the Board of Directors. Any such resolution increasing or
decreasing the number of Directors shall have the effect of creating or
eliminating a vacancy or vacancies, as the case may be; provided, however, that
no such resolution shall reduce the number of Directors below the number then
holding office.
3. In case any vacancy or vacancies shall occur in the Board of Directors
by reason of death, resignation or expiration of term of office or by reason of
an increase in the number of Directors as provided in Section 2 of this ARTICLE
III, the remaining Directors, by the affirmative vote of a Majority thereof, may
elect a Director to fill each such vacancy to hold office for the period
specified in Section 1 of this ARTICLE III.
4. Any Directors may be removed at any time with or without cause, by a
vote of stockholders holding a majority of the stock of the Corporation entitled
to vote. Any Director may be removed at any time or cause by resolution adopted
by the affirmative vote of a majority of all the Directors then holding office
at any special or regular meeting provided notice of such proposed action has
been included in the notice of such meeting.
5. Annual Meetings of the Directors shall be held with or without notice in
the general location of and promptly following the Annual Meeting of the
Shareholders. Regular meetings of the Directors may be held without notice at
such times and at such places, within or without the State of Florida, as the
Directors may from time to time determine.
6. Special meetings of the Directors may be called at any time by the
Chairman of the Board, the President or one of the Vice Presidents or the
Secretary, or upon written request of two or more Directors, such request
stating the purpose for which the meeting is to be called, to be held at the
principal office of the Corporation or at such place within or without the State
of Florida as the Directors may from time to time decide.
7. Written notice of the date, time and place of special meetings of the
Board shall be given to each Director either by personal delivery or by mail,
telegram or cablegram at least two (2) days before the date designated therein
for such meeting.
8. A majority of the whole Board of Directors shall be necessary at all
meetings to constitute a quorum for the transaction of business; but less than a
quorum may adjourn the meeting, which may be held on a subsequent date without
further notice, provided a quorum be present at such deferred meeting. Unless
otherwise specifically provided by the laws of the State of Florida or the
Certificate of Incorporation, the act of
2
<PAGE> 3
a majority of the Directors present at any properly convened meeting at which
there is a quorum shall be the act of the Board.
9. No stated salary, subject to any limitations contained in the
Certificate of Incorporation, shall be paid Directors, as such, for their
services, but by resolution of the Board a fixed sum and expenses of attendance,
if any, may be allowed for attendance at each regular or special meeting of the
Board, or of attendance at each regular or special meeting of a standing or
special committee or of the Executive Committee; provided, however, that nothing
herein contained shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
10. The Board of Directors be and is hereby authorized to name retiring
directors as Director-Emeritus having the right to attend meetings of the Board
without vote. The expenses of such Director-Emeritus, including transportation,
meals and lodging, may, in the discretion of the Board of Directors, be paid by
the Corporation.
11. Upon attaining the age of seventy-three (73), a Director shall not be
eligible for election as a member of the Board of Directors unless the
Nominating and Compensation Committee of the Board of Directors unanimously
grants a waiver of this requirement.
ARTICLE IV -- EXECUTIVE COMMITTEE
The Board of Directors may, by resolution, appoint an Executive Committee
to consist of up to five Directors, which Executive Committee shall have and may
exercise, during the intervals between meetings of the Board of Directors, all
the powers vested in the Board of Directors under any statute, the Certificate
of Incorporation or the By-Laws of the Corporation, except the power to (a)
determine the number of Directors constituting the Board, (b) remove any
Director for cause, (c) fill vacancies in the Board of Directors, (d) change the
membership or fill vacancies in the Executive Committee, (e) approve amendments
of the Certificate of Incorporation, or (f) amend or repeal the By-Laws of the
Corporation. The Board of Directors shall have the exclusive power at any time
and from time to time to change the membership of and fill vacancies in the
Executive Committee. The Executive Committee may make rules for the conduct of
its business. The Executive Committee shall keep and preserve minutes reflecting
its actions. A majority of the members of the Executive Committee shall be a
quorum. After at least three hours notice, with good faith effort to contact
each member orally, by telephone or by telegram, all actions may be taken
without additional notice of any kind by the unanimous agreement of a majority
of the members of the Executive Committee. However, if one of the members of the
Executive Committee dissents, action can only be taken upon the approval of a
majority of the members of the Executive Committee after due notice as provided
for in Article VII.
ARTICLE V. OFFICERS
1. The officers of the Corporation shall be a President, a Vice President,
a Secretary and a Treasurer, and, in the discretion of the Board of Directors, a
Chairman of the Board, an additional Vice President or Vice Presidents,
including an Executive or Senior Vice President, a Controller, and one or more
Assistant Secretaries and one or more Assistant Treasurers, who shall be elected
by the Directors at their regular annual meeting immediately following each
annual meeting of the stockholders. Officers shall hold office until the next
annual meeting of the Board of Directors unless otherwise provided in these
By-Laws, and until their successors are elected and qualify. The Chairman of the
Board and the President shall be elected from among the Directors. Any person
may hold two or more offices, except that the President may not also be
Secretary or an Assistant Secretary. No person holding two or more offices shall
sign any instrument in the capacity of more than one office.
2. If there be a Chairman of the Board, he shall preside at all meetings of
the stockholders and of the Board of Directors (otherwise the President shall
preside at such meetings), and shall also perform such other duties as may be
prescribed by the Board of Directors.
3
<PAGE> 4
3. The other officers of the Corporation shall have such powers and duties
as generally pertain to their respective offices, as well as such powers and
duties as from time to time may be conferred by the Board of Directors.
4. In the case of the absence or inability to act of any officer of the
Corporation, and of any person herein authorized to act in his place, the Board
of Directors may from time to time delegate the powers or duties of such officer
to any other officer or any Director or other person whom they may select. The
Board of Directors may delegate duties and powers to any elected or appointed
officer of the Corporation even though such duties and powers are vested in
other officers of the Corporation.
5. Vacancies in any office arising from any cause may be filled by the
Directors at any regular or special meeting.
6. The Board of Directors may appoint such other officers and agents as it
shall deem necessary or expedient, who shall hold their offices or appointed
positions for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board of Directors.
7. The salaries of all officers and agents shall be fixed by the Board of
Directors. Salaries of all employees of the Corporation (the officers or agents
shall not be included within the term "employees" for the purpose of this
Section) shall be fixed by the President or a Vice President, except that the
President may delegate such powers to other officers or agents as to employees
under their immediate control.
8. Any officer or agent elected or appointed by the Board of Directors may
be removed, at any time, with or without cause, by the Board of Directors or by
the President.
ARTICLE VI -- FISCAL YEAR
The fiscal year shall terminate at the close of business on the Sunday
closest to December 31 of each year.
ARTICLE VII -- NOTICES
1. Whenever the laws of the State of Florida or these By-Laws require
notice to be given to any Director, officer or stockholder, they shall not be
construed to mean personal notices; such notice may be given by telegram or may
be given by depositing written notice in a post office or letter box, in a
post-paid sealed wrapper, addressed to such Director, officer or stockholder at
his or her address as the same appears in the books of the Corporation; and the
time when the same shall be mailed shall be deemed to be the time of the giving
of such notice.
2. Waiver of any notice in writing, signed by a stockholder, Director or
officer, whether before or after the time stated in said waiver for holding a
meeting, shall be deemed equivalent to a notice required to be given by the laws
of the State of Florida or these By-Laws to any Director, officer or
stockholder. This provision of the By-Laws shall be liberally construed.
ARTICLE VIII -- ACTION WITHOUT MEETING
Nothing contained in these By-Laws shall be deemed to prohibit the Board of
Directors of this Corporation or any committee thereof from proceeding in
accordance with any provision of the laws of the State of Florida now or
hereafter in effect pursuant to which any action of the Board of Directors of
the Corporation or of any committee thereof, which is required or permitted to
be taken at a meeting, may be taken without a meeting if written consent to the
action signed by all the members of the Board of Directors or the committee, as
the case may be, is filed in the minutes of the proceedings of the Board of
Directors or committee prior to the taking of such action.
4
<PAGE> 5
ARTICLE IX -- AMENDMENT OR REPEAL OF BY-LAWS
The By-Laws may be amended or repealed by the Board of Directors of the
Corporation; provided that notice in general terms of such amendment or repeal
has been given to each member of the Board of Directors in writing at least five
(5) days prior to said meeting, provided that such notice shall not be required
in the event of (a) the signing by all members of the Board of Directors of a
Waiver of Notice of meeting incorporating the amendment or the repeal or (b) the
presence of all members of the Board of Directors at the meeting at which the
amendment or repeal is considered and acted upon by the Board of Directors.
ARTICLE X -- INDEMNIFICATION
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 his 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.
ARTICLE XI -- OTHER COMMITTEES
The Board of Directors may appoint an Audit and Finance Committee, a
Nominating and Compensation Committee and such other committees as the Board of
Directors deem appropriate. The number of members of these committees shall
consist of such number as are deemed appropriate by the Board of Directors.
ARTICLE XII -- CONTROL-SHARE ACQUISITIONS ELECTION
Pursuant to Section 607.0902(5) Florida Statutes, the Corporation elects
that Section 607.0902 not apply to control-share acquisitions (as defined in the
Statute) of the shares of The Wackenhut Corporation (TWC), effective July 28,
1990.
5
<PAGE> 1
EXHIBIT 4.2
June 8, 1995
Mr. Richard C. DeCook
Senior Vice President - Finance and
Chief Financial Officer
The Wackenhut Corporation
1500 San Remo Avenue
Coral Gables, FL 33146-3036
Re: The Revolving Credit and Reimbursement Agreement ("Credit
Agreement") by and among The Wackenhut Corporation ("The
Company"), NationsBank of Florida, National Association
("Agent and Lender"), and Bank of America Illinois ("Lender")
dated as January 5, 1995.
Dear Mr. DeCook:
This letter acknowledges the Agents and Lender release effective June 8, 1995
of all Collateral (including all funds on deposit in the B of A account)
pledged under the Letter of Credit Account Agreement dated as of January 5,
1995. In addition, pursuant to Section 2.10 Reduction in Commitment, the
Company agrees within 30 days of the Collateral release to reduce the Total
Revolving Loan Commitment amount to $50,000,000.
The execution and delivery of this letter shall be deemed to expressly or
impliedly waive, amend, modify or supplement any provisions of the Credit
Agreement other than as set forth herein.
This letter may be executed by the parties on separate counterparts, each of
which shall be deemed to be an original, and all of which shall together
constitute but one and the same instrument.
<PAGE> 2
Very truly yours,
NationsBank of Florida, National Bank of America Illinois, as Lender
Association, as Agent and Lender
By: By:
---------------------- -------------------------
Name: John A. Miller Name: Laurens F. Schaad Jr.
Title: Vice President Title: Vice President
Agreed To:
The Wackenhut Corporation Titania Insurance Company of America
By: By:
----------------------- -------------------------
Name: Terry P. Mayotte Name: James P. Rowan
Title: Assistant Treasurer Title: Vice President
<PAGE> 1
EXHIBIT 4.3
August 24, 1995
Mr. John Miller
Vice President
NationsBank of Florida
150 S. E. 3rd Avenue, Suite 411
Miami, Florida 33131
RE: The $60,000,000 Revolving Credit and Reimbursement Agreement ("The
Agreement") by and among The Wackenhut Corporation ("The Company"),
NationsBank of Florida N.A. as agent, and Bank of America Illinois.
Dear John:
Pursuant to Section 2.10: Reduction in Commitment of the above Agreement and
further to the Letter Agreement dated June 8, 1995, this letter serves to
notify you that effective August 22, 1995 the Total Revolving Loan Commitment
is reduced from $60,000,000 to $50,000,000.
Sincerely,
The Wackenhut Corporation
By:
-------------------
Name: Terry P. Mayotte
Title: Assistant Treasurer
<PAGE> 1
EXHIBIT 4.5
FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
THIS FIRST AMENDMENT agreed to as of this 15th day of December, 1995,
by and among THE WACKENHUT CORPORATION, a Florida corporation ("Seller"),
RECEIVABLES CAPITAL CORPORATION a Delaware corporation ("RCC"), ENTERPRISE
FUNDING CORPORATION, a Delaware corporation ("Enterprise"; and together with
RCC, the "Purchasers" and each individually a "Purchaser"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association
("BofA"), as agent for RCC, NATIONSBANK, N.A., a national banking association
("NationsBank") as agent for Enterprise (each in such capacity as agent for the
specified Purchaser, a "Managing Agent" and together, the "Managing Agents")
and BofA, as administrative agent for the Purchasers and the Managing Agents (in
such capacity, the "Administrative Agent").
RECITALS
A. Seller, RCC, Enterprise, the Administrative Agent and each
Managing Agent entered into a Receivables Purchase Agreement dated as of
January 5, 1995 (the "Receivables Purchase Agreement"), pursuant to which the
Seller has agreed to sell to the Purchasers undivided percentage interests in
receivables generated in the ordinary course of its business and in the
ordinary course of business of one or more of its wholly-owned subsidiaries.
B. Seller, RCC, Enterprise, the Administrative Agent and each
Managing Agent now desire to (i) increase the committed amount of the
receivables purchase facility to $50,000,000 and (ii) modify the Receivables
Purchase Agreement in various particulars as specified herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is mutually agreed as follows:
1. Appendix A; Definition of Three-Month Default Ratio. The
definition of "Three-Month Default Ratio" in Appendix A of the Receivables
Purchase Agreement is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"'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) calculated as at each of the three most
recent 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)
calculated as at each of the three most recent
<PAGE> 2
Month End Dates."
2. Increase Purchase Limit. The term "$40,000,000" in the
definition of "Maximum Purchase Limit" in clause (x) of Section 1.02(a) of the
Receivables Purchase Agreement is hereby amended to read "$50,000,000".
3. Limit on Three-Month Dilution Ratio. The term "4%" in Section
10.01(j) of the Receivables Purchase Agreement is hereby amended to read
"2.5%".
4. Conditions Precedent. This First Amendment shall be effective
upon receipt by each Purchaser and the Administrative Agent of an executed
original hereof, together with each of the following, each in substance and form
acceptable to the Purchasers and the Administrative Agent in their sole
discretion:
(a) A copy of the resolutions of the Board of Directors of Seller
approving this First Amendment and the transactions contemplated hereby,
including without limitation the increase of the Maximum Purchase Limit,
certified by its Secretary or Assistant Secretary;
(b) A certificate of the Secretary or Assistant Secretary of the
Seller certifying the names and true signatures of the officers authorized
on its behalf to sign this First Amendment;
(c) A favorable opinion of associate General Counsel for Seller; and
(d) The fee letter, properly executed and delivered by the Seller,
and payment of the fee described therein.
5. Representations and Warranties. The Seller hereby represents
and warrants as follows:
(a) The Seller has all requisite power and authority to execute
this First Amendment and to perform all of its obligations hereunder,
and this First Amendment has been duly executed and delivered by the
Seller and constitutes the legal, valid and binding obligations of the
Seller, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Seller of this
First Amendment have been duly authorized by all necessary corporate
action and do not (i) require any authorization, consent or approval by
any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order,
-2-
<PAGE> 3
writ, injunction or decree presently in effect, having
applicability to the Seller, or the articles of
incorporation or bylaws of the Seller, or (iii) result in a
breach of, or constitute a default under, any indenture or
loan or credit agreement or any other agreement, lease or
instrument to which the Seller is a party or by which it or
its properties may be bound or affected.
(c) All of the representations and warranties of the
Seller contained in Article VI of the Receivables Purchase
Agreement are correct on and as of the date hereof as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier
date.
6. Original Terms. Except as amended by this First Amendment,
all the orginal terms and conditions of the Receivables Purchase Agreement
shall remain in full force and effect.
7. Defined Terms. Except as expressly provided herein, all
defined terms shall have the same meanings as set forth in the Receivables
Purchase Agreement.
8. No Waiver. The execution of this First Amendment and
acceptance of any documents related hereto shall not be deemed to be a
waiver of any Termination Event under the Receivables Purchase Agreement
or breach, default or event of default under any Agreement Document,
whether or not known to any Purchaser, Managing Agent or the Administrative
Agent and whether or not existing on the date of this First Amendment.
9. Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
10. Captions. The various captions in this First Amendment
are included for convenience only and shall not affect the meaning or
interpretation of any provision of this First Amendment.
11. Execution in Counterparts. This First Amendment may be
executed, acknowledged or accepted in any number of counterparts, each
of which when so executed, acknowledged or accepted shall be deemed to
be an original and all of which when taken together shall constitute
one and the same First Amendment.
12. Effectiveness. This First Amendment shall be effective
upon the receipt by each Purchaser and the Administrative Agent of all
fully-executed counterparts and the conditions precedent described in
paragraph 4 hereof.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the day and year first above-written.
THE WACKENHUT CORPORATION
as Seller and initial Servicer
By
----------------------------
Title
-----------------------
RECEIVABLES CAPITAL CORPORATION,
as a Purchaser
By
----------------------------
Title
-----------------------
ENTERPRISE FUNDING CORPORATION,
as a Purchaser
By
----------------------------
Title
-----------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as a Managing Agent and as the
Administrative Agent
By
----------------------------
Vice President
NATIONSBANK, N.A.,
as a Managing Agent
By
----------------------------
Vice President
SIGNATURE PAGE TO FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
-4-
<PAGE> 1
EXHIBIT 4.8
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED REVOLVING CREDIT AND
REIMBURSEMENT AGREEMENT (the "Amendment Agreement") is made and entered into
this 18 day of May, 1994 by and among THE WACKENHUT CORPORATION, a Florida
corporation having its principal place of business in Coral Gables, Florida (the
"Borrower"), and NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, a national
banking association in its capacity as agent (the "Agent") for each of the
lenders (the "Lenders") party to the Credit Agreement (as defined below). Unless
the context otherwise requires, all terms used herein without definition shall
have the definition provided therefor in the Credit Agreement.
WITNESSETH:
WHEREAS, the Borrower, the Agent and the Lenders have entered into the
Amended and Restated Revolving Credit and Reimbursement Agreement dated July 1,
1993 whereby the Lenders have made loans and advances to, and issued letters of
credit for the benefit of, the Borrower, as at any time hereafter amended,
restated, modified or supplemented, the "Credit Agreement"; and
WHEREAS, the Borrower, the Lenders and the Agent have agreed that the
Credit Agreement shall be amended in the manner set forth herein;
NOW, THEREFORE, in consideration of the premises and conditions herein set
forth, it is hereby agreed as follows:
1. AMENDMENT. Subject to the conditions hereof, the Credit Agreement is
hereby amended, effective as of the date hereof, as follows:
(a) Section 1.01 thereof is hereby amended as follows:
(i) to include, immediately preceding the definition of "Business Day," the
following definition:
" 'Bridge Note' means the $4,500,000 Term Note of Wackenhut Corrections
Corporation dated May , 1994 and payable to the order of NationsBank, as the
same may be extended, modified, substituted or replaced;"
(ii) the definition of "Total Revolving Loan Commitment" is hereby amended
in its entirety to read as follows:
" 'Total Revolving Loan Commitment' means (i) for the period from the
Closing Date to September 30, 1994, $60,000,000 less the greater of (a)
$20,000,000 if the Company shall sell any of its capital stock, or (b) the net
proceeds received by the Company from any other financing permitted under this
Agreement (other than a refinancing of Indebtedness of The Atrium at Coral
Gables, Ltd., so long as the proceeds of such financing are applied to pay such
Indebtedness and the balance, if any, to reduce the Total Revolving Loan
Commitment), and (ii) after September 30, 1994, $40,000,000, as reduced pursuant
to Section 2.10 hereof; PROVIDED, HOWEVER, that the Total Revolving Loan
Commitment as determined above shall be further reduced by an amount equal to
the principal outstanding under the Bridge Note as of the date of such
determination;"
(b) Section 7.09(b)(i) thereof is hereby amended in its entirety to read as
follows:
"(i) Indebtedness arising under this Agreement and the Bridge Note,"
(c) Section 8.01 thereof is hereby amended to add a new paragraph (l) as
follows and to renumber existing paragraph (l) as paragraph (m):
<PAGE> 2
"(l) Any Default or Event of Default (as defined therein) shall have
occurred under the Bridge Note; or"
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and the
Lenders to enter into this Amendment Agreement, the Borrower hereby represents
and warrants that the Credit Agreement has been re-examined by the Borrower and
that except as disclosed by the Borrower in writing to the Lenders as of the
date hereof:
(a) The representations and warranties made by the Borrower in Article IV
thereof are true on and as of the date hereof;
(b) There has been no material change in the condition, financial or
otherwise, of the Borrower and its Subsidiaries since April 4, 1993 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 since April 4, 1993 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
(d) After giving effect to this Amendment Agreement no condition exists
which, upon the effectiveness of the amendment contemplated hereby, would
constitute a Default or an Event of Default on the part of the Borrower under
the Credit Agreement or the Notes, either immediately or with the lapse of time
or the giving of notice, or both.
3. CONSENT TO SALE OF CAPITAL STOCK. The Agent and the lenders hereby
consent to the issuance and sale of up to 31% (as determined on the date of such
sale) of the outstanding capital stock of Wackenhut Corrections Corporation to a
Person other than the Borrower or a Wholly-Owned Restricted Subsidiary.
4. CONDITIONS PRECEDENT. The effectiveness of this Amendment Agreement is
subject to the receipt by the Agent of the following:
(i) four counterparts of this Amendment Agreement duly executed by all
signatories hereto;
(ii) opinion of counsel for the Borrower as to the authorization, execution
and delivery of this Amendment Agreement and the enforceability of the same
against the Borrower in accordance with its terms;
(iii) an amount equal to the aggregate legal fees incurred by the Agent in
connection with the negotiation, review and execution of this Amendment
Agreement; and
(iv) copies of all additional agreements, instruments and documents which
the Agent may reasonably request, such documents, when appropriate, to be
certified by appropriate governmental authorities.
All proceedings by the Borrower relating to the matters provided for herein
shall be satisfactory to the Lenders, the Agent and their counsel.
5. 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, condition, 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 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.
2
<PAGE> 3
6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
7. COUNTERPARTS. This Amendment Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
8. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY (i) SUBMITS TO
THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE
PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION AND (ii) WAIVES
TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
9. ENFORCEABILITY. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
10. CREDIT AGREEMENT. All references in any of the Loan Documents to the
Credit Agreement shall mean and include the Credit Agreement as amended hereby.
11. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be binding upon
and inure to the benefit of each of the Borrower, the Lenders, the Agent and
their respective successors, assigns and legal representatives; PROVIDED,
however, that the Borrower, without the prior consent of the Lenders, may not
assign any rights, powers, duties or obligations hereunder.
[Remainder of page intentionally left blank.]
3
<PAGE> 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.
<TABLE>
<S> <C>
BORROWER:
(CORPORATE SEAL) THE WACKENHUT CORPORATION
ATTEST: By: /s/ Richard C. DeCook
--------------------------------------------
Name: Richard C. DeCook
------------------------------------------
Title: SR. V.P.
-----------------------------------------
- --------------------------------------------
Asst. Secretary
</TABLE>
Signature Page 1 of 2
<PAGE> 5
NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent for the Lenders
By: /s/ John A. Miller
------------------------------------
Name: John A. Miller
------------------------------------
Title: Vice President
------------------------------------
NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Lender
By: /s/ John A. Miller
------------------------------------
Name: John A. Miller
------------------------------------
Title: Vice President
------------------------------------
Signature Page 2 of 2
<PAGE> 1
EXHIBIT 10.3
[WACKENHUT 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
<PAGE> 2
TABLE OF CONTENTS
<TABLE> PAGE
----
<S> <C> <C>
INTRODUCTION ii
ARTICLE I DEFINITIONS 1
ARTICLE II PARTICIPANT ELIGIBILITY 2
ARTICLE III BENEFITS 3
ARTICLE IV WHEN BENEFITS ARE PAYABLE 3
ARTICLE V ADMINISTRATION 6
ARTICLE VI AMENDMENT, TERMINATION AND EXCEPTIONS 7
ARTICLE VII MISCELLANEOUS 7
</TABLE>
i
<PAGE> 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
<PAGE> 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 ELIGIBILITY
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.
<TABLE>
<CAPTION>
Position Time Period
-------- -----------
<S> <C>
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 years
Group Level
Sr. Vice President at After ten years of service and having been
Division Level in position for two years
</TABLE>
2
<PAGE> 5
Vice President at After ten years of service and having been
Division Level in position for two years
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
<PAGE> 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.
<TABLE>
<S> <C> <C>
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
-------
</TABLE>
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.
<TABLE>
<S> <C> <C>
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
------------
</TABLE>
4
<PAGE> 7
Monthly payment for life $ 1,538
-------
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
<PAGE> 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
ADMINISTRATION
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
6
<PAGE> 9
rely upon all 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
Directors 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
<PAGE> 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
<PAGE> 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";
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 6
living, or to his wife is 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 amount 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
<PAGE> 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
<PAGE> 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
8
<PAGE> 9
the extent of the cash surrender value.
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
<PAGE> 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.
(iii) In no event shall Employer's
10
<PAGE> 11
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
Attests: /s/ J. P. Rowan By: /s/ J. Calvin Harris
---------------------- --------------------------
11
<PAGE> 12
Owner:
GEORGE WACKENHUT IRREVOCABLE TRUST
Northern Trust Bank, N.A.
Co-Trustee
By: /s/ Deanne M. RT
------------------------------------
/s/ Donald B. Paul
------------------------------------
Donald B. Paul, CPA
Co-Trustee
Owner:
RUTH WACKENHUT IRREVOCABLE TRUST
Northern Trust Bank, N.A.
Co-Trustee
By: /s/ Deanne M. RT
------------------------------------
/s/ Donald B. Paul
------------------------------------
Donald B. Paul, CPA
Co-Trustee
Employee:
/s/ G. R. Wackenhut
------------------------------------
George Wackenhut
Employee's Wife
/s/ Ruth Wackenhut
------------------------------------
Ruth Wackenhut
12
<PAGE> 13
Schedule A
<TABLE>
<CAPTION>
Company Policy # Face Amount
- ------- -------- -----------
<S> <C> <C>
Manufacturers Life Insurance Company 5,130,509-2 $800,000
</TABLE>
<PAGE> 14
Schedule B
Employer Premium Payments Per Paragraph IVB(1)
<TABLE>
<CAPTION>
Year Employer's Premium
---- ------------------
<S> <C>
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
</TABLE>
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.
<PAGE> 15
Schedule C
Owner Premium Payments Per Paragraph IVB(2)
<TABLE>
<CAPTION>
Year Owner's Premium
---- ------------------
<S> <C>
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
</TABLE>
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.
<PAGE> 1
EXHIBIT 10.5
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, 2011
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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 10 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
<PAGE> 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
<PAGE> 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 Specifications for such work as provided
in Paragraph 3.A. above; (ii) the
7
<PAGE> 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 1.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
<PAGE> 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
(lst) day of the month, Rent from the Rental Commencement Date until the first
(lst) 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
<PAGE> 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
<PAGE> 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
<PAGE> 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 equipment 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
<PAGE> 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
F+/- 2.
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
<PAGE> 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. Indemnification. Tenant shall indemnify, defend and hold Landlord, its
agents and employees, harmless from and against any
14
<PAGE> 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
<PAGE> 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
<PAGE> 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 Paragrpah, 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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 guidelines 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
<PAGE> 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
<PAGE> 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 "J", 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
logo on 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 1
EXHIBIT 10.6
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").
B A C K G R O U N D:
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:
------------------------------
- ------------------------- Daniel S. Catalfumo, President
THE WACKENHUT CORPORATION
- -------------------------
BY:
- ------------------------- ------------------------------
Robert C. Kneip, Senior
Vice-President
<PAGE> 1
EXHIBIT 10.7
PROMISSORY NOTE
U.S. $9,000,000.00 MIAMI, FLORIDA
December 21 , 1995
FOR VALUE RECEIVED, ACP-ATRIUM CG, LIMITED PARTNERSHIP, a Florida
limited partnership, having an office at 3440 Hollywood Boulevard, #420,
Hollywood, Florida 33021 (the "Maker"), promises to pay to the order of THE
WACKENHUT CORPORATION, a Florida corporation, its successors and assigns (the
"Lender"), the principal sum of NINE MILLION AND NO/100 DOLLARS ($9,000,000.00)
(the "Principal Amount"), together with interest thereon (computed daily on the
outstanding principal balance of this Note) at a daily rate, expressed as a
fraction the denominator of which is three hundred sixty five (365), and the
numerator of which is six and one-half percent (6.5%), per annum.
The principal and interest due under this Note shall be payable in
lawful money of the United States of America to the order of Lender at 1500 San
Remo Avenue, Coral Gables, Florida or at such other place as may be designated
in writing by Lender, as follows:
Monthly installments equal to one hundred percent (100%) of the
Maker's Net Cash Flow (as hereinafter defined) for the preceding month, shall
be due and payable on the 15th day of each month beginning February 15, 1996.
The "preceding month" as used herein shall mean the preceding calendar month
except with respect to the first installment due February 15, 1996 which shall
include 100% of Maker's Net Cash Flow (as hereinafter defined) commencing on
the date hereof through and including January 31, 1996.
Such monthly installments shall continue until the entire indebtedness
evidenced by this Note is fully paid, except that any remaining indebtedness,
if not sooner paid, shall be due and payable in full on December 21, 1997 (the
"Final Payment Date").
Each monthly installment shall be applied first to accrued interest on
the unpaid Principal Amount, then to late charges, if any, and then to the
repayment of any deferred interest which has been capitalized and added to the
Principal Amount as set forth below, provided, however, that each monthly
installment may be applied by the Lender to the repayment of any sums advanced
by the Lender pursuant to the terms of the Mortgage (as hereinafter defined).
Prior to default and acceleration of the entire Principal Amount, accrued
interest remaining unpaid after application of each monthly installment as set
forth above shall be added to the Principal Amount hereof as of the 15th day of
each
<PAGE> 2
month and shall thereafter bear interest at the interest rate set forth above
until paid.
The Maker shall deliver to Lender with each such monthly installment a
statement of Maker's Operating Income, Operating Expenses and Net Cash Flow (as
such terms are hereinafter defined) computed on a cash basis in accordance with
generally accepted accounting principles, consistently applied, covering the
preceding month and certified by an officer of Maker to be accurate and
complete. In addition, Maker shall deliver to Lender within ninety (90) days
after the end of each calendar year commencing with calendar year 1996, an
annual financial and operating statement covering the Property (as hereinafter
defined) in such detail as may be reasonably required by Lender, certified as
accurate and complete by an officer of Maker, including the current rent roll,
the gross income received, all operating expenses, the net operating income and
depreciation for federal income tax purposes. Furthermore, Maker shall deliver
to Lender a copy of Maker's federal income tax return at the time the return is
filed with the Internal Revenue Service (but not later than July 1 of each
calendar year). Failure by Maker to deliver the statements and income tax
returns by the dates required above shall constitute a default under this Note.
For purposes of this Note, the following terms shall have the following
meanings:
"Affiliate" or "Affiliates" shall mean a person or entity controlling,
controlled by or under common control of the Maker.
"Capital Expenditure" shall mean any expenditure which is capitalized under
generally accepted accounting principles.
"Leasing Costs" shall mean any leasing commission, cash tenant allowance,
amount loaned to a tenant (provided such loan was made in connection with such
tenant's status as a tenant and in connection with a lease agreement with such
tenant), "free rent", reduced rent, or other income concession, the cost of any
refurbishment, build-out, or improvement to the premises leased to a tenant or
other out of pocket cost or expense of Maker allocable to a lease.
"Net Cash Flow" shall mean for the preceding month, the amount, if any, by
which Operating Income for such period exceeds Operating Expenses for such
period.
"Operating Expenses" shall mean for the preceding month, all expenses, computed
on a cash basis in accordance with generally accepted accounting principles,
consistently applied, paid by Maker during such period in connection with the
operation of the Property, as follows:
2
<PAGE> 3
(a) expenses in connection with the cleaning, repair, maintenance,
decoration and painting of the Property, net of any insurance proceeds in
respect of any of the foregoing;
(b) wages, benefits, payroll taxes, uniforms, insurance costs and all
other related expenses for on-site building personnel, up to and including the
level of the on-site building manager, engaged in the repair, operation and
maintenance of the Property and service to tenants;
(c) management fees at prevailing market rates except that if any such
fees are paid to an Affiliate of Maker then management fees in excess of 6% of
the Operating Income shall be excluded to the extent such fees are not included
in Operating Income.
(d) the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar item and
overtime services and the cost of building and cleaning supplies;
(e) all taxes (including, without limitation, real estate taxes,
personal or other property taxes and all sales, value added, use and similar
taxes), assessments, water, sewer or other rents, rates and charges, excises,
levies, license fees, permit fees, inspection fees and other authorization fees
and other charges, of every character that may be assessed, levied, confirmed
or imposed on or in respect of or be a lien upon (a) the Property or any part
thereof or any rent therefrom or (b) any occupancy, use, leasing or possession
of the Property or any part thereof or any gross receipt thereof or of the rent
therefrom. Notwithstanding the foregoing, there shall be excluded from taxes
as defined herein any income, profits or revenue tax upon the income of Maker
or any franchise, excise, corporate, estate, inheritance, succession, capital
levy or transfer tax of Maker.
(f) rent, liability, casualty and fidelity insurance premiums (which
in the case of any policies covering multiple properties, shall be allocated to
the Property pro rata in proportion to the insured value of the properties
covered by such policies);
(g) legal and accounting fees directly related to the operation of the
Property based on a reasonable allocation of such fees and expenses by Maker if
not separately charged by such providers;
(h) all other expenses paid by the Maker which in accordance with
generally accepted accounting principles would be included in Maker's annual
financial statements for such period as operating expenses of the Property.
Notwithstanding the foregoing, Operating Expenses shall not include
(i) any Capital Expenditure, Leasing Cost or any
3
<PAGE> 4
depreciation or amortization thereof; (ii) interest, principal and premium, if
any, paid in respect of this Note or any principal, interest or other
indebtedness paid in respect of any other loan to Maker, including without
limitation, that certain second mortgage loan made of even date herewith by ALI
Inc. to Maker or any renewals, additional advances or replacements thereof or
thereunder now or hereafter created, arising or existing; (iii) income taxes of
Maker; (iv) any expenses (including legal, accounting and other professional
fees) incurred in connection with the purchase, financing or refinancing of all
or any portion of the Property or in connection with the recovery of any
insurance proceeds related thereto unless and to the extent such expenses
exceed the proceeds recovered, or (v) any item of expense otherwise includable
in Operating Expenses but paid directly or reimbursed by any tenant (and not
included in Operating Income), insurance company or other third party.
"Operating Income" shall mean for any period, all income of Maker, computed on
a cash basis and in accordance with generally accepted accounting principles,
consistently applied, received during such period from the operation of the
Property, including, but not limited to the following:
(a) all income received by Maker from any person (including an
Affiliate of Maker) as rent, charges for electricity, oil, gas, water, steam,
heat, ventilation, air conditioning and any other energy, utility or similar
items and overtime services, escalation and reimbursement charges, management
fees, license fees, payment of interest on and amortization of the principal of
any amount loaned to a tenant which qualifies as a "Leasing Cost", and other
amounts under leases, license agreements or other agreements relating to the
Property pursuant to which space, utilities, facilities or equipment and/or
other services are furnished by Maker and parking revenues received by Maker
from the operation of the garage constituting part of the Property;
(b) rent or business interruption insurance proceeds; and
(c) all other amounts which in accordance with generally accepted
accounting principles would be included in Maker's annual financial statements
for such period as operating income of the Property.
Notwithstanding the foregoing, Operating Income shall not include (i)
any condemnation or insurance proceeds (other than rent or business
interruption insurance proceeds or any award for a temporary taking) or (ii)
any proceeds resulting from the transfer, financing or refinancing of all or
any portion of the Property, provided the net proceeds received by Maker in
respect thereof are expended solely for Capital Expenditures or Leasing Costs.
4
<PAGE> 5
"Property" shall mean the real property, including the building and
improvements situated thereon, encumbered by the Mortgage in favor of Lender
given by Maker of even date therewith as security for this Note, located at
1500 San Remo Avenue, Coral Gables, Florida and commonly known as The Atrium
at Coral Gables.
The payment of this Note shall be secured, inter alia, by a valid,
subsisting Purchase Money Real Estate Mortgage, Assignment and Security
Agreement by the Maker (the "Mortgage") encumbering certain real property
located in Dade County, Florida.
If default be made in the payment of any installment under this Note
or if the Maker violates any of the terms or breaches any of the conditions of
the Mortgage or any of the Loan Documents (as such term is defined in the
Mortgage) and such default continues beyond the expiration of any cure period
applicable thereto, the entire principal sum and accrued interest shall become
due and payable without notice at the option of the Lender. Failure to
exercise this option shall not constitute a waiver of the right to exercise the
same at any other time. From and after default and until paid, the principal
of this Note and any part thereof, and accrued and unpaid interest, if any,
shall bear interest at the rate of twelve (12%) percent per annum (the "Default
Rate"). Without limiting the scope or generality of any other obligations of
Maker set forth in the Mortgage with respect to attorneys' fees, all parties
liable for the payment of this Note agree to pay the Lender hereof reasonable
attorneys' fees and paralegal fees for the services and expenses of counsel
employed after maturity or default to collect this Note (including any
bankruptcy proceedings or appeals relating to such enforcement proceedings), or
to protect or enforce its rights in any collateral securing this Note, whether
or not suit be brought.
The principal amount outstanding at any time hereunder may be prepaid
in whole or in part without prepayment penalty or premium.
The remedies of Lender as provided herein, in the Mortgage and in the
other Loan Documents shall be cumulative and concurrent, and may be pursued
singly, successively or together, at the sole discretion of Lender, and may be
exercised as often as occasion therefor shall arise.
Maker and all sureties, endorsers and guarantors of this Note hereby
waive demand, presentment for payment, notice of nonpayment, protest, notice of
protest and all other notice, filing of suit and diligence in collecting this
Note, in enforcing any of the security rights or in proceeding against any
collateral securing this Note, and agree that this Note may be enforced by
Lender against them without the necessity at any time of resorting to or
exhausting any of the collateral for the Note, and waive the right to require
the Lender to proceed against any of the collateral, or to require the Lender
to pursue any other remedy or enforce any right.
5
<PAGE> 6
This Note shall be governed by, and construed and enforced according
to, the laws of the State of Florida, without giving effect to principles of
conflict of law, except where specifically preempted by federal law. Any action
brought against the Maker, or any guarantor or indemnitor of the indebtedness
or obligations arising under this Note, may be brought, at the Lender's option,
in the State or Federal Courts of Dade County, Florida and Maker hereby submits
to jurisdiction in such location.
The Lender may, in determining the maximum rate of interest permitted
under applicable law in effect from time to time, take advantage of any law,
rule or regulation in effect from time to time available to Lender which
exempts Lender from any limit upon the rate of interest it may charge or grants
to Lender the right to charge a higher rate of interest than that permitted by
Florida Statutes. Notwithstanding the foregoing, the Lender does not intend to
violate any applicable usury laws. Accordingly, all agreements between Maker
and Lender are expressly limited so that in no contingency or event whatsoever,
whether by reason of advancement of the proceeds hereof, acceleration of
maturity of the unpaid principal balance hereof, or otherwise, shall the amount
paid or agreed to be paid to the Lender for the use, forbearance or detention
of the money to be advanced hereunder (including all interest on this Note, all
loan fees, and the aggregate of all other amounts taken, reserved or charged
pursuant to this Note, or the Mortgage which, under applicable laws is or may
be deemed to be interest) exceed the maximum rate allowed by applicable law.
If, from any circumstances whatsoever, fulfillment of any Security Document, at
the time performance of such obligation shall be due, shall cause the effective
rate of interest upon the sums evidenced hereby to exceed the maximum rate of
interest allowed by applicable law, then, the obligation to be fulfilled shall
be reduced automatically to the extent necessary to prevent that effective rate
of interest from exceeding the maximum rate allowable under applicable law and
to the extent that the Lender shall receive any sum which would constitute
excessive interest, such sum shall be applied to the reduction of the unpaid
principal balance due hereunder and not to the payment of interest or, if such
excessive interest exceeds the unpaid balance of principal, the excess shall be
refunded to the Maker. This provision shall control every other provision of
all agreements between the Maker and the Lender.
THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING
OUT OF, UNDER OR IN CONNECTION WITH THE LOAN EVIDENCED BY THIS NOTE, AND ANY
INCREASES, AMENDMENTS, EXTENSIONS, MODIFICATIONS OR RENEWALS THEREOF, AND ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER
EXTENDING THIS LOAN, AND ANY INCREASES, AMENDMENTS,
6
<PAGE> 7
EXTENSIONS, MODIFICATIONS OR RENEWALS THERETO.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
hereinabove written.
SIGNED, SEALED AND DELIVERED "MORTGAGOR"
IN THE PRESENCE OF:
ACP-ATRIUM CG, LIMITED
PARTNERSHIP, a Florida
Limited Partnership
By: ACP-ATRIUM CG, INC., a
Florida corporation, its
general partner
By:
- --------------------------------- ---------------------------
PRINT NAME OF WITNESS BELOW: Name:
-------------------------
Title:
- --------------------------------- ------------------------
- ---------------------------------
PRINT NAME OF WITNESS BELOW:
- ---------------------------------
7
<PAGE> 8
STATE OF FLORIDA )
)ss:
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of
____________, 1995 by _________________________, ________________ of ACP-Atrium
CG, Inc., a Florida corporation, on behalf of the corporation as general
partner of ACP-Atrium CG, Limited Partnership. He/she is personally known to
me or has produced ____________________ (type of identification) as
identification.
My Commission Expires: ---------------------------------
NOTARY PUBLIC
- ---------------------- Print Name
----------------------
Commission No.
------------------
[NOTARIAL SEAL]
8
<PAGE> 1
EXHIBIT 10.8
PURCHASE MONEY
REAL ESTATE MORTGAGE, ASSIGNMENT,
AND SECURITY AGREEMENT
(The "Mortgage")
Effective Date: December 21, 1995
Mortgagor: ACP-Atrium CG, Limited Partnership,
a Florida limited partnership
3440 Hollywood Boulevard, #420
Hollywood, Florida 33021
Mortgagee: The Wackenhut Corporation
1500 San Remo Avenue
Coral Gables, FL 33143
Amount of purchase Nine Million and no/100 Dollars
money loan secured ($9,000,000.00)
hereby:
Land (description of See Exhibit A attached hereto and
real estate): incorporated
herein by reference.
1. MORTGAGE. In consideration of Ten Dollars ($10.00) and
other valuable consideration received by Mortgagor, the receipt and sufficiency
of which are hereby acknowledged, Mortgagor hereby grants, bargains, sells,
assigns, transfers, conveys and mortgages to Mortgagee, its successors and
assigns. to its own proper use and benefit forever, subject to the terms and
conditions of this Mortgage, the real estate described above as the Land,
together with:
<PAGE> 2
(a) Appurtenances. The benefit of all easements and
other rights of any nature whatsoever, if any, appurtenant to the Land or the
Improvements, or both, the benefit of all rights-of-way, strips and gores of
land, streets, alleys, passages, drainage rights, sanitary sewer and potable
water rights. storm water drainage rights, rights of ingress and egress to the
Land and all adjoining property, and any improvements of Mortgagor now or
hereafter located on any of such real property, interests, water rights and
powers, oil, gas, mineral and riparian and littoral rights, whether now
existing or hereafter arising, together with the reversion or reversions,
remainder or remainders, rents, issues, incomes and profits of any of the
foregoing (the "Appurtenances").
(b) Improvements. All buildings, structures,
betterments and other improvements of any nature now or hereafter situated in
whole or in part upon the Land or on the Appurtenances, regardless of whether
physically affixed thereto or severed or capable of severance therefrom (the
"Improvements").
(c) Tangible Property. All of Mortgagor's right, title
and interest, if any, in and to all fixtures, equipment and tangible personal
property of any nature whatsoever that is now or hereafter (i) attached or
affixed to the Land, the Appurtenances, or the Improvements, or (ii) situated
upon or about the Land, the Appurtenances and/or the Improvements, regardless
of whether physically affixed thereto or severed or capable of severance
therefrom, or (iii) used, regardless of where situated, if used, usable or
intended to be used, in connection with any present or future use or operation
of or upon the Land. The foregoing includes: all goods and inventory, all
heating, air conditioning, lighting, incinerating and power equipment; all
engines compressors, pipes, pumps, tanks, motors, conduits wiring, and
switchboards; all plumbing, lifting, cleaning, fire prevention, fire
extinguishing, refrigerating, ventilating, and communications and public
address apparatus; all signage and recreational amenities including, without
limitation, swimming pools, exercise equipment, tennis courts, clubhouse
furnishings or saunas; all boilers, furnaces, oil burners, vacuum cleaning
systems, elevators and escalators; all stoves, ovens, ranges, disposal units,
dishwashers, water heaters, exhaust systems, refrigerators, cabinets, and
partitions; all rugs, draperies and carpets; all laundry equipment; all
building materials; all furniture (including, without limitation, any outdoor
furniture), furnishings, office equipment and office supplies; and all
additions, accessions, renewals, replacements and substitutions of any or all
of the foregoing. The property interests encumbered and described by this
Paragraph are called the "Tangible Property" in this Mortgage.
(d) Rents. All rents, issues, incomes and profits in
any manner arising from the Land, Improvements, Appurtenances or Tangible
Property, or any combination thereof, including Mortgagor's interest in and to
all leases of whatsoever kind or nature, licenses, franchises and concessions
of or relating to all or any portion of the Land, Appurtenances, Improvements
or Tangible Property, or the operation thereof, whether now existing or
hereafter made, including all amendments, modifications, replacements,
substitutions, extensions, renewals or consolidations thereof. The property
interests encumbered and described in this subparagraph are called the "Rents"
in this Mortgage.
2
<PAGE> 3
(e) Secondary Financing. Except as expressly permitted
pursuant to Paragraph 38 hereof, all of Mortgagor's right, power or privilege
to further encumber any of the Collateral described in this Paragraph 1, it
being intended by this provision to divest Mortgagor of the power to encumber
or to grant a security interest in any of the Collateral as security for the
performance of an obligation, except for "Permitted Encumbrances," as defined
in Paragraph 5 herein.
(f) Proceeds. All proceeds of the conversion,
voluntary, or involuntary, of any of the property encumbered by this Mortgage
into cash or other liquidated claims, or that are otherwise payable for injury
to or the taking or requisitioning of any such property, including all
judgments, settlements and insurance and condemnation proceeds as provided in
this Mortgage.
(g) Contract Rights. All of Mortgagor's right, title
and interest in and to any and all contracts or leases, written or oral,
express or implied, now existing or hereafter entered into or arising, in any
matter related to the improvement, use, operation, sale, conversion or other
disposition of any Interest in the Land, Appurtenances, Improvements, Tangible
Property or the Rents, or any combination thereof, including all tenant leases,
sales contracts, reservation deposit agreements, any and all deposits, prepaid
items, and due to become due thereunder; and including, without limitation,
contracts pertaining to maintenance, on-site security service, elevator
maintenance, landscaping services, building or project management, marketing,
leasing, sales and janitorial services; Mortgagor's interests as lessee in
equipment leases, including telecommunications, computers, vending machines,
model furniture, televisions, laundry equipment; and Mortgagor's interests in
construction contracts or documents (including architectural drawings and plans
and specifications relating to the Improvements), service contracts, use and
access agreements, advertising contracts and purchase orders. The property
interests encumbered and described in this Paragraph are called the "Contract
Rights" in this Mortgage. Notwithstanding the foregoing, Mortgagee will not be
bound by any of Mortgagor's obligations under any of the foregoing contracts
unless and until Mortgagee elects to assume any of such contracts or leases in
writing.
(h) Name. All right, title and Interest of Mortgagor in
and to all trade names, project names, logos, service marks, trademarks,
goodwill, and slogans now or hereafter used in connection with the operation of
the Mortgaged Property.
(i) Other Intangibles. All contract rights,
commissions, money, deposits, certificates of deposit, letters of credit,
documents, instruments, chattel paper, accounts, and general intangibles as
such term from time to time are defined in the Uniform Commercial Code as
adopted by the State of Florida (the "Uniform Commercial Code") in any manner
related to the construction, use, operation, sale, conversion or other
disposition (voluntary or involuntary) of the Land, Appurtenances,
Improvements, Tangible Property, or Rents, including all construction plans and
specifications, architectural plans, engineering plans and specifications,
permits, government or quasi-governmental approvals, licenses, developer
rights, vested rights under any Planned Unit Development or Development of
Regional Impact or other project, zoning, or land use approval, insurance
policies, rights of action and other choses in action.
3
<PAGE> 4
The Land Appurtenances, Improvements and Tangible Property are
collectively referred to as the "Mortgaged Property" in this Mortgage. The
portion of the property encumbered by this Mortgage that from time to time
consists of intangible personal property, except for the Rent, is called the
"Intangible Property" in this Mortgage. The Mortgaged Property, Rents,
Intangible Property and any other property interests encumbered hereby are
hereinafter referred to collectively as the "Collateral". Wherever used in
this Mortgage, the use of the terms, "Mortgaged Property," "Rents".
"Intangible Property," and "collateral" means and includes all or any portion
thereof applicable to the context.
Notwithstanding the grant of Mortgagor's interest in the Rents and
Contract Rights above, so long as no Default shall exist hereunder or under any
of the other Loan Documents, Mortgagor shall have a license to collect and
receive all incomes arising from the operation, ownership, and maintenance of
the Mortgaged Property, Rents and Contract Rights, but not more than one (1)
month prior to accrual.
2. SECURITY AGREEMENT. To the extent any of the Collateral
encumbered by this Mortgage from time to time constitutes personal property
subject to the provisions of the Uniform Commercial Code, this Mortgage
constitutes a "Security Agreement" for all purposes under the Uniform
Commercial Code. Without limitation, Mortgagee, at its election, upon the
occurrence of a Default under this Mortgage, will have all rights, powers,
privileges and remedies from time to time available to a secured party under
the provisions of the Uniform Commercial Code with respect to the Collateral.
The names and addresses of debtor and secured party are as shown for Mortgagor
and Mortgagee, respectively, on the signature pages hereof. The remedies for
any violation of the covenants, terms, and conditions of the security agreement
herein contained shall be (i) as prescribed herein, or (ii) as prescribed by
general law, or (iii) as prescribed by the specific statutory provisions now or
hereafter enacted and specified in the Uniform Commercial Code, all at
Mortgagee's sole election. Mortgagor and Mortgagee agree that the filing of
financing statement(s) in the records normally having to do with personal
property shall never be construed as in anywise derogating from or impairing
this declaration and hereby stated intention of Mortgagor and Mortgagee that
everything used in connection with the production of income from the Collateral
or adapted for use therein or which is described or reflected in this Mortgage,
is, and at all times and for all purposes and in all proceedings both legal or
equitable shall be, regarded as part of the real estate irrespective of whether
(i) any such item is physically attached to the Improvements, (ii) serial
numbers are used for the better identification of certain items capable of
being thus identified in a recital contained herein, or (iii) any such item is
referred to or reflected in any financing statement(s) so filed at any time.
Similarly, the mention in any financing statement of the rights in. or the
proceeds of, any fire, hazard or liability insurance policy, or any award in
eminent domain proceedings for a taking or for loss of value, or Mortgagor's
interest as lessor in any present or future lease, or rights to income growing
out of the use of the Mortgaged Property, whether pursuant to a lease or
otherwise, shall not be construed as altering any of Mortgagee's rights as
determined by this Mortgage, or otherwise available at law or in equity, or
impugning the priority of this Mortgage or the Loan Documents, or both, but
such mention in any financing statement is declared to be for Mortgagee's
protection if, as, and when any court holds that notice of Mortgagee's priority
of interest. to be effective against a particular class of
4
<PAGE> 5
persons, including the federal government and any subdivision or entities of
the federal government, must be perfected in the manner required by the Uniform
Commercial Code.
Mortgagor covenants and agrees that Mortgagor will furnish Mortgagee
with notice of any change in name, identity, or organizational structure,
mailing address, residences or principal place of business thirty (30) days
prior to the effective date of any such change. Mortgagor will promptly
execute any financing statements or other instruments deemed necessary by Bank
to prevent any filed financing statement from becoming misleading or losing its
perfected status or to reinstate any lapsed financing statement.
3. AFTER-ACQUIRED PROPERTY. Without the necessity of any
further act of Mortgagor or Mortgagee, the lien of and security interest
created by this Mortgage automatically will extend to and include (i) any and
all renewals, replacements, substitutions, accessions, proceeds, products,
additions or after-acquired property for or to the Collateral, and (ii) any and
all monies, proceeds and other property that from time to time, either by
delivery to Mortgagor or by any instrument (including this Mortgage) may be
subjected to such lien and security interest by Mortgagor or by anyone on
behalf of Mortgagor, or with the consent of Mortgagor, or which otherwise may
come into the possession or otherwise be subjected to the control of Mortgagee
or Mortgagor pursuant to this Mortgage or the other Loan Documents.
4. DEBT. Mortgagor is justly indebted to Mortgagee in the
principal amount of Nine Million Dollars ($9,000,000.00) as evidenced by that
certain Promissory Note of even date herewith made by Mortgagor payable to the
order of Mortgagee and maturing as stated in said Note, unless such maturity is
accelerated or extended (as provided in said Note), which Note, together with
any and all renewals, replacements, extensions, modifications, substitutions.
future advances, and any and all other certificates or evidence of indebtedness
evidenced by said Note is herein called the "Note".
Mortgagor's obligations described below are secured, among other
things, by the collateral described in this Mortgage. which term includes any
and all amendments, extensions, renewals, replacements, substitutions,
modifications and consolidations of this Mortgage, and may also from time to
time be secured by other collateral described in written documents. The
Mortgage and such other documents as may exist on the date hereof or may exist
hereafter are referred to as the "Security Documents," which term, as defined
in the Note, includes any and all financing statements, letters of credit,
assignments, agreements, supplements, and riders made and delivered in
connection with the Note and this Mortgage, and any and all amendments,
modifications, extensions, renewals, replacements, substitutions and
consolidations thereof or thereto. The Security Documents, the Note, and all
documents between Mortgagor and Mortgagee are referred to collectively as the
"Loan Documents" The Note, the Mortgage and the Loan Documents shall always be
taken and read together as constituting part of one transaction.
The obligations of Mortgagor secured by the Security Documents
arising pursuant to the Loan Documents are as follows and are called the "Debt"
in this Mortgage and the other Loan Documents:
5
<PAGE> 6
(a) Loan Documents. Mortgagor's payment or performance
of all obligations imposed upon Mortgagor by the Loan Documents; and
(b) Advances. All sums advanced by Mortgagee to or for
the benefit of Mortgagor in the manner provided in the Loan Documents, or for
the protection of the security of the Collateral, including, without
limitation, all sums advanced pursuant to this Mortgage, including advances for
repairs, maintenance, insurance, taxes, or assessments; and
(c) Costs. All costs, expenses, losses, damages and
other charges sustained or incurred by Mortgagee because of (i) Mortgagor's
default in payment or performance, as the case may be, of any provision
contained in the Loan Documents; (ii) defense of actions instituted by
Mortgagor or a third party against Mortgagee arising out of or related to the
Loan, or in the realizing upon, protecting, perfecting, defending, or (iii)
actions brought or defended by Mortgagee enforcing Mortgagee's security
interest in the Collateral. All of these costs and expenses include reasonable
attorneys' fees, paralegals' fees, or legal assistants' fees. whether incurred
with respect to collection, litigation, bankruptcy proceedings, interpretation,
dispute, negotiation, trial, appeal, defense of actions instituted by a third
party against Mortgagee. or enforcement of any judgment based on the Loan
Documents, whether or not suit is brought to collect such amounts or to enforce
such rights or, if brought, is prosecuted to judgment.
(d) Miscellaneous Expenses. All costs and expenses
incurred by Mortgagee in connection with the Loan, whether prior to or at
closing or during the term thereof, including, without limitation, hazard and
other insurance required by the Loan Documents, surveys, brokerage commissions
and claims of brokerage, ad valorem and personal property taxes, documentary
stamp taxes and intangible taxes, attorneys' fees, consultant fees, architect's
fees, construction consultant's fees, environmental surveys or assessments, and
recording charges.
(e) Indemnities. All costs, expenses, and amounts
arising under or pursuant to any indemnity contained within the Loan Documents
or in any separate agreement executed by Mortgagor in favor of Mortgagee.
5. TITLE WARRANTIES. Subject to the Permitted Encumbrances (as
hereinafter defined), Mortgagor covenants with Mortgagee that: (i) Mortgagor is
indefeasibly seized of the Land and Improvements in fee simple, has good and
marketable title to the Collateral and has full power, lawful right and
authority to convey the same in fee simple and to grant Mortgagee a perfected
first lien security interest in the Collateral, and (ii) the Collateral is free
and clear of all liens, encumbrances, restrictions, and security interests of
any nature except for those permitted encumbrances which Mortgagee has
previously approved, as set out in Exhibit B attached hereto and incorporated
herein by reference, which are referred to as "Permitted Encumbrances" in this
Mortgage.
6. LIENS. Mortgagor will not create or permit to be created,
or to remain, and will promptly discharge at Mortgagor's expense any and all
liens or encumbrances upon, or security
6
<PAGE> 7
interests in, the Collateral, or any combination thereof, whether consensual,
common law, statutory, voluntary, involuntary, or arising by operation of law,
except Permitted Encumbrances. Notwithstanding the foregoing, and except for
any construction liens, Mortgagor may contest the amount, validity and
enforceability of any involuntary or nonconsensual lien, encumbrance or
security interest, including those arising by operation of law, in the manner
provided in Paragraph 8 below. If any construction lien is filed against the
Mortgaged Property, Mortgagor agrees to discharge or otherwise remove such lien
by bond or otherwise, within ten (10) days of imposition of same, but may
thereafter contest the amount or validity of such lien as provided in Paragraph
8 below.
7. TAXES AND OTHER IMPOSITIONS. Mortgagor will pay or cause to
be paid, when due (i) all property taxes, assessments, water, sewer, utility
and other rents, rates and charges, including all excises, taxes, levies,
license fees, permit fees, impact fees, connection fees, and other fees and
charges, whether general or special, ordinary or extraordinary, foreseen or
unforeseen, that may be assessed, levied or imposed upon the Collateral, or
otherwise arising with respect to the occupancy, use, possession or disposition
thereof, whether or not the failure to pay the same might result in the
creation of a lien upon the Collateral, or any combination thereof, (ii) all
franchise, excise and other taxes, fees and charges assessed, levied or imposed
with respect to Mortgagor's right to do business in the State of Florida and
the political subdivisions thereof, (iii) all taxes and fees (except for
Mortgagee's state and federal income taxes) that may be levied by the United
States of America or any state or political subdivision thereof, upon Mortgagee
or Mortgagor in connection with or upon the Loan Documents, or the Debt or its
payment, or collection, or any combination thereof (including all documentary
stamp taxes and intangible taxes plus any penalties and interest charged for
the late payment of any such taxes); and (iv) all lawful claims and demands of
contractors, subcontractors, mechanics, laborers, materialmen and other lienors
which, if unpaid, might result in the creation of a lien upon the Collateral.
The sums payable under this Paragraph are called "Impositions". Nothing
contained in this Paragraph will require the payment of any Imposition so long
as the amount, validity or enforceability thereof is contested by appropriate
proceedings as provided in Paragraph 8 below. With respect to state and local
real and tangible personal property taxes, however, Mortgagor will pay same and
will furnish Mortgagee with copies of the receipts for each such payment
without demand at least thirty (30) days prior to the date each of such taxes
will become delinquent, and any contest of the same must be by a suit or other
proceeding for a refund. Nothing contained in this Paragraph shall prohibit
Mortgagor from paying Impositions in installments where such method of payment
is permitted by law. With respect to all other Impositions, Mortgagor will
furnish Mortgagee with proof of such payment upon demand. If any payment
required to be made by Mortgagor by this Paragraph is prohibited by law, with
the result that Mortgagee becomes liable for its payment, then the Debt will
immediately become due and payable, at Mortgagee's option.
8. CONTESTS. Mortgagor may contest, by any and all appropriate
administrative, trial or appellate proceedings, or any combination thereof, and
in Mortgagee's name, if required by law, the amount, validity, enforceability
or application of any Imposition that Mortgagor is required to pay or perform
to any person or entity other than Mortgagee by any provision of this Mortgage
or the other Loan Documents if and only for so long as: (i) Mortgagor notifies
Mortgagee in writing of its intent to contest the Imposition; (ii) such contest
suspends the collection or enforcement of the
7
<PAGE> 8
item(s) contested; (iii) no part of the Collateral will be subject to loss,
sale or forfeiture before final determination of any such contest; (iv) neither
Mortgagor nor Mortgagee will be subject to any criminal liability; (v)
Mortgagor furnishes such security as may be required by law in connection with
each such contest; (vi) the value, usefulness and marketability of the
Collateral will not be adversely impaired by any such contest; (vii) Mortgagor
otherwise continues to pay and perform, as the case may be, the Debt and
Mortgagor's obligations under this Mortgage; (viii) Mortgagor otherwise is not
in default under any provision of the Loan Documents; (ix) each such contest is
continuously prosecuted diligently to final determination; (x) Mortgagor pays
or causes to be paid, and defends, indemnifies and holds Mortgagee harmless of
and from any and all losses, judgments, decrees and costs (including all
reasonable attorneys' fees) incurred in connection with each such contest; (xi)
Mortgagor, promptly following final determination of each such contest, fully
pays and discharges all amounts that may be levied, assessed, charged, imposed
or otherwise determined to be payable, together with all penalties, fines,
interests, costs and expenses, and otherwise complies with such final
determination, at Mortgagor's sole cost and expense; and (xii) such liens are
not filed against the Mortgaged Property pursuant to Chapter 713, Florida
Statutes, in which event such liens must be discharged or deferred to bond
pursuant to Paragraph 6 above before Mortgagor contests such liens. So long as
Mortgagor complies with the foregoing and Mortgagee is promptly reimbursed for
all costs and expenses incurred, Mortgagee will cooperate with Mortgagor in
connection with any such contest.
9. INSURANCE. Until the Debt shall have been discharged by
Mortgagor, Mortgagor shall maintain, at Mortgagor's cost and expense, the
following insurance coverages in full force and effect at all times:
(a) Hazard and Property Insurance. Mortgagor will
obtain and keep in full force (i) "All Risk" type property insurance to include
as a minimum the perils of fire and extended coverage, vandalism, water damage,
collapse, earthquake, and law and ordinance (demolition and increased cost of
construction) coverage in an amount equal to 100% of the full insurable value
of the Improvements (i.e., total cost less value of land and nondestructibles
such as foundations, underground utilities, etc.); and (ii) personal property
insurance as required by Lender in an amount equal to 100% of the full
insurable replacement value of the Tangible Property; and (iii) business income
insurance in an amount equal to (y) annual net income plus continuing normal
operating expenses, or (z) one year's rental value including, but not limited
to rental income from all Leases or sub-leases which are assigned to Lender;
and (iv) flood insurance in the maximum amount available unless Lender is
furnished a surveyor's certificate indicating that the improvements are not
located inside the special flood hazard Boundary Map or in Flood Insurance Rate
Map (FIRM) Zones A, AE, A1-A30, AH, A), A99, VE, V1-V30 OR M).
(b) Liability Insurance, Mortgagor will obtain and keep
in full force a "Broad Form Comprehensive General Liability" insurance coverage
for both Mortgagor and any contractor performing services to the Mortgaged
Property in the minimum coverage amount of One Million Dollars ($1,000,000) per
occurrence and combined single limit ("CSL") of Five Million Dollars
($5,000.000).
8
<PAGE> 9
(c) Other Insurance. Boiler and machinery insurance,
worker's compensation insurance, wind damage insurance, and other insurance
coverages as Mortgagee may reasonably require.
The policy or policies of insurance shall (i) be from companies and
in coverage amounts acceptable to Mortgagee, (ii) contain a standard mortgagee
clause in favor of Mortgagee naming Mortgagee as a mortgagee and including a
lender's loss payee clause in such policy, as applicable (iii) not be
terminable or modified without thirty (30) days' prior written notice to
Mortgagee, and (iv) be evidenced by original policies or certified copies of
policies deposited with Mortgagee, as Mortgagee may elect, to be held by
Mortgagee until the Debt shall have been fully paid and discharged. Mortgagor
shall furnish Mortgagee satisfactory evidence of payment of all premiums
required and similar evidence of renewal or replacement coverage not later than
thirty (30) days prior to the date any coverage will expire.
Each insurance policy or endorsement required herein shall be written
by an insurer having a rating not less than "A-XII" Best's Rating according to
the most current edition of Best's Key Rating Guide as determined at the time
of the initial policy and at all times during the term hereof. All policies
shall indicate that notices related to such insurance shall be sent to
Mortgagee at:
The Wackenut Corporation
1500 San Remo Avenue
Coral Gables, Florida
If any loss occurs with respect to the Mortgaged Property, Mortgagee
is hereby appointed attorney-in-fact for Mortgagor to make proof of loss if
Mortgagor fails to make the same punctually, and in such event to give a
receipt for any proceeds collected under such policies. Mortgagor will
promptly give written notice to Mortgagee of any loss or damage to the
Mortgaged Property, and will not adjust or settle any such loss without
Mortgagee's prior written consent, which consent shall not be unreasonably
withheld or delayed. Upon any Default by Mortgagor under this Mortgage, all
right, title and interest of Mortgagor in and to all such insurance policies
then in force, including any and all unearned premiums and existing claims,
will inure to Mortgagee, which, at its option, and as attorney-in-fact for
Mortgagor, may then make, settle and give binding acquittances for claims under
all such policies, and may assign and transfer such policies or cancel or
surrender them, applying any unearned premium in such manner as Mortgagee may
elect. The foregoing appointment of Mortgagee as attorney-in-fact for
Mortgagor is coupled with an interest, and is irrevocable. Notwithstanding the
occurrence of any casualty or the availability of any insurance proceeds,
Mortgagor will pay the Debt in the manner required by the Loan Documents.
10. CONDEMNATION. If all or any part of the Collateral, or any
interest therein or right accruing thereto, is taken as a result of, or in lieu
or in anticipation of, the exercise of the right of condemnation or eminent
domain, or by reason of the temporary requisition of the use or occupancy of
the Mortgaged Property, in any event by any government or quasi-governmental
9
<PAGE> 10
authority, civil or military, or any other party entitled to exercise such
powers by law, general or special, or is devalued or otherwise adversely
affected by any of the foregoing actions, all proceeds payable with respect to
any such action are assigned to Mortgagee and shall be paid to Mortgagee.
Mortgagee shall be under no obligation to question the amount of any such award
or compensation and may accept the same in the amount in which the same shall
be paid. The proceeds of any award or compensation so received shall, at the
option of the Mortgagee, either be applied to the payment of the Debt or be
paid over to the Mortgagor for the restoration of the Improvement. Mortgagor,
immediately upon obtaining knowledge of the institution or threatened
institution, of any proceedings for the Mortgaged Property, or any part
thereof, by condemnation or eminent domain, will notify the Mortgagee of the
pending of such proceedings. Mortgagee shall have the right to intervene and
participate in any proceedings for and in connection with any taking referred
to in this section. Mortgagor shall not enter into any agreement for the
taking of the Mortgaged Property or any part thereof with any person or persons
authorized to acquire the same by condemnation or eminent domain, unless the
Mortgagee shall have consented thereto in writing. Any of the foregoing
actions are sometimes called a "condemnation" or "taking" in this Mortgage and
the other Loan Documents. Such proceeds include, without limitation, severance
damages, damages arising from the change of grade of any street or the access
thereto, the taking of air rights and damages caused by noise, pollutants and
other emissions. Notwithstanding any such taking or other injury or decrease
in value, or the availability of any proceeds for any of the foregoing,
Mortgagor shall continue to pay the Debt in the manner required by the Loan
Documents. Mortgagee's rights under this Paragraph will survive the
foreclosure or other enforcement of this Mortgage, and Mortgagee will have the
right to receive and retain all proceeds to the extent of any deficiency which
exists upon such foreclosure or other enforcement, together with legal interest
thereon, and to the extent of the reasonable counsel fees, costs and
disbursements incurred by Mortgagee in connection with the collection of such
proceeds. Such right shall exist whether or not a deficiency judgment shall
have been sought or recovered or denied upon the Note. The remaining balance
of such proceeds, if any, will inure to the benefit of the party entitled
thereto by applicable law.
11. APPLICATION OF INSURANCE PROCEEDS AND AWARDS. The Mortgagor
will promptly give the Mortgagee written notice of any damage to or destruction
of the Mortgaged Property or any part thereof, generally describing the nature
and extent of such damage or destruction and the Mortgagor's best estimate of
the cost of restoring the Mortgaged Property. The Mortgagee may, at its sole
option, apply all amounts recovered under any insurance policy required to be
maintained by the Mortgagor hereunder in any one or more of the following ways:
(a) to the payment of the reasonable costs and expenses incurred by the
Mortgagee in obtaining such insurance proceeds, including the fees and expenses
of attorneys and insurance and other experts and consultants, the costs of
litigation, arbitration, mediation, investigations and other judicial,
administrative or other proceedings and all other out-of-pocket expenses; (b)
to the payment of any of the Debt other than indebtedness with respect to the
Note at the time outstanding; (c) to the payment of the principal of the Note
and any interest accrued and unpaid thereon, without regard to whether any
portion or all of such amounts shall be matured or unmatured, together with
interest at the default interest rate on any overdue principal and (to the
extent permitted by applicable law) interest; and, in case such amount shall be
insufficient to pay in full all such amounts, then such amounts shall be
applied, first,
10
<PAGE> 11
to the payment of all amounts of interest accrued on the Note and unpaid,
without preference or priority of any payment of interest over any other
payment of interest or of any other Note, and, second, to the payment of all
amounts of principal at the time outstanding, without preference or priority of
any installment or amount of principal over any other installment or amount of
principal or of any Note over any other Note, but otherwise in such manner and
order as the Mortgagee shall in its sole discretion determine; (d) to fulfill
any of the other covenants contained herein as the Mortgagee may determine; (e)
release to the Mortgagor for application to the cost of restoring the Mortgaged
Property; or (f) release to the Mortgagor. In the event of a foreclosure of
this Mortgage, the purchaser of the Mortgaged Property shall succeed to all the
rights of the Mortgagor, including any right to unearned premiums, in and to
all policies of insurance assigned and delivered to the Mortgagee.
Notwithstanding anything to the contrary contained in Paragraph 11 of
the Mortgage, and upon the terms and conditions set forth below, in the event
of damage or destruction to the buildings now or hereafter situated on the
Mortgaged Property all insurance money paid to Mortgagee on account of such
damage or destruction, less the actual costs, fees and expenses, if any,
incurred in connection with adjustment of the loss, shall be released by
Mortgagee to be applied to payment (to the extent of actual restoration
performed) of the cost of restoring, repair, replacing or rebuilding the
Mortgaged Property substantially to its value immediately prior to such damage
or destruction (the "Restoration"), including the cost of temporary repairs.
Insurance proceeds released for Restoration shall be disbursed from time to
time as such Restoration progresses subject to the following conditions:
(a) Mortgagor is not then in Default under and no event of
Default then exists with respect to any of the terms,
covenants and conditions under the Note or the Mortgage; and
(b) The cost of Restoration is less than 50% of the insurable
value of the building or buildings prior to such damage or
destruction.
(c) Mortgagee shall first be given satisfactory proof that by
the expenditure of such proceeds, the Mortgaged Property
will be fully restored, free and clear of all construction
liens, or, if such proceeds are insufficient to restore or
rebuild the Mortgaged Property, Mortgagor shall either (i)
deposit promptly with Mortgagee funds which, together with
such proceeds, shall be sufficient to complete Restoration,
or (ii) provide other assurance satisfactory to Mortgagee
that Restoration will be completed; and
(d) In the event Mortgagor shall fail either to pursue
Restoration diligently to completion or to complete
Restoration within a reasonable time, Mortgagee, at its
option, may complete Restoration for or on behalf of
Mortgagor and for such purpose may do all necessary acts.
11
<PAGE> 12
In the event any of the said conditions are not or cannot be
satisfied, then Mortgagee may apply such proceeds to payment of the Debt
secured by the Mortgage. Under no circumstances shall Mortgagee become
personally liable for the fulfillment of the terms, covenants and conditions
contained in any of the leases of the Mortgaged Property with respect to the
matters referred to in this paragraph nor obligated to take any action to
restore the Mortgaged Property. Mortgagee shall not be obligated to see to the
proper application of any funds released hereunder, nor shall any amount so
released or used be deemed a payment on the Debt secured by the mortgage.
Upon (i) completion of all the Restoration in a good workmanlike
manner and substantially in accordance with the plans and specifications
therefor, if any, approved by Mortgagee and (ii) receipt by Mortgagee of
satisfactory evidence that the Restoration has been completed and paid for in
full (or, if any part of such Restoration has not been paid for, adequate
security for such payment shall exist in form satisfactory to Mortgagee), any
balance of the insurance proceeds at the time held by Mortgagee shall be paid
to Mortgagor or its designee provided Mortgagor is not then in Default under
and no event of Default then exists with respect to any of the terms or
provisions of the Note or the Security Documents.
If, while any insurance proceeds are being held by Mortgagee to
reimburse Mortgagor for the cost of Restoration of the Mortgaged Property,
Mortgagee shall be or become entitled to, and shall, accelerate the Debt
secured by the Mortgage upon the terms and conditions set forth in the Note,
Mortgagee shall be entitled to apply all such proceeds then held by it in
reduction of the Debt secured by the Mortgage and any excess held by it over
the amount of the Debt secured by the Mortgage shall be returned to Mortgagor
or any party entitled thereto.
12. MAINTENANCE, REPAIRS, AND RECONSTRUCTION.
(a) Maintenance and Repairs. Mortgagor, at its sole
cost, shall make all repairs, renewals, replacements, servicing and
reconstruction that are necessary to maintain the Mortgaged Mortgaged Property
in good order, condition and repair. Mortgagor shall establish (and set aside
in segregated deposits) reserve funds in amounts acceptable to Mortgagee for
tenant improvements and for replacements, repairs and capital expenditures in
accordance with the provisions of the Post-Closing Escrow Agreement between
Mortgagor and Mortgagee of even date herewith. Immediately following the
occurrence of any casualty or other loss, Mortgagor promptly will undertake all
restoration required or desirable and will pursue it diligently to completion.
Mortgagor shall (i) not strip, waste, remove or demolish any portion of the
Mortgaged Property, nor suffer or permit any such action; (ii) promptly comply
with all laws, governmental regulations and public or private restrictions or
easements, or both, of any kind affecting the Mortgaged Property or requiring
any alterations or improvements to be made thereon, and (iii) not commit,
suffer or permit any act upon the Mortgaged Property in violation of any law,
subject to Mortgagor's right to contest the same in good faith to conclusion,
as provided in Paragraph 8 of this Mortgage. If any public agency or authority
requires or commences any proceedings for the demolition or removal, or both,
of any improvements or portions thereof comprising the Mortgaged Property due
to non-compliance with health, safety, fire or building codes, then, unless
Mortgagor undertakes to contest such action in the
12
<PAGE> 13
manner provided in Paragraph 8 above and pursues such contest to a successful
conclusion, such action will constitute a Default under this Mortgage.
Mortgagor will not, without Mortgagee's prior written consent, (i) make any
material alterations, additions or improvements of or to the Mortgaged
Property; (ii) make any material change in the general nature of the use or
occupancy of the Mortgaged Property; (iii) institute or join or acquiesce in
any action to change the existing zoning or land use classification of the
Mortgaged Property, or (iv) grant easements or licenses affecting the use or
operation of the Mortgaged Property. Mortgagee and any persons authorized by
Mortgagee may enter the Mortgaged Property at all reasonable times with prior
notice for inspections or for any other lawful purpose. If Mortgagor fails to
comply with the requirements of this Paragraph, then Mortgagee, without waiving
the option to foreclose, may take some or all measures Mortgagee reasonably
deems necessary or desirable for the maintenance, repair, preservation or
protection of the Mortgaged Property, and any expenses reasonably incurred by
Mortgagee in so doing shall become part of the Debt secured hereby, and shall,
at the option of Mortgagee, become immediately due and payable, and shall bear
interest at the Default Rate specified in the Note. Mortgagee shall have no
obligation to care for or maintain the Mortgaged Property, or, having taken
some measures therefor, to continue same or take other measures.
(b) Reconstruction. The Mortgagor shall promptly
repair, restore, replace or rebuild any part of the Mortgaged Property, now or
hereafter encumbered by this Mortgage which may be affected by any condemnation
proceeding or which may otherwise become damaged, destroyed, lost or unsuitable
for use. In the event the Mortgaged Property or any part thereof, if damaged
or destroyed by fire or other casualty, the Mortgagor shall immediately notify
the Mortgagee, in writing, of such damage or destruction. The Mortgagor shall
not cause or permit anything to be done which would or could increase the risk
of fire or other hazard to the Mortgaged Property, or any part thereof, or
which would or could result in an increase in any insurance premiums payable
with respect to the Mortgaged Property, or which would or could result in the
cancellation of any insurance policy carried with respect to the Mortgaged
Property. No part of the Mortgaged Property, including, but not limited to,
any building, structure, water system, sewer system, parking lot, driveway,
landscape scheme, timber or other ground improvement, equipment or other
property, now or hereafter mortgaged, shall be removed, demolished or
materially altered without the prior written consent of the Mortgagee. No top
soil, sand, sod, loam, clay or gravel shall be mined, stripped, or removed from
the Mortgaged Property without the written consent of the Mortgagee.
13. ADVANCES. If Mortgagor defaults in the observance or
performance of any of the provisions of the Loan Documents, including but not
limited to obtaining and maintaining insurance pursuant to Paragraph 9, paying
Impositions pursuant to Paragraph 7, and maintaining the Mortgaged Property
pursuant to Paragraph 12, then Mortgagee, without waiving or otherwise
impairing any other of its rights or remedies, at its sole option and without
obligation to do so, and without demand upon Mortgagor, may make any such
payment or take such action as Mortgagee deems necessary or appropriate to
correct such Default, or to protect the security of the Collateral encumbered
by the Loan Documents. All payments so made, together with all costs and
expenses so incurred, will be added to the principal amount due under the Note
and thereafter will bear interest at the rate then
13
<PAGE> 14
payable as provided for in the Note, and will be secured by the lien and
security interest granted by the Security Documents. For the foregoing
purposes, Mortgagee is authorized to (a) enter upon the Mortgaged Property; (b)
appear in and defend any action or proceeding purporting to affect the security
of this Mortgage or the rights or powers of Mortgagee hereunder, (c) pay,
purchase, contest or compromise any encumbrance, charge or lien that in the
reasonable judgment of Mortgagee appears to adversely affect the Collateral;
and (d) take whatever action Mortgagee, in its discretion, deems necessary or
appropriate in exercising any such powers. Notwithstanding the foregoing,
Mortgagor immediately, upon Mortgagee's demand, will pay all sums so expended
by Mortgagee with interest as stated above.
14. [THIS SPACE INTENTIONALLY LEFT BLANK]
15. [THIS SPACE INTENTIONALLY LEFT BLANK]
16. [THIS SPACE INTENTIONALLY LEFT BLANK]
17. ASSIGNMENT OF RENTS, LEASES, PROFITS AND CONTRACT RIGHTS.
Pursuant to Paragraph I of this Mortgage, Mortgagor has irrevocably assigned
and set over unto Mortgagee all right, title, and interest of Mortgagor in and
to the Rents and Contract Rights (including all leases and sales contracts now
or hereafter existing relating to the Mortgaged Property) as security for the
Debt, together with the right to collect and enforce the same; provided,
however, so long as there shall be no Default under the Loan Documents,
Mortgagor has been granted a license to collect and receive all Rents assigned
hereunder in accordance with Paragraph 1. Neither these assignments nor
Mortgagee's enforcement of the provisions of these assignments (including the
receipt of the Rents) will operate to subordinate the lien of this Mortgage to
any of the rights of any lessee or purchaser under any lease or sales contract
of the Mortgaged Property, or to subject Mortgagee to any liability to any such
lessee or purchaser for the performance of any obligations of Mortgagor under
any such lease or sales contract unless and until Mortgagee agrees to such
subordination or assumes such liability by an appropriate written instrument.
All right, title and interest of each such lessee or purchaser in and to the
Mortgaged Property, whether arising by virtue of any such lease, contract or
otherwise, at all times will be and remain subject, subordinate and inferior to
the lien of this Mortgage and all rights, remedies, powers and privileges of
Mortgagee arising under or by virtue of any of the Loan Documents. The
assignments of Rents and Contract Rights (including leases) contained in this
Mortgage are intended to provide Mortgagee with all the rights and remedies of
mortgagees pursuant to Section 697.07, Florida Statutes, as may be amended from
time to time. However, in no event shall this reference diminish, alter,
impair, or affect any other rights and remedies of Mortgagee. Notwithstanding
the foregoing, if Mortgagor shall have executed an Assignment of Rents
constituting one of the Loan Documents, such Assignment of Rents is hereby
incorporated herein by reference and shall control if in conflict with the
provisions of this Mortgage.
14
<PAGE> 15
18. LEASES AFFECTING MORTGAGED PROPERTY. The assignments
contained in Paragraph I shall not be deemed to impose upon Mortgagee any of
the obligations or duties of Mortgagor provided in any such lease (including,
without limitation, any liability under the covenant of quiet enjoyment
contained in any lease in the event that any tenant shall have been joined as a
party defendant in any action to foreclose this Mortgage and shall have been
barred and foreclosed thereby of all right, title and interest and equity of
redemption in the Mortgaged Property or any part thereof), and Mortgagor will
comply with and observe its obligations as landlord under all leases affecting
the Mortgaged Property or any part thereof. Mortgagor has a license to collect
the Rents, but shall not accept payment of rent more than one month in advance
without the prior written consent of the Mortgagee, and only so long as there
is no Default hereunder or under the other Loan Documents. Mortgagor shall
receive the Rents in trust on Mortgagee's behalf, and Mortgagor covenants to
apply same to the payment of taxes and assessments upon the Mortgaged Property,
to the cost of insurance and maintenance and repairs, and to the payment of the
Debt, before using any part of the Rents for any other purpose.
Prior to a Default hereunder and demand by Mortgagee for delivery of
security deposits held by Mortgagor or any agent of Mortgagor to Mortgagee or
its designee, Mortgagor shall maintain all security deposits pursuant to the
leases in a separate, identifiable account deposited with Mortgagee, or any
other institution acceptable to Mortgagee, and in accordance with all
applicable laws and regulations. Upon delivery of such security deposits to
Mortgagee, or upon Mortgagee's enforcement of its security interest in such
deposits, Mortgagee shall hold such security deposits pursuant to the terms of
the leases in respect of which such deposits were obtained by Mortgagor and in
accordance with applicable law; provided, however, in no event shall Mortgagee
be liable to any lessee of any part of the Mortgaged Property for the return of
any security deposit in any amount in excess of the amount delivered to
Mortgagee by Mortgagor. Any security deposits held by Mortgagee shall not bear
interest unless required by applicable law.
Mortgagor will: (a) not collect any of the Rents arising or accruing
under any lease in advance of the time when the same shall become due, other
than as required to be paid in advance by the terms of any lease, but in no
event more than one (1) month in advance; (b) not pledge, transfer, mortgage or
otherwise encumber or assign any of Mortgagor's interest in the leases or any
Rents arising or accruing therefrom except as expressly permitted pursuant to
the provisions of Paragraph 38 below; (c) not waive, excuse, condone, discount,
set-off, compromise, or in any manner release or discharge any tenant
thereunder of and from any obligations, covenants, conditions and agreements by
said tenant to be kept, observed and performed, including the obligation to pay
the rents thereunder, in the manner at the place and time specified therein;
(d) not cancel, terminate or consent to any surrender of any lease, nor modify,
alter or change any of the terms thereof without the prior written consent of
Mortgagee; (e) not consent to any assignment of or subletting under any lease,
whether or not in accordance with the terms thereof, without the prior written
consent of Mortgagee; and (f) not enter into, execute or deliver any leases
without the prior written consent of Mortgagee. Mortgagee's approval of any of
the leasing matters set forth in (c) through (f) above shall not be
unreasonably withheld or delayed and any request for approval of any new leases
shall be deemed appproved if Mortgagee fails to respond in writing within ten
(10) days after the date of
15
<PAGE> 16
submission to Mortgagee of the material, economic terms of any new leases, the
identity of the proposed tenants and any financial information received by
Mortgagee with respect to such proposed tenants.
In the event any tenant of the Mortgaged Property should be the
subject of any proceeding under the Federal Bankruptcy Code, as amended from
time to time, or any other federal, state or local statue which provided for
the possible termination or rejection of any of the leases assigned hereby,
Mortgagor covenants and agrees that if any of the leases is so terminated or
rejected, no settlement for damages shall be made without the prior written
consent of Mortgagee, and any check in payment of damages for termination or
rejection of any such lease will be made payable both to Mortgagor and
Mortgagee. Mortgagor hereby assigns any such payment to Mortgagee and further
covenants and agrees that upon the request of Mortgagee, it will duly endorse
to the order of Mortgagee any such check, the proceeds of which will be
applied to that portion of the Debt as Mortgagee may elect.
Notwithstanding anything to the contrary contained in Paragraph 18 or
in any of the Security Documents so long as Mortgagor is not in Default,
Mortgagor shall have the right to enter into new leases, terminate, modify and
otherwise deal with leases and the tenants under said leases in its normal
course of business without obtaining Mortgagee's prior written approval of any
such action, provided:
(a) All new or replacement leases shall be on the form
previously approved by Mortgagee;
(b) Mortgagor shall promptly furnish Mortgagee with copies of
all appropriate documents pertaining to such action taken
with regard to existing, new or replacement leases; and
(c) If execution of a new or replacement lease is involved, the
rent payable under such lease shall be not less than the
then prevailing rental rates for similar space for a similar
term in similar buildings located in South Miami, Florida.
The foregoing provisions shall only apply to leases of less than
twenty-five thousand (25,000) square feet.
19. DEFAULT. The occurrence of any of the following (time being
of the essence as to this Mortgage and all of its provisions) constitutes a
"Default" by Mortgagor under this Mortgage and, at the option of Mortgagee,
under the other Loan Documents:
(a) Scheduled Payment. Mortgagor's failure to make any
payment required by the Note when due.
(b) Monetary Default. Mortgagor's failure to make any
payment required by this Mortgage or the other Loan Documents when due.
16
<PAGE> 17
(c) Other. Mortgagor's failure to perform any other
obligation imposed upon Mortgagor by this Mortgage or the other Loan Documents
within the time period therein specified, or as may be specified by Mortgagee,
if in the sole opinion of Mortgagee such Default is curable. This provision
shall not be construed to provide Mortgagor with any grace period in complying
with any obligations imposed on Mortgagor by the terms of the Loan Documents
except as expressly specified in Paragraph 20 below.
(d) Representation. Any representation or warranty of
Mortgagor contained in this Mortgage or in any certificate delivered pursuant
hereto, or in any other instrument or statement furnished in connection
herewith, proves to be incorrect or misleading in any materially adverse
respect as of the time when the same shall have been made.
(e) Bankruptcy. Mortgagor (i) files a voluntary
petition in bankruptcy or a petition or answer seeking or acquiescing in any
reorganization or for an arrangement, composition, readjustment, liquidation,
dissolution, or similar relief for itself pursuant to the United States
Bankruptcy Code or any similar law or regulation, federal or state relating to
any relief for debtors, now or hereafter in effect; or (ii) makes an assignment
for the benefit of creditors or admits in writing its inability to pay or fails
to pay its debts as they become due; or (iii) suspends payment of its
obligations or takes any action in furtherance of the foregoing; or (iv)
consents to or acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator or other similar official of Mortgagor for all or any
part of the Collateral or other assets of such party, or either; or (v) has
filed against it an involuntary petition, arrangement, composition,
readjustment, liquidation, dissolution, or an answer proposing an adjudication
of it as a bankrupt or insolvent, or is subject to a reorganization pursuant to
the United States Bankruptcy Code, an action seeking to appoint a trustee,
receiver, custodian, or conservator or liquidator, or any similar law, federal
or state, now or hereafter in effect, and such action is approved by any court
of competent jurisdiction and the order approving the same shall not be vacated
or stayed within thirty (30) days from entry; or (vi) consents to the filing of
any such petition or answer, or shall fail to deny the material allegations of
the same in a timely manner.
(f) Judgments. (1) A final judgment, other than a final
judgment in connection with any condemnation, and including any judgment or
other final determination of any contest permitted by Paragraph 8 of this
Mortgage, is entered against Mortgagor that (i) adversely affects the value,
use or operation of the Collateral, or (ii) adversely affects, or reasonably
may adversely affect, the validity, enforceability or priority of the lien or
security interest created by this Mortgage or the other Loan Documents, or
both; or (2) execution or other final process issues thereon with respect to
the Collateral; and (3) Mortgagor does not discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution
thereon, in any event within (30) days from entry, or Mortgagor shall not,
within such period or such longer period during which execution on such
judgment shall have been stayed, appeal therefrom or from the order, decree or
process upon or pursuant to which such judgment shall have been entered, and
cause its execution to be stayed during such appeal, or if on appeal such
order, decree or process shall be affirmed and Mortgagor shall not discharge
such judgment or provide for its discharge in accordance with its terms within
17
<PAGE> 18
sixty (60) days after the entry of such order or decree or affirmance, or if
any stay of execution on appeal is released or otherwise discharged.
(g) Liens. Any federal, state or local tax lien or any
claim of lien for labor or materials or any other lien or encumbrance of any
nature whatsoever is recorded against Mortgagor or the Mortgaged Property and
is not removed by payment or transferred to substitute security in the manner
provided by law, within ten (10) days after notice thereof is received by
Mortgagor or is not contested by Mortgagor in the manner permitted by Paragraph
8 above.
(h) Leases. Mortgagor's default in the performance of
its obligations as lessor under any lease of all or any portion of the
Mortgaged Property, which default could result, in Mortgagee's judgment, in the
termination of said lease provided that this provision shall only be applicable
to default(s) by Mortgagor under one or more leases which, if terminated by
reason thereof, would result in the surrender of at least 25,000 rentable
square feet of space within the Mortgaged Property.
(i) Other Notes or Mortgages. Mortgagor's default in
the performance or payment of Mortgagor's obligations under any other note, or
under any other mortgage encumbering all or any part of the Mortgaged Property,
if the other mortgage is permitted by Mortgagee, whether such other note or
mortgage is held by Mortgagee or by any other party.
(j) Mortgagor Default Under Loan Documents. Mortgagor's
default in the payment or performance of any of Mortgagor's obligations under
any of the Loan Documents, including this Mortgage and any riders thereto.
(k) Mortgagor's Continued Existence. Mortgagor shall
cease to exist or to be qualified to do or transact business in the State in
which the Mortgaged Property is located or be dissolved or shall be a party
to a merger or consolidation, or shall sell all or substantially all of
its assets, or the death of any individual being a Mortgagor.
(l) Stock in Mortgagor. If, without the prior written
consent of Mortgagee, any shares of stock of Mortgagor are issued, sold,
transferred, conveyed, assigned, mortgaged, pledged, or otherwise disposed of
so as to result in change of control of Mortgagor, whether voluntarily or by
operation of law, and whether with or without consideration, or any agreement
for any of the foregoing is entered into; or, if Mortgagor is a partnership,
any general partnership interest or other equity interest in the partnership is
sold, transferred, assigned, conveyed, mortgaged, pledged, or otherwise
disposed of, whether voluntarily or by operation of law, and whether with or
without consideration, or any agreement for any of the foregoing is entered
into, or any general partner of Mortgagor withdraws from the partnership.
(m) THIS SPACE IS INTENTIONALLY LEFT BLANK
18
<PAGE> 19
(n) Transfer of Mortgaged Property or Ownership. Any
sale, conveyance, transfer, assignment, or other disposition of all or any part
of the Collateral or any ownership interest in Mortgagor in violation of
Paragraph 29 below.
(o) False Statement. Any material statement or
representation of Mortgagor contained in the materials furnished to Mortgagee
or prior or subsequent to the making of the loan secured hereby are discovered
to have been false or incorrect or incomplete in any material respect.
(p) Default Under Indemnity. Mortgagor shall default
under any obligation imposed upon Mortgagor by any indemnity whether contained
within any of the Loan Documents or otherwise.
20. REMEDIES. Upon the occurrence and continuance, if
applicable, of any Default, Mortgagee may exercise any one or more of the
following rights and remedies, in addition to all other rights and remedies
otherwise available at law or in equity:
(a) Other Documents. To pursue any right or remedy
provided by the Loan Documents.
(b) Acceleration. To declare the entire unpaid amount
of the Debt together with all accrued and unpaid interest thereon immediately
due and payable with interest to be due thereon at the Default Rate set forth
in the Note.
(c) Foreclosure. To foreclose the lien of this Mortgage
and obtain possession of the Collateral, by any lawful procedure.
(d) Code Rights. To exercise any right or remedy
available to Mortgagee as a secured party under the Uniform Commercial Code as
adopted by the State of Florida, as it from time to time is in force and
effect, with respect to any portion of the Collateral then constituting
property subject to the provisions of such Code; or Mortgagee, at its
option, may elect to treat the Collateral as real property, or an interest
therein, for remedial purposes.
(e) Receiver. To apply, on ex parte motion, to any
court of competent jurisdiction for the appointment of a receiver to take
charge of, manage, preserve, protect, complete construction of, rent, and
operate the Mortgaged Property and any of Mortgagor's business or businesses
situated thereon, or any combination thereof, to collect the Rents; to make all
necessary and needed repairs; to pay all taxes, assessments, insurance premiums
and all other costs incurred in connection with the Mortgaged Property; and,
after payment of the expenses of the receivership, including reasonable
attorneys' fees and other costs and expenses related to the enforcement of the
Security Documents, and after compensation to the receiver for any of the
services described herein or pursuant hereto, to apply all net proceeds derived
therefrom in reduction of the Debt or in such other maimer as the court shall
direct. The appointment of such receiver shall be a matter of strict right to
Mortgagee, regardless of the adequacy of the security or of the solvency of any
party
19
<PAGE> 20
obligated for payment of the Debt. AU expenses, fees and compensation
incurred pursuant to any such receivership shall be secured by the lien of this
Mortgage until paid. The receiver, personally or through agents, may exclude
Mortgagor wholly from the Mortgaged Property and have, hold, use, operate,
manage and control the Mortgaged Property and may, in the name of Mortgagor,
exercise all of Mortgagor's rights and powers to maintain, construct, operate,
restore, insure and keep insured the Mortgaged Property in such manner as such
receiver deems appropriate.
(f) Rents. After Mortgagee shall have given written
notice to Mortgagor, to collect all rents, issues, profits, revenues, income,
proceeds, or other benefits from the Collateral, or to pursue any remedy
available under Chapter 697.07, Florida Statutes, as amended, supplemented, or
superseded from time to time.
(g) Other Security. To proceed to realize upon any and
all other security for the Debt in such order as Mortgagee may elect; no such
action, suit, proceeding, judgment, levy, execution or other process will
constitute an election of remedies by Mortgagee or will in any manner alter,
diminish or impair the lien and security interest created by this Mortgage or
any other Security Documents unless and until the Debt is paid in full.
(h) Advances. To advance such monies and take such
other action as is authorized by Paragraphs 13 and 23 herein.
Notwithstanding anything to the contrary contained in this Mortgage
or the Security Documents, including without limitation the Note referred to
therein, Mortgagee agrees that it shall not exercise any right or remedy
provided for therein because of a Default by Mortgagor unless Mortgagee shall
first have given written notice thereof to Mortgagor and Mortgagor shall have
failed, in the event of a monetary Default as described in Paragraph 19(a) and
(b), to pay the outstanding sums within a period of ten (10) calendar days
after the giving of such notice of Default, or in the event of a non-monetary
Default as described in Paragraph 19(c), Mortgagor shall have failed within a
period of thirty (30) days after the giving of such notice of Default to cure
the non-monetary default; provided that if the non-monetary Default cannot be
cured within thirty (30) days and Mortgagor proceeds diligently with efforts to
cure such default until it shall be fully cured within no more than sixty (60)
days after the giving of such notice or such longer period as Mortgagee may
specify, Mortgagee shall not exercise any right or remedy provided herein until
such cure period shall expire; provided, further, that Mortgagee shall not be
required to give any such notice or to allow any part of the cure period if (i)
Mortgagor or any Guarantor shall have filed a petition in bankruptcy or for
re-organization or a bill in equity or otherwise initiated proceedings for the
appointment of a receiver of its or their assets and such appointment or such
receivership is not terminated within thirty (30) days; or (ii) Mortgagee
determines that its security may be imminently and materially threatened or
impaired by reason of such Default. Furthermore, any notice and grace period
requirements contained elsewhere in the Mortgage and Security Documents
including the Note secured thereby shall run concurrently with the requirements
contained in this Paragraph and not in addition thereto.
20
<PAGE> 21
21. WAIVER OF CERTAIN RIGHTS. Mortgagor will not claim, take or
insist upon any benefit or advantage of any present or future stay, extension,
redemption or moratorium law that may affect Mortgagor's obligations hereunder,
or any law providing for the valuation or appraisal of the Mortgaged Property
or any portion thereof prior to any sale or sales that may be made under or by
virtue of this Mortgage. Mortgagor, for itself and all who may claim under
Mortgagor, waives, to the extent that it lawfully may, all rights to have the
Mortgaged Property and any other security for the Debt marshalled upon any
foreclosure or otherwise. Mortgagor hereby waives and renounces all homestead
and exemption rights provided for by the laws of the United States of America
and of any state, including Florida, in and to the Mortgaged Property as
against the collection of the Debt, or any part thereof.
22. FURTHER ASSURANCES. Mortgagor, from time to time, will
execute, acknowledge,subscribe and deliver to or at the direction of Mortgagee
such documents and further assurances as Mortgagee may reasonably require for
the purpose of evidencing, perfecting or confirming the lien and security
interest created by this Mortgage, or the security intended to be afforded by
the Loan Documents, or both. Without limitation of the foregoing, Mortgagor
will defend, indemnify and hold Mortgagee harmless with respect to any suit or
proceeding in which the validity, enforceability or priority of the lien or
security interest, or both, is endangered or contested, directly or indirectly,
and will provide Mortgagee with such security for the defense of any such suit
or proceeding as Mortgagee reasonably may require. If Mortgagor fails to
undertake the defense of any such claim in a timely manner. or fails to furnish
Mortgagee with reasonable security for such defense, or, in Mortgagee's sole
but reasonable determination, fails to prosecute such defense with due
diligence, then Mortgagee is authorized to take, at the expense of Mortgagor,
all necessary and proper action in defense of any such claim, including the
retention of legal counsel, the prosecution or defense of litigation and the
compromise or discharge of claims, including payment of all costs and
reasonable attorneys' fees. All costs, expenses and losses, if any, so
incurred by Mortgagee, including reasonable attorneys' fees, regardless of
whether suit is brought and, if suit is brought, for all administrative, trial
and appellate proceedings, if any, will constitute advances by Mortgagee as
provided in Paragraph 13.
23. CUMULATIVE RIGHTS AND NON-WAIVER. No right or remedy
conferred upon or reserved to Mortgagee by this Mortgage or in any of the other
Loan Documents is intended to be exclusive of any other right or remedy; and
each and every right and remedy is cumulative and in addition to any other
right or remedy otherwise available. Every right, power, privilege and remedy
granted Mortgagee by this Mortgage or any of the other Loan Documents, or both,
or otherwise available at law or in equity may be exercised by Mortgagee from
time to time as often as Mortgagee deems expedient until the Debt is paid in
full. Mortgagee's failure to insist at any time upon the strict observance or
performance by Mortgagor of any of the provisions of this Mortgage or in any of
the other Loan Documents, or to exercise any right or remedy provided for in
this Mortgage or in any of the other Loan Documents, will not impair any such
right or remedy or be construed as a waiver or relinquishment thereof for the
future. Receipt by Mortgagee of any payment required to be made pursuant to
any of the Loan Documents with knowledge of the breach of any provision of any
of the Loan Documents will not constitute a waiver of such breach. In addition
to
21
<PAGE> 22
all other remedies provided in this Mortgage, Mortgagee will be entitled, to
the extent permitted by applicable law, to injunctive relief in the case of a
violation or attempted or threatened violation of any of the provisions of the
Loan Documents or to a decree ordering performance of any of the provisions of
any of the foregoing.
24. JUDGMENT. Mortgagee may seek and recover a judgment for all
amounts due and payable in accordance with the Note or under this Mortgage
either before, after or during the pendency of any other proceedings or action
to obtain relief under or with respect to any of the Loan Documents.
Mortgagee's right to seek and recover any such judgment will not be affected by
obtaining any other such relief. Mortgagee will continue to be entitled to
enforce payment of, and to seek and recover a judgment for, any portion of the
Debt remaining due and payable after the application of any proceeds of any
sale of the Collateral pursuant to law. Neither the lien nor security interest
of this Mortgage, nor any rights or remedies of Mortgagee hereunder or under
any of the Loan Documents, will be impaired in any way by the recovery of any
judgment by Mortgagee against Mortgagor or any guarantor of the Debt, or by the
levy of an execution under such judgment upon any portion of the Collateral,
until the Debt is paid in full.
25. [THIS SPACE INTENTIONALLY LEFT BLANK]
26. RELEASES AND EXTENSIONS BY Mortgagee. Mortgagee, from time
to time, without notice to any person and without affecting the liability of
Mortgagor or of any guarantor or of any other person (other than any
person expressly released by Mortgagee in writing) for the payment of any of
the Debt, and without affecting the priority or extent of the lien and security
interest of this Mortgage (except as to property specifically released by
Mortgagee in writing), may do any or all of the following: (i) release in whole
or in part any person liable for payment of any or all of the Debt, or (ii)
extend the time or otherwise alter the terms of payment of the Debt, in whole
or in part, or (iii) accept additional or substitute security of any kind, or
(iv) release or otherwise deal with all or any portion of the Collateral.
27. NOTICES. Any notice or demand that must or may be given or
made in connection with this Mortgage must be in writing and, unless receipt is
expressly required, will be deemed given, delivered or made, as the case may
be, when delivered by personal delivery or when mailed by express mail, by
overnight delivery service of a nationally- recognized company, or by certified
or registered mail, return receipt requested, in any event, with sufficient
postage affixed, and addressed to the parties at the addresses written on the
first page of this Mortgage or on the signature pages of this Mortgage. Such
addresses may be changed by notice pursuant to this Paragraph. Notice of
change of address is effective only upon receipt. All of the persons executing
this Mortgage as Mortgagor severally agree that a single notice to Mortgagor in
the manner provided in this Paragraph will be effective to bind each such
person for all purposes.
28. ESTOPPEL LETTERS. As and when, from time to time, requested
by either Mortgagor or Mortgagee, and within ten (10) days after any such
request, Mortgagor or Mortgagee, as the case may be, will execute and deliver
to or at the direction of Mortgagee or Mortgagor, as the
22
<PAGE> 23
case may be, such estoppel letters certifying such matters relating to
this Mortgage or the Loan Documents, or both, as may reasonably be required.
29. TRANSFER. Mortgagor may not sell, convey, assign, transfer
or otherwise dispose of any interest in all or any portion of the Collateral,
or any ownership interest in Mortgagor or any guarantor, without Mortgagee's
prior written consent, which consent may be withheld in Mortgagee's sole
discretion. Whether such offer is voluntary or involuntary, or by operation of
law (other than in connection with the death, disability or incompetency of any
individual Mortgagor), any such offer will be void as to Mortgagee, and
constitute an immediate Default under this Mortgage, without notice, in the
sole discretion of Mortgagee. By consent to any offer, sale, or conveyance
hereunder shall not be deemed a consent to any subsequent offer, sale, or
conveyance for which Mortgagee's prior written approval has not been obtained.
30. GENERAL. The provisions of this Mortgage inure to the
benefit of Mortgagee and its successors and assigns, and bind all persons
executing this Mortgage as Mortgagor and their respective heirs, legal
representatives, successors and assigns, jointly and severally, and all persons
now or hereafter claiming any right, title and interest in and to any of the
property, real, personal or mixed, tangible or intangible, now or hereafter
existing or any substitutions or replacements thereof and described in this
Mortgage as the Collateral. Time is of the essence to this Mortgage and each
of its provisions. The provisions of this Mortgage are to be interpreted,
construed, applied and enforced in accordance with the laws of the State of
Florida, regardless of where this Mortgage is executed, delivered or breached,
or where any payment or other performance required by this Mortgage is made,
where any action or other proceeding involving this Mortgage is instituted, or
whether the laws of the State of Florida otherwise would apply the laws of
another jurisdiction; the foregoing choice of law provisions will apply to the
Loan Documents. The provisions of the Loan Documents are severable at
Mortgagee's option so that if any provision is declared by a court of competent
jurisdiction to be invalid or unenforceable, no other provision will be
affected by such invalidity or unenforceability, but will remain in force and
effect according to its original terms, if Mortgagee so elects. Wherever used
in this Mortgage or the other Loan Documents, or both, and unless expressly
provided otherwise: (i) use of the singular includes the plural, and vice
versa; (ii) use of one gender includes all genders; (iii) use of the term
"include" or "including" is always without limitation; (iv) use of the words,
"should," "must" and "will" has the same legal effect as the use of the word
"shall"; (v) the term "day" means a banking day which shall be a day on which
Mortgagee and other banks are open for the transaction of business, excluding
any national holidays, and any performance which would otherwise be required on
a day other than a banking day shall be timely performed in such instance, if
performed on the next succeeding banking day; (vi) any definition herein
incorporating one or more documents or items shall refer to such items
"singularly and collectively", and (vii) "person" means any natural person or
artificial entity having legal capacity. Paragraph headings and subheadings
are for indexing purposes only and are not to be used to interpret, construe,
apply or enforce the provisions of this Mortgage. Mortgagor and Mortgagee
intend the provisions of this Mortgage and the other Loan Documents to be
interpreted, construed, applied and enforced so as to avoid inconsistencies or
conflicting results. This Mortgage may be
23
<PAGE> 24
amended only by a written instrument executed by Mortgagor and
Mortgagee with the same formalities as this Mortgage.
31. SATISFACTION. The lien and security interest provided by
the Loan Documents will continue unimpaired and in full force and effect unless
and until the Debt is paid in full, whereupon such lien and security interest
will be without further force or effect.
32. [THIS SPACE INTENTIONALLY LEFT BLANK]
33. MORTGAGOR AS TENANT HOLDING OVER. In the event of a
foreclosure sale of the Mortgaged Property, Mortgagor shall be deemed a tenant
holding over and shall forthwith deliver possession to Mortgagee or any
purchaser or purchasers at such sale or be summarily dispossessed according to
provisions of the law of the State of Florida applicable to tenants holding
over.
34. TIME OF THE ESSENCE. Time is of the essence with respect to
each and every covenant,agreement, and obligation of Mortgagor under this
Mortgage and the other Loan Documents,and any and all other instruments now or
hereafter evidencing, securing or otherwise relating to the Loan.
35. ORAL MODIFICATION INEFFECTIVE. No term of this Mortgage or
any other of the Loan Documents, or such documents, may be waived, changed,
modified, discharged, or terminated except by an instrument in writing signed
by the party against which enforcement of the waiver, change, modification,
discharge, or termination is sought.
36. HAZARDOUS SUBSTANCES. Mortgagor covenants and agrees with
Mortgagee that, throughout the term of the Note: (a) the Mortgaged Property
shall be operated and maintained in compliance with all governmental or
regulatory requirements; (b) Mortgagor shall maintain or procure all necessary
permits, licenses, and certificates required by federal, state, and local laws
throughout the Loan term; (c) all hazardous or toxic substances, within the
definition of any applicable statute or regulation, which may be used by any
person for any purpose upon the Mortgaged Property, shall be used or stored
thereon only in a safe and approved manner, in accordance with all industrial
standards and all laws, regulations and requirements for such storage
promulgated by any applicable governmental agency or authority; (d) other than
as described in (c) above, the Mortgaged Property will not be used for the
purpose of storing such substances; and (e) other than as described in (c)
above, no such storage or use will otherwise be allowed on the Mortgaged
Property (whether through leases with tenants who might store or use hazardous
substances or otherwise) which will cause, or which will increase the
likelihood of causing, the release of such hazardous or toxic substances onto
the Mortgaged Property. Mortgagor shall immediately notify Mortgagee of any
failure to comply under this Paragraph or receipt of any notice of violation or
third party complaint. Mortgagor hereby agrees to indemnify and save and hold
Mortgagee harmless of and from all claims, damages, loss, liabilities,
penalties, fines, remedial action requirements, and enforcement actions, along
with the costs and attorneys' fees incurred by Mortgagee in defending
Mortgagor's use, generation, transportation, and disposal, release, or
24
<PAGE> 25
threatened release of hazardous substances, including without limitation,
asbestos-containing materials or damage whatsoever incurred by Mortgagee
arising out of or by reason of any violation of any applicable statute or
regulation for the protection of the environment which occurs upon the
Mortgaged Property from and after the date hereof, or by reason of the
imposition of any governmental lien for the recovery of environmental clean-up
costs expended by reason of such violation, including without limitation any
lien arising pursuant to any so-called "Super Fund" or "Super Lien"
legislation. The foregoing indemnity and covenants of Mortgagor shall not be
applicable to any violations of law or any liability resulting from adverse
environmental conditions in, on or about the Mortgaged Property created or in
existence prior to the date hereof ("Pre-existing Environmental Conditions") A
default under this Paragraph shall constitute a Default under this Mortgage.
It is expressly acknowledged by Mortgagor that this indemnification shall
survive any foreclosure of the lien and security interest of this Mortgage or
the discharge of this Mortgage and shall inure to the benefit of Mortgagee, its
successors and assigns.
37. ENVIRONMENTAL ASSESSMENTS. At any time Mortgagee has a
reasonable basis to suspect that a violation of Mortgagor's obligations
set forth in Paragraph 36 has occurred or in the event a Default by Mortgagor
shall have occurred and be continuing beyond any cure period applicable
thereto, Mortgagee may, at its election, obtain one or more environmental
assessments of the Mortgaged Property prepared by a geohydrologist, an
independent engineer, or other qualified consultant or expert approved by
Mortgagee evaluating or confirming (i) whether any hazardous substances are
present in the soil or water at the Mortgaged Property and (ii) whether the use
and operation of the Mortgaged Property comply with all applicable
environmental laws relating to air quality, environmental control, release of
oil, hazardous materials, hazardous wastes and hazardous substances, and any
and all other applicable environmental laws. Environmental assessments may
include detailed visual inspections of the Mortgaged Property including,
without limitation, any and all storage areas, storage tanks, drains, dry
wells, and leaching areas, and the taking of soil samples, surface water
samples, and ground water samples, as well as such other investigations or
analyses as are necessary or appropriate for a complete determination of the
compliance of the Mortgaged Property and the use and operation thereof with all
applicable environmental laws. All such environmental assessments shall be at
the sole cost and expense of Mortgagor. In the event it is determined that
additional tests and/or remediation are necessary as a result of the aforesaid
assessments, or in the event such additional testing or remediation is
recommended by the aforesaid assessments, the Mortgagor agrees to immediately
perform the tests or undertake the remediation as recommended. Nothing
contained in this Paragraph 8 shall be applicable to, or shall impose any
obligation upon Mortgagor with respect to, any Pre-existing Environmental
Conditions.
38. Permitted Secondary Financing. Mortgagee has consented to a
second mortgage encumbering the Property to be given contemporaneously herewith
by Mortgagor in favor of ALI, Inc., a Delaware corporation pursuant to the
terms of that certain Intercreditor Agreement of even date herewith.
39. WAIVER OF JURY TRIAL. BY ACCEPTANCE HEREOF MORTGAGOR AGREES
THAT NEITHER MORTGAGOR, NOR ANY OF THEM OR LEGAL
25
<PAGE> 26
REPRESENTATIVE OF MORTGAGOR (ALL OF WHOM ARE HEREINAFTER REFERRED TO AS
THE "PARTIES") SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF
THIS MORTGAGE OR ANY INSTRUMENT EVIDENCING, SECURING, OR RELATING TO THE
INDEBTEDNESS AND OTHER OBLIGATIONS EVIDENCED HEREBY, ANY RELATED AGREEMENT OR
INSTRUMENT, ANY OTHER COLLATERAL FOR THE INDEBTEDNESS EVIDENCED HEREBY OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES, OR ANY OF THEM.
NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY
TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL HAS NOT BEEN
WARIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE
PARTIES WITH MORTGAGEE, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
MORTGAGEE HAS IN NO WAY AGREED WITH OR REPRESENTED TO THE PARTIES THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, Mortgagor has executed and delivered this
Mortgage as of the date stated above.
SIGNED, SEALED AND DELIVERED "MORTGAGOR"
IN THE PRESENCE OF:
ACP-ATRIUM CG, LIMITED PARTNERSHIP,
a Florida Limited Partnership
By: ACP-ATRIUM CG, INC., a
Florida corporation, its
general partner
By:
- --------------------------- ---------------------------
PRINT NAME OF WITNESS BELOW: Name:
----------------------
- --------------------------- Title:
----------------------
- ---------------------------
PRINT NAME OF WITNESS BELOW:
- ---------------------------
26
<PAGE> 27
STATE OF FLORIDA)
)ss:
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of
____________, 1995 by _________________________, ________________ of ACP-Atrium
CG, Inc., a Florida corporation, on behalf of the corporation as general
partner of ACP-Atrium CG, Limited Partnership. He/she is personally known to
me or has produced ____________________ (type of identification) as
identification.
My Commission Expires:
---------------------------------
NOTARY PUBLIC
- ---------------------- ---------------------------------
Print Name
Commission No.:
----------------
[NOTARIAL SEAL]
27
<PAGE> 28
STATE OF FLORIDA)
)SS:
COUNTY OF DADE )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, the foregoing instrument was acknowledged before me by
_____________________________, the _____________ of __________________________,
a ___________________, freely and voluntarily under authority duly vested in
him/her by said corporation and that the seal affixed thereto is the true
corporate seal of said corporation. He/She is personally known to me or who
has produced ________________ as identification and who DID/DID NOT take an
oath.
WITNESS my hand and official seal in the County and State last
aforesaid this day of ____________________________, 19__.
My Commission Expires:
------------------------------
NOTARY PUBLIC
- --------------------------
Print Name
------------------------------
Commission No.:
------------------
[NOTARIAL SEAL]
[JLR.WACKENHUT]030
28
<PAGE> 1
EXHIBIT 10.9
KEY EMPLOYEE LONG-TERM
INCENTIVE STOCK PLAN
The Wackenhut Corporation
July 1991
<PAGE> 2
The Wackenhut Corporation
Key Employee Long-Term Incentive Stock Plan
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Section Page
- ------- ------- ----
<S> <C> <C> <C>
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 2
2 DEFINITIONS AND CONSTRUCTION
----------------------------
2.1 Definitions 2
2.2 Gender and Number 8
2.3 Severability 8
3 ADMINISTRATION
--------------
3.1 The Committee 9
3.2 Authority of the Committee 9
3.3 Decisions Binding 9
3.4 Procedures of the Committee 10
3.5 Award Agreements 10
4 SHARES SUBJECT TO THE PLAN
--------------------------
4.1 Number of Shares 11
4.2 Lapsed Awards 11
4.3 Adjustments in Authorized Shares 11
5 ELIGIBILITY AND PARTICIPATION
-----------------------------
5.1 Eligibility 12
5.2 Actual Participation 12
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Article Section Page
------- ------- ----
<S> <C> <C> <C>
6 STOCK OPTIONS
-------------
6.1 Grant of Options 12
6.2 Option Agreement 13
6.3 Option Price 13
6.4 Duration of Options 13
6.5 Exercise of Options 13
6.6 Payment 14
6.7 Restrictions on Share Transferability 14
6.8 Termination of Employment Due to Death, Disability, or Retirement 15
6.9 Termination of Employment for Other Reasons 16
6.10 Nontransferability of Options 16
7 RESTRICTED STOCK UNITS
----------------------
7.1 Grant of Restricted Stock Units 16
7.2 Restricted Stock Unit Agreement 16
7.3 Vesting 17
7.4 Other Restrictions 17
7.5 Payment 17
7.6 Dividend Equivalents 17
7.7 Termination of Employment Due to Death, Disability or Retirement 18
7.8 Termination of Employment for Other Reasons 18
8 PERFORMANCE UNITS AND PERFORMANCE SHARES
----------------------------------------
8.1 Grant of Performance Units and Performance Shares 19
8.2 Value of Performance Units and Performance Shares 19
8.3 Payment of Performance Units and Performance Shares 19
8.4 Form and Timing of Payment 20
8.5 Termination of Employment Due to Death, Disability or Retirement 20
8.6 Termination of Employment for Other Reasons 20
8.7 Nontransferability 20
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Article Section Page
------- ------- ----
<S> <C> <C> <C>
9 RIGHTS OF EMPLOYEES
-------------------
9.1 Employment 21
9.2 Participation 21
10 CHANGE IN CONTROL
-----------------
10.1 Stock Based Awards 21
10.2 Performance Based Awards 21
11 AMENDMENT, MODIFICATION, AND TERMINATION
----------------------------------------
11.1 Amendment, Modification, and Termination 22
11.2 Awards Previously Granted 23
12 WITHHOLDING
-----------
12.1 Tax Withholding 23
12.2 Share Withholding 23
13 REDEMPTION OF COMMON STOCK ON TERMINATION OF EMPLOYMENT 24
-------------------------------------------------------
14 INDEMNIFICATION 24
---------------
15 SUCCESSORS 25
----------
16 REQUIREMENTS OF LAW
-------------------
16.1 Requirements of Law 25
16.2 Governing Law 25
</TABLE>
iii
<PAGE> 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 withing 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 performances.
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 judgment, interest, and special effort the successful conduct of its
operations largely is dependent.
-1-
<PAGE> 6
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.
(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
-2-
<PAGE> 7
(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
-3-
<PAGE> 8
(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 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.
-4-
<PAGE> 9
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.
-5-
<PAGE> 10
(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 an award, 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
-6-
<PAGE> 11
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.
-7-
<PAGE> 12
(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)
(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 common
stock of The Wackenhut Corporation.
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 Serverability. 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.
-8-
<PAGE> 13
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 conditons 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.
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
-9-
<PAGE> 14
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.
-10-
<PAGE> 15
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section
4.3 herein, no more than 250,000 Shares may be granted under the Plan, of which
no more than 100,000 may be issued in payment of Restricted Stock Units under
Article 7 of the Plan. Stock delivered under the Plan may consist, in whole or
in part, of authorized and unissued Shares or treasury Shares. The payment of
Performance Units or Performance Shares shall not be deemed to constitute an
issuance of Stock under the Plan unless payment is made in Stock, in which case
only the number of Shares issued in payment of the Performance Unit or
Performance Share Award shall constitute an issuance of Stock under the Plan.
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 the Plan, 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 enlargement of
rights; and provided that the number of Shares subject to any Award shall
always be a whole number. Any
-11-
<PAGE> 16
adjustment of an ISO under this paragraph shall be made in such a manner so as
not to constitue 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 of 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.
-12-
<PAGE> 17
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.
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. However, in no event may any Option
granted under this Plan become exercisable prior to six (6) months following
the date of its grant.
-13-
<PAGE> 18
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
-14-
<PAGE> 19
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 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.
In its sole discretion, and prior to the termination of the employment
due to death, Disability or retirement, the Committee may extend the period
during which outstanding Options may be exercised.
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.
-15-
<PAGE> 20
6.9 Termination of Employment for Other Reasons. If the employment
of the Participant shall terminate for any reason other than for 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. The Committee, in its sole discretion, shall have the right to
extend the 90 days up to one (1) year after the date of such termination, but,
however, in no event beyond the expiration date of the Options.
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.
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
-16-
<PAGE> 21
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 Resticted 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, provided that in no case shall
the Restriction period be less than six months.
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
-17-
<PAGE> 22
Company would have paid to such Participant during the term of those Restricted
Stock Units as if the Particpant 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 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,
-18-
<PAGE> 23
provided, however, that, in the event of an 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) 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," and
shall, in all cases, exceed six (6) months in length.
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.
-19-
<PAGE> 24
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. Payment
shall be made at the time payments are made to Participants who did not
terminate service during the Performance Period.
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; provided, however, that in the event of an involuntary
termination of the employment of the Participant by the Company other than for
Cause, the Committee in its sole discretion may waive the automatic forfeiture
provisions and pay out on a 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
-20-
<PAGE> 25
shall be exercisable during his lifetime only by the Participant or the
Participant's legal representative.
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
-21-
<PAGE> 26
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. Not withstanding the foregoing, all Performance
Units and Performance Share Awards which shall have been outstanding less than
six (6) months on the effective date of the Change in Control shall not be
deemed to have earned either the performance goals or the target goals.
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 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
(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
-22-
<PAGE> 27
(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.
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.
-23-
<PAGE> 28
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.
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
-24-
<PAGE> 29
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 on 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 or 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.
-25-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE CORPORATION
SUBSIDIARIES OF THE WACKENHUT CORPORATION
American Guard and Alert, Inc. (Alaska)
Titania Advertising, Inc. (Florida)
Titania Insurance Company of America (Vermont)
Tuhnekcaw, Inc. (Delaware)
Wackenhut Airline Services, Inc. (Florida)
Wackenhut Australia, Pty., Ltd.
Wackenhut Corrections Corporation (Florida)
Wackenhut Educational Services, Inc. (Florida)
Wackenhut Financial, Inc. (Delaware)
Wackenhut International, Incorporated (Florida)
Wackenhut of Nevada, Inc. (Nevada)
Wackenhut Services, Incorporated (Florida)
Wackenhut Sports Security, Inc. (Florida)
SUBSIDIARIES OF WACKENHUT INTERNATIONAL, INCORPORATED
Central African Republic
Instituto Wackenhut, S.A. (Ecuador)
Peruana de Seguridad y Vigilancia, S.A. (PESEVISA) (Peru)
Seguridad Movil del Ecuador, S.A. (Ecuador)
Servicios Estrategicos, S.A. (Peru)
Wackenhut A/O (Russia)
Wackenhut Belize Ltd. (Belize)
Wackenhut Bolivia, S.A. (Bolivia)
Wackenhut 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 Venezuela, S.A. (Venezuela)
Wackenhut del Ecuador, S.A. (Ecuador)
Wackenhut Dominicana, S.A. (Dominican Republic)
Wackenhut Gambia, Ltd. (Gambia)
Wackenhut Ghana Limited (Ghana)
Wackenhut International (PVT) (Pakistan)
Wackenhut Korea Corporation (Korea)
Wackenhut of Canada Limited (Canada)
Wackenhut Maghreb, S.A. (Morocco)
Wackenhut Paraguay, S.A. (Paraguay)
Wackenhut Puerto Rico, Inc. (Puerto Rico)
Wackenhut S.A. (Costa Rica)
Wackenhut Seges (Ivory Coast)
Wackenhut Sierra Leone (Sierra Leone)
Wackenhut U K Limited (United Kingdom)
Wackenhut Uruguay (Uruguay)
WII/Sound and Security Engineering Co. (Jordan)
<PAGE> 2
SUBSIDIARIES OF WACKENHUT U.K. LIMITED
Advance Security Technology, Ltd. (United Kingdom)
Wackenhut Appointments Limited (United Kingdom)
Wackenhut Investigations Limited (United Kingdom)
SUBSIDIARY OF AMERICAN GUARD AND ALERT
Ahtna AGA Security, Inc. (Alaska)
SUBSIDIARY OF WACKENHUT CORRECTIONS CORPORATION
Wackenhut Corrections (U.K.), Limited (United Kingdom)
Wackenhut Corrections Corporation Australia (Australia)
WCC Financial, Inc. (Delaware)
SUBSIDIARY OF WACKENHUT CORRECTIONS CORPORATION AUSTRALIA
Australasian Correctional Management PTY, Limited (Australia)
<PAGE> 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 File Nos. 33-59159
and 33-67158.
ARTHUR ANDERSEN LLP
Miami, Florida,
March 29, 1996.
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
In connection with the filing with the Securities and Exchange
Commission by The Wackenhut Corporation, a Florida corporation (the
"Corporation"), of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, under the Securities Exchange Act of 1934, I
hereby appoint and constitute Robert C. Kneip, James P. Rowan and Daniel Mason,
or any one of them (with full power in each one of them to act alone), as my
true and lawful agents and attorneys-in-fact, each with power of substitution
and full power and authority to act for me in any and all capacities for the
purpose of signing my name as an officer or director of The Wackenhut
Corporation to, and filing with the Securities and Exchange Commission, the
above defined Annual Report on Form 10-K, any amendment or amendments to it,
and any exhibit or other documents related thereto or required in connection
therewith, and I ratify and confirm all that each of said attorneys-in-fact, or
his substitute or substitutes may do or cause to be done by virtue of this
appointment and authorization.
IN WITNESS WHEREOF, I have executed this instrument this 25th day of
March, 1996.
/s/ George R. Wackenhut Date: March 25, 1996
- ------------------------------ --------------
George R. Wackenhut - Director
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
In connection with the filing with the Securities and Exchange
Commission by The Wackenhut Corporation, a Florida corporation (the
"Corporation"), of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, under the Securities Exchange Act of 1934, I
hereby appoint and constitute Robert C. Kneip, James P. Rowan and Daniel Mason,
or any one of them (with full power in each one of them to act alone), as my
true and lawful agents and attorneys-in-fact, each with power of substitution
and full power and authority to act for me in any and all capacities for the
purpose of signing my name as an officer or director of The Wackenhut
Corporation to, and filing with the Securities and Exchange Commission, the
above defined Annual Report on Form 10-K, any amendment or amendments to it,
and any exhibit or other documents related thereto or required in connection
therewith, and I ratify and confirm all that each of said attorneys-in-fact, or
his substitute or substitutes may do or cause to be done by virtue of this
appointment and authorization.
IN WITNESS WHEREOF, I have executed this instrument this 28th day of
March, 1996.
/s/ Daniel E. Mason Date: March 28, 1996
- ------------------------------ --------------
Daniel E. Mason - Vice President
and Chief Financial Officer,
Domestic Operations
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
In connection with the filing with the Securities and Exchange
Commission by The Wackenhut Corporation, a Florida corporation (the
"Corporation"), of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, under the Securities Exchange Act of 1934, I
hereby appoint and constitute Robert C. Kneip, James P. Rowan and Daniel Mason,
or any one of them (with full power in each one of them to act alone), as my
true and lawful agents and attorneys-in-fact, each with power of substitution
and full power and authority to act for me in any and all capacities for the
purpose of signing my name as an officer or director of The Wackenhut
Corporation to, and filing with the Securities and Exchange Commission, the
above defined Annual Report on Form 10-K, any amendment or amendments to it,
and any exhibit or other documents related thereto or required in connection
therewith, and I ratify and confirm all that each of said attorneys-in-fact, or
his substitute or substitutes may do or cause to be done by virtue of this
appointment and authorization.
IN WITNESS WHEREOF, I have executed this instrument this 26th day of
March, 1996.
/s/ Juan D. Miyar Date: March 26, 1996
- ------------------------------ --------------
Juan D. Miyar - Vice President -
Accounting and Corporate
Contoller
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
In connection with the filing with the Securities and Exchange
Commission by The Wackenhut Corporation, a Florida corporation (the
"Corporation"), of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, under the Securities Exchange Act of 1934, I
hereby appoint and constitute Robert C. Kneip, James P. Rowan and Daniel Mason,
or any one of them (with full power in each one of them to act alone), as my
true and lawful agents and attorneys-in-fact, each with power of substitution
and full power and authority to act for me in any and all capacities for the
purpose of signing my name as an officer or director of The Wackenhut
Corporation to, and filing with the Securities and Exchange Commission, the
above defined Annual Report on Form 10-K, any amendment or amendments to it,
and any exhibit or other documents related thereto or required in connection
therewith, and I ratify and confirm all that each of said attorneys-in-fact, or
his substitute or substitutes may do or cause to be done by virtue of this
appointment and authorization.
IN WITNESS WHEREOF, I have executed this instrument this 25th day of
March, 1996.
/s/ Julius W. Becton, Jr. Date: March 25, 1996
- ------------------------------ --------------
Julius W. Becton, Jr. - Director
<PAGE> 5
EXHIBIT 24
POWER OF ATTORNEY
In connection with the filing with the Securities and Exchange
Commission by The Wackenhut Corporation, a Florida corporation (the
"Corporation"), of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, under the Securities Exchange Act of 1934, I
hereby appoint and constitute Robert C. Kneip, James P. Rowan and Daniel Mason,
or any one of them (with full power in each one of them to act alone), as my
true and lawful agents and attorneys-in-fact, each with power of substitution
and full power and authority to act for me in any and all capacities for the
purpose of signing my name as an officer or director of The Wackenhut
Corporation to, and filing with the Securities and Exchange Commission, the
above defined Annual Report on Form 10-K, any amendment or amendments to it,
and any exhibit or other documents related thereto or required in connection
therewith, and I ratify and confirm all that each of said attorneys-in-fact, or
his substitute or substitutes may do or cause to be done by virtue of this
appointment and authorization.
IN WITNESS WHEREOF, I have executed this instrument this 25th day of
March, 1996.
/s/ Paul X. Kelley Date: March 25, 1996
- ------------------------------ --------------
Paul X. Kelley - Director
<PAGE> 6
EXHIBIT 24
POWER OF ATTORNEY
In connection with the filing with the Securities and Exchange
Commission by The Wackenhut Corporation, a Florida corporation (the
"Corporation"), of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, under the Securities Exchange Act of 1934, I
hereby appoint and constitute Robert C. Kneip, James P. Rowan and Daniel Mason,
or any one of them (with full power in each one of them to act alone), as my
true and lawful agents and attorneys-in-fact, each with power of substitution
and full power and authority to act for me in any and all capacities for the
purpose of signing my name as an officer or director of The Wackenhut
Corporation to, and filing with the Securities and Exchange Commission, the
above defined Annual Report on Form 10-K, any amendment or amendments to it,
and any exhibit or other documents related thereto or required in connection
therewith, and I ratify and confirm all that each of said attorneys-in-fact, or
his substitute or substitutes may do or cause to be done by virtue of this
appointment and authorization.
IN WITNESS WHEREOF, I have executed this instrument this 25th day of
March, 1996.
/s/ Thomas P. Stafford Date: March 25, 1996
- ------------------------------ --------------
Thomas P. Stafford - Director
<PAGE> 7
EXHIBIT 24
POWER OF ATTORNEY
In connection with the filing with the Securities and Exchange
Commission by The Wackenhut Corporation, a Florida corporation (the
"Corporation"), of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, under the Securities Exchange Act of 1934, I
hereby appoint and constitute Robert C. Kneip, James P. Rowan and Daniel Mason,
or any one of them (with full power in each one of them to act alone), as my
true and lawful agents and attorneys-in-fact, each with power of substitution
and full power and authority to act for me in any and all capacities for the
purpose of signing my name as an officer or director of The Wackenhut
Corporation to, and filing with the Securities and Exchange Commission, the
above defined Annual Report on Form 10-K, any amendment or amendments to it,
and any exhibit or other documents related thereto or required in connection
therewith, and I ratify and confirm all that each of said attorneys-in-fact, or
his substitute or substitutes may do or cause to be done by virtue of this
appointment and authorization.
IN WITNESS WHEREOF, I have executed this instrument this 25th day of
March, 1996.
/s/ Richard R. Wackenhut Date: March 25, 1996
- ------------------------------ --------------
Richard R. Wackenhut - Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-02-1995
<PERIOD-END> DEC-31-1995
<CASH> 20,185
<SECURITIES> 5,774<F1>
<RECEIVABLES> 77,121<F2>
<ALLOWANCES> 1,268
<INVENTORY> 6,798
<CURRENT-ASSETS> 122,162<F3>
<PP&E> 29,132
<DEPRECIATION> 9,851
<TOTAL-ASSETS> 197,927
<CURRENT-LIABILITIES> 72,524
<BONDS> 5,376
0
0
<COMMON> 1,213
<OTHER-SE> 61,691
<TOTAL-LIABILITY-AND-EQUITY> 197,927<F4>
<SALES> 0
<TOTAL-REVENUES> 796,732
<CGS> 0
<TOTAL-COSTS> 780,958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 863
<INTEREST-EXPENSE> 3,356
<INCOME-PRETAX> 13,733
<INCOME-TAX> 4,742
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,260<F5>
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.00
<FN>
<F1>MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT ARE CLASSIFIED AS
NON-CURRENT ASSETS ON THE BALANCE SHEET.
<F2>IN JANUARY 1995, THE CORPORATION ENTERED INTO A $40 MILLION, THREE YEAR
ACCOUNTS RECEIVABLE SECURITIZATION FACILITY AGREEMENT TO SELL AN UNDIVIDED
INTEREST IN A DEFINED POOL OF ELIGIBLE RECEIVABLES. IN DECEMBER 1995, THE
ACCOUNTS RECEIVABLE SECURITIZATION FACILITY WAS INCREASED TO $50 MILLION.
AT DEC. 31, 1995, $35 MILLION OF ACCOOUNTS RECEIVABLE HAD BEEN SOLD AND ARE
INCLUDED AS A REDUCTION IN ACCOUNTS RECEIVABLE ON THIS SCHEDULE.
<F3>INCLUDES $18,058 OF OTHER CURRENT ASSETS.
<F4>INCLUDES $40,118 RESERVE FOR LOSSES OF CASUALTY REINSURANCE SUBSIDIARY,
$8,978 MINORITY INTEREST AND $8,027 OTHER LIABILITIES.
<F5>INCLUDES MINORITY INTEREST AND EQUITY INCOME OF FOREIGN AFFILIATES - NET OF
INCOME TAXES OF $2,362 AND $(631) RESPECTIVELY.
</FN>
</TABLE>
